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                 SOUTH CAROLINA ASSOCIATED AUTO INSURERS PLAN


PROPOSAL NAME:                South Carolina Associated Auto Insurers Plan 
                              Joint Underwriting Association--Servicing 
                              Carrier Solicitation

COVERAGE TYPE:                Private Passenger Property and Casualty 
                              Automobile Insurance

PROPOSAL NOTICE NUMBER:       98-002/PPAI

PROPOSAL OPENING DATE:        August 14, 1998 at 4:30 p.m.




                                    [LOGO]


                                  Issued By:

                               Lee P. Jedziniak
                                   Director
                     South Carolina Department of Insurance
                              1612 Marion Street
                        Columbia, South Carolina 29201





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                               TABLE OF CONTENTS

PROPOSAL NOTICE NO.......................................................     1

PROPOSAL NOTICE NUMBER...................................................     1

SECTION 1: GENERAL OVERVIEW..............................................     1

1.1.     Purpose.........................................................     1

1.2.     Authority for Competitive Sealed Solicitation of Proposals......     1

1.3.     Date for Submission of Proposals................................   1,2

1.4.     Incorrectly Marked Envelopes....................................     2

1.5.     Solicitation Does Not Bind Director or Advisory Board...........     2

1.6.     Mandatory Pre-proposal Conference...............................     2

1.7.     Questions Concerning the RFP at Mandatory Pre-proposal 
           Conference....................................................     2

1.8.     Submission of Written Inquiries.................................     3

1.9.     Disqualification of Proposals...................................     3

1.10.    Disqualification of Proposals...................................     3

         1.10.1.   Proof of Collusion....................................     3
         1.10.2.   Lack of Responsibility................................     3
         1.10.3.   Noncompliance with Applicable Law.....................     3
         1.10.4.   Conditional or Incomplete Proposals...................   3,4
         1.10.5.   Reservations by Respondent to Accept or Reject Award..     4
         1.10.6.   Late Submission of Proposals..........................     4


SECTION 2: GENERAL INSTRUCTIONS

2.1.     No Liability for Proposal Preparations Costs or Nonaward 
           of Contract...................................................     4

2.2.     Proposal Must Comply with RFP...................................     4

2.3.     Proposal Must Be In Official Name of Company/Individual.........     4

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2.4.     All Requested Information Must Be Included......................     4

2.5.     Proposal Submission Requirements................................   4,5

2.6.     Official Positions or Communications Re RFP.....................     5

2.7.     Certification of Qualifications to Act as Servicing Carrier.....     5

2.8.     One Proposal per Organization...................................     5

2.9.     Solicitation is Intended to Promote Competition.................     5

2.10.    Proposals Must Be Complete and Clear............................     6

2.11.    Single Bound Volume(s) Required.................................     6

2.12.    Separate Appendices.............................................     6

2.13.    No Communication with Director or Advisory Board After 
           Proposal Submission...........................................     6

2.14.    RFP Amendments..................................................   6,7

         2.14.1.  Verbal Comments Cannot Modify Written Provisions.......     6
         2.14.2.  Amendments Must Be Written.............................     7

2.15.    Oral Presentations..............................................     7

2.16.    Possible Contract Awards........................................     7

2.17.    Confidential and Proprietary Information........................     7

2.18.    Notice of Intent to Award.......................................     7

2.19.    Mail Pick-Up....................................................     7

2.20.    Information for Envelope or Wrapping Material...................   7,8

2.21.    Statement of Award..............................................     8

2.22.    FEIN or Social Security Number..................................     8

2.23.    Proposed Time Table.............................................     8

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SECTION 3: BACKGROUND

3.1.     About the South Carolina Associated Auto Insurers Plan..........   8,9

3.2.     Director Authorized to Solicit Proposals........................     9

         3.2.1.  Competitive Solicitation................................    10
         3.2.2.  Solicitation Not Governed by Procurement Code...........     9

3.3.     No Right to Award or Disposition of Appeal......................


SECTION 4: SCOPE OF PROPOSAL.............................................     9

4.1.     Overview of Responsibilities of Servicing Carrier...............     9

4.2.     Informational References to the Plan of Operation...............    10

4.3.     Proposals Become Property of the Plan...........................    10

4.4.     Confidentiality of Evaluations and Score Sheets.................    10

4.5.     Disqualification for Failure to Comply with RFP.................    10

4.6.     Documents Comprising Contract...................................    11

4.7.     Conflict(s).....................................................    11


SECTION 5: DEFINITIONS

5.1.     Advisory Board..................................................    11

5.2.     Producer........................................................    11

5.3.     Association.....................................................    11

5.4.     Committee.......................................................    11

5.5.     Days............................................................    11

5.6.     Department......................................................    11

5.7.     Director........................................................    11

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5.8.     Member..........................................................     11

5.9.     Plan............................................................     11

5.10.    Plan Administrator..............................................     12

5.11.    Plan of Operation...............................................     12

5.12.    Proposal........................................................     12

5.13.    Request for Proposals...........................................     12

5.14.    Servicing Carrier...............................................     12

5.15.    You, Your, Offeror, Applicant, or Respondent....................     12

5.16.    Voluntary Market................................................     12


SECTION 6: QUALIFICATIONS FOR SERVICING CARRIER(S).......................     12

6.1.     Surplus, Performance Bond and Statutory Deposit Requirements....     13

6.2.     Experience Required.............................................     13

6.3.     Service Facility Requirements...................................     13

6.4.     Insurance Writing Requirements..................................     13

6.5.     Net Worth Requirements for Affiliated Entity....................     13

6.6.     Execution of Contract Award Document............................     13

6.7.     Discrimination in Service Prohibited............................     13

6.8.     Service Required for Entire Term of Contract....................     14

6.9.     Financial Stability Requirement.................................     14

6.10.    Cooperation with Winding Up of Association Required.............     14

6.11.    Affidavit of Non-Collusion Required.............................     14

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6.12.    Year 2000 Compliant Systems Required............................     14

6.13.    Proposal Submission Requirements................................     14

6.14.    Continuing Responsibilities of the Respondent...................     15

6.15.    Possible Number of Servicing Carriers...........................     15

6.16.    Acceptable Quota Shares.........................................     16

6.17.    Cost Proposals for More than One Quota Permitted................     16

6.18.    Bond and Proposal Fee Requirements..............................     16

         6.18.1.  Proposal Bond Amount
         6.18.2.  Performance Bond Requirements
         6.18.3.  Proposal Fee


SECTION 7: SERVICES REQUIRED.............................................     18

7.1.     Service Effective Date..........................................     18

7.2.     Scope of Work...................................................  18-28

7.3.     Respondent Is Bound by Enhancements.............................     29

7.4.     Contract Term...................................................     30

         7.4.1.  Contract Period
         7.4.2.  Contract Term Includes Run-off Obligations


SECTION 8: COMPENSATION..................................................     30

8.1.     Servicing Carrier Fee(s)........................................     30

8.2.     Fee Adjustments for Incentives/Disincentives Program............     31

8.3.     Total Compensation/Payment Schedule.............................     31

8.4.     Incentives/Disincentives Program Summary........................     31

         8.4.1.  Audits

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         8.4.2.  Rating Tables
         8.4.3.  Incentives
         8.4.4.  Disincentives


SECTION 9: PROPOSAL INFORMATION..........................................     32

9.1.     Proposal Contents...............................................     32

         9.1.1.  Cover Letter............................................     32

                 9.1.1.1.  Terms and Conditions..........................     33
                 9.1.1.2.  Legal Status..................................     33
                 9.1.1.3.  Federal Tax Identification Number.............     33
                 9.1.1.4.  Prime Contractor..............................     33
                 9.1.1.5.  Nondiscrimination.............................     33
                 9.1.1.6.  Identify Subcontractors.......................     33
                 9.1.1.7.  Subcontractors/Affiliated Entities
                             Legally Bound...............................     33
                 9.1.1.8.  Ownership of Material.........................     34
                 9.1.1.9.  Evidence of Qualifications....................     34

         9.1.2.  Proposal Letter.........................................     34

9.2.     Company Business Plan--Qualitative Questionnaires...............     34

         9.1.1.  Executive Summary.......................................     35
         9.2.2.  Background and Experience...............................     35
                 
                 9.2.2.1.  Name of Company...............................     35
                 9.2.2.2.  Date Established..............................     35
                 9.2.2.3.  Ownership/Legal Status........................     35
                 9.2.2.4.  Primary Line of Business for Entity...........     35

9.3.     Past Performance and Commitment.................................     35
            
9.4.     Financial Information...........................................     35

9.5.     Cost/Price......................................................     35

9.6.     Effect of Alterations/Erasures..................................     36

9.7.     Duration of Offer...............................................     36

9.8.     Director Reserves Right to Waive Minor Deficiencies.............     36

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9.9.     Other Data......................................................     36

9.10.    Video Tapes.....................................................     37


SECTION 10: METHODOLOGY, EVALUATION AND AWARD............................     37

10.1.    Introduction....................................................     37

10.2.    Overall Proposal................................................     37

         10.2.1.  Technical Compliance...................................     37
         10.2.2.  Nonresponsive Proposals................................     37
         10.2.2.  Business Plan..........................................     38

                  10.2.3.1.  Business Plan Questionnaire--Quantitative...     38
                  10.2.3.2.  Business Plan Questionnaire--Qualitative....     38
                  10.2.3.3.  Business Plan Questionnaire--Qualitative-
                               Enhancements..............................     39

10.3.    Comparative Assessment..........................................     39

10.4.    Scoring Methodology.............................................     40


SECTION 11: CONTRACTUAL REQUIREMENTS.....................................     41

11.1.    Contract Must Be in Name of Respondent/Offeror..................     41

11.2.    S. C. Law Clause................................................     41

11.3.    Respondent's Qualifications.....................................     41

11.4.    Equal Opportunity...............................................     42

11.5.    Termination for Default.........................................     42

11.6.    Immediate Termination...........................................     42

11.7.    Prime Contractor Responsibilities...............................     42

11.8.    Subcontracting..................................................     44

11.9.    Ownership of Material...........................................     44

11.10.   Accurate Information............................................     45

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11.12.   Compliance with State and Federal Requirements..................     46

11.13.   Conflicts of Interest...........................................     46

11.14.   Assignment......................................................     47

11.15.   Entire Contract.................................................     47

11.16.   Severability Clause.............................................     47

11.17.   Amendments......................................................     47

11.18.   Communications and Notices......................................     47

11.19.   Insurance.......................................................     48

11.20.   Titles/Paragraph Headings.......................................     48

11.21.   Independent Contractor Status...................................     48

11.22.   Fiduciary.......................................................     48

11.23.   Access to Records...............................................     49

11.24.   Annual Examinations.............................................     49

11.25.   Conflicts.......................................................     49

11.26.   Other Parties...................................................     49

11.27.   Counterparts....................................................     50


SECTION 12: PROTEST PROCEDURES...........................................     50

12.1.    Protests Must Be in Writing.....................................     50

12.2.    Protest Information.............................................     50

12.3.    Notification of Protest.........................................     50

12.4.    Administrative Review...........................................     50

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12.5.    Notice of the Decision..........................................     51

12.6.    Finality of Decision/Appeal.....................................     51

12.7.    Protests Shall Not Operate As Stay of Award.....................     51


SECTION 13: EXHIBITS................................................... Attached

EXHIBIT  1:  Affidavit of Non-Collusion

EXHIBIT  2:  South Carolina Reinsurance Facility Exhibit

EXHIBIT  3:  Business Plan--Quantitative Questionnaire

EXHIBIT  4:  Business Plan--Qualitative Questionnaire
             South Carolina Associated Auto Insurers Sample Servicing
               Carrier Reports and Documents

EXHIBIT  6:  Second Draft--Private Passenger Auto Policy Forms, 
               Endorsements, and Application Forms

EXHIBIT  7:  Sample Servicing Carrier Producer Correspondence and Reports

EXHIBIT  8:  Calculation of Proposal Bond Amount

EXHIBIT  9:  Pricing Sheet

EXHIBIT 10:  Articles of the Association

EXHIBIT 11:  Rules of Practice

EXHIBIT 12:  Rating and Statistical Manual

EXHIBIT 13:  Manual of Rules and Rates

EXHIBIT 14:  Proposal Letter

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                                 July 17, 1998

PROPOSAL NOTICE NO.: 98-002/PPAI
Release Date:  July 17, 1998 after 5:00 p.m.

                             South Carolina Associated Auto Insurers Plan Joint
                             Underwriting Association----Servicing Carrier
                             Solicitation
                             Private Passenger Property and Casualty Automobile
                             Insurance Coverage

PROPOSAL OPENING DATE:  August 14, 1998 at 4:30 p.m.


PROPOSALS MUST BE SUBMITTED SHOWING THE ABOVE PROPOSAL NUMBER


SECTION 1:  GENERAL OVERVIEW

1.1.   PURPOSE

       The purpose of this solicitation is to select Servicing Carriers to 
       service the private passenger automobile insurance business of the 
       South Carolina Associated Auto Insurers Plan.

1.2.   AUTHORITY FOR COMPETITIVE SEALED SOLICITATION OF PROPOSALS

       S. C. Code Ann. Section 38-91-340 provides that the Servicing Carriers 
       for the Association may be competitively bid as provided for in that 
       section. Separate bidding processes may be done for Private Passenger 
       Automobile and Commercial Automobile insurance. If the carriers are 
       competitively bid, then the director or his designee must appoint the 
       committee or committees of individuals as he considers qualified to 
       establish standards and procedures for the consideration and evaluation 
       of bids. The committee or committees must evaluate and award contracts 
       pursuant to the final approval of the director or his designee. 
       Accordingly, the Director of the South Carolina Department of 
       Insurance (director) invites you to submit a proposal in accordance 
       with the requirements of this solicitation for insurers to act as 
       Servicing Carriers for private passenger automobile property and 
       casualty insurance.

1.3.   DATE FOR SUBMISSION OF PROPOSALS

       Proposals are to be submitted to the director not later than 4:30 
       p.m., August 14, 1998, at which time Respondents to this request will 
       be publicly identified. Due to the possibility of negotiation with any 
       Respondent submitting a proposal which appears to be eligible for a 

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       contract award pursuant to the selection criteria set forth in this 
       Request for Proposal (RFP), prices will not be divulged at the time of 
       opening.

1.4.   INCORRECTLY MARKED ENVELOPES

       Neither the director, nor the South Carolina Department of Insurance, 
       nor any committee appointed by him to perform in accordance with 
       S. C. Code Ann. Section 38-91-340 assume any responsibility for unmarked
       or incorrectly marked envelopes being considered for an award.

1.5.   SOLICITATION DOES NOT BIND DIRECTOR OR ADVISORY BOARD

       THIS SOLICITATION DOES NOT COMMIT THE ADVISORY BOARD, THE DIRECTOR, 
       ANY COMMITTEE APPOINTED BY HIM, THE DEPARTMENT OR THE STATE OF SOUTH 
       CAROLINA TO AWARD A CONTRACT, TO PAY COSTS INCURRED IN PREPARATION OF 
       A PROPOSAL, OR TO PROCURE OR CONTRACT FOR THE ARTICLES OF GOODS OR 
       SERVICES REFERENCED IN THIS RFP. THE DIRECTOR RESERVES THE RIGHT TO 
       REJECT THE RECOMMENDATION OF THE COMMITTEE, ANY OR ALL OF THE 
       PROPOSALS RECEIVED AS A RESULT OF THIS REQUEST, OR TO CANCEL IN PART, 
       OR IN ITS ENTIRETY, THIS REQUEST IF HE DEEMS, WITHIN HIS SOLE 
       DISCRETION, IT IS IN THE BEST INTERESTS OF THE ASSOCIATION AND/OR 
       CONSUMERS OF THIS STATE TO DO SO.

1.6.   MANDATORY PRE-PROPOSAL CONFERENCE

       The director or his designee will hold a mandatory pre-proposal 
       conference at 10:00 a.m. on July 29, 1998 at the offices of the South 
       Carolina Department of Insurance, 1612 Marion Street, Room #401, 
       Columbia, South Carolina. Questions concerning the content and scope 
       of the RFP and the procedural steps of the RFP will be answered at 
       that time. ALL POTENTIAL RESPONDENTS ARE REQUIRED TO ATTEND THIS 
       CONFERENCE. Proposals submitted by Respondents who do not attend the 
       mandatory pre-proposal conference will NOT be considered. Each 
       Respondent may send no more than two representatives to the conference.

1.7.   QUESTIONS CONCERNING THE RFP AT THE MANDATORY PRE-PROPOSAL CONFERENCE

       Please forward any questions you may have to Lee P. Jedziniak, 
       Director, South Carolina Department of Insurance in writing, by 
       July 27, 1998 at 4:30 p.m. EST. Any additional questions or requests 
       for information must be asked, or submitted, prior to the adjournment 
       of the pre-proposal conference. Once the conference is adjourned, no 
       further questions will be addressed. Any questions not answered during 
       the conference will be responded to, in writing, and mailed to all 
       potential Respondents in attendance at the mandatory pre-proposal 
       conference.

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1.8.   SUBMISSION OF WRITTEN INQUIRIES

       All inquiries regarding this RFP must be submitted, in writing, to the 
       director of the South Carolina Department of Insurance at the address 
       listed below. NO PHONE CALLS WILL BE ACCEPTED.

1.9.   ADDRESS FOR INQUIRIES

       Mark envelopes: PPAI SERVICING CARRIER RFP QUESTIONS.

       Mail Questions to:

       Lee P. Jedziniak
       Director of Insurance
       South Carolina Department of Insurance
       Post Office Box 100105
       Columbia, South Carolina 29202-3105

1.10.  DISQUALIFICATION OF PROPOSALS

       The director reserves the right to consider as acceptable only those 
       proposals submitted in accordance with all requirements set forth in 
       this RFP. Any proposal offering another set of terms and conditions 
       contradictory to those included in the RFP may be disqualified without 
       further notice. A respondent will be disqualified and the proposal 
       automatically rejected for any one or more of the following reasons:

       1.10.1.  COLLUSION

                Proof of collusion among offerors, in which case all 
                proposals involved in the collusive action will be rejected;

       1.10.2.  LACK OF RESPONSIBILITY

                Respondent's lack of responsibility and cooperation as shown 
                by past work or services.

       1.10.3.  NONCOMPLIANCE WITH APPLICABLE LAW

                The proposal shows any noncompliance with any applicable law.

       1.10.4.  CONDITIONAL OR INCOMPLETE PROPOSALS

                The proposal is conditional, incomplete, or irregular in such 
                a way as to make the

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                proposal incomplete, indefinite, or ambiguous as to its 
                meaning.

       1.10.5.  RESERVATIONS LANGUAGE

                The proposal has any provision reserving the right to accept 
                or reject award, or to enter into a contract pursuant to an 
                award, or provisions contrary to those required in the 
                solicitation.

       1.10.6.  LATE SUBMISSION

                The delivery of the proposal after the deadline specified in 
                the timetable.


SECTION 2:  GENERAL INSTRUCTIONS

2.1.   NO LIABILITY FOR PROPOSAL PREPARATION COSTS OR NONAWARD OF CONTRACT

       This RFP does not commit the director or any committee appointed by 
       him to award a contract to any Respondent, or to pay any costs 
       incurred in the preparation and mailing of the Respondent's proposal 
       or in participating in this process.

2.2.   PROPOSAL MUST COMPLY WITH RFP

       Proposals will be considered as specified under the terms and 
       conditions of this RFP.

2.3.   PROPOSAL MUST BE IN OFFICIAL NAME OF COMPANY/INDIVIDUAL

       Proposals must be made in the official name of the firm(s) or 
       individual(s) under which the business is conducted (showing an 
       official business address), and must be signed in ink by a person duly 
       authorized to legally bind the person, partnership, company or 
       corporation submitting the proposal. If an entity affiliates with an 
       insurer in accordance with S. C. Code Ann. Section 38-91-340, the 
       affiliated insurer must also provide the same information.

2.4.   ALL REQUESTED INFORMATION MUST BE INCLUDED

       Respondents must include all requested information and any additional 
       information they wish to be considered.

2.5.   PROPOSAL SUBMISSION REQUIREMENTS

       A Respondent to this RFP must make a sealed submission of one (1) 
       original and nine (9)

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       copies of your proposal, including all attachments. Your proposals 
       must be received by 4:30 p.m., EST, on August 14, 1998. The proposals 
       may be mailed to or hand delivered to the address listed below:

       MAILING ADDRESS:                          ADDRESS FOR HAND DELIVERY:

       Lee P. Jedziniak                          Lee P. Jedziniak
       Director                                  Director
       South Carolina Department of Insurance    S. C. Department of Insurance
       Post Office Box 100105                    1612 Marion Street
       Columbia, South Carolina 29202-3105       Columbia, South Carolina 29201

       IT IS THE RESPONSIBILITY OF EACH RESPONDENT TO ENSURE THE TIMELY 
       DELIVERY OF ITS PROPOSAL. PROPOSALS DELIVERED AFTER THE TIME STATED 
       ABOVE WILL NOT BE CONSIDERED.

2.6.   OFFICIAL POSITIONS OR COMMUNICATIONS REGARDING RFP

       The only official position relating to this RFP is that position which 
       is expressed by the director, in writing, signed by the director, and 
       issued by the director or his designee. No other means of 
       communication, whether written or oral, will be construed as a formal 
       or official response or statement.

2.7.   CERTIFICATION OF QUALIFICATIONS TO ACT AS SERVICING CARRIER

       By submission of your signed proposal you are certifying that, if 
       awarded this contract, you are qualified to perform in accordance with 
       its terms and conditions and that you will comply with all applicable 
       state and federal laws.

2.8.   ONE PROPOSAL PER ORGANIZATION

       No more than one proposal may be submitted by a single organization or 
       person. If multiple proposals are submitted by that person or 
       organization, the director or committee appointed by him will 
       disqualify all such proposals as nonconforming. This prohibition does 
       not apply to the copies requested in Section 2.5.

2.9.   SOLICITATION IS INTENDED TO PROMOTE COMPETITION

       This RFP is intended to promote competition. It will be the 
       Respondent's duty to advise the director during the mandatory 
       pre-proposal conference if any language, requirements, etc., or any 
       combination thereof, inadvertently restrict or limit the requirements 
       stated in this RFP to a single source. Such notification must be 
       submitted in writing.

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2.10.  PROPOSALS MUST BE COMPLETE AND CLEAR

       Proposals should be prepared simply and economically providing a 
       straightforward, concise description of your ability to satisfy the 
       requirements of the RFP. Emphasis must be placed on completeness and 
       clarity of content of the proposal submitted.

2.11.  SINGLE BOUND VOLUME(S) REQUIRED

       Each copy of the proposal must be bound in a single volume. All 
       documentation submitted with the proposal must be bound in that single 
       volume, if possible. If it is not practical or possible to bind all 
       materials, attachments, supplementals, etc., in this single volume, 
       then written reference must be made in the bound volume to any such 
       materials, attachments, supplementals, etc., not appearing in the 
       bound volume.

2.12.  SEPARATE APPENDICES

       If your proposal includes any comment over and above the specific 
       information requested in this RFP, you are to include this information 
       as a separate appendix, attachment, or addition to your proposal.

2.13.  NO COMMUNICATION WITH DIRECTOR OR ADVISORY BOARD AFTER PROPOSAL 
       SUBMISSION

       By submitting a proposal, a Respondent agrees that during the period 
       following issuance of the proposal, and prior to the final award of a 
       contract, the Respondent will not discuss this solicitation with the 
       director, any member of the Department or Advisory Board except as 
       specifically designated in this RFP. Respondents must not attempt to 
       discuss with, or attempt to negotiate with, any member of the 
       Department or Advisory Board any aspect of this RFP. Such contact will 
       result in the automatic disqualification of any proposal submitted.

2.14.  RFP AMENDMENTS

       2.14.1.  VERBAL COMMENTS CANNOT MODIFY WRITTEN PROVISION(S)

                Verbal comments or discussion by the director or his 
                designee, the Department, or any of its employees relative to 
                this solicitation cannot add, delete, or modify any written 
                provision. any change must be in the form of a written 
                amendment signed by the director and distributed to all 
                Respondents by the director or his designee.

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       2.14.2.  AMENDMENTS MUST BE WRITTEN

                If it becomes necessary to revise any part of the RFP, a 
                written amendment will be provided to all Respondents who 
                received the original RFP. Amendments to the contract will be 
                governed by the appropriate paragraph in the Contractual 
                Requirements section of this RFP.

2.15.  ORAL PRESENTATIONS

       Oral presentations may be required under this solicitation.

2.16.  POSSIBLE CONTRACT AWARD

       A contract award resulting from the RFP will be awarded to the most 
       responsive and responsible offeror whose proposal is determined to be 
       the most advantageous for South Carolina citizens, taking into 
       consideration the price and the evaluation factors set forth herein. 
       However, the director reserves the right to reject any and all 
       proposals received. In all cases, the director will be the sole judge 
       as to whether a Respondent's proposal has, or has not, satisfactorily 
       met the requirements of this RFP.

2.17.  CONFIDENTIAL AND PROPRIETARY INFORMATION

       No documents relating to this solicitation will be presented or 
       otherwise made available to any other person, agency, or organization 
       until after an award. Information obtained in response to this RFP 
       which may be "proprietary" or "confidential" will not be disclosed 
       except as required by law. Such "proprietary" or "confidential" 
       information includes information which, if disclosed, might cause harm 
       to the competitive position of the Respondent supplying the 
       information. All Respondents must therefore conspicuously mark as 
       "PROPRIETARY" or "CONFIDENTIAL" each part of their proposal which they 
       consider to contain "proprietary" or "confidential" information.

2.18.  NOTICE OF INTENT TO AWARD

       The Notice of Intent to Award the contract is tentatively scheduled to 
       be mailed on August 31, 1998.

2.19.  MAIL PICK-UP

       All Department mail is picked up once daily at 8:00 a.m.

2.20.  INFORMATION FOR ENVELOPE OR WRAPPING MATERIAL

       The submitting Respondent is required to have printed on the envelope 
       or wrapping

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       containing the proposal the Proposal Notice Number specified in the 
       RFP and the Proposal Opening Date.

2.21.  STATEMENT OF AWARD

       Respondents who desire to have a Statement of Award must include a 
       self-addressed, stamped envelope.

2.22.  FEIN OR SOCIAL SECURITY NUMBER

       Note: Failure to furnish your FEIN or Social Security Number will 
             result in a delay in awarding the contract.

2.23.  PROPOSED TIME TABLE

       Listed below is the proposed time frame for the RFP process:

       Request for Proposals Issued                       July 17, 1998

       Date Questions are Due                             July 27, 1998

       Mandatory Conference for Potential Respondents     July 29, 1998

       Proposals Due                                      August 14, 1998

       Notification of Award of Contract                  August 31, 1998

       Appeals Deadline                                   September 10, 1998

       Contract Effective Date                            October 1, 1998

       The director reserves the right to adjust this schedule as he deems 
       necessary.


SECTION 3:  BACKGROUND

3.1.   ABOUT THE SCAAIP

       The South Carolina Associated Auto Insurers Plan is a joint 
       underwriting association. It was created on July 3, 1997 by the State 
       of South Carolina General Assembly with the passage of the South 
       Carolina Automobile Insurance Reform Act, Act No. 154. See S.C. Code 
       Ann. Section 38-91-10 ET SEQ. (Supp. 1997). Every insurer authorized 
       to write, and writing, automobile insurance within the State of South 
       Carolina is required to be a member, and remains a member as a 
       condition of its authority to transact automobile insurance business 
       within this

                                       8
<PAGE>

       state. The Advisory Board is authorized pursuant to S. C. Code Ann. 
       Section 38-91-310 (Supp. 1997) to direct the operation of the 
       Association.

3.2.   DIRECTOR AUTHORIZED TO SOLICIT PROPOSALS

       3.2.1.   COMPETITIVE SOLICITATION

                The director has decided to solicit competitive, sealed 
                proposals for an insurer(s) to act as Servicing Carrier(s) 
                for the Association. The successful Respondent(s) must meet 
                the requirements set forth herein and provide services in 
                compliance with the Plan of Operation.

       3.2.2.   RFP NOT GOVERNED BY PROCUREMENT CODE

                S. C. Code Ann. Section 38-91-340 provides that the director 
                or his designee may competitively bid for Servicing Carriers 
                to service the insurance business of the Association. 
                Accordingly, this RFP is not governed by the State of South 
                Carolina Procurement Code, including its protest or appeal 
                procedures, or any other state requirements which govern the 
                procurement of goods and services for state agencies set 
                forth in South Carolina law. This competitive process is 
                being conducted by the director or his designee in accordance 
                with South Carolina law.

3.3.   NO RIGHT TO AN AWARD

       A RESPONDENT SUBMITTING A PROPOSAL IN RESPONSE TO THIS RFP UNDERSTANDS 
       AND AGREES BY THAT SUBMISSION THAT IT HAS NO VESTED RIGHT TO AN AWARD 
       OR OTHER DISPOSITION OF ITS RESPONSE OR ANY APPEAL OR PROTEST FILED. 
       THE RESPONDENT FURTHER AGREES THAT ITS RESPONSE IS MERELY AN OFFER BY 
       THE RESPONDENT THAT THE DIRECTOR MAY REJECT WITHIN HIS SOLE DISCRETION.


SECTION 4:  SCOPE OF PROPOSAL

4.1.   OVERVIEW OF RESPONSIBILITIES OF SERVICING CARRIER

       The director is soliciting proposals in order to select insurer(s) to 
       function as Servicing Carrier(s) on behalf of the Association. The 
       Servicing Carrier(s) will be expected to perform any and all duties 
       required for the effective and efficient operation of the Plan for the 
       State of South Carolina. Those specific services are outlined and 
       further defined in the SCOPE OF SERVICES section of this RFP.

                                       9
<PAGE>

4.2.   INFORMATIONAL REFERENCES TO THE PLAN OF OPERATION

       The SCOPE OF SERVICES section of this RFP which follows may contain 
       specific references to provisions in the Plan of Operation. These 
       references are for informational purposes only, and are not intended 
       to represent the total scope of the Servicing Carrier(s)' functions 
       and responsibilities. A complete understanding of the duties to be 
       performed by the Servicing Carrier can only be gained after reading 
       this RFP and all of the provisions of the Plan of Operation, the 
       performance standards, financial reporting requirements, and all 
       pertinent South Carolina insurance statutes and regulations.

4.3.   PROPOSALS BECOME PROPERTY OF THE PLAN

       Proposals will become the property of the Plan. They may be used only 
       for the limited purpose of administering and servicing the business of 
       the Association for the State of South Carolina. The individual or 
       entity submitting the proposal has no ownership rights thereto. By 
       submitting a proposal in response to this RFP, the Respondent 
       effectively assigns any interest in the data or materials developed of 
       whatever nature in response to this RFP to the Association. Any 
       portion of a Respondent's proposal that is considered to be a trade 
       secret and is marked "PROPRIETARY" and "CONFIDENTIAL" will be held as 
       confidential, and will not be disclosed or shared with any third party 
       except as required by South Carolina law, a validly issued subpoena, 
       or other court order.

4.4.   CONFIDENTIALITY OF EVALUATIONS AND SCORE SHEETS

       Except as otherwise provided in this paragraph, evaluations, score 
       sheets, and any other documents or information utilized by the 
       director in the evaluation and selection process are confidential and 
       will not be disclosed to, or shared with, any Respondent or any 
       external party except as required by law or other valid court process. 
       Each Respondent may review copies of its final score sheets. It is 
       understood that each Respondent relies on this confidentiality 
       provision in preparing and submitting its own confidential proposal. 
       Notwithstanding any of the above, any information or document may be 
       subject to disclosure pursuant to a validly issued subpoena, request 
       from the South Carolina Department of Insurance, or court order 
       requiring disclosure by the Advisory Board under applicable statutes, 
       regulations, or state or federal case law.

4.5.   DISQUALIFICATION FOR FAILURE TO COMPLY WITH RFP

       All proposals must be complete and carefully worded and must convey 
       ALL of the information requested in order to be considered responsive. 
       If the proposal fails to conform to the essential requirements of the 
       RFP, the director, his designee and/or the appropriate committee 
       thereof will be the sole judge as to whether that variance is 
       significant enough to consider the RFP nonresponsive and, therefore, 
       not eligible for an award.

                                       10
<PAGE>

4.6.   DOCUMENTS COMPRISING CONTRACT

       Unless stated otherwise herein, the basic and governing language of 
       the contract resulting from this solicitation will consist of the 
       award document, the RFP documents, including any exhibits, attachments 
       and amendments, and the successful Respondent's proposal. In the event 
       of a conflict between the RFP and the proposal submitted, the terms 
       and conditions of the RFP will govern.

4.7.   CONFLICT

       In the event of a conflict between the terms and conditions of this 
       RFP and the Plan of Operation, the terms and conditions of the Plan of 
       Operation will control.


SECTION 5:  DEFINITIONS

       For the purposes of this RFP, the following definitions will apply:

5.1.   "Advisory Board" means the Advisory Board of the South Carolina 
       Associated Auto Insurers Plan.

5.2.   "Producer" means an agent duly licensed by the South Carolina 
       Department of Insurance to transact automobile insurance business.

5.3.   "Association" means the joint underwriting association established 
       pursuant to South Carolina Act No. 154, i.e., the South Carolina 
       Associated Auto Insurers Plan.

5.4.   "Committee or committees" means the committee(s) appointed by the 
       director or his designee of the South Carolina Department of Insurance 
       to perform in accordance with S.C. Code Ann. Section 38-91-340 (Supp. 
       1997).

5.5.   "Days" means calendar days unless otherwise noted.

5.6.   "Department" means the South Carolina Department of Insurance.

5.7.   "Director" means the director of the South Carolina Department of 
       Insurance or his designee.

5.8.   "Member" means an insurer authorized to write automobile insurance in 
       the State of South Carolina.

5.9.   "Plan" means the South Carolina Associated Auto Insurers Plan (also 
       referred to as SCAAIP or Association).

                                       11
<PAGE>

5.10.  "Plan Administrator" means the individual or entity hired by the 
       Advisory Board to manage the operation of the Association.

5.11.  "Plan of Operation" means the Plan of Operation developed by the 
       Advisory Board and approved by the director pursuant to the provisions 
       of the Automobile Insurance Reform Act, Act No. 154.

5.12.  "Proposal" means your response to this RFP, including the services you 
       propose to provide, your offered price, and any attachment or 
       enclosures submitted with your response.

5.13.  "Request for Proposals" means this document including all exhibits, 
       attachments, amendments and any subsequent distribution made to 
       prospective Respondents affecting the terms and conditions of the 
       proposals.

5.14.  "Servicing Carrier" means the successful Respondent or the carrier(s) 
       selected to provide automobile insurance coverage to qualified 
       applicants of the Association with said carrier being afforded 
       reinsurance by the participating companies of the reinsurance pooling 
       mechanism.

5.15.  "You," "Your," "Offeror," "Applicant" or "Respondent" means an 
       individual or organization, and any affiliated entity submitting a 
       proposal in response to this RFP.

5.16.  "Voluntary Market" refers to the Servicing Carrier's non-SCAAIP motor 
       vehicle insurance operations and customers, as the context requires.


SECTION 6:  QUALIFICATION FOR SERVICING CARRIER

6.1.   SURPLUS, PERFORMANCE BOND AND STATUTORY DEPOSIT REQUIREMENTS

       The applicant must have a policyholder surplus of $10 million dollars 
       as of the end of the fiscal year immediately preceding the submission 
       of the appointment application (Proposal), as evidenced by an audited 
       financial statement, and an A. M. Best rating of not less than the 
       lowest A rating, and provide a performance bond in the amount of $1.5 
       million dollars. An applicant with any B rating, must provide a bond 
       one and one half times that required of an A rated applicant and an 
       applicant that is not rated or rated below the lowest B rating must 
       provide a performance bond two times that required of an A rated 
       applicant. In addition, an applicant that is not rated or is rated 
       below the lowest A rating must provide a statutory deposit of $1 for 
       each $10 of premium written through the Association.

                                       12
<PAGE>

6.2.   EXPERIENCE REQUIRED

       The applicant must be licensed and writing in South Carolina by 
       March 2, 1999, automobile physical damage and liability insurance on 
       private passenger and/or commercial motor vehicles. The applicant must 
       have a minimum of five years experience writing automobile property 
       and casualty insurance, or prove to the satisfaction of the Director 
       of Insurance that it has the experience and capability to perform the 
       duties of the Servicing Carrier. Groups of companies under the same 
       ownership and management must be treated as a single member under this 
       paragraph. Groups of companies under either the same ownership or 
       management, but not both, may elect to be treated either separately or 
       as a single member.

6.3.   SERVICE FACILITY REQUIREMENTS

       The applicant must be an insurer, or be affiliated with an insurer 
       that has a service facility capable of affording policy issuance; 
       premium collections services for all classes of risks, statewide; 
       service insurance claims in every state, Washington, D. C., and Canada 
       and all other usual and customary policyholder services.

6.4.   INSURANCE WRITING REQUIREMENTS

       The applicant must be an insurer licensed, or be affiliated with an 
       insurer licensed, to write and writing automobile liability and 
       physical damage insurance without restriction for the most recent five 
       years or prove to the satisfaction of the director that it has the 
       capability to perform as Servicing Carrier.

6.5.   NET WORTH REQUIREMENTS FOR AFFILIATED ENTITY

       The applicant must be an entity with a net worth of 10 million dollars 
       and be affiliated with an insurer that has policyholder surplus of 10 
       million dollars at the end of the fiscal year immediately preceding 
       the submission of the appointment proposal.

6.6.   EXECUTION OF CONTRACT AWARD DOCUMENT

       The applicant must execute the Award Document as required and comply 
       with the provisions of the Agreement.

6.7.   DISCRIMINATION IN SERVICE BETWEEN VOLUNTARY INSURED AND ASSOCIATION 
       INSURED PROHIBITED

       The applicant must have the necessary facilities, or be affiliated 
       with an insurer with the necessary facilities, to provide Association 
       risks with the same level of service rendered to its voluntary market 
       insureds, including both policy and claims services. If a Servicing 
       Carrier services its South Carolina voluntary market from a policy 
       service facility not

                                       13
<PAGE>

       physically located in South Carolina, it is acceptable to service its 
       Association business from this same policy service facility provided 
       that the same level of service is maintained. If Servicing Carriers do 
       not have claims facilities in South Carolina, it will be necessary to 
       designate another insurer, an independent claims adjusting firm or 
       some other means subject to the approval of the director for the 
       purpose of claims settlement and service.

6.8.   SERVICE REQUIRED FOR ENTIRE TERM OF CONTRACT

       The applicant must be able to administer the contract for the entire 
       term of the contract based upon the specifications outlined in the 
       RFP. The term of the contract includes the run-off period.

6.9.   FINANCIAL STABILITY REQUIREMENT

       The applicant must demonstrate its financial stability, and the 
       financial stability of any other entity with which it is affiliated, 
       in accordance with the criteria established within this RFP (SEE ALSO 
       Section 9.1) by complying with the requirements of the Plan of 
       Operation and this RFP.

6.10.  COOPERATE WITH WINDING UP OF ASSOCIATION

       The applicant must agree and certify that it will cooperate with the 
       winding up of the affairs of the Association and the conversion to an 
       assigned risk plan, if any.

6.11.  AFFIDAVIT OF NON-COLLUSION REQUIRED

       The applicant must submit an "Affidavit of Non-Collusion" which is 
       attached to this RFP as Exhibit 1.(1)

6.12.  YEAR 2000 COMPLIANT SYSTEMS REQUIRED

       Certify delivery of computer and data processing systems that will be 
       year 2000 compliant by January 1, 1999; and

6.13.  PROPOSAL SUBMISSION REQUIREMENTS

       Submit a proposal that meets the requirements of this RFP, a proposal 
       bond, a performance bond, and bid fee in the amounts specified in this 
       RFP.


---------------
       (1) If the Respondent subcontracts any or a part of the services 
required under this RFP, all subcontractors must also submit an Affidavit of 
Non-Collusion.

                                       14
<PAGE>

6.14.  CONTINUING RESPONSIBILITIES OF THE RESPONDENT

       Each Respondent must demonstrate initially, and on a continuing basis, 
       that it meets the eligibility criteria established in this RFP. Once a 
       Respondent is selected to be a Servicing Carrier, it shall:

       6.14.1.  Maintain the qualifications and eligibility requirements 
                outlined herein and in the South Carolina Associated Auto 
                Insurers Plan of Operation, Rules of Practice and other 
                pertinent rules and regulations of the Association.

       6.14.2   Comply with any and all performance standards promulgated 
                and/or amended by the Advisory Board for Servicing Carriers 
                and any enhanced performance as set forth in the Respondent's 
                proposal.

       6.14.3.  Execute the Award documents and comply with all provisions of 
                it and the RFP.

       6.14.4.  If at any time a Servicing Carrier evidences in any manner to 
                the Plan Administrator a substantial disregard for, or 
                inability to comply with the performance standards, 
                procedures, Plan requirements, or no longer meets the 
                eligibility criteria, the Servicing Carrier shall be subject 
                to the terms of the Servicing Carrier agreement, including 
                the provision on termination.

       6.15.5.  In the event a Servicing Carrier fails to maintain the 
                required financial rating during the term of the contract, 
                the Advisory Board has the option of terminating the 
                Servicing Carrier's quota share and requesting that the 
                director or his designee assign it to the remaining carriers 
                or utilizing any other option it deems appropriate including, 
                but not limited, to e.g., requiring collateralization of 
                obligations for the balance of the Servicing Carrier 
                contract, requesting that the director or his designee select 
                the next qualified bidder, or initiate another RFP process to 
                replace the nonqualifying carrier for the remainder of the 
                term.

6.15.  POSSIBLE NUMBER OF SERVICING CARRIERS

       The Advisory Board has determined that no more than five (5) Servicing 
       Carriers will be selected to service the Private Passenger Automobile 
       insurance business for the State of South Carolina. Respondents must 
       indicate the quota of the market share of Association business it is 
       proposing to service in the state.

                                       15
<PAGE>

6.16.  ACCEPTABLE QUOTA SHARES

       The acceptable quota shares are as follows: 20%, 30%, 25%, 33 1/3%, 
       50%, 75%, and 100%. Respondent must state both the minimum and maximum 
       share that it will to service within the following parameters:

                -  The minimum share a carrier will bid on shall not be less
                   than 20%; and 

                -  The maximum share a carrier will bid on shall not exceed 
                   100%. 

6.17.  COST PROPOSALS FOR MORE THAN ONE QUOTA PERMITTED

       Respondents are encouraged to submit cost proposals for more than one 
       quota to allow the director the maximum flexibility in the final 
       selection and quota determination. Different Servicing Carrier 
       allowances may be submitted for different quotas.

6.18.  BOND(S) AND PROPOSAL FEE REQUIREMENTS

       Each Respondent must submit the proposal and performance bonds in 
       accordance with the requirements of this RFP.

       6.18.1.  PROPOSAL BOND:

                Respondents shall calculate the proposal bond amount using 
                this format.

                6.18.1.1.      Estimate the amount of the SCAAIP annual 
                               premium.

                6.18.1.2.      Estimate the total amount of the SCAAIP 
                               premium for the entire life of the program, 
                               i.e., for policies effective March 1, 1999 
                               through February 28, 2003.

                6.18.1.3.      Calculate the Respondent's share of total 
                               SCAAIP premium for the life of the program by 
                               multiplying the premium from step 2 by the 
                               quota of the market share of Association 
                               business the Respondent is proposing to service 
                               in the State.

                6.18.1.4.      Calculate Respondents total compensation by 
                               multiplying the share of premium from step 3 
                               by the Respondents proposed compensation 
                               percentages.

                6.18.1.5.      The proposal bond amount is determined by 
                               multiplying the Respondent's total estimated 
                               compensation by 5%.

                                       16
<PAGE>

                The suggested formula for determining the proposal bond 
                amount is reflected in Exhibit 8.

       6.18.2.  PERFORMANCE BOND

                6.18.2.1.      The successful Respondent must furnish to the 
                               Advisory Board within ten days of the 
                               acceptance of his proposal, a Performance 
                               Bond, Certificate of Deposit, or Cashier's 
                               Check for the amounts specified in Section 6.1 
                               above. The performance bond will not be 
                               triggered where termination of the contract is 
                               for reasons beyond the control of the 
                               Respondent in accordance with the Contractual 
                               Requirements Section of this RFP.

                6.18.2.2.      Bonds must be issued by a surety company 
                               licensed to do business in South Carolina, 
                               with an "A" minimum rating of performance as 
                               stated in the most current publication of 
                               "Best Key Rating." Each bond must be 
                               accompanied by a "Power of Attorney" 
                               authorizing the attorney-in-fact to bind the 
                               surety, and certified to include the date of 
                               the bond. Bonds must be fully executed.

                6.18.2.3.      Certificates of Deposit or Cashier's Checks 
                               must be issued by a financial institution 
                               located in South Carolina which is insured by 
                               the FDIC or FSLIC, and will be retained by the 
                               State for the duration of the contract period.

       6.18.3.  PROPOSAL FEE

                Each Respondent shall submit with the proposal responding to 
                this solicitation a fee in the amount of $500. This fee shall 
                be submitted via check made payable to the South Carolina 
                Associated Auto Insurers Plan.

                                       17


<PAGE>

                         SECTION 7: SERVICES REQUIRED

7.1.  SERVICE EFFECTIVE DATE

      Selected Servicing Carriers must be prepared to begin receiving new 
      business assignments with March 1 effective dates as of January 15, 
      1999. Servicing Carriers will not be able to change its quota 
      assignment during the contract period. Servicing Carriers will not be 
      able to restrict the producer assignments that it receives.

7.2.  SCOPE OF WORK

      7.2.1.  The Servicing Carrier must provide all services outlined in the 
              Servicing Carrier Performance Standards of the Rules of 
              Practice (Exhibit 11) including, but not limited to, 
              underwriting, policy issuance, auditing, billing, premium 
              collection, loss control and claims administration services as 
              required by, and in accordance with established procedures, 
              standards and requirements of the Plan Administrator and the 
              Advisory Board. The performance standards listed below and the 
              Rules of Practice set forth the minimum standards which the 
              Servicing Carrier must perform in accordance with the rules of 
              the Association. Additional or enhanced performance standards 
              that a Servicing Carrier commits to providing in its proposal 
              to become a Servicing Carrier, serve to raise the minimum 
              standards for that specific Servicing Carrier.

      7.2.2.  The responsibilities hereby delegated to and assumed by the 
              Servicing Carrier are those of an independent contractor. 
              Nothing contained in this RFP, or any subsequent contractual 
              document, will be construed to create or constitute an 
              employment, agency, partnership or joint venture, or any other 
              relationship between the Advisory Board and the Servicing 
              Carrier(s). Accordingly, the Servicing Carrier has no authority 
              to make any agreement on behalf of the Advisory Board or to 
              otherwise contractually bind the Advisory Board without its 
              express written consent. The Servicing Carrier will be 
              responsible for any and all costs associated with providing the 
              services described in this RFP.

      7.2.3.  Servicing Carriers must write each of the following lines of 
              business on behalf of the Association:

              7.2.3.1. Private Passenger Automobile Insurance Coverage

                       "Private Passenger Automobile Insurance" means the 
                       following types of motor vehicles owned or leased under
                       a long term contract by an


                                       18

<PAGE>

                       individual or individuals:

                       (1)  motor vehicles of the private passenger automobile
                            insurance type or station wagon type;

                       (2)  panel trucks, delivery sedans, vehicles with a 
                            pick up body, vans or similar motor vehicles 
                            designed for use on streets and highways and so 
                            licensed;

                       (3)  motor homes, so long as the motor vehicles 
                            described in (a) and (b) are not used in the
                            occupation, profession or business of the 
                            insured other than farming or ranching; and

                       (4)  motorcycles.

             7.2.3.2.  Individual private passenger does not include: 
                       (1) motor vehicles that are used for public or livery 
                       conveyance or rented to others without a driver; 
                       (2) fire department vehicles, police vehicles, 
                       ambulances, and rescue squad vehicles which are 
                       publicly owned; (3) motor driven cycles, motor scooters,
                       mopeds; (4) dune buggies, all-terrain vehicles, go-carts
                       and snowmobiles; (5) golf carts; and (6) small 
                       commercial risks.

      7.2.4.  The Servicing Carrier must comply with all requirements 
              established by the Advisory board, the SCAAIP Plan of 
              Operation, the SCAAIP Accounting and Statistical Manual, the 
              Manual of Rules and Rates, the SCAAIP Rules of Practice as now 
              constituted and hereafter amended, and any other rule 
              established by the SCAAIP Advisory Board for the effective and 
              efficient operation of the Association. The Servicing Carrier 
              must provide all services necessary for the effective and 
              efficient administration and servicing of the insurance 
              business of the SCAAIP including, but not limited to:

              7.2.4.1.  GENERAL RESPONSIBILITIES:

                        In addition to any other responsibilities noted in
                        this RFP, the Servicing Carrier must perform the 
                        following general responsibilities:

                        a.  At initial policy issuance and each renewal 
                            thereafter, Servicing Carriers must accomplish 
                            confirmation of driving record of each insured 
                            driver by obtaining copies of  the insured's 
                            motor vehicle records issued by the State of 
                            South Carolina Department of Public Safety or on 
                            the basis of motor vehicle records issued by the 
                            appropriate agency of another


                                       19

<PAGE>

                            state Servicing Carriers must properly price all 
                            policies and when appropriate, check 
                            classification and territory through inspection 
                            reports and other techniques.

                        b.  Servicing Carriers must issue insurance policies 
                            to applicants by the expiration date of the 
                            binder issued in accordance with the Rules of 
                            Practice.

                        c.  Servicing Carriers must carry out all subsequent 
                            policy transactions on a timely basis in 
                            accordance with the Rules of Practice.

                        d.  Servicing Carriers must carry out all necessary 
                            accounting procedures as outlined in the rules and 
                            regulations of the Association. These accounting 
                            procedures may include, but not be limited, to:

                            1.  Billing and collection; and
                            2.  Commission payments and statements to 
                                producers.

                        e.  Servicing Carriers must properly identify 
                            producers certified by the Association for 
                            placement of Association coverage and make annual 
                            reports by producer to the Association for 
                            analysis.

                        f.  Servicing Carriers must collect the necessary 
                            data to disburse commission payments monthly to 
                            producers and store this data and deliver the 
                            same to the Internal Revenue Service annually.

                        g.  Servicing Carriers must generate the statistical 
                            and accounting information in report formats 
                            required by the Association. The content and 
                            format of these reports will be in accordance 
                            with the results and specifications as may be 
                            established by the Association.

                        h.  Servicing Carriers must properly and effectively 
                            operate the take-out plan in an effort to 
                            depopulate the Association market.

                        i.  Servicing Carriers must generate on a policy 
                            level and overall level a report reflecting the 
                            amounts of claim reserves necessary for 
                            Association policies in order that the


                                       20

<PAGE>

                            Association will be in a position to evaluate the 
                            proper reserving practices and detect possible 
                            under/over reserving. The content and format of 
                            the reserving reports furnished to the 
                            Association by the Servicing Carrier shall be in 
                            accordance with the specifications established by 
                            the Association.

             7.2.4.2.  UNDERWRITING/RATING SERVICES.  The Servicing Carrier 
                       will, in conjunction with the other services required 
                       herein, provide the underwriting services necessary 
                       for the effective and efficient operation of the 
                       Association. The Servicing Carrier must use its best 
                       efforts to underwrite the risk. This contract will be 
                       entered into by the Advisory Board with the Servicing 
                       Carrier in reliance upon the skills of its management 
                       and staff as represented in its response to this RFP. 
                       Those underwriting services include, but are not 
                       limited, to the following:

                       a.  General Underwriting/Rating 

                           The Servicing Carrier shall properly price all
                           policies in accordance with the approved rating 
                           plans and approved forms contained in the 
                           Association's Manual of Rules and Rates and 
                           establish procedures for appropriate and timely 
                           verification of policyholders' and operators' 
                           driving records and/or obtain other information as 
                           necessary to assist in the proper classification 
                           and rating of an applicant. SEE ALSO Rules of 
                           Practice.

                       b.  Servicing Carrier Must Perform All Services 
                           Outlined in Performance Standards for Servicing 
                           Carriers and Rules of Practice.

                           IN ADDITION TO THE SERVICES OUTLINED WITHIN THIS 
                           RFP, THE SERVICING CARRIER IS RESPONSIBLE FOR 
                           PERFORMING ANY AND ALL SERVICES OUTLINED IN THE 
                           RULES OF PRACTICE FOR SERVICING CARRIERS WHICH IS 
                           ATTACHED TO THIS RFP AS EXHIBIT 11 AND 
                           INCORPORATED INTO THIS DOCUMENT BY REFERENCE.

             7.2.4.3.  ACCOUNTING SERVICES.  The Servicing Carrier will, in
                       conjunction


                                       21

<PAGE>

                       with the other services required herein, the Accounting
                       and Statistical Requirements Manual or other Plan  
                       documents, or rules established by the Advisory Board, 
                       prepare and maintain separate financial records to 
                       account for the business of the Association in 
                       accordance with statutory accounting principles. 
                       Accounting responsibilities include, but are not 
                       limited, to the following:

                       a.  Performing an annual audit of the producers' 
                           records conducted by an independent, certified 
                           public accounting firm;

                       b.  Entering properly all entries reflecting the 
                           business transacted on behalf of the Association 
                           into books and ledgers maintained on behalf of the 
                           Plan;

                       c.  Complying with the Accounting and Statistical 
                           Requirements Manual;

                       d.  Handling disbursements from, and monthly 
                           reconciliations of, all accounts maintained on 
                           behalf of the Plan;

                       e.  Establishing a separate bank account for business 
                           transacted on behalf of the South Carolina 
                           Associated Auto Insurers Plan;

                       f.  Preventing the commingling of funds collected from 
                           business transacted on behalf of SCAAIP with funds 
                           collected in the voluntary market;

                       g.  Billing for and collecting premiums due the South 
                           Carolina Associated Auto Insurers' Plan;

                       h.  Complying with statutory accounting principles and 
                           maintaining internal controls;

                       i.  Handling claim transactions, salvage and 
                           subrogation recoveries and agent compensation;

                       j.  Performing any other accounting service requested 
                           by the Advisory Board not specifically enumerated 
                           within this RFP;


                                       22

<PAGE>

                       k.  Prepare filings and pay all applicable municipal, 
                           fire and premium taxes using the funds of the 
                           Plan; and

                       l.  Collect and report South Carolina recoupment 
                           surcharges.

                       The Accounting Services must be performed in accordance
                       with the requirements of the Plan documents as they 
                       currently exist or are hereafter amended.

             7.2.4.4.  AUDITING SERVICES.  The Servicing Carrier, in 
                       conjunction with the other services required by this 
                       RFP, will conduct in accordance with the requirements
                       of the Plan Documents, at least annually, audits of 
                       the producers affiliated with the Servicing Carrier to
                       ensure:

                       a.  Compliance with the Plan of Operation, Operating 
                           Principles, and Manual of Rules and Rates;

                       b.  Applications received are complete and contain 
                           accurate information as required by the Producer 
                           Performance Standards of the Rules of Practice of 
                           the Plan of Operation;

                       c.  Private passenger automobile insurance risk 
                           applications submitted to the Plan contain 
                           accurate information;

                       d.  Premium and loss data submitted is accurate;

                       e.  Producer is performing in accordance with the 
                           applicable performance standards; and

                       f.  Producers are properly placing risks in the SCAAIP.

                       The foregoing is not an exhaustive list. The Servicing 
                       Carrier will be required to perform any other 
                       reasonable auditing services deemed necessary by the 
                       Advisory Board.

             7.2.4.5.  CUSTOMER SERVICE.  The Servicing Carrier will, in 
                       conjunction with the other services required by this 
                       RFP, establish measurable customer service standards, 
                       procedures for monitoring compliance therewith and 
                       time frames for achieving resolution of the issues 
                       that are designed to ensure that customers, including, 
                       but not limited to, producers, policyholders, 
                       prospective applicants, industry and the Plan 
                       Administrator receive quality customer service. Those 
                       services


                                       23

<PAGE>

                       the Servicing Carrier is required to provide include, 
                       but are not limited, to the following:

                       a.  Employing courteous and properly trained staff 
                           members to respond to the needs of, and issues 
                           raised by producers, consumers, and industry 
                           regarding coverages available through the SCAAIP;

                       b.  Establishing procedures which ensure that insureds 
                           in the SCAAIP receive the same quality service as 
                           members in the producers' voluntary market;

                       c.  Ensuring that SCAAIP policyholders receive the 
                           same level and quality of service as policyholders 
                           insured in the voluntary market;

                       d.  Assisting producers assigned to them with 
                           underwriting and claims ratings issues;

                       e.  Issuing timely notification of cancellation, 
                           renewal and nonrenewal of the policy;

                       f.  Responding to complaints and disputes fairly and 
                           promptly;

                       g.  Notifying customers of key contract names, 
                           addresses, a toll free number and other telephone 
                           and facsimile numbers for underwriting, claims, 
                           loss control, and billing at the customer's 
                           request;

                       h.  Handling claims including the investigation, 
                           resolution, and communications regarding the claim 
                           in a prompt, professional and timely manner;

                       i.  Providing copies of underwriting and claims 
                           handling guidelines or procedures used in the 
                           carrier's voluntary business to the Plan 
                           Administrator upon request;

                       j.  The Plan Administrator has the authority to review 
                           Servicing Carrier Procedures for its Association 
                           and voluntary book of business; and


                                       24

<PAGE>

                       k.  Performing any other reasonable customer services 
                           required by the Advisory Board.

             7.2.4.6.  DATA PROCESSING SERVICES.  The Servicing Carrier will
                       perform all data processing requirements necessary for 
                       the effective and efficient operation of the Plan 
                       including, but not limited to, the following:

                       a.  Providing policy level detail, as required by the 
                           Plan Administrator, for eligibility determination 
                           and/or a take-out and fraud prevention program 
                           databases in a format prescribed by the Plan 
                           Administrator. This information must be submitted 
                           to the Plan Administrator or the Advisory Board in 
                           accordance with the schedule established in the 
                           Plan of Operation or other pertinent manuals or 
                           instructions to the Servicing Carrier;

                       b.  Establishing a computer system with E-mail 
                           capability and have ability to use a telephonic 
                           binding system provided by the Plan Administrator 
                           if required by the Advisory Board. If the 
                           Servicing Carrier is providing its own independent 
                           electronic binding system, then the Servicing 
                           Carrier must attach a detailed description of its 
                           electronic binding system and the applicable 
                           procedures to its response to this RFP;

                       c.  Consolidating and accounting for premium loss and 
                           reserve reporting in accordance with the 
                           requirements of the Accounting and Statistical 
                           Requirements Manual (See Exhibit 12);

                       d.  Monitoring the effective date of all policies 
                           received from all producers and maintaining a 
                           historical record which will enable the Servicing 
                           Carrier to verify the effective dates of coverage, 
                           if necessary;

                       e.  Creating or preparing reports as necessary that 
                           reflect the activity of the entire book of 
                           business transacted by the carrier on behalf of 
                           the Association including, but not limited to, 
                           premium, loss, salvage and subrogation, 
                           litigation, producer deficiencies for


                                       25

<PAGE>

                           underwriting, claims audit or administration, and 
                           other performance reviews and requested by the 
                           Advisory Board or the Plan Administrator;

                       f.  Tracking applications submitted by producers on a 
                           periodic basis to ensure that applications are not 
                           being improperly placed in the Association. The 
                           system must be capable of comparing the number of 
                           applications submitted monthly to the annual 
                           volume provided on the Association Producer 
                           Certification Application form.  Servicing Carrier 
                           must notify the producer and the Plan 
                           Administrator when the number of applications 
                           submitted appear to be exceeding the 10% threshold.

                       g.  Tracking the physical damage claims submitted 
                           and/or filed with the Association in relationship 
                           to the date and time the policy is issued;

                       h.  Accessing the motor vehicle records of the South 
                           Carolina Department of Public Safety;

                       i.  Establishing the necessary computer, 
                           telecommunication, data transmission systems or 
                           purchasing the necessary software to accomplish 
                           the work of the Association. The computer or 
                           telecommunications system shall include an 
                           Internet Website page so that producers can have 
                           access to information and forms concerning the 
                           Association and communicate with the Servicing 
                           Carrier electronically;

                       j.  Certifying that all computer and data processing 
                           systems that it uses and utilized by its 
                           subcontractors will be year 2000 compliant by 
                           January 1, 1999; and

                       k.  Performing any other reasonable data processing 
                           services required by the Advisory Board for the 
                           efficient operation of the Association.

             7.2.4.7.  FRAUD DETECTION AND PREVENTION SERVICES.  In conjunction
                       with other services required under this RFP, the 
                       Servicing Carrier will


                                       26

<PAGE>

                       provide fraud detection and prevention services which
                       include, but are not limited to:

                       a.  Complying with fraud detection and prevention 
                           measures, guidelines, rules, standards established 
                           by the SCAAIP Advisory Board;

                       b.  Conducting seminars and other educational 
                           initiatives designed to prevent fraud in the 
                           SCAAIP;

                       c.  Complying with the fraud reporting requirements of 
                           Title 38, Chapter 55 of the South Carolina Code 
                           Annotated; and

                       d.  Establishing a Special Investigative Unit capable 
                           of responding and timely investigating complaints 
                           within the State of South Carolina;

                       e.  Performing periodic audits and reviews of the 
                           producers assigned to the carrier to ensure that 
                           the producers are complying with the rules and 
                           regulations of the SCAAIP;

                       f.  Cooperate with the Plan Administrator in the 
                           development and implementation of new fraud 
                           prevention initiatives; and

                       g.  Performing any other reasonable fraud prevention 
                           services required by the Advisory Board.

             7.2.4.8.  REPORTING SERVICES.  The Servicing Carrier, in 
                       conjunction with the other services required by this
                       RFP, and in addition to all reports required by the
                       Plan of Operation, Portfolio of Forms and Endorsements
                       and/or other Plan documents, will prepare and make 
                       periodic reports to the Plan Administrator and/or 
                       Advisory Board in accordance with the deadlines 
                       established in this RFP or, its exhibits, if any, and 
                       the Advisory Board. Those reports may include, but are
                       not limited, to the sample documents contained in 
                       Exhibit 6:

                       a.  Producer Certification letters;

                       b.  Producer Compliance letters;


                                       27

<PAGE>

                       c.  Producer Complaint letters; and

                       d.  Deficiency Letters.

                       This is not an exhaustive list. The Advisory Board 
                       shall designate annually the reports that must be 
                       filed. Notwithstanding, the Servicing Carrier is 
                       required to report violations of the South Carolina 
                       insurance laws to the South Carolina Department of 
                       Insurance and other appropriate authorities within 
                       thirty (30) days of discovery of the violation. 
                       Violation reports must be in writing. SEE Exhibit 11: 
                       Rules of Practice for more information about the 
                       reports required.

             7.2.4.9.  RECORDS MANAGEMENT AND RETENTION SERVICES.  The 
                       Servicing Carrier, in conjunction with the other 
                       services required by this RFP, shall provide records 
                       management and retention services for the Plan 
                       including, but not limited to:

                       a.  Servicing as the official repository of all 
                           documents compiled, filed with, or issued by the 
                           Plan involving the producers assigned to it;

                       b.  Maintaining and managing accurate and complete 
                           records of all business transacted by or with the 
                           Plan;

                       c.  Maintaining accurate record of producer 
                           performance and deficiencies;

                       d.  Complying with provisions of South Carolina 
                           Freedom of Information Act regarding the release 
                           of information in accordance with Advisory Board 
                           policy; and

                       e.  Performing any other reasonable records retention 
                           and records management services required for the 
                           effective and efficient operation of the Advisory 
                           Board.

             7.2.4.10. PRODUCER SERVICES.  In conjunction with the other 
                       services to be provided under this RFP, the Servicing 
                       Carrier shall provide the following producer services:

                       a.  Ensure that producers are complying with the 
                           Performance Standards for Producers, the Plan of 
                           Operation and any other applicable Association 
                           rules or regulations;


                                       28

<PAGE>

                       b.  Monitor and track producer licensing and 
                           certification to ensure that only certified 
                           producers are placing risks with the Association;

                       c.  Complying with the procedures set forth in the 
                           Plan of Operation for handling producer 
                           deficiencies (SEE Exhibit 11:Rules of 
                           Practice-Producer);

                       d.  Monitor the immediate binding of coverage to 
                           ensure that producers are complying with the 
                           electronic binding procedures of the Association;

                       e.  Supply forms and endorsements to producers 
                           assigned to that carrier in accordance with the 
                           specifications of the Association;

                       f.  Performing any other reasonable producer services 
                           in accordance with the specifications of the 
                           Association.

             7.2.4.11. ACTUARIAL SERVICES.  The Servicing Carrier will, in 
                       conjunction with other services required herein or 
                       in the Plan documents, assist the Plan Administrator
                       with the actuarial services necessary for the effective
                       and efficient operation of the Association including, 
                       but not limited to;

                       a.  Summarizing and maintaining earned and unearned 
                           premiums, traditionally incurred but not reported 
                           losses (IBNR), or any other data of an actuarial 
                           nature required for reports generated by or for 
                           the Association;

                       b.  Responding to requests from the Plan Administrator 
                           for information necessary to conduct reserve 
                           analyses. Servicing Carrier shall supply the 
                           information by the deadline established by the 
                           Plan Administrator; and

                       c.  Submitting annual actuarial statement of opinion 
                           on reserves by the deadline established by the 
                           Plan Administrator.

7.3.  RESPONDENT IS BOUND BY ENHANCEMENTS

      By Submitting a proposal to this RFP, you are agreeing to meet all of 
      the performance standards, procedures and Plan requirements. If you 
      state in your response to the proposal that you will exceed a 
      particular standard or procedural expectation, you will


                                       29

<PAGE>

      be expected to comply with that higher standard or procedure. You will 
      be audited against your own enhancement standards where the promised 
      performance exceeds the minimum performance standards.

7.4.  CONTRACT TERM

      7.4.1.  INITIAL CONTRACT PERIOD

              The term of the contract awarded in accordance with this RFP 
              shall begin on the effective date through February 28, 2003 and 
              shall contribute until all claims are closed for policies 
              effective through February 28, 2003 or February 28, 2014 
              whichever occurs last.

      7.4.2.  CONTRACT TERM INCLUDES RUN OFF OBLIGATIONS

              The original contract period shall be as stated above. The 
              contract shall not bind, nor propose to bind, the  Advisory 
              Board or the director for any contractual commitment in excess 
              of the original contract period. The director shall have the 
              right within his sole discretion to renew the contract for one 
              additional year, or any portion thereof. In the event the 
              director exercises the right to extend the agreement, all 
              terms, conditions, and provisions of the contract shall remain 
              the same and apply during the renewal period.  The Servicing 
              Carrier agrees to be responsible for the run off associated 
              with business placed in the Association, and agrees that 
              responsibility for administering run off obligations shall 
              survive the expiration or earlier termination of this contract.

SECTION 8:  COMPENSATION

8.1.  SERVICING CARRIER FEE(S)

      Respondents shall state an operating Servicing Carrier fee as a 
      percentage of written premium and a claim service fee as a percentage 
      of earned premium. Carriers will be paid both fees for Association 
      business. However, Servicing Carriers will receive no fees on 
      ineligible premiums charged off and only 50% of the fees for eligible 
      premiums charged off. SEE Exhibit 12. Your allowance will be valid for 
      the entire term of the contract plus the entire term of the run-off 
      period. The allowance includes all costs of servicing the business of 
      the Association including, but not limited to, general expense, other 
      acquisition expense and claims loss expense. Servicing Carrier fees 
      will not be based upon recoupment.

8.2.  FEE ADJUSTMENTS FOR INCENTIVES/DISINCENTIVES PROGRAM


                                       30

<PAGE>

      Compensation will be adjusted through the Incentives/Program which 
      provides monetary incentives and disincentives based upon a carrier's 
      paid loss performance and performance on a graded audit.

8.3.  TOTAL COMPENSATION/PAYMENT SCHEDULE

      The payments made pursuant to this contract shall constitute the total 
      compensation due the successful Servicing Carrier or contractor for the 
      services described herein, the administering of all run off business, 
      and any other obligations required hereunder, regardless of the 
      difficulty, hours worked, or material or equipment required. Payment 
      for services as Servicing Carrier shall be paid from the premiums 
      collected. Payments shall be made on a monthly basis in accordance with 
      the Accounting and Statistical Requirements. Servicing Carriers will 
      not be paid any fees on recoupment.

8.4.  INCENTIVES/DISINCENTIVES

      8.4.1.  AUDITS

             8.4.1.1.  The incentives and disincentives depend upon a 
                       compliance audit process which consists of two major 
                       components: (1) operations (underwriting, producer 
                       deficiency program); and (2) claims.

             8.4.1.2.  Transactions are chosen approximately 30 to 60 days 
                       prior to audit, utilizing the most current transaction 
                       detail. The files are audited to determine compliance 
                       with the Association manuals and the Servicing Carrier 
                       contract.

      8.4.2.  RATING TABLES

             8.4.2.1.  COMPLIANCE RATIOS

                       The compliance ratio for audit attributes tested is 
                       based upon ranges indicating Commendable, 
                       Satisfactory, Marginal and Unsatisfactory. The 
                       percentages are based upon a sample size of 100.

<TABLE>
<CAPTION>
 Commendable       Satisfactory         Marginal        Unsatisfactory
<S>                <C>                  <C>             <C>
greater than         90%-94%             85%-89%        less than 84%
    =95%             
</TABLE>

              8.4.2.2.  WEIGHTED AUDITS


                                       31
<PAGE>


                              AUDIT PROCEDURES
                         INCENTIVES/DISINCENTIVES


AUDIT SCHEDULE

<TABLE>
<CAPTION>

            Activity                                      Date 
    <S>                                       <C>
        Preliminary Audit                     June Through September 1999
    Full Scale Audit of FY98-99               June Through September 2000
    Full Scale Audit of FY99-00               June Through September 2001
    Full Scale Audit of FY00-01               June Through September 2002
    Full Scale Audit of FY01-02               June Through September 2003
    Full Scale Audit of FY02-03               June Through September 2004

</TABLE>


LOSS RATIO EVALUATION

The paid loss ratio will be evaluated at the close of the fiscal year one 
year after the fiscal year closes. The paid loss ratio will be paid losses 
divided by earned premiums where the premiums have not been charged off.

<TABLE>
<CAPTION>

               Activity                             Evaluation Date
         <S>                                      <C>
         Loss Ratio of FY98-99                    September 30, 2000
         Loss Ratio of FY99-00                    September 30, 2001
         Loss Ratio of FY00-01                    September 30, 2002
         Loss Ratio of FY01-02                    September 30, 2003
         Loss Ratio of FY02-03                    September 30, 2004

</TABLE>

<PAGE>


                        Each audit attribute is assigned a weighted factor. 
                        Plan Administrator staff will conduct the audit and 
                        determine the aggregate score.

       8.4.3.   INCENTIVES

                Based upon the evaluation schedule, an insurer with a paid 
                loss ratio less than or equal to the average loss ratio for 
                all the Servicing Carriers combined is eligible for 
                incentives based upon the audits. Audit scores will not be 
                rounded up to the next number. If the overall audit score for 
                the fiscal year in question is Commendable, the incentive is 
                5% of the total compensation paid the Servicing Carrier.

       8.4.4.   DISINCENTIVES

                Based upon the evaluation schedule, an insurer with a paid 
                loss ratio greater than or equal to the average loss ratio 
                for all the Servicing Carriers combined is eligible for 
                disincentives based upon the audits. If the overall audit 
                score for the fiscal year in question is Unsatisfactory, the 
                disincentive is 5% of the total compensation paid the 
                Servicing Carrier.

SECTION 9:   PROPOSAL INFORMATION

9.1   PROPOSAL CONTENTS

      So that the director or his designee may consider your proposal, submit 
      as a minimum the following information in the listed format:

      9.1.1.    COVER LETTER

                Submit a cover letter from an officer of the company with 
                the proposal which provides the name, title, address, 
                telephone number, and facsimile number of the individual 
                authorized to enter into the contract on behalf of your 
                organization and receive any subsequent notices regarding the 
                contract or proposal. The cover letter must be included as a 
                part of the Respondent's proposal. It must also contain the 
                following information:


                                      32

<PAGE>


                9.1.1.1.   TERMS AND CONDITIONS

                           A statement that the Respondent understands and 
                           will comply with all terms and conditions of the 
                           RFP

                9.1.1.2.   LEGAL STATUS

                           A statement which indicates the legal status of 
                           the Respondent

                9.1.1.3.   FEDERAL TAX IDENTIFICATION NUMBER

                           Statement identifying the tax identification 
                           number of the respondent.

                9.1.1.4.   PRIME CONTRACTOR

                           Statement that the prime contractor is registered 
                           and authorized to do business in South Carolina 
                           and provide assurance that any subcontractor 
                           proposed is also properly licensed, registered 
                           and/or authorized to do business in South Carolina.

                9.1.1.5.   NONDISCRIMINATION

                           A statement of affirmative action that the 
                           respondent does not discriminate in its employment 
                           on the basis of race, sex, age, color, religion, 
                           sex, marital status, political affiliation, 
                           national origin, handicap or disability.

                9.1.1.6.   IDENTIFY SUBCONTRACTORS

                           A statement identifying all subcontractors, if 
                           proposed, including names, addresses and phone 
                           numbers of the subcontractors and principal 
                           officers' names and titles.

                9.1.1.7.   SUBCONTRACTORS/AFFILIATED ENTITIES LEGALLY BOUND

                           If use of a subcontractor is proposed, or if the 
                           respondent plans to affiliate with another entity, 
                           a statement from the subcontractor or entity must 
                           be appended to the transmittal letter and signed 
                           by an individual authorized to legally bind the 
                           subcontractor. The statement shall indicate

                           --  the signatory is authorized to legally bind 
                               the entity;

                                      33
<PAGE>


                           --  the general scope of the work to be performed 
                               by the subcontractor or affiliated entity;

                           --  the subcontractor's agreement to perform the 
                               work described; and

                           --  the subcontractor's assertion that it does not 
                               discriminate in its employment practices with 
                               regard to race, sex, age, color, religion, 
                               marital status, political affiliation, national 
                               origin, disability, or handicap.

                9.1.1.8.   OWNERSHIP OF MATERIAL

                           A statement that the respondent acknowledges that 
                           all materials developed, prepared, assembled or 
                           conceived by the respondent pursuant to this RFP 
                           are "works made for hire" and are owned by the 
                           Association. The Association shall own all 
                           documents and materials produced by the Respondent 
                           and no duplications shall be made of this material 
                           unless authorized by the Association.

                9.1.1.9.   EVIDENCE OF QUALIFICATIONS

                           A statement that the Respondent meets the 
                           qualifications as stated in this RFP. Respondent 
                           must attach documentation to show that the 
                           Respondent meets all of the qualifications listed. 
                           The documentation required must include proof of 
                           the items listed in Section 6.

      9.1.2.    PROPOSAL LETTER

                The Respondent shall submit a proposal letter with its 
                corporate seal affixed and signed by someone authorized to 
                bind the company. If the individual signing the proposal 
                letter is not the corporate president, then the individual 
                must also submit evidence which shows that the individual is 
                authorized to bind the corporation. The fully executed 
                proposal letter must be submitted along with the Respondent's 
                complete proposal. Upon signing by the chair of the Advisory 
                Board, the proposal letter will become the cover page of the 
                contract with the successful Respondent.

9.2.  COMPANY BUSINESS PLAN.  Proposals submitted must outline how you 
      propose to perform each of the responsibilities listed in the SCOPE OF 
      WORK section of this RFP. Each eligible Respondent must submit a 
      comprehensive company business plan which demonstrates that it has, or 
      is willing, to establish prior to the commencement of its term, 
      sufficient servicing capacity, facilities, and resources to provide the 
      best levels of performance and service in meeting its obligations to 
      the Association, the insureds, regulatory authorities, and member 
      companies. Interviews may be conducted to clarify statements contained 
      in the proposal. The Respondent must include information in the 
      proposal submitted which specifically indicates the amount of physical 
      damage and liability premiums the Respondent has written

                                      34

<PAGE>


      in the State of South Carolina for the past five years. The Business 
      Plan should provide the following information:

      9.2.1.    EXECUTIVE SUMMARY

                The executive summary shall clearly and concisely summarize and 
                highlight the contents of the proposals so as to give the 
                director a broad and thorough understanding of the proposal.

      9.2.2.    BACKGROUND AND EXPERIENCE

                This section shall include for the Respondent, subcontractors 
                and any affiliated entities details on the background of the 
                company or business, its size and resources, and explicit 
                details of experience relevant to the work outlined in this 
                RFP, including a list of recent projects similar to this 
                project. The background on the company shall cover the 
                following: 

                9.2.2.1.   Name of Company
                9.2.2.2.   Date Established
                9.2.2.3.   Ownership (public company, partnership, 
                           subsidiary, sole proprietorship)
                9.2.2.4.   Primary line of business for the entity

9.3   PAST PERFORMANCE AND COMMITMENT

      The Respondent must also provide documents supporting past performance, 
      such as a report from a Plan Manager of a pooling mechanism in which 
      the Respondent is currently or formerly was a Servicing Carrier, 
      complaint/appeal records, current Plan residual market compliance 
      audits, market conduct exams conducted on involuntary operations 
      (including direct assigned business). Other relevant and pertinent 
      information shall be provided such as length of service as a Servicing 
      Carrier, explanation of resignations and terminations from pooling 
      mechanisms and participation within the involuntary market (assisting 
      committees and regulators by attending meetings, contributing and 
      formulating solutions to market issues).

9.4.  FINANCIAL INFORMATION.

      Respondent shall submit the following financial information:

      9.4.1.    Copies of your audited financial statements for the past 
                three (3) years;

      9.4.2.    A copy of your credit rating from an accredited national 
                credit rating bureau;

                                     35

<PAGE>


      9.4.3.    Copies of your annual reports for the past three years; and
 
      9.4.4.    Certification that your company has not declared bankruptcy 
                within the last three years, signed by an officer of your
                company.

9.5.  COST/PRICE.  Respondent must submit its cost as a percentage of 
      premium. Servicing Carriers will only receive 50% of the ineligible 
      allowance for eligible premiums charged off and will not receive any 
      allowance for charged off premiums. Respondents must submit separate 
      cost for each market share quota it proposes to service. Respondents 
      must use Exhibit 9: Pricing Sheet to submit the cost/price for services.

9.6.  EFFECT OF ALTERATIONS/ERASURES.

      A proposal containing alterations or erasures will not be 
      considered,unless the alteration or erasure is crossed out and the 
      correction thereof printed in ink or typewritten adjacent thereto and 
      initialed in ink by the person signing the proposal. This prohibition 
      includes correction fluid. HAND WRITTEN PROPOSALS OR PROPOSALS WRITTEN 
      IN INK SHALL NOT BE CONSIDERED.

9.7.  DURATION OF OFFER.

      All proposals must indicate that they are valid until notification of 
      an award has been issued. This period may be extended by mutual 
      agreement between the Servicing Carrier and the Advisory Board. The 
      costs submitted with the proposal shall be firm from the date of 
      submission.

9.8.  DIRECTOR RESERVES RIGHT TO WAIVE MINOR DEFICIENCIES.

      The director or his designee reserves the right to waive minor 
      deficiencies and the informalities if, in his judgment, the best 
      interest of the State of Carolina shall be served. In addition, the 
      director or his designee reserves the right to accept or reject any or 
      all proposals received as a result of this solicitation, to obtain 
      information concerning any or all Respondents from all sources and to 
      request an oral presentation from any or all Respondents.

9.9.  OTHER DATA.

      The director or his designee reserves the right to request additional 
      financial statements and any other data from the Respondent. Respondent 
      must submit any additional information by the date established by the 
      director or his designee. Failure to submit the requested information 
      may result in the disqualification of the proposal. The director or his 
      designee may request a Dunn and Bradstreet Report on all Respondents.

                                      36

<PAGE>


9.10. VIDEO TAPES

      You may supplement your proposal with video or cassette tapes, if 
      desired; however, no personal visits shall be scheduled other than the 
      Mandatory Pre-proposal Conference or possible presentation. If a video 
      or cassette is submitted, you must submit at least six copies.


                 SECTION 10: METHODOLOGY, EVALUATION AND AWARD

10.1. INTRODUCTION

      Responses to the RFP will be reviewed, evaluated and scored first by a 
      committee appointed by the director or his designee in the manner 
      outlined below to determine the ability of the Respondent to meet the 
      requirements of the Plan. The review will be based upon the following:

10.2. OVERALL PROPOSAL.  Proposals shall be evaluated in two stages: 
      Technical Compliance and Comparative Assessment.

      10.2.1.   TECHNICAL COMPLIANCE.

                In the technical compliance phase, the proposal shall be 
                evaluated for compliance with all of the requirements of this 
                RFP. The proposal shall be reviewed to determine if it meets 
                the minimum qualifications. If it is determined not to meet 
                the minimum qualifications, the proposal shall be 
                automatically disqualified and shall not be considered by the 
                Evaluation Committee. Additionally, if the proposal is 
                determined to be non-conforming, it shall be automatically 
                disqualified and shall not be considered. Submitting multiple 
                proposals is an example of a proposal that would be 
                considered non-conforming.

      10.2.2.   NONRESPONSIVE PROPOSALS

                IT IS THE RESPONDENT'S SOLE RESPONSIBILITY TO SUBMIT ALL 
                REQUIRED INFORMATION. THE ADVISORY BOARD IS UNDER NO 
                OBLIGATION TO SOLICIT SUCH INFORMATION IF IT IS NOT INCLUDED 
                IN THE PROPOSAL. FAILURE TO SUBMIT SUCH INFORMATION MAY CAUSE 
                THE COMMITTEE TO CONSIDER THE PROPOSAL NONRESPONSIVE AND 
                INELIGIBLE FOR AN AWARD.

                                      37






<PAGE>

     10.2.3.     BUSINESS PLAN.

                 10.2.3.1.     BUSINESS PLAN QUESTIONNAIRE--QUANTITATIVE

                               Stage two of the evaluation process shall be a 
                               comparative assessment of the substantive 
                               contents or the Business Plan component of the 
                               proposal. The Business Plan consists of two 
                               sets of questions on which the Respondents will 
                               be evaluated and scored. The first addresses 
                               quantitative, time-driven standards. The 
                               Quantitative Questionnaire shall be used in 
                               responding to this portion of the Plan of 
                               Operation. Respondents should note that the 
                               Quantitative Questionnaire may not contain all 
                               of the Performance Standards, Procedures, and 
                               Plan requirements which could be enhanced. 
                               Rather, it allows a Respondent to quantify in 
                               consistent terms a carrier's intended level of 
                               service and any enhancements to be made, to 
                               certain specific performance standards, 
                               procedures, and Plan requirements considered 
                               to be important for evaluation purposes. While 
                               other quantifiable standards may be enhanced 
                               by the Respondent, only those addressed in 
                               Exhibit 4 will be considered for evaluation 
                               and scoring purposes.


                 10.2.3.2.     BUSINESS PLAN QUESTIONNAIRE--QUALITATIVE

                               The second area contains specific qualitative 
                               questions related to some major areas of 
                               operation. The Business Plan--Qualitative 
                               (Exhibit 3) shall be used to respond to this 
                               portion of the Plan of Operation. These 
                               responses will be evaluated and scored based 
                               upon your operational capabilities as 
                               described in your responses, any qualitative 
                               enhancements to the processes or procedures 
                               described, and how clearly and concisely and 
                               completely each question is answered. In 
                               responding to these questions, you should use 
                               the pages provided and indicate your response 
                               below the questions. While other qualitative 
                               standards or procedures may be enhanced by the 
                               Respondent, only those in

                                       38

<PAGE>

                               response to the questions posed in Exhibit 4 
                               will be considered for evaluation and scoring 
                               purposes. Additional sheets may be attached if 
                               necessary.


                 10.2.3.3.     BUSINESS PLAN--QUALITATIVE QUESTIONNAIRE

                               If you indicate in your responses to the 
                               Business Plan Qualitative Questionnaire 
                               (Exhibit 3) that you, your subcontractors, 
                               and/or affiliated insurers will provide 
                               services which exceed those required by the 
                               Performance Standards, you must restate the 
                               enhancements in summary format at the end of 
                               the Qualitative Questionnaire using the sample 
                               format shown in Exhibit 4. Enhancements not 
                               summarized and restated will not be considered 
                               in evaluating your proposal. Please state your 
                               enhancements clearly and concisely as there 
                               will be no negotiations after a contract has 
                               been awarded as to "what was intended" when 
                               the proposal was submitted, and the 
                               enhancement will be scored and tested as 
                               stated in the proposal, and will be 
                               incorporated into any contract that may be 
                               awarded.

                               The responses to the Business Plan 
                               Questionnaires must describe in detail how the 
                               Respondent proposes to transact business with 
                               the association. Proposals shall be compared 
                               with one another to determine which offers the 
                               best services for the best price.


    10.3.        COMPARATIVE ASSESSMENT. The Business Plan shall be reviewed 
                 in the following manner;

                 10.3.1.       A committee of five members shall be appointed 
                               to review, verify information submitted, and 
                               evaluate the proposals;

                 10.3.2.       Each evaluator shall review the proposals 
                               independently;

                 10.3.3.       For each section noted in the scoring section, 
                               the lowest and highest scores assigned by the

                                       39

<PAGE>

                               members of the committee in each category 
                               shall be discarded. The remaining three scores 
                               shall be averaged;

                 10.3.4.       The score for each section shall be totaled 
                               for the final score; and

                 10.3.5.       The maximum score for the entire proposal 
                               shall be a total of two hundred (200) points 
                               per evaluator.

     10.4.       SCORING METHODOLOGY. Responses to the RFP will then be 
                 reviewed by the selection committee established by the 
                 director to evaluate and recommend Respondents to the 
                 director for final selection of the Servicing Carriers. The 
                 committee will review the overall proposal. The director, 
                 assisted by the Evaluation Committee, will make the final 
                 selection of the Servicing Carriers.

                 Weights given each component scored are as follows;

                 10.4.1.       BUSINESS PLAN--QUANTITATIVE--Your responses to 
                               the Business Plan Quantitative Enhancements 
                               Questionnaire will be reviewed for level of 
                               responsiveness and service to the residual 
                               automobile market insured, as they relate to 
                               the objectives and scope of the RFP.

                               Your response to each activity outline will 
                               be assigned a point value. The total available 
                               points for the Quantitative Enhancements 
                               Questionnaire is 50. Twenty points will be 
                               assigned to the Claims Processing component 
                               and 30 points for the Underwriting/Processing 
                               component of the Quantitative Questionnaire.

                 10.4.2.       BUSINESS PLAN--QUALITATIVE--Your responses to 
                               the Business Plan Qualitative Questionnaire 
                               will be reviewed for the level of qualitative 
                               services, processes, and procedures, and how 
                               clearly the responses describe each to "Meet," 
                               "Exceed," or "Well Exceed" standards, 
                               procedures and requirements.

                               Each of the two major areas addressed in the 
                               Qualitative Questionnaire will be scored on 
                               the basis of whether, in the sole judgment of 
                               the director and the committee, that carrier's 
                               responses "meets," "exceeds" or "well exceeds" 
                               the performance standards, procedures and 
                               requirements. It is important to note that the 
                               result achieved by the carrier, e.g., 
                               "exceeds" for a particular area, such as 
                               underwriting, does not necessarily mean that 
                               the response exceeds on every possible 
                               standard, procedure or requirement. Rather, 
                               the response of 

                                       40

<PAGE>

                               the carrier reflected the attributes of the 
                               "exceeds" category and would receive the score 
                               corresponding to the "exceeds" result. While 
                               all areas addressed will be evaluated by the 
                               director or the committee appointed by him, 
                               specific scores will be applied to each 
                               question.

                               The maximum number of points available for the 
                               Plan of Operation-Qualitative is 50, which 
                               represents 25% of the maximum number of points 
                               for the total Plan of Operation. A Respondent 
                               can be awarded anywhere from one to fifty 
                               points for this category. For scoring 
                               purposes, the maximum number of points for the 
                               qualitative portion of the Plan of Operation 
                               is subdivided 30% for Claims Administration 
                               and 70% for Underwriting and Processing.

                               The total number of raw score points available 
                               for the Plan of Operation encompassing both 
                               the Qualitative and Quantitative Questionnaire 
                               is 100.

                 10.4.3.       PRICE/COMPENSATION

                               A Respondent may receive up to one hundred 
                               (100) points for this section. The 
                               Respondent's Compensation will not be the sole 
                               factor in determining whether a proposal 
                               should be selected. The director is looking 
                               for the proposal which provides the best 
                               services to the insurance-buying public of the 
                               residual market at the best possible cost, but 
                               it is expressly understood that neither the 
                               director nor the committee is under any 
                               obligation to award any contract to any 
                               Respondent submitting a proposal under the 
                               terms and conditions of this RFP.


CHAPTER 11.  CONTRACTUAL REQUIREMENTS

11.1    CONTRACT MUST BE IN NAME OF RESPONDENT/OFFEROR. Contracts shall be 
        executed in the name of the organization or individual shown in the 
        proposal. You must commit to a contract for the entire term plus 
        administer any run off obligations. Accordingly, the term shall be 
        from the effective date of this agreement through the entire term. 
        Run-off obligations shall survive the expiration or termination of 
        this contract.

11.2.   S. C. LAW CLAUSE.

        11.2.1.  Upon award of a contract under this RFP, the person, 
                 partnership, association, or corporation to whom the award 
                 is made, must comply with the laws of South Carolina which 
                 require such persons or entities to be authorized and/or 
                 licensed to do business in this State. Notwithstanding the 
                 fact that applicable statutes may

                                       41

<PAGE>

                 exempt or exclude the successful Respondent from 
                 requirements that it be authorized and/or licensed to do 
                 business in this State, by submission of this signed 
                 proposal, the Respondent agrees to be subjected to the 
                 jurisdiction and process of the courts of the State of South 
                 Carolina, Richland County, City of Columbia, as to all 
                 matters and disputes arising out of, or to arise under the 
                 contract and the performance thereof, including any 
                 questions as to liability for taxes, licenses, or fees levied 
                 by the State of South Carolina.

        11.2.2.  This RFP and any subsequent contractual agreement shall be 
                 construed in accordance with the laws of the State of South 
                 Carolina. The Servicing Carrier shall fully comply with all 
                 local, state, and federal laws and regulations related to the 
                 performance of the contract to the extent that such laws may 
                 be applicable. The Servicing Carrier must be registered and 
                 maintain good standing with the Secretary of State for the 
                 State of South Carolina and other regulatory agencies as may 
                 be required by law or regulation.

11.3.   RESPONDENT'S QUALIFICATIONS. Contractor must, upon the request of the 
        director of the Advisory Board, furnish satisfactory evidence of its 
        ability to furnish the services required by the terms and conditions 
        of this RFP. The Advisory Board reserves the right to make the final 
        determination as to the Contractor's ability to provide the services 
        requested herein.

11.4.   EQUAL OPPORTUNITY. The Servicing Carrier shall comply with all 
        federal and state requirements concerning fair employment and 
        treatment of all employees, without regard or discrimination on the 
        basis of race, sex, age, color, religion, national origin, physical 
        handicap, or disability.

11.5.   TERMINATION. The Advisory Board may terminate this agreement at any 
        time upon an event of default. Events of Default include, but are not 
        limited, to:

                 11.5.1.       Willful misconduct by the Servicing Carrier 
                               with respect to a matter that is the subject 
                               of this contract;

                 11.5.2.       Gross negligence or recklessness in the 
                               performance of its responsibilities under this 
                               agreement;

                 11.5.3.       Any act, error, omission, whether intentional 
                               or unintentional, by the Servicing Carrier, 
                               its officers, directors, employees, agents, 
                               subagent, or subcontractors that places the 
                               Plan in violation of any applicable law, rule, 
                               regulation, or lawful and binding order of the 
                               South Carolina Department of Insurance, or 
                               other regulatory agency or authority, or court 
                               of competent jurisdiction;

                 11.5.4.       Failure to fully and adequately perform, or 
                               default in the performance of, as

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<PAGE>

                               determined in the sole discretion of the 
                               Advisory Board, any provision, term or 
                               condition hereof or any obligation or 
                               liability imposed under this agreement, the 
                               Plan of Operation, any applicable law, or any 
                               rule or order of the Department;

                 11.5.5.       Disclosure in an audit or examination by the 
                               Department that the Servicing Carrier has 
                               failed to perform its services in compliance 
                               with the Plan of Operation, the laws of the 
                               State of South Carolina or any applicable 
                               rules or orders of the Department;

                 11.5.6.       Refusal of the Servicing Carrier, its 
                               officers, directors, legal representatives, 
                               agents, employees, or subcontractors to give 
                               the Advisory Board or the Department access to 
                               its books, records, and operations, so that 
                               the books of the Servicing Carrier and its 
                               subcontractors, if any, may be audited or 
                               examined;

                 11.5.7.       Failure by the Servicing Carrier to maintain 
                               the necessary insurance coverages and to fully 
                               and adequately perform the services in the RFP 
                               and its proposal; or

                 11.5.8.       Failure of the Servicing Carrier to follow any 
                               lawful directive of the Advisory Board that is 
                               called for by, or not inconsistent with this 
                               contract, the Plan, any applicable law, or any 
                               rule or order of the Department.

11.6.   IMMEDIATE TERMINATION. In addition to the Advisory Board's right to 
        terminate this contract as provided above, the Advisory Board may 
        terminate this agreement immediately upon the occurrence of any of 
        the following events:

                 11.6.1.       The expiration of the term as set forth herein;

                 11.6.2.       The commencement of bankruptcy, 
                               rehabilitation, or receivership proceedings 
                               under the laws of any jurisdiction by the 
                               Servicing Carrier or any affiliated entity;

                 11.6.3.       The filing of a financial statement which 
                               discloses that the financial condition of the 
                               Servicing Carrier is impaired;

                 11.6.4.       A determination by the Advisory Board that the 
                               Servicing Carrier no longer meets the 
                               qualifications set forth in this RFP or the 
                               Plan documents;

                 11.6.5.       The Servicing Carrier's loss of ability to 
                               transact business within the State of South 
                               Carolina including, but not limited, to an 
                               agreement

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<PAGE>

                               not to write any additional business, 
                               suspension or revocation of the Servicing 
                               Carrier's or insurer's certificate of 
                               authority;

                 11.6.6.       The enactment of legislation into law by the 
                               South Carolina General Assembly, or the 
                               promulgation of regulations, rules, or orders 
                               by the Department, which effectively 
                               deactivates the Plan or transfers the 
                               coverages of the Plan to another entity, or 
                               materially enlarges, abridges, or otherwise 
                               significantly affects the obligations or 
                               duties of the Servicing Carrier, or 
                               materially limits the Plan's ability to 
                               receive or use substantially all services 
                               contemplated under this Agreement;

                 11.6.7.       Failure of any two consecutive audits by the 
                               Servicing Carrier. Each audit may consist of 
                               multiple parts and failure of any one part is 
                               considered as a failure of the entire audit. 
                               The test audit done in the first several 
                               months of the startup will be the first audit 
                               considered under this process; and

                 11.6.8.       The Advisory Board may enforce the performance 
                               bond if the contract is terminated for any 
                               event of default enumerated above or any of 
                               the provisions listed in subsection 9: 
                               IMMEDIATE TERMINATION except provisions 9(a), 
                               (f) and (g). The Servicing Carrier or surety 
                               understands that it has ten (10) days after 
                               notice of default to deliver the face value of 
                               the performance bond to the Advisory Board and 
                               agrees to deliver said amount within the time 
                               frame established.

11.7.   PRIME CONTRACTOR RESPONSIBILITIES.

                 11.7.1        The successful Respondent shall be considered 
                               the prime contractor and be required to assume 
                               sole responsibility for all services required 
                               by this RFP. The Advisory Board shall consider 
                               the Respondent the sole point of contact for 
                               purposes of this RFP and any subsequent 
                               contractual documents.

                 11.7.2        The Servicing Carrier shall comply with, 
                               implement, execute, carry out, and perform all 
                               of the obligations and assume all liabilities 
                               imposed upon it under the Plan of Operation, 
                               including the prompt payment of all 
                               obligations of the Association.

11.8.   SUBCONTRACTING.

                 If any part of the work covered by this RFP is to be 
                 subcontracted, the Respondent shall identify the 
                 subcontracting organization or other person and the 
                 contractual arrangements made therewith. All subcontractors 
                 must be approved by the director

                                       44

<PAGE>

                 or his designee. The services required under this RFP shall 
                 not be subcontracted without the express written approval of 
                 the director or his designee. The successful Respondent 
                 shall also furnish the corporate and company name, and the 
                 names of the officers of any subcontractors, it engages or 
                 proposes to engage, to perform the work required under this 
                 RFP. Subcontractors must also meet the qualifications 
                 outlined in this RFP and comply with the terms and 
                 conditions outlined herein.

11.9.   OWNERSHIP OF MATERIAL.
                   
                 All books, records, electronic or hard copy files, policies, 
                 contracts, agreements, endorsements, supplies, and related 
                 materials used by the Servicing Carrier in the performance 
                 of its duties under the terms of this RFP are the property 
                 of the Plan. The Servicing Carrier shall deliver to the 
                 Advisory Board at its request, and at the Servicing 
                 Carrier's expense, all such books, records, files, policies, 
                 contracts, agreements, endorsements, supplies and related 
                 material.

11.10.  ACCURATE INFORMATION.

                 All reports, data, information, and other material set forth 
                 in the RFP, furnished, or to be furnished, by the Servicing 
                 Carrier with respect to its appointment as Servicing Carrier 
                 or with respect to its performance of its duties under this 
                 contract and the Plan of Operation, and all reports, 
                 statements, or other documents containing financial, 
                 accounting, statistical, or related information furnished, 
                 or to be furnished, by the Servicing Carrier to the Advisory 
                 Board or to the Advisory Board's statistical agent or 
                 agency, if any, during the term of this contract are, or 
                 shall be, true and correct to the best of the Servicing 
                 Carrier's knowledge and belief and, with respect to 
                 financial, accounting, and statistical information, have 
                 been, or shall be prepared, consistently and in accordance 
                 with financial, accounting, and statistical principles 
                 required or permitted to be used by the Advisory Board.

11.12.  INDEMNIFICATION.

                 11.12.1.      The Servicing Carrier, its agents, employees, 
                               and/or representatives shall not do or 
                               perform, and shall refrain from doing or 
                               performing, any act or thing in violation of 
                               this contract, the Plan of Operation, South 
                               Carolina law, or the laws of the United States 
                               of America which the Servicing Carrier knows 
                               or has reason to know would subject the Plan, 
                               any member of the Board, or any officer, 
                               employee, representative, or agent of the Plan 
                               to any administrative, civil or criminal 
                               fines, forfeitures or penalties. The Servicing 
                               Carrier agrees to indemnify and hold harmless 
                               the Department, Plan, Advisory Board, Plan 
                               Administrator, their officers, employees, 
                               representatives,

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<PAGE>

                               and agents, individually and collectively, and 
                               agrees to indemnify the same from any act, 
                               omission, agreement, debt, fines, forfeitures, 
                               or penalties and all costs and expenses 
                               including, without limitation attorneys' fees 
                               and expenses, imposed against or incurred by 
                               the Association as a result of the acts or 
                               omissions of the Servicing Carrier upon which 
                               such penalties are based. The Servicing 
                               Carrier agrees that if the Advisory Board is 
                               subject to any claim, demand, or penalty or 
                               becomes a party to any suit or judicial 
                               proceeding by reason of any claim against, or 
                               act or omission by the Servicing Carrier, its 
                               employees, agents, or representatives, on the 
                               Administrator's premises, the Servicing 
                               Carrier shall defend the Advisory Board and 
                               shall indemnify it against all judgments, 
                               settlements, penalties, and expenses, 
                               including attorney's fees and court costs and 
                               any other expenses of litigation or 
                               administrative proceeding incurred or imposed 
                               upon the Plan or the Advisory Board.

                 11.12.2.      The Servicing Carrier also agrees to hold 
                               harmless and indemnify the Department, Plan, 
                               Advisory Board, Plan Administrator, their 
                               members, officers, employees, representatives, 
                               and agents, individually, and collectively, in 
                               their personal and official capacities from 
                               any and all liabilities resulting from the 
                               employment of any individuals, persons, 
                               consultants, actuaries, or agents to perform 
                               the services under the terms of this contract 
                               including, but not limited to, compensation 
                               due and owing, applicable taxes, insurance, or 
                               other prerequisites, etc.

11.13.  COMPLIANCE WITH STATE AND FEDERAL REQUIREMENTS.

                 The Servicing Carrier warrants that it, its employees, 
                 agents, representatives, officers, directors and 
                 subcontractors, if any, shall comply with all relevant 
                 state and federal requirements which govern its 
                 performance under this RFP.

11.14.  CONFLICT OF INTEREST.

                 The Servicing Carrier, agrees on behalf of itself, its 
                 employees, agents, directors, officers, representatives, 
                 successors, and subcontractors that it shall comply with the 
                 conflict of interest provision set forth in the Plan of 
                 Operation. Additionally, the Servicing Carrier understands 
                 and agrees it represents the interests of the Plan, it is 
                 directly accountable to the Plan and the Advisory Board, and 
                 that it shall not engage in any act or form any 
                 relationships outside the performance of its 
                 responsibilities of this contract which may constitute a 
                 conflict of interest or hinder the services the Servicing 
                 Carrier is required to render pursuant to the terms of this 
                 contract. The Servicing Carrier shall disclose any and all 
                 contractual relationships it may have with

                                       46

<PAGE>

                 members transacting the business of insurance within the 
                 State of South Carolina and representatives that may also be 
                 sitting on the Advisory Board.

11.15.  ASSIGNMENT.

                 Servicing Carrier understands and agrees that this agreement 
                 has been entered into in reliance upon the trust and skills 
                 of the Servicing Carrier, its management and principal 
                 executive officers. Accordingly, this agreement is not 
                 assignable without the prior written consent of the Advisory 
                 Board which it may withhold for any reason. Any attempt at 
                 such assignment shall be void.

11.16.  ENTIRE CONTRACT.

                 The contract between the South Carolina Associated Auto 
                 Insurers Advisory Board and the Respondent shall consist of: 
                 (1) RFP, any amendments, exhibits or attachments; and (2) 
                 the Respondent's proposal submitted in response to the RFP. 
                 The Advisory Board reserves the right to clarify any 
                 contractual provision in writing, and such written 
                 clarification shall govern in case of conflict with the 
                 applicable requirements stated in the RFP or the 
                 Respondent's response to the RFP. In all other matters not 
                 affected by the written clarification, the RFP shall govern.

11.17.  SEVERABILITY CLAUSE.

                 To the extent that a provision of the contract is contrary 
                 to the Constitution or laws of this State or the United 
                 States, the provision shall be void and unenforceable. 
                 However, the balance of the contract shall remain in full 
                 force and effect between the parties unless terminated by 
                 the written consent of both the Servicing Carrier and the 
                 Advisory Board.

11.18.  AMENDMENTS.

                 No modification of any provision in the contract shall be 
                 made or construed to have been made unless such modification 
                 is mutually agreed to in writing by authorized 
                 representatives of the successful Respondent and Advisory 
                 Board and incorporated in a written amendment to the 
                 agreement executed by the authorized representatives of both 
                 parties.

11.19.  COMMUNICATIONS AND NOTICES.

                 All notices to be furnished hereunder shall be, in writing, 
                 and shall be delivered either by hand or first class mail to 
                 the following addresses:

                                       47







<PAGE>

           FOR THE ASSOCIATION:
           Lee P. Jedziniak
           Chair
           South Carolina Associated Auto Insurers' Plan
           Post Office Box 11099
           Columbia, South Carolina 29211



           FOR THE SERVICING CARRIER:

           ---------------------------------------------
           ---------------------------------------------
           ---------------------------------------------


    11.20. INSURANCE.

           The Servicing Carrier must acquire and maintain adequate liability 
           insurance sufficient to protect the Plan, its Advisory Board 
           members, directors, if any, officers, employees, and legal 
           representatives against loss or liability resulting from any 
           activity of the Servicing Carrier, its employees, officers, 
           directors, agents, or subcontractors related to its performance. 
           The insurance shall cover general liability and professional 
           liability. The Plan, and the Advisory Board members shall be named 
           as additional co-insureds and be entitled to all notices issued 
           under the policy to cover claims that may arise out of or result 
           from the Servicing Carrier's performance. Written evidence of 
           insurance shall be provided by the Servicing Carrier to the 
           Advisory Board and to the South Carolina Department of Insurance. 
           The evidence of insurance coverage shall include, but not be 
           limited, to effective dates of coverage, limits of liability, 
           insurer's name, policy number(s), and endorsement by 
           representatives of the the insurance company. The evidence of 
           insurance must be submitted upon award of the contract. In the 
           event the insurance coverage is canceled, all parties entitled to 
           notice must receive thirty (30) days notice prior to the 
           cancellation of any coverage provided under the policy. The 
           Servicing Carrier shall maintain workers' compensation insurance 
           for all of its employees.

    11.21. TITLES/PARAGRAPH HEADINGS.

           Paragraph headings and subtitles used herein have been inserted 
           for convenience of reference only and shall not be construed to 
           affect the meaning of this agreement.

    11.22. INDEPENDENT CONTRACTOR STATUS.


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<PAGE>

           The Servicing Carrier shall be an independent contractor 
           performing its services for the Plan free from any supervision or 
           control of the Plan, except such supervision and control as may be 
           exercised by the Advisory Board in connection with enforcing 
           compliance with this Agreement, the South Carolina Code of Laws, 
           and the Plan of Operation.

    11.23. FIDUCIARY.

           The Servicing Carrier shall be deemed a fiduciary in the handling 
           of Plan funds and assets that come into the control or possession 
           of the Servicing Carrier. The Servicing Carrier shall account for 
           all funds and shall not convert such premiums or other funds 
           received to its use or benefit without the express written consent 
           of the Advisory Board.

    11.24. ACCESS TO RECORDS.

           The Servicing Carrier shall make available all records relating to 
           the performance of the work of this contract available to the 
           Advisory Board and the Department for audit, inspection, and/or 
           examination at any time upon request.

    11.25. ANNUAL EXAMINATION.

           The Servicing Carrier shall submit at least annually to an 
           examination conducted by an independent auditor contracted by the 
           Advisory Board or the Department. The Servicing Carrier shall 
           cooperate fully with any examinations required by the Advisory 
           Board or the Department. The Plan Administrator shall conduct 
           annually an audit or examination of any Servicing Carriers 
           providing services to the Plan.

    11.26. CONFLICT.

           In the event of a conflict between the RFP, the contract, and the 
           terms of the Plan of Operation, the Plan of Operation shall 
           govern. In the event of a conflict between this RFP, the 
           Agreement, and applicable South Carolina law, federal law, or 
           administrative rule, the law shall govern.

    11.27. OTHER PARTIES.

           This Agreement is between the Servicing Carrier and the Advisory 
           Board, and no insurer, producer/agent, claimant, insured, or 
           other person not a party to this agreement shall have or acquire 
           any rights by reason of the execution and delivery of this 
           Agreement or the performance of any of the obligations hereunder.

                                       49

<PAGE>

    11.28. COUNTERPARTS.

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

SECTION 12:  PROTEST PROCEDURES

    12.1.  PROTESTS MUST BE IN WRITING

           Protests must be received in writing within ten (10) calendar days 
           from the date of the notice of award announcement. Protests must 
           be addressed and mailed to:

           Lee P. Jedziniak
           Chair
           South Carolina Associated Auto Insurers' Plan
           Post Office Box 11099
           Columbia, South Carolina 29211

           All parties submitting a proposal pursuant to the terms and 
           conditions of this RFP understand and agree that a protest of the 
           award shall NOT operate as a stay of the award or implementation 
           of the contract.

    12.2.  PROTEST INFORMATION.

           Protests shall include your name, address, and telephone number, 
           and shall set forth in detail the grounds for the protest and the 
           relief requested as to give notice of the issues to be decided.

    12.3.  NOTIFICATION OF PROTEST.

           The director or his designee shall, within five calendar days 
           after the close of the protest period, notify all Respondents and 
           the Advisory Board that a protest of the award has been made.

    12.4.  ADMINISTRATIVE REVIEW.

           Within ten calendar days' receipt of the written protest, the 
           director or his designee shall conduct an administrative review of 
           the matter and issue a decision stating the reasons for the action 
           taken.


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<PAGE>

    12.5.  NOTICE OF DECISION.

           A copy of the decision along with a statement of the appeal rights 
           stated in paragraph 6 shall be mailed and otherwise furnished to 
           the protestor. Within five days of the decision, a copy of the 
           decision shall be forwarded to all Respondents.

    12.6.  FINALITY OF DECISION/APPEAL.

           This decision shall be final and conclusive in all respects.

    12.7.  PROTESTS SHALL NOT OPERATE AS A STAY OF THIS AWARD.

           The South Carolina Associated Auto Insurers Plan must be fully 
           operational by January 15, 1999. Therefore, time is of the 
           essence. It has been determined that the contract shall not be 
           stayed by any written protest. Neither the director nor the 
           Advisory Board shall be responsible for any costs incurred by the 
           successful Respondent or the protestor in preparing for, or 
           submitting a proposal pursuant to the terms and conditions of this 
           contract.


SECTION 13:  EXHIBITS

Exhibit 1.:  Affidavit of Non-Collusion

Exhibit 2.:  South Carolina Reinsurance Facility Experience

Exhibit 3.:  Business Plan--Qualitative Questionnaire

Exhibit 4.:  Business Plan--Quantitative Questionnaire

Exhibit 5.:  South Carolina Associate Auto Insurers Sample Servicing Carrier 
             Reports and Documents


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<PAGE>

Exhibit  6.:  Second Draft-Private Passenger Auto Policy Forms, 
              Endorsements, and Applications Forms

Exhibit  7.:  Sample Servicing Carrier Producer Correspondence and Reports

Exhibit  8.:  Calculation of Proposal Bond Amount

Exhibit  9.:  Pricing Sheet

Exhibit 10.:  Articles of the Association

Exhibit 11.:  Rules of Practice

Exhibit 12.:  Rating and Statistical Manual

Exhibit 13.:  Manual of Rules and Rates

Exhibit 14.:  Proposal Letter

Exhibit 15.:  Disaster Recovery Plan Requirements


                                       52


<PAGE>


                                 [LETTERHEAD] 




                                  MEMORANDUM


TO:      All Potential Respondents

FROM:    Lee P. Jedziniak
         Director

RE:      Amendment No. 1

         Request for Proposal #98-002-Solicitation for Servicing Carriers to 
         Service Private Passenger Automobile Insurance


DATE:    July 4, 1998


     The following is a list of clarifications, changes or amendments to RFP 
#98-002 which was forwarded to you on, or about, July 17, 1998.

     First, attached you will find the Manual of Rules and Rates-Private 
Passenger Section. This document was attached to the information you received 
as Exhibit 13. It is possible that the even-numbered pages may have been 
inadvertently omitted from several of the exhibits previously mailed. The 
attached Manual of Rules and Rates supersedes and replaces the copies you 
were previously mailed and is incorporated into the above-referenced RFP by 
reference.

     Second, we have received one written inquiry about the omission of pages 
5 and 6 from the Rules of Practice. Attached are copies of these pages. The 
Rules of Practice manual that you previously received is amended to include 
these pages.

     Third, we have received one written inquiry about Exhibit 4. Attached is 
a complete copy of this exhibit. It supersedes and replaces the exhibit you 
previously received.

     Fourth, there is no exhibit 5. This exhibit number was supposed to be 
reserved for future use. However, this change was inadvertently omitted from 
the copies you received.

     Fifth, this RFP involves private passenger automobile insurance only. We 
anticipate that the RFP for commercial automobile property and casualty 
insurance will be issued by August 10, 1998 once the manuals and forms for 
commercial automobile insurance have been approved by the South Carolina 
Associated Auto Insurers Plan Advisory Board.


<PAGE>


     Finally, any additional questions or concerns you may have regarding the 
RFP should be in writing, directed to my attention, and mailed or transmitted 
via facsimile transmission to the address and number indicated in the RFP. 
Telephone calls with questions about the RFP will not be accepted. Your 
questions will be answered at the Mandatory Preproposal Conference which is 
scheduled for Wednesday, July 29, 1998 at 10:00 a.m. in Room 401 of the South 
Carolina Department of Insurance.


c.c.  Tom Assad
      AIPSO
      Plan Administrator


<PAGE>

                                 [LETTERHEAD]  




                                  MEMORANDUM


TO:      All Potential Respondents

FROM:    Lee P. Jedziniak
         Director, South Carolina Department of Insurance
         and Chair, SCAAIP Advisory Board

RE:      Amendment #2 to RFP 98-002/PPAI

DATE:    August 7, 1998


     The request for Proposal issued on July 17, 1998 is hereby amended to 
reflect the following changes:

     1.   DEADLINE FOR SUBMITTING PROPOSALS EXTENDED

          The deadline for submitting proposals has been extended until 
          August 28, 1998. All potential respondents must submit proposals in 
          response to this solicitation by that deadline. Proposals received 
          after that date shall not be considered. This amends Paragraph 1.2 
          on Page 1 of the RFP.

     2.   DEADLINE FOR SUBMITTING QUESTIONS EXTENDED

          The deadline for questions has been extended. The deadline for 
          respondents to submit any additional questions about 
          RFP-98-002/PPAI is August 12, 1998. No additional questions will be 
          considered after that date. This amends Paragraph 1.7 on Page 2 of 
          the RFP.

     3.   THE PROPOSED SCHEDULE FOUND IN PARAGRAPH 2.23 HAS BEEN AMENDED AS 
          FOLLOWS:

          PROPOSED TIME TABLE

          Listed below is the proposed time frame for the RFP process:


<PAGE>

<TABLE>

          <S>                                             <C>
          Request for Proposals Issued                    July 17, 1998

          Date Questions are Due                          August 12, 1998

          Mandatory Conference for Potential Respondents  July 29, 1998

          Proposals Due                                   August 28, 1998

          Notification of Award of Contract               September 10, 1998

          Appeals Deadline                                September 20, 1998

          Contract Effective Date                         October 15, 1998

</TABLE>

          The Director reserves the right to adjust this schedule as he deems 
     necessary.

     4.   EXHIBIT 13: MANUAL OF RULES AND RATE HAS BEEN AMENDED AS FOLLOWS:

          a.   RULE 21 CHANGED

               Rules 21 in the Manual of Rules and Rates has been changed. A 
               copy of the amended rule is attached as Exhibit A and B.

               PRIVATE PASSENGER CHAPTER (PAGES P-4 AND P-5)

               Pages P-4 and P-5 of the Private Passenger Chapter have been 
               amended. These pages were amended to eliminate the exception 
               under Section 5(c).

          b.   TERRITORY CONVERSION CHART ADDED

               The Territory Conversion Chart attached to this response as 
               Exhibit C has been added to the Manual of Rules and Rates.

          c.   RATES FOR PRIVATE PASSENGER AUTOMOBILE APPROVED

               The rates for private passenger automobile insurance were 
               approved by the Advisory Board on August 5, 1998. Attached as 
               Exhibit D to this Memorandum are the proposed rates for the 
               South Carolina Associated Auto Insurances Plan.


<PAGE>


     5.   AMENDMENT TO EXHIBIT 11: RULES OF PRACTICE

          The SCAAIP Advisory Board approved a producer commission rate of 
          10%. The 10% commission rate applies to both new business and 
          renewals and both commercial and private passenger automobile 
          property and casualty insurance.

     6.   SPECIFICATIONS FOR CONSTRUCTING DATABASE

          The RFP has been amended to add specifications for constructing a 
          database. The attached specifications for constructing a database 
          has been added to the terms and conditions of the RFP. These are 
          the minimum specifications for constructing this database. See 
          Exhibit E.

     7.   POLICY FORMS AND ENDORSEMENT PORTFOLIO AMENDED

          a.   Pages 18 of 18 has been amended to reverse the order of 
               sections F and G. A copy of this revised page is attached to 
               this Memorandum as Exhibit F.


          b.   The Personal Auto Application and the Personal Auto Policy 
               Change Request have been amended. Attached as Exhibits G and H
               are samples of the form. One amendment was omitted during the 
               printing of the form. Therefore, in addition to the amendments 
               reflected, Ques #10 is amended to read as follow: "Please 
               provide the name of insurance company or agent and reason(s) 
               and approximate date coverage was refused."

     8.   SERVICING CARRIER REQUIRED TO ISSUE PROOF OF INSURANCE COVERAGE 
          THROUGH THE SCAAIP

          Section 7.2, Scope of Work, section is amended to add the following 
          language:

          7.2.4.12.  PROOF OF INSURANCE SERVICES. The Servicing Carrier will, 
          in conjunction with all other services required herein or in the 
          Plan Documents, issue proof of insurance coverage to insureds of 
          the Association in accordance with Bulletin 97-2. This service 
          includes, but is not limited, to the following:


<PAGE>


        a.   Issuing an insurance card or endorsement form in accordance 
             with the specifications provided by the Plan Administrator 
             which includes the insurer's name, the policy number, the 
             policy term, the vehicle identification number, insured 
             identification, and coverage information or a statement that 
             coverage meets this State's minimum financial responsibility 
             requirements;

        b.   Ensuring that all insureds receive a sufficient number of 
             document to evidence proof of insurance;

        c.   Notifying all insureds of the requirement that proof be 
             maintained and displayed pursuant to the law; and

        d.   Performing any other reasonable proof of insurance services in 
             accordance with the rules, regulations, policies and 
             procedures of the Association or as required by the Plan 
             Administrator.

        Attached as Exhibit 1 is Bulletin 97-2.

   9.   MINIMUM LIMITS FOR INSURANCE COVERAGE

        Section 11.20 requires the successful respondent to obtain and 
        maintain adequate liability insurance sufficient to protect the 
        Plan, its Advisory Board members, director, if any, officers, 
        employees, and legal representatives against any loss or liability 
        resulting from any activity of the Plan Administrator, its 
        employees, directors, agents, officers, subcontractors, etc., 
        related to its performance under the contract. The minimum limits 
        of coverage for such a policy shall be:

         $1,000,000 per occurrence for general liability insurance coverage
         $1,000,000 per occurrence for professional liability insurance coverage
         $1,000,000 per occurrence for property damage insurance coverage

   10.  AUDIT PROCEDURES/INCENTIVES AND DISINCENTIVES

        Section 8.4 of the RFP is hereby amended to include the schedule 
        attached as Exhibit J. This schedule is subject to change as 
        determined by the Advisory Board.

   These amendments are incorporated into RFP #98-002/PAI as if specificially 
repeated verbatim therein. They supersede and replace, where applicable, the 
present language of the corresponding sections of the RFP. Any questions 
about the RFP or the written responses to the questions submitted concerning 
the RFP must be set forth, in writing, and submitted by 5:00 p.m., August 12, 
1998.


<PAGE>


                                  [Letterhead]






                          MEMORANDUM


TO:   All Potential Respondents

FROM: Lee P. Jedziniak
      Director

RE:   Responses to Questions Submitted August 12, 1998

DATE: August 18, 1998

     What follows are the questions submitted on August 12, 1998 and the 
responses to each. Please read each question carefully as the response may 
change or clarify a previous response.

1.   Underwriting/Rating Services, renewal policies or certificates. (Page 8 
     of the 8/7/98 responses, number 36.) & (Exhibit 3, Page 3 c.)
     Please clarify which process will be required of all servicing carriers?
     Quote and issue renewal when paid or issue renewal and self-destruct if 
     not paid?

     A:  Issue renewal and self-destruct if not paid.

2.   Policy or endorsement forms.
     Recent response regarding these forms made it clear that the wording on 
     the forms cannot be changed. Is there any flexibility regarding the 
     design of the forms since computer programming sometimes requires the 
     need to rearrange some data? If the appearance (not content) of the form 
     is changed, does it have to be submitted to the Association 
     Administrator for approval or filing?

     A:  The design, not content, of the JUA forms may be changed. Since the 
         forms are filed with the Department for approval, the Administrator 
         should receive a copy of your change in order to refile with the 
         Department.


                                       1

<PAGE>

3.   Cancellations by Insured.
     Rules of Practice, Section 11 A - return premium shall be calculated at 
     90 of the pro rata unearned premium for the period of coverage, subject 
     to a minimum period of 60 days, or the minimum premium whichever is 
     greater. However, in the Manual of Rules and Rates, Rule 8, A does not 
     contain the wording "subject to a minimum period of 60 days, or the 
     minimum premium, whichever is greater." Please advise which rule 
     applies. If the rule in the Rules of Practice is the one that applies, 
     does this mean that the policy cannot be canceled before 60 days has 
     elapsed or does the 60 day earned premium become the minimum in the 
     event the policy is in force for less than 60 days?

     A:  The policy form reflects the 60 day cancellation limitation. The 
         60 day cancellation requirement is found in Section 56-10-280.

4.   Cancellation by Servicing Carrier.
     Rules of Practice Section 11 B.2. and manual of Rules and Rates,
     Rule 8, B - Each such cancellation shall be on a pro rata basis ... with 
     the balance returned to the insured. Should this rule be modified as 
     follows: If the policy is premium financed, the return premium will be 
     returned to the premium finance company.

     A:  The premium finance company must show Power of Attorney in order to 
         receive return premium. A wording change in the rule is not 
         necessary.

5.   Response #81 - 6.12 Qualification For Servicing Carrier, Year 2000
     Compliant Systems Required.
     Exhibit A Certification Statement - was not attached to the August 7 
     package. Exhibit A was Page P-4 for Plan Manual.

     A:  A Certification Statement is attached.

6.   David Amaral's July 1, 1998 Memo entitled SCRF Experience By Policy Year 
     - Quarter Ending March 31, 1998 - Reports 1998 total policy year premium 
     of $135.6M and 1997 policy year premium of $425M. Written premium for 
     the Facility has been relatively flat. The $136M PY premium implies a 
     20% growth. Are these figures accurate? Are you expecting this type of 
     growth?

     A:  The figures in the Memo are accurate for the Facility. However, the 
         Department, the Plan Administrator, and the Advisory Board have not 
         made any premium projections for the SCAAIP.

7.   Section 10.2.3.3 of the RFP states that a sample format of the 
     qualitative questionnaire enhancement summary can be found in exhibit 4. 
     However, exhibit 4 does not contain a sample enhancement summary format, 
     only the qualitative questionnaire itself and a scoring


                                     2

<PAGE>

     methodology. Would you please provide a sample format for the 
     qualitative questionnaire enhancement summary?

     A:  The format is as shown which includes the section (underwriting/
         processing or administration), responsibilities and questions, with 
         space left for your answer. This is the format sample mentioned in 
         Section 10.2.3.3 of the REP.

8.   Will the DOI provide Proposal and Performance Bid forms that the DOI has 
     created or will standard AIA Bid and Performance Bond Forms suffice?

     A:  The standard form will suffice.

9.   What is the number of licensed property and casualty agents in South 
     Carolina?

     A:  Fifteen Thousand One Hundred and Fourteen (15,114) agents are 
         licensed for property. Fifteen Thousand Four Hundred Forty-six 
         (15,446) agents are licensed for casualty. Both licenses are 
         necessary to write automobile business.

10.  Please clarify further the intent of your answer to question 20 in your 
     August 7, 1998 memo. If your intent is that MVRs be requested at each 
     six-month term, insureds with six-month policies will be subject to 
     up-rating due to MVR surcharges twice a year, while insured with 
     twelve-month policies will be subject only once. Will six month policies 
     require MVR orders on EACH six month term?

     A:  Yes.

11.  Question 21 of your August 7th response involved inspection reports. In 
     order to respond to this area in the Qualitative Questionnaire, it is 
     necessary for us to understand exactly what is required of the servicing 
     carrier in relation to inspection reports. Will inspection reports be 
     required for all policies? What is the Plan's definition of an 
     inspection report?

     A:  Inspection reports will be required for all policies. For purposes 
         of this RFP, an inspection report includes, but is not limited, to 
         CLUE reports, driver classification checks, youthful driver 
         questionnaires, etc.

12.  Question 1.a. is unclear. Are premium taxes paid by the JUA or by the 
     servicing carrier (and therefore expected to be included in the 
     reimbursement rate)? If the latter, what is the expected tax rate? The 
     manual makes reference to the "Association's funds," and the "servicing 
     carrier bank accounts," but it is still not clear if that refers to a 
     pass-through item or one that is covered by the servicing carrier's bid.

     A:  Premium tax is paid by the servicing carrier using JUA funds (check 
         stock).


                                        3

<PAGE>

         Therefore, it is an expense of the JUA which should not be included in
         your proposal price.

13.  Recoupment premium taxes are a "pass through" for the S.C. Reinsurance 
     Facility at the present time. Will they be handled the same for the JUA?

     A:  Servicing carrier collects recoupment, remits funds to the JUA and 
         is responsible for paying premium taxes. Again, the tax will be paid 
         using JUA funds and should not impact the servicing carrier's 
         proposal price.

14.  There appears to be a discrepancy with the answer to question 1.d. and 
     question 1 itself. Although the answer indicates that all LAE, allocated 
     or unallocated, "are a part of the claims service fee received by the 
     carrier," the original question indicates that legal allocated loss 
     adjustment expenses are reimbursed by the JUA. Which is correct?

     A:  All ALAE, including legal ALAE, are part of the claims service fee 
         received by the servicing carrier and are not reimbursable by the 
         JUA.

15.  Your previous response to question 100 indicated that producers would be 
     reimbursed for MVR costs using JUA funds. Is this correct?

     A:  Yes, producers will be reimbursed using JUA funds.

16.  Question 1.4.B of the qualitative questionnaire asks about the 
     anticipated frequency of independent auditor using during the contract 
     period. Is this question referring to the use of independent auditors 
     for the auditing of servicing carriers or producers?

     A:  This question relates to commercial. It is inapplicable to this 
         solicitation.

17.  Your response to question #58 of your August 7, 1998, memo stated that 
     policy file records may be maintained on electronic image systems "as 
     long as a hard copy can be produced upon request." Will a reproduction 
     of the original suffice or must the original document itself be produced?

     A:  A reproduction of the original will suffice.

18.  With respect to ownership of material outlined in paragraphs 9.1.1.8 and 
     11.9 of the REP and further referenced as question #61 in the August 7, 
     1998 memo, there is an additional issue as relates to proprietary 
     software being used by a servicing carrier. In most cases the servicing 
     carriers do not own the proprietary software: In fact, they have a 
     license to use the software and are contractually restricted from 
     transferring ownership. Examples of proprietary vendor software are:


                                       4

<PAGE>

          -Microsoft Products
          -Word Processing Software
          -Database Software (IBM, Oracle, etc.)
          -Operating System Software (AS400, MVS, UNIX, etc.)
          -Insurance Vendor Software (Companion using PMSC Software, Seibels
           using Inspire Software, etc.)

     This issue could potentially prevent any company from responding to the 
     RFP. No company can operate its business without some level of 
     proprietary software which they do not own and therefore cannot be 
     transferred to the plan.

     The data that is processed by these systems is not normally an issue and 
     can be owned by the servicing carrier or the plan. The data would be the 
     policy, claims, billing, financial, statistical information related to 
     the policies being serviced by the particular servicing carriers.

     Would it be sufficient for the plan to own the data processed by the 
     various systems, but not the actual proprietary software itself?

     A:  No. The RFP specifically provides that the Plan owns all data and 
         systems DEVELOPED to process the work of the JUA. This requirement 
         does not apply to software which the respondent does not own or have 
         proprietary rights to and was not created to transact the business 
         of the JUA.

19.  Will an audit be required for every producer regardless of the number of 
     policies issued or number of records retained by the servicing carrier 
     in the producer's file? Will there be minimum standards or thresholds 
     that apply for these audits?

     A:  Yes, an audit will be required of all producers actively placing 
         business with the JUA. Each audit must review producer compliance 
         with all Plan documents, rules and regulations.

20.  Section 7. Renewal Policies and Certificates, of the Rules of Practice, 
     General, states that insureds non-renewed due to reaching the maximum 24 
     month term may reapply as a new applicant. If there is no lapse in 
     coverage, will a new "CLUE" report be required, even though all claims 
     activity will be reflected in the Servicing Carrier's records?

     A:  No.


                                         5

<PAGE>

21.  The question "Will the Servicing Carrier be required to file financial
     responsibility in all 50 states?" was answered with a yes to question #33
     in the 7/29/98 exhibit and was answered with a no to question #99 in the 
     8/7/98 exhibit. In most states a carrier must be authorized and licensed 
     as a property and casualty insurance carrier in order to file an SR22. 
     (Please see attached documents) Could you please clarify your response?

     A:  The response "No" in Question #99 of the August 7, 1998 response 
         clarified that the filing of financial responsibility was not 
         limited to 50 states, but also included ALL United States 
         territories.

22.  The servicing carrier reimburses the agent for MVR's, is the agent then 
     responsible for giving the insured credit for an MVR which the insured 
     obtained from the Department of Public Safety?

     A:  Yes, the agent should reimburse the insured.

23.  Regarding 8.4.3 and 8.4.4, please be specific in the definition of paid 
     loss ratio as to the numerator and denominator?

     A:  The numerator means paid losses, and the denominator is earned 
         premium.

24.  Will the agent be responsible for the counter-signature or can the 
     countersignature be done at the Company level?

     A:  This can be done on the company or producer level as long as the 
         producer is a licensed State of South Carolina agent and is 
         certified by the JUA.

25.  Regarding court approved settlements on minors. State statute indicates 
     when a minor nets $2500.00 the case is to be court approved. Are we to 
     understand that court approval is required on all settlements involving 
     minors regardless of the injury if the settlement gross is $2500.00?

     A:  This question does not appear to be related to the requirements of 
         the RFP. We recommend that you consult your attorney regarding this 
         issue.

26.  Need clarification where credit applies for the Accident Prevention 
     Course. The rating example states that it applies only to Collision 
     coverage, but the Manual of Rules and Rates states that it applies to BI, 
     PD and Collision.

     A:  The Manual of Rules and Rates states the application of credit 
         correctly.

27.  In the Affidavit of Non-Collusion (3) the date of March 3, 1998 appears. 
     What date


                                       6

<PAGE>

     should be put in its place? Also, the wording of (3) is confusing -- 
     should the "or agents" in the third sentence be there? "That the 
     contents of the proposal have not been communicated by the Respondent or 
     its employees or agents to any person not an employee or agent of the 
     Respondent or agents to any person not an employee or agent of the 
     Respondent or its surety on any bond furnished with the proposal and 
     will not be communicated to any such person prior to March 3, 1998."

     A:  The word "or agents" should be deleted. The date should be August 28,
         1998 which is the date that the proposals are due to be submitted to 
         the Director.

28.  If the servicing carrier receives an application which after a review of 
     the payment history file is deemed to be ineligible, is the servicing 
     carrier expected to void application, cancel with notice, cancel flat or 
     void the policy [sic] AD INITIO? If no coverage is provided at all, who 
     provides notice to the prospective insured that he/she has no coverage? 
     What are the notice requirements to the applicant?

     A:  The Plan Requirements for cancellation of policies and notices of 
         cancellation are provided in the Rules of Practice. The purpose of 
         the Qualitative Questionnaire is for you to state your exact 
         procedures in your responses. Please explain how you plan to handle 
         the notice to the prospective insured.

29.  Are all entries on the application required to be captured to a data 
     base, or just those listed in the August 7, 1998, "Servicing Carrier 
     List of Fields"?

     A:  All entries must be captured.

30.  Does the statement "status of account" mean a detailed listing of 
     payments and balances, or just the remaining balance?

     A:  It means a detailed listing of payments and balances.

31.  If an agent is decertified and commissions are withheld, what is the 
     status of the unpaid commissions if the agent is reinstated?

     A:  Commission for a policy submitted by a decertified or suspended 
         producer is retained by the servicing carrier (Rules of Practice, 
         Section 1.M, sixth paragraph). Once another certified producer is 
         identified, the commission from that point forward goes to the new 
         producer of record.

32.  Is the minimum policy premium of $25.00 per vehicle not refunded on flat 
     cancellations?


                                     7

<PAGE>

     A:  If the policy is canceled flat, no charge. Flat cancellation means 
         cancellation as of the inception date.

33.  Will the payment history data base of ineligible applicants/insureds 
     include individuals owing money to a premium finance company?

     A:  No, not a database requirement.

34.  The RFP states that the servicing carrier must report individuals with a 
     "past due" balance owed to the Company. Would "past due" include 
     individuals who have not paid their last installment, or would "past 
     due" refer only to individuals who have an outstanding balance on an 
     automobile policy that has terminated, expired or canceled?

     A:  Both.

35.  When is the statutory deposit actually due?

     A:  The statutory deposit must be increased by the successful 
         respondent(s) on, or before, December 31, 1998.

36.  Can the statutory deposit be posted incrementally as premium volume 
     grows?

     A:  Yes. The Plan Administrator will notify the servicing carrier when, 
         and if, its statutory deposit must be increased. Failure to increase 
         the deposit by the deadline stated will result in termination of the 
         servicing carrier agreement.

37.  Could you provide an example of an ineligible write-off?

     A:  Yes. An example of an ineligible write-off would include the earned 
         premium on a renewal policy that was not requested and the renewal 
         premium/deposit was not paid.

38.  In the Accounting and Statistical manual there is no requirement to 
     report either policy number or claim number. Is this correct?

     A:  The accounting and statistical data reported to the Plan 
         Administrator is summary level only and does not require reporting 
         of a policy number or claim number. However, chapter 6, Part II, F. 
         of the Accounting and Statistical Manual indicates that policy level 
         detail reporting will be required to establish a centralized 
         database. The specifications of this database have yet to be 
         defined; however, it is likely that policy numbers will be required.


                                        8

<PAGE>

39.  Who will establish the three position "town code" and how will the 
     servicing carrier receive the code?

     A:  The requirement of reporting premium by municipality to the Central 
         Processor has been eliminated; therefore, the "town code" should be 
         disregarded. All municipal taxers will be paid directly by the 
         servicing carrier using JUA funds.

40.  Is the $20.00 minimum per installation requirement waived on amounts due 
     of less than $20.00?

     A:  Yes, this is a performance standard for establishing premium 
         installments. This should not be confused with minimum premium. The 
         minimum installment does not increase the insured's total policy 
         premium as a minimum premium could. When establishing an installment 
         payment plan, an installment falling below $20 should be included in 
         the previous installment and billed subject to the $4 installment 
         fee. If a policy change or other activity causes an installment to 
         be adjusted and fall below $20, the actual premium due is billed 
         subject to the installment charge. The installment minimum has no 
         effect on the total policy premium.

41.  Could you clarify what is considered as a "new business CERTIFICATE"?

     A:  Use of "certificate" regarding the issuance of original policy, 
         refers certificates of insurance as may be requested by the insured, 
         not a "new business certificate."

42.  Will the Servicing Carrier be required to issue a policy with both a 
     motorcycle and an automobile on it?

     A:  Motorcycles are defined as individual private passenger automobile and 
         should be given the same consideration as private passenger 
         automobiles.

43.  Is the $100.00 minimum deposit for liability coverages and the $75.00 
     minimum for physical damage coverage per policy or per vehicle?

     A:  The $100.00 minimum deposit for liability coverage and the $75 
         minimum for physical damage coverage is per vehicle.

44.  Has the file layout for the transfer of information to and from the Plan 
     Administrator been established? If so, could a copy be provided upon 
     request?

     A:  For the accounting and statistical reporting of SCAAIP premium and 
         loss data, the tape specifications are included in the Accounting 
         and Statistical Requirements


                                         9

<PAGE>

         Manual; a record layout will be provided upon request. Please be 
         aware that an alternative to tape reporting of this data exists by 
         utilizing a pre-formatted Lotus spreadsheet provided by the Plan 
         Administrator (see A&S Requirements Manual, Chapter 6, Part II, B).

         Take-out and anti-fraud data base file reporting formats have not 
         been developed; however, the information that would be required was 
         provided in the August 7 responses to RFP questions.

45.  Will the servicing carrier be required to mail all new business to the 
     agent or to the insured?

     A:  The intent is that the servicing carrier mails the policy to the 
         insured with a copy to the producer. This is done to eliminate that 
         the producer is an agent of the servicing carrier or the JUA.

46.  Will it be acceptable to mail refund checks to the agent for disbursement
     to the insureds?

     A:  This is not addressed in the South Carolina Plan of Operation. 
         Again, to eliminate any implication that the producer is an agent of 
         the servicing carrier or the JUA, refunds should be sent to the 
         insured.

47.  "Work for hire" is included in section 9.1.1.8. The "works for hire" 
     doctrine states that the compensating party retains all rights in the 
     copyrightable product created within the employment/agent relationship. 
     Does the scope of 9.1.1.8 include modifications to systems implemented 
     to provide Plan services? If so, does 9.1.1.8 include all works created 
     while engaged in operations considered by the JUA to be within the 
     normal scope of the Plan relationship?

     A:  The scope of 9.1.1.8 includes modifications to systems implemented 
         to provide Plan services. Yes, it includes all works created while 
         engaged in operation considered by the JUA to be within the normal 
         scope of the Plan relationship.

48.  When the JUA becomes the copyright owner of creations by virtue of the 
     41 work made for hire" provision of the agreement, does it then have the 
     exclusive right to license the use of a product created by a member 
     servicing carrier?

     A:  Yes.

49.  Must the servicing carrier "grant back" any improvements made to a 
     system created for


                                     10

<PAGE>

     the JUA? Meaning that if a carrier improves a system, must it grant the 
     rights to those improvements back to the JUA?

     A:  Yes.

50.  If a servicing carrier develops software for the JUA, must it disclose 
     whether there are any conflicting intellectual property rights? Thus, 
     must the servicing carrier warrant and hold harmless that any rights 
     that pass to the JUA by virtue of section 9.1.1.8 do not infringe upon 
     third party's rights?

     A:  Yes.

The proposals are due August 28, 1998. No additional questions concerning
RFP #98-001 will be addressed by the Advisory Board or me. No telephone calls 
regarding this RFP will be accepted.




                                       11



<PAGE>


                                                                      Exhibit 99


                                TABLE OF CONTENTS

<TABLE>

<S>                                                                    <C>

Cover Letter                                                           Page 1

          Section 11.14 Disclosure                                     Page 4

Proposal Letter                                                        Page 5

Company Business Plan

          Executive Summary                                            Page 6

          Background and Experience                                    Page 11

Past Performance and Commitment                                        Page 13

Financial Information

          Solvency Certification                                       Page 14

          Credit Rating Statement                                      Page 15

Cost/Price

          Pricing Enhancement                                          Page 16

          100% Quota Share                                             Page 17

          75% Quota Share                                              Page 18

          50% Quota Share                                              Page 19

          33 1/3 % Quota Share                                         Page 19-A

          30% Quota Share                                              Page 19-B

          25% Quota Share                                              Page 19-C

          20% Quota Share                                              Page 19-D

Duration of Offer                                                      Page 20

Qualitative Business Plan                                              Page 21

Quantitative Business Plan                                             Page 44

Qualitative Summary of Enhancements                                    Page 54

Disaster Recovery Plan                                                 Page 56

Affidavit of Non-Collusion                                             Page 58

Proposal and Performance Bonds

Year 2000 Certification                                                Page 59

</TABLE>


<PAGE>


                   [THE SEIBELS BRUCE GROUP, INC. LETTERHEAD]


September 9, 1998


Mr. Lee P. Jedziniak
Director
South Carolina Department of Insurance
1612 Marion Street
Columbia, South Carolina, 29201


Dear Mr. Jedziniak:

Please find attached the response by South Carolina Insurance Company ("SCIC")
to the South Carolina Associated Auto Insurers Plan Joint Underwriting
Association Servicing Carrier Solicitation, proposal notice number 98-001/PPAI.
It is with great pleasure that South Carolina Insurance Company responds to this
Request for Proposal as we believe that South Carolina Insurance Company is
uniquely qualified to be a servicing carrier for the South Carolina Associated
Auto Insurers Plan.

I call your attention to the following items:

o    South Carolina Insurance Company understands and will comply with all terms
     of the Proposal.
o    South Carolina Insurance Company is a South Carolina corporation in good
     standing.
o    The Federal Tax ID number of South Carolina Insurance Company is
     57-0248730.
o    South Carolina Insurance Company will be the prime contractor and is
     registered and authorized to do business in South Carolina. No
     subcontractors will be used.
o    South Carolina Insurance Company does not discriminate on the basis of
     race, sex, age, color, religion, marital status, political affiliation,
     national origin, handicap or disability.
o    SCIC warrants that it, its employees, agents, directors, officers,
     representatives, successors and subcontractors shall comply with all
     relevant state and federal requirements governing its performance under the
     RFP.
o    All materials developed, prepared, assembled or conceived by the Respondent
     pursuant to this RFP are "works for hire" and are owned by the South
     Carolina Associated Auto Insurers Plan Joint Underwriting Association.
o    The Respondent currently meets or will meet prior to the start of the
     contract, all of the qualifications as described in this RFP. All required
     documentation to that effect is contained in this Proposal.

<PAGE>


Mr. Lee P. Jedziniak
September 9, 1998
Page 2


South Carolina Insurance Company, together with its affiliated company, Catawba
Insurance Company, is the most experienced writer among all bidders in the
nonstandard, South Carolina automobile insurance market. As a servicing carrier
for the South Carolina Reinsurance Facility since inception, it has been dealing
with the proposed population of the JUA for 24 years. During this time, it has
operated under claims and underwriting guidelines which are the same as those
proposed for use in this RFP. It also has 24 years experience in auditing
producers for compliance with rules and written guidelines for residual market
mechanisms.

Because of its past experience and current compliance with most, if not all, of
the servicing guidelines proposed for the JUA, South Carolina Insurance
Company's staff and systems are uniquely positioned to perform to the JUA's
highest expectations. Both our claims staff and policy processing teams are
knowledgeable of the intricacies of the South Carolina market and are committed
to providing quality services to the JUA. For each of the past 24 years, our
company has been judged by independent Facility auditors to be in compliance
with all claims and underwriting guidelines which are proposed for use by the
JUA.

Lastly, and most significantly, South Carolina Insurance Company, as a domestic
insurer standing the test of time, is a major stakeholder in both South Carolina
and the success of its residual market operations. We are, therefore, imbued
with an extra incentive to ensure the orderly and efficient transition of the
automobile residual market mechanism.

In the Cost/Price section of this proposal, we have included a "price
enhancement" which is neither a modification of the RFP nor a condition of our
proposal. We have indicated on the Cost/Price sheets our bid for servicing the
JUA book of business in accordance with the RFP specifications. This "price
enhancement", however, represents an even better price for furnishing exactly
the same services should the Director/Advisory Board accept our Demotech rating,
performance history and other submitted information, as sufficient proof of
financial stability. By recognizing South Carolina Insurance Company's primary
role as a servicing carrier and reflecting same in a waiver of additional
statutory deposits and performance bond requirements consistent with other
bidders, we would be willing to further reduce costs associated with servicing
carrier operations through additional negotiated methods permitted under Section
2.16 of the RFP. We seriously question the efficacy of the additional deposit
and bonding requirements, since the costs of default are the same despite the
A.M.Best of the defaulting carrier. By this enhancement, we are simply
suggesting that the price proposed can be further reduced by modification of
certain requirements of the RFP without risk to the Plan constituents.


<PAGE>


Mr. Lee P. Jedziniak
September 9, 1998
Page 3


We look forward to your response. If I can be of any assistance or answer
questions regarding the proposal, please feel free to call me at 803-748-2006.


Sincerely,

/s/ R. Thomas Savage, Jr.
-------------------------
R. Thomas Savage, Jr.
Chief Financial Officer


<PAGE>


                            SECTION 11.14 DISCLOSURE


South Carolina Insurance Company makes the following disclosure pursuant to
Section 11.14: David E. Rowell, Sr. is a designated agent assigned to Catawba
Insurance Company and, since passage of Act 154, has a voluntary market contract
with both Catawba and SCIC.


                                       4

<PAGE>


                                 PROPOSAL LETTER


We propose to furnish and deliver any and all of the services named in the
Request for Proposals, Proposal Notice No. 98-002/PPAI. The prices proposed
herein shall apply for the period of time stated in the RFP.

It is understood that this proposal constitutes an offer and when signed by the
authorized party will, with RFP, exhibits, and any amendments thereto,
constitute a valid and legal contract between the undersigned respondent and the
South Carolina Associated Auto Insurers Plan.

We acknowledge that we have read and understand the requirements of the RFP and
represent that this proposal is made in accordance with the terms and conditions
of the RFP. By signing this proposal, we guarantee and certify that all items
included in this proposal meet or exceed any and all such terms and conditions.
We also affirm, by signing this proposal, that we have reviewed all exhibits
attached and that we have used this documentation as a basis for submitting our
proposal. We understand and agree that this solicitation does not guarantee an
award of a contract.

We agree, if awarded the contract, to deliver goods or services which meet or
exceed the requirements of this RFP.


/s/ R. Thomas Savage, Jr.                                           9/9/98
-----------------------------------------------------         -----------------
Signature of Authorized Representative/Corporate Seal                Date


NOTICE OF AWARD

Proposal Accepted By:

-----------------------------------------------------         -----------------
Director                                                             Date


                                       5

<PAGE>


                BUSINESS PLAN TO ACT AS SERVICING CARRIER FOR THE
                  SOUTH CAROLINA ASSOCIATED AUTO INSURERS PLAN

                                       BY

                        SOUTH CAROLINA INSURANCE COMPANY


EXECUTIVE SUMMARY

     South Carolina Insurance Company (SCIC) proposes to act as Servicing
     Carrier for the South Carolina Associated Auto Insurers Plan (the Plan) as
     outlined in Request for Proposal number 98-002/PPAI (the RFP). SCIC either
     has or is willing to establish prior to the commencement of the term of the
     contract, sufficient servicing capacity, facilities, and resources to
     provide the best levels of performance and service in meeting its
     obligations to the Plan, the insureds, regulatory authorities, and member
     companies.

     SCIC is uniquely qualified as a Servicing Carrier for the Plan by virtue of
     its extensive experience as a voluntary automobile insurance market as well
     as its long-standing role as a Servicing Carrier for the South Carolina
     Reinsurance Facility through its Catawba Insurance Company subsidiary. We
     have a proven track record for compliance with claims and underwriting
     guidelines to be used by the JUA. As a domestic carrier, SCIC is intimately
     familiar with the South Carolina market, which, when combined with its
     experience with the Facility, offers a level of stability to policyholders
     that no other respondent to the RFP can match. SCIC is a participant in the
     voluntary nonstandard auto market in South Carolina and will treat the Plan
     business with the same care and attention as it will its retained business
     which will result in better service to all constituents of the Plan.
     Furthermore, SCIC and its employees are stakeholders in the overall
     economic progress of the State of South Carolina giving them a vested
     interest in an orderly auto insurance market.

     Seibels Bruce has over 70 years experience serving the independent agency
     system. Unlike other potential respondents, SCIC has not abandoned the
     South Carolina auto market in past years. This company's continued
     experience with South Carolina agents has built strong relationships which
     will benefit the JUA operations.

     Because of the foregoing attributes, SCIC is best positioned of all
     respondents to the RFP to provide the various components required in the
     RFP, including Underwriting, Policy Issuance, Auditing, Billing, Premium
     Collection, Loss Control, Claims Administration and Information Systems.
     Summaries of SCIC's responses on these areas follow.


                                        6

<PAGE>


     UNDERWRITING

     SCIC will follow essentially the same procedures that are currently being
     followed by Catawba Insurance Company in its underwriting of risks for the
     South Carolina Reinsurance Facility. The system and procedures, however,
     are flexible, and can be tailored for any attributes of the Plan. The
     underwriting process basically has four components--new business,
     renewals, endorsements and cancellations. The activity flow has been laid
     out in detail as seen in the attached essay on underwriting. SCIC has three
     customers under the Plan; the Plan itself, the Agents and the Insureds.
     Quality service to our customers is a prime mission of our organization and
     a consistent theme throughout our processes.

     Applications for new business are easily transmitted by agents and are
     carefully handled with a view to compliance for guidelines, statutory
     requirements, rating, option form compliance, proper classification and
     completeness. Several steps, all transparent to the insured, have been
     included in order to verify information so that the policy can be rated and
     underwritten correctly. Our renewal process is streamlined and focuses on
     accurate pricing. This is accomplished through an automated comparison of
     the applicants with the SC motor vehicle records. Nonrenewals are issued
     when appropriate. As with the new application process, information is
     verified through several steps to identify any rating changes. Midterm
     endorsements, cancellations and account monitoring are all handled with the
     same commitment to quality.

     Additionally, our Facility underwriting audits demonstrate proven and
     accurate pricing and underwriting of risks in the South Carolina market. No
     other respondent has our track record or market experience. Most have no
     experience in this market.

     Because SCIC has been a participant in the South Carolina auto insurance
     market for so long, it supports its effort with an exceptionally talented
     and seasoned team. Underwriting supervisors average 18 years of experience
     in the field. All members of the team have experience in the South Carolina
     market and 18% hold a professional designation. Because it is headquartered
     in South Carolina, SCIC will service the Plan out of its Columbia office.
     All of these characteristics set SCIC apart from the competition in its
     ability to service the needs of the Plan.

     POLICY ISSUANCE

     All policy documents and forms are issued in accordance with South Carolina
     statutes. These documents have been in use for several years and comply
     with regulatory provisions and have been approved by the Department of
     Insurance (DOI). SCIC has proven its ability to issue policies in
     accordance with not only statutory requirements, but also in accordance
     with external directions of outside bodies such as the South Carolina
     Reinsurance Facility and FEMA's flood program.


                                        7

<PAGE>

     New business and endorsements are monitored for accuracy. Likewise, time in
     processing is measured to ensure timely issuance to the policyholder.

     AUDITING SERVICES

     As a servicing carrier for the SCRF, Catawba is already required to audit
     the trust accounts of the designated agencies to ensure compliance with
     accounting standards. When the contract is awarded, this process will be
     expanded to include "all encompassing" audits of the agencies to ensure
     compliance with all standards of the SCAAIP. This will include monitoring
     the amount of business placed into the JUA to determine if the Plan is
     being over utilized. The audits will be conducted on an annual basis.

     In addition, our underwriting department will be staffed with an auditor to
     track the certifications and performance of all agents assigned.
     Deficiencies will be monitored and tracked in accordance with the Rules of
     Practice outlined by the SCAAIP.

     BILLING

     SCIC has a fully automated billing system that provides direct bill
     capability and is compatible with most premium finance companies. The
     direct bill program, which is utilized for the Catawba Facility contract,
     will be used for the Plan and is an extremely effective and efficient tool
     that generates customer bills as policies and endorsements are processed.
     Premium collections for the Plan will be processed in compliance with Plan
     guidelines governing application of payments and policy cancellations. Cash
     is collected and applied to policies daily with several reconciliation
     routines to ensure accurate processing. All errors are thoroughly
     researched and completely resolved. The personnel are highly experienced as
     evidenced by an average tenure of over 10 years. Management of the function
     has an average tenure of 20 years.

     COLLECTIONS

     SCIC will bring to bear its excellent collection practices to the
     collection of uncollectable earned premiums. Nonstandard books of business
     are characterized by credit exposure to insureds for whom premiums are
     earned in advance of payment by the insured. The most typical example of
     this situation is a midterm endorsement to a policy which creates earned
     premium in excess of the equity in the policy. When the insureds fail to
     pay the new earned premium, SCIC cancels the policy at the earliest
     opportunity and immediately enacts collection measures. Industry experience
     with regard to uncollectable earned premium (bad debt ratio) is between
     1.5% to 2% of gross written premium. Catawba Insurance Company has been
     able to surpass the industry standard by limiting its bad debt ratio to
     under 1% of gross written premium. Improving the bad debt ratio by 1/2% on
     a $40,000,000 book of business, for example, reduces the cost to the Plan.
     It has been the experience with Catawba's


                                       8

<PAGE>

     Facility book of business that approximately 22% of unearned premiums that
     are charged off are ultimately collected. Collection of these premiums
     ultimately results in lower costs for insureds under the Plan.

     Although payment in full is required up front for new business, the JUA
     will experience past due premiums relating to underwriting of CLUE reports
     and endorsement activity. Our ability to out-perform the industry in
     collecting these past due premiums sets us apart from the other
     respondents.

     Collection efforts will be courteous and aimed at educating the customer to
     the reasons behind a past due payment and resolving any misunderstandings
     that the insured has. This educational approach has a secondary benefit of
     reducing coverage lapses, which has a stabilizing effect on the market. If
     collection efforts by SCIC fail, the account receivable will be referred
     either to a collection agency or an attorney, depending on the size and
     complexity of the case. Collection efforts will comply fully with the Rules
     of Practice--Servicing Carriers.

     LOSS CONTROL

     Loss control on a personal auto book of business is essentially part of the
     underwriting process. By virtue of SCIC's emphasis on quality, loss control
     is a natural extension of the every day activities of the team. Adverse
     trends will be noted and reported to the Plan. SCIC's experience with a
     voluntary book of non-standard South Carolina auto business will also add
     great value to this process. Because the claims and underwriting personnel
     for the Plan will be working closely with the team handling the voluntary
     book, the Plan will benefit from the additional experience that other team
     members have to offer.

     CLAIMS ADMINISTRATION

     SCIC is extremely well positioned to administer claims arising out of the
     Plan due to our current physical presence in Columbia, S.C., our previous
     experience with the SCRF and emphasis on quality. Overall, the focus of the
     Claims department is customer satisfaction, customer retention and severity
     control. As a consequence, Plan claims will be handled with the same
     attention and focus as claims against SCIC retained policies, i.e. with a
     focus on rapid settlement and severity control. Special units have been set
     up to handle certain types of losses such as total losses or losses where
     subrogation appears likely. Best practice guidelines are in place to ensure
     proper case review and effective overall management.

     We have consistently been "In Compliance" with our Facility claim audits.
     This track record sets us apart from most other respondents. These audits
     indicate our ability to properly administrate claims in a servicing carrier
     environment.

     Inspire's Policy and Claims Administration (PCA) system, the software which
     will be used to process Plan policies and Claims produces a full array of
     reports which are


                                       9

<PAGE>

     used to monitor claims administration and employee performance. The
     Internal Audit Department at Seibels Bruce will audit all claims functions
     periodically for adherence to the Plan guidelines.

     Our SIU consists of a fully licensed adjuster with a law enforcement
     background and reports directly to the AVP of Claims. Our AVP of Claims has
     five years of law enforcement experience plus thirteen years property and
     casualty SIU experience. The AVP created and oversaw the SIU operation at
     Integon for five years.

     We are committed to customer service as evidenced by our toll free number
     which allows claims to be reported directly to the Company to ensure timely
     contact and quality claim handling. The claims reporting capability will be
     expanded to 24 hours a day to comply with the SCAAIP standards. Performance
     will be monitored by a claims satisfaction survey and will be measured
     against benchmarks. Customer complaints are dealt with through a formal
     procedure to ensure satisfaction of those complaints and proper notice to
     Regulators.

     INFORMATION SYSTEMS

     Plan policies will be processed out of SCIC's data center which is located
     in Columbia and which currently handles the South Carolina Reinsurance
     Facility business, SCIC's Voluntary Auto program, as well as SCIC's
     Homeowners, Dwelling Fire, Motorcycle and Commercial Lines programs.
     Columbia is located in the heart of South Carolina where there is limited
     exposure to the destructive forces of nature such as hurricanes. All
     operational and development support is located on-site at the Columbia
     location. This includes programmers, business analysts, data center
     personnel, network support and IS Management.

     The Data Center was established in 1994 on an IBM AS/400 platform. This
     machine is rated as one of the most reliable on the market with a rating of
     99.95% up time. Operational processes are established that ensure system
     security, backup and recovery, change management, capacity planning, and
     performance tuning. Nightly batch processes have been automated to the
     extent of no longer needing a second or third shift operator. Interfaces
     are in place through the IBM network to the SC DMV, NICB, and Enterprise
     Rental Car. A number of agents have direct access to the system via Frame
     Relay or dial-in, which allows them to inquiry on their policies. We also
     have approximately thirty agents with which we interface using a third
     party finance company. The finance company compiles the new business
     policies from each of the thirty agents and transmits it once a day. These
     policies are then added to our daily data collection files and run through
     batch processing. Data Center printing is done on-site. All printed
     material for SC Auto is systematically bar-coded to allow for the automatic
     assembly process.

     Currently our software of choice is Inspire's Policy and Claims
     Administration (PCA) system. The PCA application was initially chosen,
     customized and implemented to process SC Reinsurance Facility business. The
     system is structured around tables to


                                       10

<PAGE>

     allow for easier development, maintenance and modifications. A variety of
     features enhance our ability to process both policies and claims. Some of
     these automated features include CLUE and MVR ordering and reporting,
     violation assignment, VIN/Symbol assignment to allow for accurate on-line
     rating and Bureau and statistical reporting. In addition, the system
     affords easy data entry, extensive editing, convenient cross-referencing
     for various database files and complete history files that include
     pertinent transactional and financial information. Statistical reporting is
     in place to report detail, summary and recoupment premium and claims data
     on a monthly basis to AIPSO. Balancing routines ensure accurate reporting.
     Reporting to the Department of Insurance is also in place and is handled on
     a monthly basis. These procedures are established, efficient and flexible
     to expand at any time.

     In summary, the computer facility, wide area network, processes,
     procedures, and experienced staff are in place to maintain, support and
     grow the current business. Additional features, interfaces and enhancements
     are continuously analyzed to improve the system and its associated
     processes. Collectively these elements provide for the stability of today's
     processes as well as ensuring successful implementation of new processes.

BACKGROUND AND EXPERIENCE

South Carolina Insurance Company (SCIC) will be the sole respondent on the
Request for Proposal and will not utilize any subcontractors or affiliated
companies. SCIC was established on June 10, 1910. In 1972 SCIC had its initial
public offering and later became a subsidiary of The Seibels Bruce Group, Inc.
The stock today is traded on the NASDAQ national market under the symbol SBIG.

The Seibels Bruce Group is a multi line property and casualty insurer which will
comply fully with the requirements of the RFP with regard to licenses. The
primary line of business of SBIG is non-standard auto, which it offers through
its three subsidiaries, SCIC, Catawba Insurance Company (Catawba), and Universal
Insurance Company. SCIC offers a voluntary market for non-standard auto in nine
states while Catawba serves as one of the Servicing Carriers for the South
Carolina Reinsurance Facility (the Facility).

As can be seen in the table below, Catawba's Servicing Carrier experience is
extensive.


<TABLE>
<CAPTION>

       Year           Written Premium           Earned Premium
       ----           ---------------           --------------
       <S>            <C>                       <C>
       1993           $82,131,309               $80,816,988
       1994           $80,547,925               $83,970,212
       1995           $64,206,362               $66,863,968 
       1996           $69,342,208               $65,754,202
       1997           $75,216,072               $75,387,286

</TABLE>


As you will see in the "Past performance and Commitment" section of this
proposal, we have been in compliance with all claim and underwriting audits
completed by the South Carolina Reinsurance Facility in the past 5 years. Our
commitment to this Plan is


                                       11

<PAGE>

demonstrated by the fact that we have been a servicing carrier for the Facility
since its inception in 1974. No other respondent can demonstrate more experience
in the residual markets of South Carolina than SCIC. It is by virtue of the
experience with the Facility that SCIC is best positioned to serve the South
Carolina Associated Auto Insurers Plan. In that many of the same personnel work
for both Catawba and SCIC, SCIC is completely prepared to handle all aspects of
the Plan business. Catawba was one of the original Servicing Carriers for the
Facility and has consistently provided a high level of service for the Facility,
the insureds and for the Designated Agents which wrote for the Facility. This
experience, combined with the overall knowledge of the South Carolina auto
insurance market and its commitment to the State of South Carolina makes SCIC
the logical choice to be named a servicing Carrier for the South Carolina
Associated Auto Insurers Plan.


                                       12

<PAGE>


                         PAST PERFORMANCE AND COMMITMENT

Seibels Bruce has served the State of South Carolina as a servicing carrier for
the Reinsurance Facility since its inception in 1974. For almost 25 years,
Seibels Bruce has demonstrated their commitment to the consumers of South
Carolina by assisting them in obtaining insurance coverage through the residual
market. Our service to the agents and consumers has always been considered
exceptional.

Since 1974, Seibels Bruce has served on the Governing Board of the South
Carolina Reinsurance Facility. We have always been an active member of this
board.

Our performance audits for the past five years resulted as follows:


<TABLE>
<CAPTION>

       Year           Claims Result            Underwriting Result
       ----           -------------            -------------------
       <S>            <C>                      <C>
       1993           Passed                   In Compliance
       1994           Passed                   In Compliance
       1995           Passed                   In Compliance
       1996           Passed                   In Compliance
       1997           Passed                   In Compliance

</TABLE>


We feel these results demonstrate our ability to follow the guidelines and rules
of practice for the South Carolina Reinsurance Facility.

Our most recent target market conduct exam was completed on August 5, 1996. A
copy of the summary page is attached. This targeted market conduct exam was
completed on the records of the South Carolina Reinsurance Facility business we
wrote as a servicing carrier. The purpose was to review the procedures used in
determination of surcharge and points for rating purposes. The scope of the exam
encompassed review of underwriting procedures, rating manuals, insurer
guidelines, and recalculation of points for rating. We were determined to be in
compliance.

The South Carolina Insurance Company served the North Carolina Reinsurance
Facility from its inception in 1973 until 1995. In this role, the South Carolina
Insurance Company demonstrated its ability to provide accurate policy rating and
efficient claims administration for 22 years.

We also serve FEMA as a WYO Flood provider. South Carolina Insurance Company has
served FEMA since its inception in 1983. Through the years, we have been subject
to the most stringent of audits. In fact, several WYO companies are under
investigation for improper handling of FEMA funds. We have recently undergone a
targeted audit regarding our accounting practices by Deloitte and Touche. Our
practices have been determined to be in compliance with Federal law.


                                       13

<PAGE>


             SOUTH CAROLINA INSURANCE COMPANY SOLVENCY CERTIFICATION

This document serves as certification that South Carolina Insurance Company nor
its parent, The Seibels Bruce Group, Inc., nor any of its affiliated companies
has declared bankruptcy within the last three- (3) years.


                                       14

<PAGE>


                                  CREDIT RATING

Section 9.4.2 of the Request for Proposal indicates that the Respondent shall
submit a copy of the Respondent's credit rating from an accredited national
credit rating bureau. Neither the Respondent nor its parent, The Seibels Bruce
Group, Inc. have publicly traded debt securities that would require a rating
from an accredited national credit rating bureau such as Standard and Poors or
Moody's. Dun and Bradstreet does not rate Insurance Companies because the Dun
and Bradstreet rating model cannot accommodate these type companies.

In response, we submit a copy of our Financial Stability Rating from Demotech
which represents that company's analysis of the ability of South Carolina
Insurance Company to "meet its financial obligations." We also offer audited
statutory financial statements for the last three years for the Respondent as
well as its parent.

South Carolina Insurance Company is not rated by A.M. Best Company, Inc. because
its rating procedures are inapplicable to our operations. Under the "NR-3"
assigned designation, the absence of a rating is due to the fact that Best's
normal rating procedures do not apply due to [SCIC's] unique or unusual business
features. The unique or unusual business feature associated with our operations
is its primary non-risk bearing, servicing carrier operation.


                                       15

<PAGE>


                              PRICING ENHANCEMENTS

As stated in our cover letter, we are prepared to offer pricing enhancements
should the Director choose to exercise its prerogative under Section 2.16.
Included in this section are our pricing sheets with the proposed pricing based
on the current RFP requirements. It is not our intention to modify the original
RFP.

Our proposed enhancements are offered in an attempt to provide the best pricing
available to SCAAIP and the consumers of South Carolina. We are confident that
our pricing and processes are competitive. However, the current requirements for
the non-rated company require us to incur and pass on unnecessary expenses.

If the requirement to post a statutory deposit is waived, and the performance
bond amount is capped at $1.5 million, we would reduce our prices to the
following amounts by market shares:

50% QUOTA SHARE
Operating Service Fee - Liability 5.027% of written liability premium

Operations Service Fee - Physical Damage 5.027% of written physical damage
premium

Claims Service Fee - Liability 13.367% of earned liability premium

Claims Service Fee - Physical Damage 9.723% of earned physical damage premium

75% QUOTA SHARE
Operating Service Fee - Liability 4.482% of written liability premium

Operations Service Fee - Physical Damage 4.482% of written physical damage
premium

Claims Service Fee - Liability 11.397% of earned liability premium

Claims Service Fee - Physical Damage 8.209% of earned physical damage premium

100% QUOTA SHARE
Operating Service Fee - Liability 3.763% of written liability premium

Operations Service Fee - Physical Damage 3.763% of written physical damage
premium

Claims Service Fee - Liability 9.56% of earned liability premium

Claims Service Fee - Physical Damage 6.515% of earned physical damage premium


                                       16

<PAGE>


                                  PRICING SHEET

          We hereby submit the following compensation percentages to serve as a
          Servicing Carrier for the South Carolina Associated Auto Insurers Plan
          in accordance with the terms and conditions of this proposal.


          Company:  South Carolina Insurance Company


          By: /s/ R. Thomas Savage, Jr. / CFO                  9/9/98
             -------------------------------------------------------------------
             Authorized Signature/Title                         Date


          Percentage share of Association business we are proposing to service
          in the state (use separate sheets if bidding on more than one
          percentage share):

                                       100%

          In computing monthly fees for services rendered as a servicing carrier
          of the Association, the below percentages of premium will be used upon
          which monthly payments will be made. It is understood that these
          percentages will be adjusted in accordance with the
          incentive/disincentive program, and for eligible charge-offs. No
          compensation will be issued for ineligible charge offs.


          Operating Service Fee - Liability 4.013% of written liability premium

          Operating Service Fee - Physical Damage 4.013% of written physical
          damage premium

          Claims Service Fee - Liability 9.810% of earned liability premium

          Claims Service Fee - Physical Damage 6.765% of earned physical damage
          premium


                                       17

<PAGE>


                                  PRICING SHEET

          We hereby submit the following compensation percentages to serve as a
          Servicing Carrier for the South Carolina Associated Auto Insurers Plan
          in accordance with the terms and conditions of this proposal.


          Company:  South Carolina Insurance Company


          By: /s/ R. Thomas Savage, Jr. / CFO                   9/9/98
             -------------------------------------------------------------------
             Authorized Signature/Title                          Date


          Percentage share of Association business we are proposing to service
          in the state (use separate sheets if bidding on more than one
          percentage share):

                                       75%

          In computing monthly fees for services rendered as a servicing carrier
          of the Association, the below percentages of premium will be used upon
          which monthly payments will be made. It is understood that these
          percentages will be adjusted in accordance with the
          incentive/disincentive program, and for eligible charge-offs. No
          compensation will be issued for ineligible charge offs.


          Operating Service Fee - Liability 4.732% of written liability premium

          Operating Service Fee - Physical Damage 4.732% of written physical
          damage premium

          Claims Service Fee - Liability 11.647% of earned liability premium

          Claims Service Fee - Physical Damage 8.459% of earned physical damage
          premium


                                       18

<PAGE>


                                  PRICING SHEET

          We hereby submit the following compensation percentages to serve as a
          Servicing Carrier for the South Carolina Associated Auto Insurers Plan
          in accordance with the terms and conditions of this proposal.


          Company:  South Carolina Insurance Company


          By: /s/ R. Thomas Savage, Jr. / CFO                  9/9/98
             -------------------------------------------------------------------
             Authorized Signature/Title                         Date


          Percentage share of Association business we are proposing to service
          in the state (use separate sheets if bidding on more than one
          percentage share):

                                       50%

          In computing monthly fees for services rendered as a servicing carrier
          of the Association, the below percentages of premium will be used upon
          which monthly payments will be made. It is understood that these
          percentages will be adjusted in accordance with the
          incentive/disincentive program, and for eligible charge-offs. No
          compensation will be issued for ineligible charge offs.


          Operating Service Fee - Liability 5.527% of written liability premium

          Operating Service Fee - Physical Damage 5.527% of written physical
          damage premium

          Claims Service Fee - Liability 13.867% of earned liability premium

          Claims Service Fee - Physical Damage 10.223% of earned physical damage
          premium


                                       19

<PAGE>


                                  PRICING SHEET

          We hereby submit the following compensation percentages to serve as a
          Servicing Carrier for the South Carolina Associated Auto Insurers Plan
          in accordance with the terms and conditions of this proposal.


          Company:  South Carolina Insurance Company


          By: /s/ R. Thomas Savage, Jr. / CFO                  9/9/98
             -------------------------------------------------------------------
          Authorized Signature/Title                            Date


          Percentage share of Association business we are proposing to service
          in the state (use separate sheets if bidding on more than one
          percentage share):

                                       33 1/3%

          In computing monthly fees for services rendered as a servicing carrier
          of the Association, the below percentages of premium will be used upon
          which monthly payments will be made. It is understood that these
          percentages will be adjusted in accordance with the
          incentive/disincentive program, and for eligible charge-offs. No
          compensation will be issued for ineligible charge offs.


          Operating Service Fee - Liability 7.435% of written liability premium

          Operating Service Fee - Physical Damage 7.435% of written physical
          damage premium

          Claims Service Fee - Liability 18.528% of earned liability premium

          Claims Service Fee - Physical Damage 14.238% of earned physical damage
          premium


                                      19-A

<PAGE>


                                  PRICING SHEET

          We hereby submit the following compensation percentages to serve as a
          Servicing Carrier for the South Carolina Associated Auto Insurers Plan
          in accordance with the terms and conditions of this proposal.


          Company:  South Carolina Insurance Company


          By: /s/ R. Thomas Savage, Jr. / CFO                  9/9/98
             -------------------------------------------------------------------
          Authorized Signature/Title                            Date


          Percentage share of Association business we are proposing to service
          in the state (use separate sheets if bidding on more than one
          percentage share):

                                       30%

          In computing monthly fees for services rendered as a servicing carrier
          of the Association, the below percentages of premium will be used upon
          which monthly payments will be made. It is understood that these
          percentages will be adjusted in accordance with the
          incentive/disincentive program, and for eligible charge-offs. No
          compensation will be issued for ineligible charge offs.


          Operating Service Fee - Liability 7.796% of written liability premium

          Operating Service Fee - Physical Damage 7.796% of written physical
          damage premium

          Claims Service Fee - Liability 19.394% of earned liability premium

          Claims Service Fee - Physical Damage 15.062% of earned physical damage
          premium


                                      19-B

<PAGE>


                                  PRICING SHEET

          We hereby submit the following compensation percentages to serve as a
          Servicing Carrier for the South Carolina Associated Auto Insurers Plan
          in accordance with the terms and conditions of this proposal.


          Company:  South Carolina Insurance Company


          By: /s/ R. Thomas Savage, Jr. / CFO                9/9/98
             -------------------------------------------------------------------
             Authorized Signature/Title                       Date


          Percentage share of Association business we are proposing to service
          in the state (use separate sheets if bidding on more than one
          percentage share):

                                       25%

          In computing monthly fees for services rendered as a servicing carrier
          of the Association, the below percentages of premium will be used upon
          which monthly payments will be made. It is understood that these
          percentages will be adjusted in accordance with the
          incentive/disincentive program, and for eligible charge-offs. No
          compensation will be issued for ineligible charge offs.


          Operating Service Fee - Liability 8.688% of written liability premium

          Operating Service Fee - Physical Damage 8.688% of written physical
          damage premium

          Claims Service Fee - Liability 21.497% of earned liability premium

          Claims Service Fee - Physical Damage 16.994% of earned physical damage
          premium


                                      19-C

<PAGE>


                                  PRICING SHEET

          We hereby submit the following compensation percentages to serve as a
          Servicing Carrier for the South Carolina Associated Auto Insurers Plan
          in accordance with the terms and conditions of this proposal.


          Company:  South Carolina Insurance Company


          By: /s/ R. Thomas Savage, Jr. / CFO                9/9/98
             -------------------------------------------------------------------
             Authorized Signature/Title                       Date


          Percentage share of Association business we are proposing to service
          in the state (use separate sheets if bidding on more than one
          percentage share):

                                       20%

          In computing monthly fees for services rendered as a servicing carrier
          of the Association, the below percentages of premium will be used upon
          which monthly payments will be made. It is understood that these
          percentages will be adjusted in accordance with the
          incentive/disincentive program, and for eligible charge-offs. No
          compensation will be issued for ineligible charge offs.


          Operating Service Fee - Liability 9.975% of written liability premium

          Operating Service Fee - Physical Damage 9.975% of written physical
          damage premium

          Claims Service Fee - Liability 24.652% of earned liability premium

          Claims Service Fee - Physical Damage 19.893% of earned physical damage
          premium


                                      19-D

<PAGE>


                                DURATION OF OFFER

The Respondent, South Carolina Insurance Company, certifies that its proposal is
valid until notification of an award has been issued. The Respondent, South
Carolina Insurance Company, understands that this period may be extended by
mutual agreement between the Servicing Carrier and the Advisory Board. The
Respondent, South Carolina Insurance Company, certifies that the costs submitted
with the proposal shall be firm from the date of submission.


                                       20
<PAGE>


EXHIBIT 4: BUSINESS PLAN --- QUALITATIVE QUESTIONNAIRE

         The qualitative questionnaire will be scored with a total number of 50
         points possible. Of the 50 total points, 30 points involve
         Underwriting/Processing and 20 points involve Claims Administration.
         Please insert additional answer sheets for responses, if required.


         Underwriting/Processing

                  General Responsibilities                    5 essays
                  Resources                                   5 essays
                  Account/Selection Criteria                  1 essay
                  Sub-Contractors Vendors                     4 essays

              Total                                          15 essays

                  Please score the above section on the basis of 0 to 30 points.

                       Score __________     (Scorer Use Only)


         Claims Administration

                  Claims Investigation                        4 essays
                  Resources                                   5 essays
                  Case Review                                 2 essays
                  Sub-Contractors Vendors                     3 essays

                   Total                                     14 essays

                  Please score the above section on the basis of 0 to 20 points.

                       Score _________  (Scorer Use Only)





                                       21
<PAGE>


         I.       UNDERWRITING/PROCESSING   (30pts.)

         1.       General Responsibilities

         A.       Describe your new business underwriting procedures, including
                  qualitative enhancements, relative to application review,
                  information gathering and verification of risk eligibility,
                  and accurate policy issuance.

         Catawba Insurance Company, a subsidiary of SCIC is currently a
         Servicing Carrier for the South Carolina Reinsurance Facility. We have
         performed this role since the Facility's inception in 1974. In 1997, we
         processed approximately 52,000 new policies, 63,000 endorsement
         requests, 38,000 cancellations, 10,000 reinstatements, and 59,000
         renewals for the South Carolina Reinsurance Facility. In the fourth
         quarter of 1997, we started writing voluntary auto business in South
         Carolina. As such, we are familiar with the market nuances and
         statutory requirements associated with processing new business in this
         state.

         Currently, our procedures are as follows for both South Carolina
         Reinsurance Facility and voluntary auto business:

         All applications are received and stamped the day they are received in
         the mailroom. The premium amount remitted is reviewed by our processing
         staff to verify the proper payment amount was received. The premium
         amount remitted is written on the application for future reference by
         our underwriting staff. Checks are then detached and submitted to our
         billing department for entry onto our policy system and deposited into
         our facility bank account. These deposits are made daily by 11:00am.

         At this point, applications are reviewed by processing staff to verify
         MVR's were provided on all drivers. In instances where an MVR is not
         provided for a driver, one is ordered "real-time" from the South
         Carolina Department of Public Safety. We have a direct link with this
         department and receive these MVR's instantly to avoid processing
         delays. Out of state MVR's are ordered through ChoicePoint and usually
         received within one to two days. When available, we have the capability
         of ordering MVR's real-time.

         Applications are then sent to data entry. All relevant data is entered
         into our policy system. This includes, but is not limited to, names,
         addresses, agency codes, effective dates, policy term, dates of birth,
         vehicle information, and territory. The new business underwriter enters
         data relating to MVR's, CLUE, objective standard rating, or information
         requiring review and judgement to process.



                                       22
<PAGE>


         CLUE reports are ordered on all new business by the processing staff.
         These reports are received the following business day and attached to
         the application.

         Currently, many of our agents utilize an agency management system
         provided to them by Prime Rate Premium Finance Company. We have a new
         business upload arrangement with Prime Rate that allows us to
         systematically prefill the initial data entry, apply payments, and
         order CLUE reports. This process enhances the processing time when
         used.

         Once these procedures have been completed, the applications and all
         documents provided by the agents and obtained by our staff are
         delivered to the new business underwriting unit. New business
         underwriters receive the applications for review on a "first in/first
         out" basis. Applications are underwritten for compliance with
         guidelines, statutory requirements, rating, option form compliance,
         proper classification, and missing information.

         The following is an example of the underwriters' responsibilities:

         o        Verify the application is received from the agent in a timely
                  manner. If not, a deficiency letter goes to the agency and the
                  SCRF.
         o        Verify eligibility and proper information was obtained to bind
                  coverage. This would include MVR's, proof of ownership,
                  insurability, and necessary rating information. Deficiency
                  letters are mailed when appropriate.
         o        Verify territory assignment.
         o        Call and/or write the agency for any missing information.
         o        When a properly executed UM/UIM option form is not provided,
                  agents are notified in writing and the coverages are issued
                  with UM/UIM equal to the liability limits.
         o        MVR's are underwritten with regards to date ordered,
                  eligibility of risk, and the application of surcharges.
                  Underwriters have access to the South Carolina Department of
                  Public Safety MVR link from their terminals. When necessary,
                  they will order MVR's for instant access.

                  When necessary, underwriters have access to MVR Decoder
                  reference manuals to evaluate out of state MVR's and surcharge
                  assignment.

         o        CLUE reports are underwritten for surcharge application, and
                  additional drivers. When additional drivers are suspected,
                  underwriters will attempt to contact the insured by phone or
                  in writing. When this is not successful, they call or send a
                  letter to the agent asking them to help identify and explain
                  the existence of additional drivers. If the facts warrant, the
                  underwriter may use their discretion and add the drivers
                  immediately.
         o        ADD reports are ordered in many cases when the number of
                  vehicles in relation to the number of drivers does not appear
                  reasonable.
         o        A letter is sent to the insured notifying them of any
                  additional surcharge points added as a result of a CLUE
                  report.



                                       23
<PAGE>


         o        Underwriters use the information provided on the applications,
                  MVR's, and CLUE reports to ensure proper classification of
                  risks.
         o        Given the current "mandate to write", very few applications
                  are determined to be ineligible. However, when this occurs the
                  underwriter processes the cancellation in accordance with
                  statutory provisions. Certification of delivery is obtained.
         o        When requested, financial responsibility filings (SR22) are
                  made. In many instances, insureds require immediate filings.
                  We have a "Same Day SR22" procedure where an agent may fax an
                  application and MVR's by 12:00pm for immediate filing. We have
                  a courier who delivers SR22's to the highway department daily
                  at 2:30pm. This proves to be very convenient to insureds that
                  are in dire straits.
         o        Our processing system provides underwriters with a diary
                  mechanism for following up on a future status of a policy when
                  required. This may be used to obtain missing information.
         o        Underwriters also have access to an on-line policy log.
                  Comments, decisions, and conversations with agents and
                  insureds can be documented for future reference.

         From a qualitative view, our system provides the following
enhancements:

         o        VIN Verification- ISO tapes are routinely loaded onto our
                  database to verify VIN and symbol assignment. Edits assist the
                  underwriting and processing staff in ensuring proper VIN
                  entry.
         o        Premium Summary- Our system provides a premium summary review.
                  An underwriter can view the completed policy entry and match
                  the calculated premium to the premium submitted on the
                  application. When the premium matches, the policy is released.
                  If the premium doesn't match, the underwriter can evaluate the
                  difference by reviewing the entry and the application. If a
                  significant refund is due, the agent is notified to try and
                  ascertain the difference prior to generating the refund. All
                  refunds and additional premium due notices are generated
                  systematically when the policies are released.
         o        Our system provides automated rating capabilities for antique
                  autos, classic autos, customization and motorhomes.
         o        Our policy system provides on-line edits to assist processing
                  specialists and underwriters in entering and obtaining
                  accurate information. These edits focus on rating and
                  classification of risks.
         o        Error reports generate daily to alert us of entry and
                  processing errors.
         o        Policy documentation is made and retained on-line.
         o        Policy diaries are maintained via our policy system.
         o        Our underwriting auditor reviews samples of new business
                  applications daily for quality and adherence to guidelines and
                  procedures.
         o        A daily sample of the previous day's processed new business is
                  reviewed to determine the length of time in processing.



                                       24
<PAGE>


         Once these efforts are completed, the application documents are sent to
         records for microfilming. Records are retained for seven years beyond
         the life of the policy.

         New business policy documents include a declarations page, ID cards,
         policy jacket, and additional premium due notices. Insured and agent
         copies are sent to the agency. Insured copies are countersigned by the
         agent and delivered or mailed to the insured. Special interest copies
         are generated and mailed directly to the special interest. ID cards
         comply with current statutory requirements and one card per vehicle is
         produced.

         In the current statutory environment, we are not permitted to cancel,
         or refuse a policy due to incomplete applications. Effective March 1,
         1999 the statute changes permitting us to take action. Our procedures
         will be to contact the agent and/or insured to obtain the information.
         The policy will be placed on diary for a 14 day follow up. If the
         necessary information is not obtained, the policy will not be issued
         and proper notification sent to the insured and agent.

         All procedures have undergone the scrutiny of the SCRF. We are audited
         yearly for underwriting compliance and have always passed our reviews.

         B.       Describe your renewal business underwriting procedures,
                  including qualitative enhancements, relative to criteria used
                  to determine adequacy of money submitted by the insured,
                  verification of risk continuing eligibility, and accurate
                  policy issuance.

         Our renewal underwriting procedures operate within the current legal
         environment in South Carolina. This environment minimizes the instances
         you may nonrenew a policy. These most frequent reasons are as follows:

         1.       The named insured has moved out of state.
         2.       The named insured is deceased.
         3.       The named insured does not have a valid S.C. drivers license
                  or has a suspended or revoked license.

         Therefore, renewal underwriting in the current environment focuses on
         accurate pricing. This does not imply risk qualification does not
         occur. We do recognize the legal environment is changing with the
         implementation of the JUA and we will change our procedures
         accordingly. Our current procedures are as follows:

         Sixty (60) days prior to the renewal effective date, we receive a tape
         of all of our policies whose driver's (and license numbers) are coming
         up for renewal to the South Carolina Department of Public Safety
         (SCDPS). They in turn match this tape against their MVR database. This
         tape identifies the licenses that have had activity since the last
         renewal review. In other words, they identify those drivers



                                       25
<PAGE>


         whose MVR's have changed since the last renewal. The SCDPS then
         transmits these MVR's back to our policy system via tape.

         The new MVR data is evaluated by our Automated Violation Assignment
         (AVA) system. This system automatically assigns most surcharges
         discovered on the violation/accident tape provided. AVA generates a
         daily list of policies with the remaining MVR activity that must be
         evaluated by our renewal underwriters. Consideration must be given to
         violations associated with accidents so as not to add surcharge points
         for both the accident and violation. This is in accordance with S.C.
         law. The renewal underwriters flag suspensions and expired licenses for
         review. When appropriate, nonrenewals are issued. Our underwriting
         review is as follows:

         o        If a suspended license is identified, we set the policy up for
                  nonrenewal and mail the insured and agent a letter advising
                  the insured that their license is suspended and ask them to
                  have it reinstated to avoid nonrenewal.
         o        The same procedure is followed for expired licenses. The
                  insured and agent are afforded the opportunity to reinstate
                  the insured's license prior to the nonrenewal is issued.
         o        AVA also alerts us to discrepancies in the date of births. If
                  the dates on the MVR don't match what is on our system, the
                  underwriter has the opportunity to re-rate the policy.
         o        Multiple violations are referred for proper point assignment.

         The renewal underwriters receive a daily listing of all new paid losses
         in excess of the BI and PD thresholds. This allows us to add accident
         surcharges immediately to become effective at the next renewal. This
         enhancement allows us to more effectively rate the policy by not
         waiting until a claim feature is closed before adding the surcharge.
         Waiting until the feature or file is closed can delay application of
         the surcharge by one or more renewal cycles.

         In the new business essay, we referred to our future status (diary)
         feature. Whether underwriting at the new business or the endorsement
         stage, our underwriters will diary policies for the next renewal cycle
         if any pertinent renewal underwriting criteria should be reviewed. Our
         renewal underwriters receive these diaries 60 days prior to renewal for
         review and underwriting action. This feature is used when:

         o        An excluded driver needs to have a FR-9 and exclusion form
                  reapplied. The insured and agent is asked to reapply for the
                  exclusion prior to the renewal offer. If it is not received,
                  the driver is rated back onto the policy for the renewal
                  offer.
         o        Cross referenced files are reviewed. In some instances spouses
                  have separate policies and we verify the point assignment if
                  one of the policies cancels. For example, the policy with the
                  points may cancel.



                                       26
<PAGE>


                  Without proof of other coverage, the spouse and points are
                  added to the remaining policy.
         o        When points are not being applied because they are applied to
                  a motorcycle policy, we diary for verification the motorcycle
                  policy is still in force. If not, surcharge points are
                  applied.
         o        In some instances, points are not applied for a driver because
                  they are applied on another auto policy. We request an updated
                  certificate of coverage. If not received, the points are
                  applied.

         Our policy system generates a listing of all policies with out of state
         drivers licenses and drivers with permits. These MVR's are ordered,
         underwritten, and points applied when applicable by the renewal
         underwriting staff. When a driver's "permit" restriction is removed,
         the drivers and vehicles are reclassified to reflect the proper rate.

         If the named insured is not a member of the military, or a student, the
         policy is nonrenewed. Permitted driver's MVR's are reviewed to
         determine if the license is still under a "permit". When the license
         becomes unrestricted, the policy is reclassified to consider rating for
         the youthful or inexperienced operator.

         Our claims staff routinely complete and refer claim referral reports to
         the underwriting department. These reports may provide information
         concerning unlisted drivers, or other appropriate underwriting
         information. This information is reviewed and applied to the policies
         as appropriate.

         All renewal offers are mailed to the insured, agent and special
         interests forty-five (45) days in advance of the renewal effective
         date. The renewal offer includes a renewal declarations page, renewal
         questionnaire, updated ID cards, and a billing notice (including past
         due balances). When the renewal questionnaire is returned, the policy
         is updated accordingly.

         Fourteen (14) days prior to the renewal, a reminder notice is mailed to
         the insured and agent if payment has not been received. If payment is
         not received by the renewal effective date, a lapse notice is generated
         to all interested parties. In accordance with SCRF guidelines, a
         fourteen-day (14) grace period is considered for late payments.
         Financial responsibility filings (SR22 & SR26) are made as appropriate
         and delivered to the SCDPS daily.

         The SCRF does not currently offer payment plans. They require payment
         in full. As a result, most policies are premium financed and the full
         premium submitted. If, and when payment deficiencies exist, we credit
         the money and bill for the remaining balance due. When necessary, our
         policy system generates cancellations according to S.C. law. Currently,
         any unpaid balances and bad debt are the servicing carrier's
         responsibility.



                                       27
<PAGE>


         Looking forward to the JUA, we believe the procedures will accurately
         and efficiently provide for proper rating and risk review of JUA
         renewals. As the residual market mechanism, it is unlikely that much of
         the underwriting criteria will change. Without seeing the renewal
         underwriting guidelines, it is difficult to describe how our procedures
         may change. However, our procedures are flexible and will easily adjust
         to the prescribed guidelines.

         In addition to the system features mentioned previously, we have an
         underwriting expert system (UES) feature. This is an automated risk
         review feature designed for voluntary risks in an accept/reject
         underwriting environment. This feature reviews underwriting criteria
         and can make underwriting decisions or flag policies for review by an
         underwriter. If the JUA guidelines can be utilized in this manner, we
         expect to use UES.

         Once again, these procedures have undergone stringent audits with the
         SCRF. These processes have always been acceptable.

         C.       Describe your mid-term underwriting review/evaluation process,
                  including qualitative enhancements, with respect to
                  interaction with other disciplines, account monitoring,
                  criteria for issuance of endorsements, cancellations, etc.

         Mid-term underwriting occurs by receipt of policy changes (endorsement
         requests) and by handling service calls from agents and insureds. Our
         processes are as follows:

         Our Customer Service unit is staffed with CSR's who focus solely on
         handling our service calls. This unit is staffed with experienced
         underwriters who are familiar with all stages of our underwriting
         process. In the process of servicing customers, issues arise that
         require underwriting expertise. These situations may result in
         immediate action being taken on a file. When this happens, these CSR's
         can and will re-evaluate the risk for eligibility and proper rating.
         They will immediately enter policy changes as required. If the
         situation doesn't call for immediate action, or when information needs
         to be clarified prior to renewal, they will enter a future status
         (diary) comment for review at renewal.

         As mentioned in previous essays, our policy system has a policy log
         that can be reviewed by the CSR. Comments by other underwriting staff
         can be reviewed prior to making decisions that effect the policy.
         Likewise, the CSR's routinely document their conversations and actions
         for future reference. In fact, all conversations and decisions are
         documented on this policy log by all underwriting staff. This provides
         a chronological account of the policy history.

         Policy change (endorsement) requests are submitted by agents and date
         stamped when received in the mailroom. These change requests are sorted
         and delivered to underwriting. All changes submitted with money are
         prioritized for immediate application of money and processing. This
         ensures all monies are applied and deposited in a timely fashion.



                                       28
<PAGE>


         When drivers are added, MVR's are ordered to ensure proper
         classification and rating. A MVR decoder reference manual is utilized
         on out of state MVR's to ensure proper interpretation of that states
         MVR. S.C. MVR's are ordered "real-time" to speed processing as
         previously described.

         Underwriters re-evaluate all risks with the submission of an
         endorsement to ensure qualification, classification, and rating of the
         risk occurs. When necessary, a future status comment is used to flag
         the policy for follow-up or renewal review. Generally, the following
         mid-term underwriting occurs:

         o        The underwriter orders ADD reports from ChoicePoint when they
                  suspect additional drivers may exist. Many times this occurs
                  simply because the number of cars to drivers seems
                  unreasonable for the risk.
         o        When missing, or additional information is needed, the
                  endorsement underwriter will call or write the agent and/or
                  insured.
         o        The effective date of the endorsement is verified with the
                  date the endorsement is signed. Backdated endorsements are
                  referred to a supervisor for review and contact with the
                  agent.
         o        Verification of proper documentation such as UM/UIM option
                  forms, FR9 and exclusion forms, and proof of ownership are
                  verified. If the option form is not submitted or not executed
                  properly, the change is not made and the form returned to the
                  agent. The same procedure applies to driver exclusions. No
                  change is made if the proper documentation is not provided.
         o        Policy logs are updated to document conversations and
                  decisions.
         o        Insured signatures are encouraged on all endorsements,
                  however, we will process an endorsement without a signature as
                  long as it is not deleting or reducing coverage. These cases
                  are sent back to the agent for the insured's signature.
         o        Verify the request is coming from the named insured or
                  appropriate representative (POA or executor).
         o        Discounts are applied when qualifications are met.
         o        Our system is programmed to automatically update and rerate a
                  policy mid-term when a driver turns age 25. This is in
                  accordance with SCID regulations.
         o        After changes are completed, the policy is rerated and viewed
                  by the underwriter for accuracy.

     Claims coverage questions arise and are referred to underwriting. Most of
     these coverage disputes arise from endorsements, although some result from
     new business or renewals. Whatever the reason, all coverage questions are
     referred to underwriting from claims. The coverage issues are identified
     and resolved by underwriting staff. 95% of coverage issues can be resolved
     within 24 hours.

     Insured/finance cancellation requests are separated in the mailroom and
     date stamped the day of receipt. All cancellations are entered the day of
     receipt. These cancellations are underwritten as follows:



                                       29
<PAGE>


         o        Backdated cancellations are referred to a supervisor for
                  review and contact with the agent prior to processing.
         o        Cancellations resulting from a total loss are reviewed to
                  determine the date the rental coverage expired. This requires
                  review of the claim file. The date of cancellation is the day
                  after the rental car was turned in.
         o        Verification of proper signature.
         o        Agents are contacted on questionable cases.
         o        A cancellation declaration is mailed to all interested parties
                  to confirm the cancellation. This also serves as notice to the
                  special interest that the policy has cancelled.
         o        SR26 forms allowing the required 15-day notice is mailed when
                  applicable.
         o        We verify the cancellation date is not within the first 60
                  days of a new policy term or 90 days on SR22 policies in
                  accordance with S.C. law.
         o        Verify proper documentation is submitted to pro-rate
                  cancellation.
         o        Refunds are generated systematically and provided to the
                  finance company if applicable.

         Our policy system provides edits to prevent us from canceling policies
         within the 61st or 91st day of the policy term.

         Our mid-term processing has always been acceptable to the SCRF. Our
         past audits all reflect compliance.

         D.       Describe your procedures as respects processing of
                  cancellations for the reasons of non-compliance, non-payment
                  of premiums, not allowing reasonable access for
                  audit/inspections, or disclosure of exposure.

         Current statutory requirements only allow for cancellation in the
         following instances:

         o        Revoked or suspended license
         o        Non-payment of premium
         o        Material misrepresentation

         When an MVR is obtained by our underwriting staff and the insured's
         license is determined to be suspended, revoked, or otherwise invalid,
         we take the action permissible for the circumstances. If it is a new
         business application, we cancel effective the 61st day of the policy
         period in accordance with statute. If it is determined mid-term, the
         notice of nonrenewal is processed immediately.

         When an additional premium is due, the insured receives a billing
         notice immediately. If this additional premium is not received within
         20 days, a cancellation notice is generated on an equity basis. This
         means we calculate the "paid to date" and generate the cancellation
         notice 20 days prior to this date. In cases where there is no equity,
         the cancellation date will always calculate a minimum 20 days notice
         and an outstanding balance will be due. All billing notices and
         cancellations are generated systematically. Cancellation notices
         indicate the reason for cancellation and the



                                       30
<PAGE>


         balance due. If the payment is received prior to the cancellation date,
         the policy is reinstated. We do require the agent to submit a copy of
         the payment receipt when requesting reinstatement.

         When past due balances remain, the system generates earned premium due
         notices upon the cancellation date. If no funds are received, the
         policy is referred to our collections department for policyholder
         contact. The system then automatically generates a series of collection
         letters to the insured. If no contact or cooperation is obtained, we
         refer the account to a collection agency.

         The mandate to write currently limits our opportunity to cancel a
         policy for failure to allow audit, inspection or disclosure of
         exposure. When the JUA goes into effect, the mandate to write will no
         longer exist. Our underwriting processes will allow us to cancel within
         the guidelines set forth by the JUA. We will be prepared to cancel
         immediately, or utilize our future status diary mechanism to allow the
         insured a reasonable time to comply. Essentially, when an underwriter
         deems the insured or agent to be uncooperative, they can process a
         cancellation immediately, or maintain the policy on diary for
         compliance. This decision will be determined at the underwriter's
         discretion based upon JUA guidelines.

         Cancellation and nonrenewal notices are mailed and a "certificate of
         mailing" received by the U.S.P.S.


         E.       Describe the procedures utilized to monitor and manage the
                  above activities as respects compliance with performance
                  standards and enhancements portion.

         All performance standards are monitored with the idea of "what gets
         measured gets done". We have several ways in which we objectively
         monitor performance.

         We have an auditor on staff who reviews our work product for accuracy,
         completeness, procedural compliance, proper rating, and underwriting
         judgement. This process encompasses new business and policy changes.

         When the underwriter completes their processing of an application or
         endorsement, the source documents are released to the auditor prior to
         going to microfilming. We review a random sampling of 100 applications
         and 100 endorsements per week. The auditor reviews the work product
         from the eyes of an underwriter and determines any deficiencies on the
         file. All MVR, CLUE reports, option forms, etc. are available for
         review.

         Deficiencies are noted and given to the supervisor for review and
         feedback with the underwriter or processing specialist. The auditor
         tracks the deficiencies by type and individual. This results in
         identification of individual and departmental weaknesses, and allows us
         to focus coaching and training where needed. Essentially, we know who
         is making errors, and the category of errors they are making. A quality



                                       31
<PAGE>


         percentage rating is determined for each individual and tracked
         monthly. Each employee has a "Quality" goal that is part of his or her
         yearly performance and salary evaluation.

         We also audit our time in processing of source documents. We randomly
         sample 50 applications and 50 endorsements per day to determine the
         "time in process". This measure is calculated from the day we receive
         the source document in our mailroom, until the day our policy documents
         are actually mailed. We include weekends and holidays in the
         calculation. We then measure the percentage of source documents
         processed within a number of days. For example, we would know that we
         processed 95% of our applications within 8 days, and it takes 12 days
         to process 100%. This result is tracked on a monthly and year to date
         basis for both applications and endorsements.

         As mentioned in previous essays, we have "real-time" access to MVR's
         (in most states) and to CLUE. This aids us in meeting our time in
         process standards.

         Our underwriting unit is divided into specialized units. We separate
         the new business, endorsement and customer service functions. We feel
         this allows our underwriters to focus and become experts on a
         specialty; thus, improving quality and efficiencies. However, all
         underwriters and CSR's are cross-trained and proficient in all
         functions. This allows us maximum flexibility in managing workloads and
         call volumes. For example, when application volume is lower than
         planned, we can shift some of that staff to endorsements where the
         volume may be higher. This allows us to manage our backlog and levels
         of inventory.

         We track inventory daily. We know how many applications, policy
         changes, and cancellations we have on hand to be processed on a daily
         basis.

         Our phone system utilizes automatic call distribution and management
         reporting enhancements. Calls are received and distributed to the first
         available CSR. This minimizes wait times and doesn't force the customer
         to rely on the availability of one underwriter. As we mentioned in a
         previous essay, our CSR's are trained underwriters and are empowered to
         handle any need of a customer.

         Our customer service unit has a dedicated supervisor. The supervisor
         has access to phone service measures in a "real time" environment. Call
         handling statistics are tracked hourly, daily, weekly, monthly and
         yearly. This data tracks individual and departmental performance
         against standards. Among other things, we know:

         o        Percentage of calls answered within the first 20 seconds
                  (approx. 5-6 rings)
         o        Percentage of abandoned calls
         o        Number of calls offered
         o        Number of calls abandoned



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<PAGE>


         This data allows us to manage our phone service to the customer and the
         performance of our staff. Each CSR has specific performance goals aimed
         at reaching our objectives. These goals are part of their yearly
         performance and salary evaluations.

         Our customer service unit has a "wallboard" that displays the current
         number of calls being offered, the number on hold, and the longest hold
         time. This information is displayed "real time" for the benefit of the
         entire department. Each CSR phone has a red light that illuminates when
         calls are on hold as well.

         Voice mail is not utilized in our department below the supervisory and
         management ranks. We intend for the customer to speak to a person at
         all times.

         Lastly, we have mentioned our performance and salary evaluations. Each
         employee has objective and subjective goals by which they are
         evaluated. The majority of the weight is placed on the objective goals.
         These goals are measured monthly and sometimes weekly. Feedback and
         coaching is provided on an ongoing basis. Each employee knows their
         performance appraisal and merit review will be evaluated against his or
         her goals.


         2. Resources

         A.       What is the average years South Carolina insurance
                  underwriting experience for underwriters assigned South
                  Carolina accounts?

         Given that Columbia, South Carolina is the home office of The Seibels
         Bruce Group, Inc. and its affiliated companies, we have long been
         involved in underwriting South Carolina policies. As a result, all of
         our staff has been trained and actively involved in the South Carolina
         marketplace. The average years of experience for our underwriting
         positions are as follows:

         o        Processing Specialists              7 years.
         o        Underwriters                        6 years.
         o        Customer Service Representatives    8 years.
         o        Auditor                            18 years.
         o        Underwriting Supervisors           19 years.
         o        Underwriting Manager                7 years.

         B.       What is the percentage of underwriters assigned to South
                  Carolina who are experienced in underwriting South Carolina
                  Private Passenger Automobile Business?

         All underwriting and customer service is handled by our South Carolina
         Auto Operations Center. As a result, 100% of our staff has, and is
         continually gaining, experience in the South Carolina marketplace.



                                       33
<PAGE>


         C.       What is the percentage of underwriting employees assigned to
                  South Carolina holding professional designations?

         To date, 18% hold professional designations.

         D.       List the locations of offices underwriting automobile business
                  for South Carolina.

         All underwriting for South Carolina automobile business and customer
         service takes place in Columbia, South Carolina.

         E.       What is the percentage of underwriting/processing
                  representatives assigned to South Carolina who are employed by
                  the company and located or workplace domiciled within South
                  Carolina?

         100% of the underwriting/processing staff is located or workplace
         domiciled in Columbia, South Carolina.

         3.       Account Selection/Criteria

         A.       Describe how accounts are monitored during the policy period
                  to determine need for additional services or corrective action
                  including fraud prevention and fraud investigation.

         There are three ways in which we monitor and review accounts during the
         policy term. These activities help us to ensure proper rating and
         classification of risks.

         All endorsements are reviewed by underwriters to determine how the
         risks should be reclassified as a result of the change request. Driver
         assignment and surcharge assignments are reevaluated with each change

         When CSR's receive phone calls from agents and insured's, conversations
         are documented for future reference. Likewise, when underwriting rating
         factors appear to be changing the CSR will re-evaluate the risk and
         make any necessary changes to ensure the proper rate is charged.

         Our claims department routinely sends underwriting referrals notices to
         our underwriters. The claim adjuster will make these referrals to
         notify us of address changes, additional drivers, suspected fraud, and
         situations where rating jumping is suspected.

         Whenever we uncover situations where the insured has not been charged
         the proper rate (such as additional drivers), the policy is re-rated
         using the effective date that would have applied. This usually results
         in us backdating the change. For example, if a driver was not disclosed
         at the point of sale or uncovered in the new business



                                       34
<PAGE>


         underwriting process, we will order and MVR and add the driver and any
         applicable surcharges effective the inception date of the policy.

         4.       Sub-Contractors/Vendors

         A.       Will you subcontract any of the work contemplated under this
                  bid? And under what circumstances?

         No subcontracting is anticipated.

         B.       Describe the anticipated frequency of independent auditor use
                  during the contract period?

         Not applicable.

         C.       If the answer to A above is yes, how will the performance
                  standards and any enhancements be communicated and monitored?

         Not applicable.

         D.       Describe the qualifications of your sub-contractors/vendors.

         Not applicable.




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<PAGE>


         II.      CLAIMS ADMINISTRATION (20 PTS.)


         1.       CLAIMS INVESTIGATION


                  A. Describe your claim investigation procedures, including
                  qualitative enhancements, relative to timeliness of first
                  notice of injury, coverage and classification verification,
                  determination of compensability/liability, subrogation etc.

         We understand the importance of timely first report of injury. National
         studies have shown most people who get attorneys to represent them for
         their injury wait an average of three days before obtaining an
         attorney. Thus, the sooner a claim is reported, the greater the
         opportunity to control severity and improve customer service. We have
         worked with our agents through our marketing and claim departments to
         increase their awareness and their customers awareness of the
         importance of timely first notice of injury. Our Direct Reporting Unit
         is a separate and distinct unit designed to receive new losses, obtain
         coverage and to verify classification. 

         The Direct Reporting Unit has the authority and responsibility of
         transferring calls involving serious injury to the adjuster while the
         insured or claimant is reporting the loss. This unit can also transfer
         other calls. This is helpful in starting the investigation process the
         moment the claim is reported. Contacts of the involved parties are
         started immediately. Explaining the claim process and what they should
         expect throughout the claim is begun right away. Recorded statements
         and important information regarding injury, excess liability policies
         and a plan of action are started at the onset of the claim. This
         procedure insures prompt contact with the insured or claimant at a
         critical time of the loss. In addition our investigation procedures
         require 24-hour contact and 72-hour follow up on any parties outside of
         those who reported the loss initially. We are using the SCRF guidelines
         in both our voluntary and facility claim setting. The SCRF claim
         guidelines are specific in regard to when recorded statements are
         obtained, when scene investigations are needed and when police reports
         are secured. These guidelines mirror the SCAAIP guidelines introduced
         recently to us.

         Our qualitative enhancements for first notice of claim include managing
         our service levels. This includes the volume or number of calls
         received, the total time of the telephone call, the average hold time
         and the abandon rate. These management reports are available through
         our ACD telephone system, which also assists in monitoring calls for
         quality control as well as training issues. In addition all losses are
         reviewed by the supervisor and specific instructions given to the
         representative prior to assignment and placed on supervisor diary.

         As our claim representatives handle the claims, each file is to include
         a specific plan of action, which is documented at the onset of the
         claim. The documentation in our file supports our liability decision as
         well as cover any applicable case law, policy interpretation and
         practices of the insurance industry. The initial supervisor review
         provides a plan of action and up front instruction for the adjuster and
         is further discussed



                                       36
<PAGE>


         and documented by the claim adjuster throughout the file to insure
         reserving is adequate and all potential exposures are addressed. The
         adjuster looks to see what potentially could happen in a file and work
         towards the timely conclusion of the claim. This pro-active claim
         handling approach reduces the severity of the claim both in the expense
         and the exposure of the claim.

         It is at this initial point of investigation where we address any
         subrogation or recovery issues. It is important at the onset of the
         claim to recognize a potential comparative case, uninsured motorist
         case or a case involving vandalism, etc. which may initiate a
         subrogation claim. We notify our subrogation unit at the initial point
         where subrogation is recognized and immediately establish a reserve and
         action plan to include proper investigation to protect our subrogation
         rights as well as prepare a plan of recovery. Our subrogation
         procedures and requirements follow those set by SCRF. Our log tracks
         the recovery and ongoing activity of the file. We play an active roll
         in arbitration of cases through filing claims with Arbitration Forums,
         as well as appearing for arbitration hearings for review of files
         presented by other members. In this area of specialization, the
         adjuster takes active notice of our costs of recovery and insures
         reserves for both recovery and expenses to recovery are recognized and
         documented.

         In order to enhance customer service and control loss of use we have
         electronically linked to the Enterprise Rent-a-Car ARMS system. This
         allows us to go on line and establish rental reservations for our
         customers. The rental company places a diary entry on the system, which
         allows the adjuster to follow up with body shops to ensure the rental
         is not over extended.

         We have a separate Total Loss Unit that handles the negotiation and
         settlement of total losses for both first and third party claims. The
         adjuster works with our Auto Material Damage unit which reviews all
         potential total losses and all shop estimates for reasonability and
         accuracy. This unit insures that LKQ parts or aftermarket parts are
         considered and any betterment is considered. As we currently handle our
         claims in accordance with the SCRF Guidelines, our claims, which
         involve total losses, are entered into the salvage log upon entry into
         the total loss area. This allows us to track salvage disposition,
         charges against salvage and to insure the optimum recovery is reached.

         As a Designated Carrier for the South Carolina Reinsurance Facility,
         any claims in which suit is filed against our insured or against the
         Company, are handled per the Litigation Management and Suit Handling
         Procedures. Our Litigation unit is supervised by our Litigation
         Supervisor who instructs our staff and agents regarding the proper
         handling of all Summons and Complaints. This unit keeps a log which
         indicates the style of the complaint, the named insured, date answer
         due, Plaintiff and Defense Counsel, the date of service and the
         adjuster who is handling the loss. Our diary system is in place to
         follow with the assignment of counsel to include extensions or answers
         to complaints. In addition, guidelines are specific in regards to
         letters of acknowledgement, excess letters and specific duties for
         Defense counsel to complete. To assist in controlling legal expenses,
         defense counsel does not complete any investigative tasks or negotiate
         settlements unless the adjuster gives specific instructions. Legal fees
         for services are negotiated and it is the adjuster's responsibility to
         properly reserve for these expenses and review all legal bills. Our
         suit files require Defense Attorneys to provide a 14-day



                                       37
<PAGE>


         acknowledgement of our request for representation of our insured, and
         correspondence with our insured to advise them of the said
         representation. We require an initial case analysis in which we ask for
         counsel's opinion in regard to liability, applicable law, venue,
         verdict trends and other pertinent factors which will establish our
         course of action. This initial case analysis will also assist us to
         ensure proper reserves are established for both our exposure and our
         expenses, and is due within 30 days.

         Coverage issues are addressed at the inception of the loss. Our
         Underwriting Department will assist with coverage issues and work with
         the agent, when needed, to assist in documenting payment receipts,
         endorsements, etc. We can address most coverage issues the same day the
         loss is reported and usually resolve any coverage issues pertaining to
         new policies, new autos and policies pending payments quickly to insure
         quality customer service. Currently, we resolve most coverage issues
         within 24 hours.

         We utilize glass management companies to control costs and severity.
         The glass management company takes loss notices directly from our
         insureds. This gives them the opportunity to mitigate the loss.
         Although the insured has the option of choosing their glass vendor,
         most do not have a preference. The glass management company is able to
         direct the insured to a glass shop that is capable of providing
         excellent service, quality repairs, and who will cooperate in
         controlling costs. The glass management company attempts to "sell" the
         insured on repairs when appropriate.

         By working with a glass management company, we receive the expert
         knowledge necessary to properly evaluate the glass loss. They have
         knowledge of the market rates for glass and are able to command the
         best discount of NAGS parts. In situations where the insured chooses
         the glass shop, they review the charges and negotiate the settlement
         directly with the glass shop.

         We receive monthly reports showing the amounts and types of losses
         paid. This includes the percentage of repairs. We feel their services
         are critical in controlling losses in a market where there is no
         deductible for glass.

         Independent appraisers are used for writing repair estimates on insured
         and claimant vehicles. This gives us access countrywide for handling
         claims. All appraisers are licensed and familiar with current repair
         techniques. We will utilize staff appraisers as the volumes permit. We
         also have access to our staff appraisers in North Carolina through our
         subsidiary company in Winston-Salem. This gives us a strong presence in
         the Carolinas.

         When any outside investigation or contact is needed, we use independent
         adjusters. All adjusters used are licensed and qualified for the type
         of investigation needed.

         B.       Describe your case review, suspense and follow-up procedures
                  on open claim files.

         An effective claims review process emphasizes proper customer service,
         severity control and expense management. It provides for continual
         development of claim skills and insures reserves are adequate and
         documented. It is also used to address the specific



                                       38
<PAGE>


         disposition of the claim file. In addition file reviews are utilized in
         performance management.

         The file review schedule includes reviews of all files during the first
         15 days, 30 days, 90 days.

         1.       FIFTEEN-DAY REVIEW: A clear report of coverage applicable to
                  the loss will be addressed. Loss facts and a clear liability
                  analysis will be addressed at this point. Reserves and
                  proposed handling to bring the loss to a conclusion to include
                  the plan of action will be included in this report. First
                  reports are reviewed by supervisor for reserves, coverage
                  questions and to insure the adjuster has a plan of action in
                  place for the handling of the file.

         2.       30 DAY REVIEW: Comment in regard to specific work completed
                  within the last 15 days will be documented at this point to
                  include what areas of the file need to be completed to
                  conclude handling of the claim. Comments regarding reserves to
                  include, in all injury claims, a projected bodily injury
                  settlement range.

         3.       90-DAY REVIEW: The exposures for the file should be known and
                  reserves in place at this point of the handling of the file.
                  There should be no initial reserves in place at this time
                  unless adequate to cover the exposure. File review and
                  captioned reports are needed at this point in any serious
                  bodily injury claims carrying a reserve greater than $10,000
                  and any cases with contested liability or coverage issues. Any
                  cases in which suit has been filed should also contain a
                  detailed captioned report. These reports will include comments
                  in regard to the following

                  (a)      Coverage: limits, effective date of policy, type of
                           property insured and coverage issues.
                  (b)      The insured, to include address, phone number,
                           employment, and ,if the driver of the insured auto is
                           different than the named insured this information
                           should also be documented to include the relationship
                           with the insured and any other applicable insurance
                           if appropriate. (Our underwriting department is
                           notified upon any change in address, or any resident
                           driver not listed on the policy both at this point as
                           well as upon receipt of the claim if different than
                           records indicate)
                  (c)      The date, time and place of the loss including a
                           description of the scene and weather conditions if
                           significant to the loss.
                  (d)      Detailed description of the loss and any witnesses.
                  (e)      Witnesses - when significant to the investigation.
                  (f)      Summary of the investigating officers report.
                  (g)      Photographs as documented in the file.
                  (h)      Injuries - description of the injury to include
                           specials to date and any other insurance applicable
                           or available. Diagnosis and prognosis and future
                           treatment should be included in this caption.
                  (i)      Damages - both autos should be included, even if no
                           coverage available to the insured auto.
                  (j)      Venue, Jurisdiction and any attorneys involved.



                                       39
<PAGE>


                  (k)      Evaluation - include any offers/demands made.
                  (l)      Plan of Action: outline of work to be completed to
                           bring the file to conclusion.

         The designated supervisor will review all 90-day reports. The
         supervisor comments on the file in respect to injury damage reserves
         and disposition. Specific comments should be made in regard to the
         reserves and specific documentation in regard to why the reserve is
         adequate for the loss or what reserve should be carried. In addition,
         specifics should be documented in what is needed to bring the file to
         conclusion. The claim representative is to address any instruction
         within 15 days and outline the needed activity on instruction given by
         the supervisor in the claim file review.

         C.       Describe the guidelines, criteria, and procedures used to
                  identify and investigate claim fraud.

         NICB provides our claims staff with in-house training on how to
         recognize fraud indicators Our adjusters will periodically attend
         various fraud-related seminars sponsored by NICB, Defense Counsel and
         other insurance industry personnel, when available. Our guidelines are
         specific with regard to statements and file documentation for the
         investigation of suspicious claims. The results of a claim
         investigation are weighted against the fraud indicators promulgated by
         NICB in our efforts to identify insurance fraud. As a fraud indicator
         is recognized, additional investigation is required to either validate
         the indicator or rule it out. Specialized staff has been hired to aid
         adjusters in identifying fraud and conducting fraud investigations as
         needed. If there is suspected fraud the file will be transferred to the
         special investigator in the Columbia, South Carolina claim office. We
         have additional SIU staff in our Tennessee and North Carolina claim
         offices that are available for training and assistance when needed.


         Our adjusters are required to notify NICB on all total theft and fire
         claims as well as any other claim involving suspected fraud activity.
         Databases, such as NICB, the Index Bureau and our own claims database,
         are routinely checked for claims history in an effort to identify
         repeat offenders. Outside vendors may be utilized on a case-by-case
         basis when the need for an expert becomes apparent during the course of
         an investigation, i.e. a cause and origin expert on a vehicle fire,
         accident reconstruction or independent medical exam on a questionable
         injury claim. Proofs of Loss and/or Releases are always obtained if
         settling a suspicious claim.

         We have specific guidelines regarding investigation on bodily injury
         cases involving minor impact claims. Clear photographs of both the
         insured's auto as well as the claimant's auto are recommended along
         with full medical reports.

         D.       Describe the use of the 1-800 toll free claims reporting
                  number and how these calls are translated into open claim
                  files.

         As described in B above our Direct Reporting Unit and the 800# play a
         critical role in the handling of a claim file. Our claim service begins
         with our Direct Reporting Unit receiving all loss notices, either
         through the service of our 800#, mail or by facsimile.



                                       40
<PAGE>


         This service allows our customers, agents and claimants to report all
         loss information in a single call. Once the loss information is
         received the coverage is confirmed, the file established and the claim
         directed to the appropriate supervisor. Certain injury claims are
         immediately transferred to an adjuster. It is the supervisor's
         responsibility to ensure proper assignment of the claim and appropriate
         instruction to the claim representative as inappropriate claim
         assignments result in higher severity and poor customer service.

         As this area is the "first impression" given of our claim service we
         have specific standards set forth within this unit. Our telephone
         system allows us to monitor our service levels, monitor telephone
         conversations and provide specific goals to the customer service
         representatives of the requirements of their position. In addition, we
         are able to monitor the amount of calls received within specific time
         periods, which allows for scheduling during peak hours. This insures
         our customer service standards are met. We have the capability of
         forwarding our 800# to one of our other claim office in the event of an
         internal or external catastrophe.

         The 800# will be available to receive loss reports via facsimile or
         voice mail 24 hours a day. Our goal is to establish a relationship with
         a call center that will allow our customers direct access 24-hours a
         day to report any type of loss to a "live" person.

         2.       RESOURCES

                  A.       What is the average years South Carolina claims
                           experience for claim representatives to be assigned
                           South Carolina accounts?

         As previously indicated, given that Columbia, South Carolina is the
         home office of The Seibels Bruce Group, Inc. and its affiliated
         companies, we have long been involved in handling claims for South
         Carolina agencies. As a result our staff is trained and experienced in
         South Carolina regulations, case law and requirements. The average
         years of experience for our claims positions are as follows:

         o        Litigation Specialists       13.3 years
         o        Claim Representatives         8.5 years
         o        Management/Supervisor        12.7 years

                  B.       What is the percentage of claim representatives
                           assigned to South Carolina who are employed by the
                           company and located or workplace domiciled within
                           South Carolina?

         100% of our claim staff is located or workplace domiciled in Columbia,
         South Carolina.

                  C.       What percentage of claims employees assigned to South
                           Carolina hold professional designations?

         Currently, 4 % have completed the necessary requirements for a
         professional designation. Also, an additional 6% have completed some
         portion of the necessary requirements for a professional designation.



                                       41
<PAGE>


                  D.       What is the caseload per claim representative for
                           those assigned to South Carolina automobile business?

         Currently, our average caseload is as follows:

         Front Line Adjusters                131
         Bodily Injury Adjusters             205
         Litigation Specialists              207

                  E.       List the locations of offices performing claim
                           activities for South Carolina business.

         All activities are currently performed in Columbia, South Carolina. It
         is expected that the majority of the claims functions will be handled
         in Columbia for the life of the contract. However, some specialized
         functions (such as SIU) may be handled in our Winston-Salem or
         Nashville offices where other specialized staff exists. Regardless of
         location, all such activities for our South Carolina Reinsurance
         Facility, JUA, and voluntary claims will be handled in the same manner.

                  3.       Case Review

                           A.       Describe your review and documentation
                                    procedures for reserve adequacy on open
                                    cases.

         Claim Representatives are responsible for establishing all initial
         reserves. These initial reserves are based on established averages by
         coverage. Initial reserves are opened within 24 hours of coverage
         confirmation. As new developments occur on a claim, reserves are
         adjusted immediately and the file documented. Stair stepping of
         reserves by waiting for verification of one piece of information is
         viewed as a deficiency.

         At all diaries an entry regarding the reserve and the analysis thereof
         is documented. The analysis is based upon the information gathered by
         the claim representative relating to the coverage exposed.

         To insure reserve adequacy, all supervisor reviews require a reserve
         analysis. Instruction regarding automobile values, and specific
         questions regarding injuries sustained, to include employment, lost
         time from work and to insure the adjuster is actively pursuing
         information to determine the full scope of the exposure is part of the
         supervisory process.

         Management reports are generated monthly that detail all open loss
         reserves and amount paid on closed claims for the month. This report is
         sorted by adjuster, policy number and claim number.

                           B.       Describe your reserving methodology and the
                                    procedures used in reserving.

         Reserves, reserve changes and requests for authority are all documented
         and supported in our file materials. It is procedure to have reserves
         established by the adjuster and reviewed at not only each diary dates,
         but as the company receives additional



                                       42
<PAGE>


         information. The file is to clearly document the adjuster's position
         regarding each reserve that is carried.

         Each adjuster has his or her individual reserve/settlement authority.
         All requests for authority above this amount is documented and
         submitted to the supervisor for authority. Authority is granted on a
         case by case basis and all accompanying documentation in file to
         support such reserve. The service of the loss reporting unit, along
         with timely coverage confirmation and contact requirements, tied in
         with the adequate investigation and file reporting ties into the
         control and adequate reserving of each individual file. Adjusters are
         trained to always look to the avenue in which the claim is progressing
         and to adequately plan for loss and expense as these two items effect
         the bottom line of our companies profitably.

         4.       Sub-Contractors Vendors

                  A.       Identify the subcontractor(s) you propose to use on
                           this contract and describe in detail the work each
                           subcontractor will perform.

         No subcontracting is anticipated.

                  B.       Describe how the servicing carrier performance
                           standards and any enhancements will be communicated
                           and monitored to the subcontractors(s).

                  C.       List and describe in detail the background,
                           qualifications, and experience of the
                           sub-contractors/vendors you propose to use during the
                           contract period.





                                       43
<PAGE>


EXHIBIT 3: BUSINESS PLAN-QUANTITATIVE QUESTIONNAIRE

The quantitative questionnaire will be scored with a total number of 50 points
possible.

I.      UNDERWRITING/PROCESSING

                 General Responsibilities                    3 items
                 Underwriting/Rating Services                2 items
                 Issuance of Original Policy                 2 items
                 Renewal Policies                            1 item
                 Incomplete Applications/Endorsements        3 items
                 Endorsements                                1 items
                 Producer Certification                      6 items
                 Return Premiums                             1 item
                 Premium Billing                             3 items
                 Producer Commissions                        1 item
                 Total                                      22 items

                 Please score the above section on the basis of 0 to 30 points.

                 Score ____________ (Scorer Use Only)

II.     CLAIMS ADMINISTRATION
                 Loss Reporting                              4 items
                 Coverage Confirmation                       2 items
                 Contract Requirements                       3 items
                 Adequate Investigation                      1 item
                 File Reporting                              1 item
                 Subrogation                                 2 items
                 Litigation Management and Suit Handling     1 item
                 Total                                      14 items

                 Please score the above section on the basis of 0 to 20 points.
                 Score ____________ (Scorer Use Only)




                                       44
<PAGE>


1.       UNDERWRITING/PROCESSING (30 PTS.)

I.       GENERAL RESPONSIBILITIES:

                  In addition to any other responsibilities noted in this RFP,
                  the Servicing Carrier will perform the following general
                  responsibilities:

                  a.       At initial issue and each renewal thereafter,
                           servicing carriers must accomplish confirmation of
                           driving record of each insured driver by obtaining
                           copies of the insured's motor vehicle records from
                           the State of South Carolina Department of Public
                           Safety or on the basis of motor vehicle records
                           issued by the appropriate agency of another state.
                           Servicing carriers must properly price all policies
                           and when appropriate, check classification and
                           territory through inspection reports and other
                           techniques.

MINIMUM STANDARD: 30 DAYS

ENHANCEMENT - Driving records will be verified within 15 working days of receipt
of a new business application. On renewals, driver records will be verified at
least 30 working days prior to renewal.

                  b.       Servicing carriers must issue insurance policies to
                           applicants by the expiration date of the binder
                           issued.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- New policies will be issued prior to the binder expiration date,
and, within 15 working days of receipt when all necessary information is
provided.

                  c.       Servicing carriers must carry out all subsequent
                           policy transactions on a timely basis.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- Subsequent policy transaction will be completed within 15 working
days when all necessary information is provided.

2.       UNDERWRITING/RATING SERVICES:

         a. General Underwriting/Rating

         The Servicing Carrier shall:



                                       45
<PAGE>


                           (1)      Properly price all policies in accordance
                                    with the approved rating plans contained in
                                    the Association's Manual of Rules and Rates
                                    and establish procedures for appropriate and
                                    timely verification of policyholders' and
                                    operators' driving records and/or obtain
                                    other information as necessary to assist in
                                    the proper classification and rating of an
                                    applicant including CLUE reports.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- Policies will be properly priced within 15 working days of receipt
when all necessary information is provided.

                           (2)      Attempt to secure and verify account loss
                                    history from the previous company or
                                    companies to insure proper application of
                                    any applicable premium surcharge or rating
                                    plans.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- Loss histories will be verified and proper surcharges applied
within 15 working days of receipt when all necessary information is provided,
and, when the prior carriers cooperate.

         b. Issuance Of Original Policy

                           (1).     Within two working days following the
                                    receipt of application make SR-22 filings of
                                    policy and certificates provided all
                                    information necessary is contained in the
                                    application form and such application is
                                    accompanied by the deposit premium
                                    prescribed in Section 5 of the Servicing
                                    Carrier Rules of Practice. Such filings will
                                    indicate the effective date which must be
                                    the same as the policy effective date.

MINIMUM STANDARD 2 DAYS

ENHANCEMENT- SR-22's will be filed properly within 2 working days of receipt
when all necessary information is provided. "Same day" SR-22 service will be
provided when all procedures are followed and submitted by 12:00 p.m.

                           (2).     within 30 calendar days issue a policy and
                                    certificates if all information necessary
                                    for the Servicing Carrier to fix the proper
                                    rate is contained on the application form,
                                    such policy to become effective in
                                    accordance with the



                                       46
<PAGE>


                                    provisions of Section 6 of the Servicing
                                    Carrier Rules of Practice.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- New policies will be issued within 20 calendar days when all
necessary information is provided.

         c. Renewal Policies Or Certificates

         Servicing Carrier shall perform the following responsibilities
         regarding the issuance of Association renewal policies. Upon receipt of
         the application the Servicing Carrier shall:

                           (1)      Renewal policies and certificates must be
                                    mailed within 30 calendar days of the
                                    Servicing Carrier's receipt of the renewal
                                    premium specified under a. or b. above.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- Our renewal policies and certificates are mailed as part of our
renewal offer at least 30 days in advance of the renewal effective
date.__________________

          Private passenger automobile insurance may renew for three, six month
          terms, and small commercial risks may renew for one, 12 month term, if
          otherwise eligible.

         d.       Incomplete Applications/Endorsements

                           (1)      Applications shall be accepted by the
                                    Servicing Carrier and shall be processed if
                                    the requirements shown in Sections 5 and 6
                                    of the Servicing Carrier Rules of Practice
                                    are complied with, and it shall be the
                                    responsibility of the Servicing Carrier to
                                    communicate to the insured and producer of
                                    record in what respect an application is
                                    incomplete and requires correction.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- Incomplete applications and endorsements will be identified and
communicated to the agent and insured within 15 working days.

                           (2)      Servicing carriers shall not return any
                                    insurance application or change request
                                    without definite action. The application or
                                    change request must ultimately, (after
                                    additional or missing information is
                                    requested and received), be accepted and a
                                    policy or endorsement issued, rejected or
                                    canceled with proper legal notice, or in
                                    limited instances involving fraud, material
                                    misrepresentation, submission of invalid
                                    funds or prior debt to the SCAAIP, voided if
                                    deemed appropriate under the circumstances.



                                       47
<PAGE>


                                    Servicing carriers may return applications
                                    for missing information if a copy of the
                                    application is retained.

MINIMUM STANDARD 15 DAYS

ENHANCEMENT- Once needed or additional information is obtained, definite action
will be taken within 10 working days of receipt.

                           (3)      The Servicing Carrier shall give at least 15
                                    days to the insured and to the producer of
                                    record to respond to underwriting
                                    information requests and no part of the
                                    deposit premium shall be returned to the
                                    insured or to the producer of record except
                                    upon proper cancellation in accordance with
                                    the provisions of Section 11 of the
                                    Servicing Carrier Rules of Practice, as
                                    applicable.

MINIMUM STANDARD 15 DAYS

ENHANCEMENT- We will provide a minimum of 15 days for the insured and agent to
respond to a request for additional information.

         e. Endorsements

                           (1)      Any endorsement requested of the Servicing
                                    Carrier shall be issued and mailed within 30
                                    days after all information necessary to
                                    properly underwrite and rate the policy has
                                    been received.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- Endorsements will be issued and mailed within 15 working days of
receipt when all necessary information is provided.

         f. Producer Certification (Producer Certification Program is in Section
            of the Producer Rules of Practice)

            The Servicing Carrier shall:

                           (1)      establish and maintain a file for each
                                    certified producer to monitor performance.
                                    Such file shall include application
                                    deficiencies, complaints and other
                                    correspondence. The Servicing Carrier should
                                    review the files at least monthly to
                                    identify producers who should be referred to
                                    SCAAIP for consideration by Application
                                    Committee.

                           (2)      track application deficiencies from the
                                    application/policy underwriting system to
                                    identify producers who should be referred to
                                    SCAAIP.



                                       48
<PAGE>


                           (3)      investigate performance complaints, and if
                                    possible, resolve them.

MINIMUM STANDARD 30 DAYS

ENHANCEMENT- Certified producers performance will be monitored and review
monthly. Once a producer has been placed on warning, the producer will be
monitored and reviewed bi-weekly. All performance complaints will be resolved
within 10 working days when possible.

                           (4)      notify insured of toll free number for the
                                    insured to call for service on an SCAAIP
                                    policy in the event his producer is
                                    decertified and the insured is seeking a new
                                    certified producer.

MINIMUM STANDARD 5 DAYS

ENHANCEMENT- The insured's notification will be mailed within 3 working days.

                           (5)      generate a list of all applications and
                                    policies written on behalf of a producer
                                    over a period of three years. This data will
                                    be used to distribute letters advising
                                    insureds of assigned certified producers in
                                    the event of decertification or suspension.

MINIMUM STANDARD 5 DAYS

ENHANCEMENT- The list will be generated within 3 working days.

                           (6)      block payment of commissions on either
                                    applications only or both applications and
                                    renewals in the event the producer is
                                    decertified or suspended.

MINIMUM STANDARD 2 DAYS

ENHANCEMENT- No enhancement to the minimum standard is being proposed.

         g. Return Premiums

                           (1)      Within 30 days of the receipt of a request
                                    for either cancellation or an endorsement
                                    resulting in a return premium, the Servicing
                                    Carrier must mail the return premium check.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- Return premiums will be processed and mailed within 30 calendar
days of their request being processed. The only exceptions will be when statutes
govern cancellation time frames.



                                       49
<PAGE>


         h.       Premium Billing

                  All billing and payment guidelines are to be consistent with
                  the premium deposit and installment provisions outlined in
                  Section 5 of the Servicing Carrier Rules of Practice.

                  (1)      Policies which develop an additional premium as a
                           result of an inadequate deposit submitted with the
                           application or policy change request, or shortage in
                           premium resulting from a policy change request,
                           preliminary premium audit or other determination of a
                           premium shortage, the total additional premium must
                           be billed within 30 days from determination of the
                           additional premium due, or the next premium
                           installment billing date, whichever occurs first. The
                           premium payment due date must not exceed 30 days from
                           the premium billing date.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- Additional premiums will be billed within 5 working days of being
processed, and the due date will be 14 days unless instructed otherwise by
SCAAIP.

                  (2)      For policies subject to a final premium audit that
                           result in an additional earned premium due the
                           SCAAIP, the premium must be billed within 30 days of
                           the completion of the final premium audit and the
                           premium payment due date must not exceed 30 days from
                           the premium billing date.

                  (3)      If the final premium audit develops a return premium,
                           the Servicing Carrier will remit gross return premium
                           to the insured within 30 days from the completion
                           date of the audit. The producer will be billed for
                           the return commission in accordance with the Rules of
                           Practice for Producers Writing South Carolina
                           Associated Auto Insurers Plan Risks.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- It appears this requirement applies to commercial policies and does
not apply to this RFP.

          i.      Producer Commissions

                   Servicing carriers must collect the necessary data to
                   disburse commission payments to agents and store this data
                   and report it to the Internal Revenue Service annually, if
                   required.

                  (1)      Commission shall be paid no less frequently than
                           monthly and shall be paid within 15 days after the
                           close of the month in which the commission was
                           credited to the producer's account. The Servicing
                           Carrier must issue a statement and if applicable, the
                           proper compensation check unless the



                                       50
<PAGE>


                           producer fails to provide his/her proper tax
                           identification number.

MINIMUM STANDARD 15 DAYS

ENHANCEMENT- Commissions will be paid within 10 calendar days of the close of
month.

         The Servicing Carrier must take steps to collect unearned producer
         commission from the producer.

II.      CLAIMS ADMINISTRATION (20 PTS.)

1.       Loss Reporting

         a.       Agents shall phone carrier on ALL claims involving serious
                  bodily injury and/or death the same day the agent received the
                  loss. All other claims should be reported by the next working
                  day.

         b.       Servicing Carrier will confirm coverage day of receipt of
                  loss. Coverage confirmation will clearly be reflected in claim
                  file together with the name of the person so confirming the
                  coverage.

         c.       Losses will be referred to an adjuster within 24 hours of
                  receipt of claim by the Claims Department and the file so
                  documented. All file material received from an outside source,
                  including loss notices, will be dated and stamped.

         d.       Servicing Carrier must have a 1-800 toll free number for the
                  reporting of claims directly to the claims area of the
                  Servicing Carrier such that claims reported through the toll
                  free number are entered into the claims system the same day.

MINIMUM STANDARD SAME DAY

ENHANCEMENT- No enhancement to the minimum standard is being proposed.

2.   Coverage Confirmation

         a.       Coverage confirmation shall consist of policyholder's name,
                  policy number, policy period, date of loss, coverage limits,
                  including deductibles, insured vehicle, VIN number and lien
                  bolder, premium status, and any applicable endorsements. File
                  will be clearly documented as to above including date of such
                  coverage confirmation and the name of the person confirming
                  coverage.


         b.       Full form reports are required on all questionable coverage
                  cases that



                                       51
<PAGE>


                  remain unresolved for more than 14 days after receipt of
                  claim.

MINIMUM STANDARD 14 DAYS

ENHANCEMENT- We will confirm coverage within 7 working days and provide full
form reports on questionable cases unresolved after 7 days.

3.       Contract Requirements

         c.       All claims involving death or serious. bodily injury shall be
                  telephoned to adjuster the same day received by the carrier.
                  File will be clearly documented. All others will be assigned
                  to an adjuster within 24 hours after received by company and
                  the file so documented.

MINIMUM STANDARD 1 DAYS

ENHANCEMENT- No enhancement to the minimum standard is proposed.

         b.       Contact letter will be sent or phone conversation made with
                  insured, insured driver, and claimants within 24 hours of
                  assignment and will be clearly documented. In cases of death
                  or serious bodily injury, contact must be in person.

         c.       A letter must be followed up by a contact in person or by
                  phone within 72 hours.

MINIMUM STANDARD 3 DAYS

ENHANCEMENT- No enhancement to the minimum standard is proposed.

4.       Adequate Investigation

         a.       Adequate investigation is that investigation necessary to
                  support a carrier liability decision for an accident or a
                  decision involving a claim for loss or damage under an
                  applicable insurance policy. The investigation must be
                  sufficient to resolve questions of applicable laws, case
                  decisions, Insurance Department Regulations, policy
                  interpretation and insurance industry practices. Please refer
                  to the South Carolina Associated Auto Insurers Plan Claim
                  Handling Guidelines.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- No enhancement to the minimum standards is proposed.

5.   File Reporting



                                       52
<PAGE>


         a.       Carrier will have a first report within 15 days of assignment.
                  The report shall include a clear report on coverage, contract
                  requirements, facts of accident, liability analysis
                  considering existing laws and facts, reserves, and proposed
                  handling to bring to a conclusion including work to be done.

MINIMUM STANDARD 15 DAYS

ENHANCEMENT- no enhancement to the minimum standard is proposed.

6.       Subrogation

         a.       Subrogation files shall be reviewed and documented by company
                  supervisory personnel. Said review to include necessary
                  investigation including the ability to pay on the part of the
                  responsible party, will reflect whether arbitration
                  considered/attempted, reasonable efforts to recover, including
                  procuring a promissory note and confession of judgement from
                  the uninsured motorist, or a clear, concise reason why such
                  was not done, as to whether to refer to counsel, all abandoned
                  subrogation must be approved by Supervisor in writing.

         b.       In subrogation log, entries must be made in said Log
                  regardless of disposition and the subrogation log must reflect
                  timely and ongoing documentation that is in chronological
                  order.

MINIMUM STANDARDS: 30 DAYS

ENHANCEMENT- No enhancement to the minimum standards is proposed.

7.   Litigation Management and Suit Handling

         a.       Letter of acknowledgment and excess should be sent to the
                  insured within 14 days of receipt of the Summons and Complaint
                  by the carrier.

MINIMUM STANDARD 14 DAYS

ENHANCEMENT- Excess letters to the insured will be sent within 7 calendar days
of receipt of summons.




                                       53
<PAGE>


BUSINESS PLAN- QUALITATIVE SUMMARY OF ENHANCEMENTS


1.       UNDERWRITING/PROCESSING

Driving records will be verified within 15 working days of receipt of a new
business application. On renewals, driver records will be verified at least 30
working days prior to renewal.

 New policies will be issued prior to the binder expiration date, and, within 15
working days of receipt when all necessary information is provided.

Subsequent policy transactions will be completed within 15 working days when all
necessary information is provided.

Policies will be properly priced within 15 working days of receipt when all
necessary information is provided.

Loss histories will be verified and proper surcharges applied within 15 working
days of receipt when all necessary information is provided, and, when the prior
carriers cooperate.

SR-22's will be filed properly within 2 working days of receipt when all
necessary information is provided. Additionally, we will offer "same day" SR-22
filings if requested by the agent and all necessary information is submitted by
12:00 p.m.

New policies will be issued within 20 calendar days when all necessary
information is provided.

Our renewal policies and certificates will be mailed as part of our renewal
offer at least 30 days in advance of the renewal effective date.

Incomplete applications and endorsements will be identified and the needed
information communicated to the agent and insured within 15 working days.

Once needed or additional information is obtained, definite action will be taken
within 10 working days of receipt.

We will provide a minimum of 15 days for the insured and agent to respond to a
request for additional information. When appropriate, we may give a longer
period of time.

Endorsements will be issued and mailed within 15 working days of receipt when
all necessary information is provided.

Certified producers performance will be monitored and reviewed monthly. Once a
producer has been placed on warning, they will be monitored and reviewed
bi-weekly. All performance complaints will be resolved within 10 working days
when possible.



                                       54
<PAGE>


When an agent is decertified, the following will result:

o        The insured's notification will be mailed within 3 working days.

o        A list will be generated within 3 working days identifying all
         applications and policies written over a period of three years.

o        Commissions will be blocked within 2 working days.

Return premiums will be processed and mailed within 30 calendar days of their
request being processed. The only exceptions will be when statutes govern
cancellation time frames.

Agent's commissions will be paid within 10 calendar days of the close of the
month.

Our Customer Service Unit will adhere to an 85% service standard. This means 85%
of the calls answered will occur within 20 seconds. The abandoned call rate will
not exceed 10%.

II.      CLAIMS ADMINISTRATION

We will confirm coverage within 7 working days of notification of loss and
provide full form reports on questionable cases unresolved after 7 days.

Excess letters to the insured will be sent within 7 calendar days of receipt of
summons.

Our Direct Reporting Unit will adhere to an 85% service standard. This means 85%
of the calls answered will occur within 20 seconds. The abandoned call rate will
not exceed 10%.




                                       55
<PAGE>


DISASTER RECOVERY PLAN SUMMARY

LEVEL 1

Seibels Bruce disaster recovery Level 1 preparation protects the
Company in the event of short-term or temporary equipment outages.
Backups, uninterrupted power supplies (UPS) and redundant hardware will
cover basic short-term disruptions in computer operations, including
short-term power outages, commonly failing parts and corrupted data. In
a Level 1 disaster, computer systems remain operational with little to
no loss of functionality. The following outlines the Company's Level 1
program:

BACKUPS:

o        Backups are performed each day of the week. On Friday nights, full
         system backups are performed on all platforms. On Saturday through
         Thursday nights, backups of all objects changed since the last full
         backup are performed on all platforms.
o        The backups are rotated off-site at 9:00am on the following business
         day. 
o        Daily backup tapes are sent off-site for 5 weeks before being rotated
         for reuse.
o        Weekly full backup tapes are sent off-site for 15 weeks before being
         rotated for reuse.
o        Monthly full backup tapes are sent off-site to be kept indefinitely.
o        Retrieval from off-site storage can take place within 30 minutes.

         UNINTERRUPTED POWER SUPPLIES:

o        The AS/400 is on a UPS that has a sustain time of 30 minutes at full
         load.

         REDUNDANT HARDWARE:

o        All disk drives are protected by either RAID5 or Mirroring.
o        A spare 3590-tape drive is housed on the AS/400, essential to nightly
         processing.

LEVEL 2

Seibels Bruce disaster recovery Level 2 preparation protects the
Company from uncommon equipment failure, long-term power outages or
damaged equipment. Some downtime or loss of functionality may be
experienced in a Level 2 disaster. In addition to Level 1 preparations,
the Level 2 plan includes maintenance contracts and vendor agreements
that will cover long-term disruptions in computer system operations.
The following outlines the Company's Level 2 program:

AT&T TELECOM SWITCHING:

o        AT&T data and voice lines will be rerouted to the Seibels Bruce
         facility in Winston-Salem, NC.

VENDOR AGREEMENTS:

o        As the preferred customer, Seibels Bruce will receive priority
         treatment from primary hardware vendor MicroPrice
o        MicroPrice will provide service within 24 hours.

SUNGUARD DISASTER RECOVERY SERVICES CONTRACT:

o        A binding contractual agreement with Sunguard Disaster Recovery
         Services calls for the deployment of mobile comparable hardware,
         technical staff and power to the site of our choice.
o        Delivery time is guaranteed within 48 hours.



                                       56
<PAGE>


o        Given the proximity of Seibels Bruce to Sunguard Deployment Center in
         Atlanta, the actual delivery time is expected to be within 12 hours.

MAINTENANCE AND SUPPORT CONTRACTS:

o        A hardware maintenance contract with IBM ensures on-site technical
         support, maintenance and delivery of any needed parts during equipment
         failure or damage. Support will be provided 24 hours a day, seven days
         a week.
o        A support contract with IBM ensures technical support for software
         running on the AS/400. This support is provided on a 24 hour a day,
         seven days a week basis.


LEVEL 3

Seibels Bruce disaster recovery Level 3 preparation protects the Company from
partial or complete data center destruction. A Level 3 disaster is a long-term
outage where the data center has been destroyed or is no longer usable. In
addition to Level 1 and 2 preparations, the Level 3 plan includes rapid
replacement and relocation, if necessary, of essential equipment so that data
processing can continue. The following outlines the Company's Level 3 program:

ALTERNATE SITES:

o        In the event of site destruction local to the data center, mobile
         replacement equipment provided by Sunguard will be deployed on Seibels
         Bruce's Columbia, SC facility to resume near normal data processing.
o        In the event of total site destruction, mobile replacement equipment
         provided by Sunguard will be deployed to the Seibels Bruce
         Winston-Salem, NC facility.





                                       57
<PAGE>


                           AFFIDAVIT OF NON-COLLUSION


I hereby swear under penalty of perjury:

(1)      That I am an officer, director and employee of the Respondent, South
         Carolina Insurance Company, and am duly authorized to execute this
         affidavit on behalf of the Respondent, South Carolina Insurance
         Company;

(2)      That the attached proposal has been arrived at by the bidder
         independently and has been submitted without collusion with, and
         without any agreement, understanding, or planned common course of
         action with, any other vendor of materials, supplies, equipment or
         services described in the RFP, designed to limit independent bidding or
         competition;

(3)      That the contents of the proposal have not been communicated by the
         Respondent, South Carolina Insurance Company, or its employees or
         agents to any person not an employee or agent of the Respondent, South
         Carolina Insurance Company to any person not an employee or agent of
         the Respondent, South Carolina Insurance Company, or its surety on any
         bond furnished with the proposal and will not be communicated to any
         such person prior to September 9, 1998.

(4)      That I have read and fully understand the contents of this Affidavit of
         Non-Collusion and make it of my own free will and accord.


                                         John A. Weitzel
                                         President and Chief Executive Officer
                                         South Carolina Insurance Company


September 9, 1998                        Signature: /s/ John A. Weitzel
                                                  -----------------------------


State of  South Carolina
County of Richland

                  The foregoing Affidavit of Non-Collusion was subscribed before
me this 9th day of September, 1998 by John A. Weitzel as President and Chief
Executive Officer of South Carolina Insurance Company, who is personally known
to me and who did take an oath.

/s/ Janet H. Langley
---------------------------
Notary Public

My Commission expires:  07-12-03
                      -----------



                                       58
<PAGE>


                       YEAR 2000 COMPLIANCE CERTIFICATION

South Carolina Insurance Company represents and warrants that all products and
services supplied and to be supplied pursuant to this agreement (and all
products supplied or developed by Contractor pursuant to such services) are and
shall be Year 2000 compliant (to the extent that concept is applicable), as
defined by the British Standards Institution in DISC PD2000-1: "Year 2000
c[ompliant] shall mean that neither performance nor functionality is affected by
dates prior to, during and after the year 2000. In particular:

Rule 1.      No value for current date will cause any interruption in
             operation.
Rule 2.      Date-based functionality must behave consistently for dates prior
             to, during and after year 2000.
Rule 3.      In all interfaces and data storage, the century in any date must be
             specified either explicitly or by unambiguous algorithms or
             interfacing rules.
Rule 4.      Year 2000 must be recognized as a leap year.


         By signature of its authorized representative, South Carolina Insurance
Company represents and warrants that the products and services supplied and/or 
developed comply with the aforementioned requirements.

         Dated this 9th day of September, 1998.



                                       /s/ R. Thomas Savage, Jr.
                                      ----------------------------------
                                      Authorized Representative
                                      South Carolina Insurance Company


Sworn to before me this 9th day of September, 1998.


[illegible]
----------------------------------------
My commission expires: November 23, 2007
----------------------------------------









                                       59


<PAGE>



                                  [Letterhead]




                               September 15, 1998


CONFIDENTIAL
TRANSMITTED BY FACSIMILE AND
HAND DELIVERY
Steve Harding
The Seibels Bruce Group, Inc.
Post Office Box 1
Columbia, South Carolina 29202

            RE:  Proposal Submitted in Response to RFP #98-002/PPAI

Dear Mr. Harding:

     Section 9.8 of RFP #98-002/PPAI gives the "director or his designee the 
right to waive minor deficiencies and the informalities if, in his judgment, 
the best interests of the State of South Carolina shall be served." 
Additionally, RFP #98-002/PPAI, Section 9.9, page 36 provides that "the 
director or his designee reserves the right to request additional financial 
statements and any other data from the Respondent."

     This letter written to request additional copies of data which may have 
been submitted with the original proposal, but not attached to the copies 
submitted; or clarification of statements or references made in your 
proposal; or other data in accordance with the requirements of the Request 
for Proposal. Please submit the following information to the Department by 
5:00 p.m., Friday, September 18, 1998.

     First, we are unable to locate a statement that you will be able to 
service claims in accordance with the requirements of the RFP. Section 6.3 
provides that the applicant must be an insurer, or affiliated with an 
insurer, that has a service facility capable of providing policy issuance; 
premium collection services for all classes of risks, statewide; service 
insurance claims in every state, Washington, D.C. and Canada. . . This is a 
qualification. Section 2.7 provides that submitting a proposal in response to 
this RFP you are certifying that you meet the qualifications set forth in the 
RFP. Although it may implied in your proposal that you meet this 
qualification, a more specific statement is needed to address this issue. If 
this information is included with your proposal, please direct me to the 
sections of your proposal which address this issue.

     Second, there is no reference to the ability of your company to 
administer the run-off business of the JUA. Section 6.8 of the RFP provides 
that the applicant must be able to contract for the entire term of the 
contract based upon the specifications outlined in the RFP. The term of the 
contract includes the run-off period. If this information is included within 
your proposal, please direct my attention to the sections of your proposal 
which address this issue.



<PAGE>


     Third, we are unable to find any certification that your company will 
cooperate with the wind-up of the affairs of the JUA, that you are able to 
service claims in accordance with the requirements of the RFP and you ability 
to administer the run-off business of the JUA. Section 6.10 establishes this 
as a qualification for the servicing carrier. Inasmuch as Section 9.1.1.1 
provides that you will comply with the requirements of the RFP, and Section 2.7
provides that by submitting a proposal you are certifying that you meet 
the qualifications set forth in the RFP, it is implied that you agree to so 
comply. Please confirm this in your response or direct my attention to the 
section of your proposal which addresses this issue.

     Fourth, section 9.3 of RFP #98-002/PPAI requires that you attach 
documentation establishing your previous experience with residual market 
mechanisms. We are unable to locate a report from a Plan Manager of a pooling 
mechanism. The omission of this item implies that you have no much report. 
Please confirm this in your September 18 response. If this information is 
included in your proposal, please direct my attention to the section of the 
proposal which addresses this issue.

     Finally, we are unable to locate any statement in your proposal which 
states that the proposal is valid until the notification of award is issued. 
Please direct my attention to the section of your proposal which addesses 
this issue or forward the certification statement to me by the established 
deadline.

     Please do not call the Department regarding this matter. Please do not 
write requesting additional time. Please submit your responses to the 
Department, in writing, by the established deadline. If requested information 
is not received by the September 18 deadline, then your proposal, IF it meets 
all other requirements to be considered responsive, will be scored 
accordingly.

     Your response to this letter must be signed by an officer with the 
authority to contractually bind your company. It must state that it 
supplements and amends the proposal submitted to me as if originally 
incorporated within that document. Your letter must indicate that you agree 
to be bound by its terms as well as the proposal submitted.

     This letter shall not be construed to mean that there are no additional 
issues regarding the proposal you submitted. There may, or may not, be 
additional issues which may affect a contract award. This letter also shall 
not be construed to mean that your proposal is, or is not, responsive to this 
solicitation. The information requested in this letter is requested so that 
the committee may evaluate the proposal submitted. Please note that the 
submission of this information does not entitle your company to an award of 
the contract. As the RFP indicates, I may reject any or all proposals, and I 
am not under any obligation to award a contract to any of the Respondents 
submitting a proposal in response to this solicitation.

                                       Sincerely,,

                                       /s/ Lee P. Jedziniak

                                       Lee P. Jedziniak
                                       Director


<PAGE>


[LETTERHEAD]


R. THOMAS SAVAGE, JR.
CHIEF FINANCIAL OFFICER


September 17, 1998



Lee P. Jedziniak
Director
SC Department of Insurance
1612 Marion Street
Columbia, SC 29201


Dear Director Jedziniak:

This will acknowledge receipt of your letter dated September 15, 1998, 
requesting additional copies of data, clarification of statements or other 
information related to the above referenced Request for Proposal. For your 
convenience in identifying the supplemental information and the point to 
which it is directed, the specific request made in your letter is set out, 
followed by a summary response and referencing attached materials when 
appropriate.

     "FIRST, WE ARE UNABLE TO LOCATE A STATEMENT THAT YOU WILL BE 
     ABLE TO SERVICE CLAIMS IN ACCORDANCE WITH THE REQUIREMENTS OF 
     THE RFP. SECTION 6.3 PROVIDES THAT THE APPLICANT MUST BE AN 
     INSURER, OR AFFILIATED WITH AN INSURER, THAT HAS A SERVICE 
     FACILITY CAPABLE OF PROVIDING POLICY ISSUANCE; PREMIUM 
     COLLECTION SERVICES FOR ALL CLASSES OF RISKS, STATEWIDE; 
     SERVICE INSURANCE CLAIMS IN EVERY STATE, WASHINGTON, D.C. AND 
     CANADA... THIS IS A QUALIFICATION. SECTION 2.7 PROVIDES THAT 
     SUBMITTING A PROPOSAL IN RESPONSE TO THIS RFP YOU ARE 
     CERTIFYING THAT YOU MEET THE QUALIFICATIONS SET FORTH IN THE 
     RFP. ALTHOUGH IT MAY BE IMPLIED IN YOUR PROPOSAL THAT YOU MEET 
     THIS QUALIFICATION, A MORE SPECIFIC STATEMENT IS NEEDED TO 
     ADDRESS THIS ISSUE. IF THIS INFORMATION IS INCLUDED WITHIN 
     YOUR PROPOSAL, PLEASE DIRECT ME TO THE SECTIONS OF YOUR 
     PROPOSAL WHICH ADDRESS THIS ISSUE."

     -  On page 1 of the Cover Letter, we stated that "South Carolina 
        Insurance Company understands and will comply with all terms of the 
        Proposal." Further, we stated that we currently meet or, at the time 
        of the commencement of any contract period, will meet "all of the 
        qualifications as described in this RFP." These statements were 
        intended to convey our understanding and compliance with this 
        qualification.

     -  On page 5 of our Proposal (Proposal Letter), we have also represented 
        that our proposal is made in accordance with all the terms and 
        conditions of the RFP and have certified that we "guarantee and 
        certify that all items included in this proposal meet or exceed any 
        such

<PAGE>

   terms or conditions [of the RFP]." Again, it was our intention that such 
   representations and certifications satisfy the provisions of Section 6.3 
   and Section 2.7.

-  To the extent a more specific statement is or may be required for the 
   qualification described in Section 6.3, this will certify that South 
   Carolina Insurance Company is an insurer with service facilities capable 
   of affording policy issuance; premium collection services for all classes 
   of risks, statewide; service insurance claims in every state, Washington, 
   D.C., and Canada and all other usual and customary policyholder services 
   and, if awarded the contract, is qualified to perform in accordance with 
   the terms and conditions of the contract and RFP and that it will comply 
   with all applicable state and federal laws.

-  South Carolina Insurance Company has the ability or capability to satisfy 
   the service requirements embodied in Sections 6.3 or 2.7 in every way, we 
   are prepared at your convenience to further expand on our business plan to 
   address specifically any further questions or concerns.

"SECOND, THERE IS NO REFERENCE TO THE ABILITY OF YOUR COMPANY TO ADMINISTER 
THE RUN-OFF BUSINESS OF THE JUA. SECTION 6.8 OF THE RFP PROVIDES THAT THE 
APPLICANT MUST BE ABLE TO CONTRACT FOR THE ENTIRE TERM OF THE CONTRACT BASED 
UPON THE SPECIFICATIONS OUTLINED IN THE RFP. THE TERM OF THE CONTRACT 
INCLUDES THE RUN-OFF PERIOD. IF THIS INFORMATION IS INCLUDED WITHIN YOUR 
PROPOSAL, PLEASE DIRECT MY ATTENTION TO THE SECTIONS OF YOUR PROPOSAL WHICH 
ADDRESS THIS ISSUE.

-  As indicated above, it was our intention in submitting a proposal and 
   expressly stating in the Cover Page and Proposal Letter of our compliance 
   with all of the terms and conditions of the RFP if not otherwise 
   specifically addressed, including Section 6.8.

-  To the extent a more specific statement is, or may be, required to address 
   the requirements of Section 6.8, South Carolina Insurance Company hereby 
   certifies that it is prepared and able to administer the contract for the 
   entire term of the contract based upon the specifications outlined in the 
   RFP. The term of the contract includes the run-off period.

"THIRD, WE ARE UNABLE TO FIND ANY CERTIFICATION THAT YOUR COMPANY WILL 
COOPERATE WITH THE WIND UP OF THE AFFAIRS OF THE JUA, THAT YOU ARE ABLE TO 
SERVICE CLAIMS IN ACCORDANCE WITH THE REQUIREMENTS OF THE RFP AND YOUR 
ABILITY TO ADMINISTER THE RUN-OFF BUSINESS OF THE JUA. INASMUCH AS SECTION 
9.1.1.1 PROVIDES THAT YOU WILL COMPLY WITH THE REQUIREMENTS OF THE RFP, AND 
SECTION 2.7 PROVIDES THAT BY SUBMITTING A PROPOSAL YOU ARE CERTIFYING THAT 
YOU MEET THE QUALIFICATIONS SET FORTH IN THE RFP, IT IS IMPLIED THAT YOU 
AGREE TO SO COMPLY. PLEASE CONFIRM THIS IN YOUR RESPONSE OR DIRECT MY 
ATTENTION TO THE SECTION OF YOUR PROPOSAL WHICH ADDRESSES THIS ISSUE."

-  Again, as indicated above, it was our intention in submiting a proposal 
   and expressly stating in the Cover Page and Proposal Letter of our 
   compliance with all terms and conditions of the RFP if not otherwise 
   specifically addressed, including Section 6.10.

<PAGE>

-   To the extent that a more specific statement is, or may be, required to 
    address the Section 6.10 qualification, South Carolina Insurance Company 
    hereby certifies that it will cooperate with the winding up of the affairs
    of the association and the conversion to an assigned risk plan, if any.

-   With respect to the Section 9.1.1.1 requirement, we call your attention to 
    the Proposal Letter, page 5, which contains, INTER ALIA, our certification 
    that South Carolina Insurance Company understands and will comply with all 
    terms and conditions of the RFP. We again reiterate this certification 
    that we understand and will comply with all terms and conditions of the 
    RFP.

"FOURTH, SECTION 9.3 OF RFP #98-002/PPAI REQUIRES THAT YOU ATTACH 
DOCUMENTATION ESTABLISHING YOUR PREVIOUS EXPERIENCE WITH RESIDUAL MARKET 
MECHANISMS. WE ARE UNABLE TO LOCATE A REPORT FROM A PLAN MANAGER OF A POOLING 
MECHANISM. THE OMISSION OF THIS ITEM IMPLIES THAT YOU HAVE NO SUCH REPORT. 
PLEASE CONFIRM THIS IN YOUR SEPTEMBER 18 RESPONSE. IF THIS INFORMATION IS 
INCLUDED IN YOUR PROPOSAL, PLEASE DIRECT MY ATTENTION TO THE SECTION OF THE
PROPOSAL WHICH ADDRESSES THIS ISSUE."

-   South Carolina Insurance Company's previous experience with residual 
    market mechanisms is documented by the Past Performance and Commitment 
    Memorandum found at page 13 of our proposal. As you know, South Carolina 
    Insurance Company, or its Seibels Bruce affiliate, Catawba Insurance 
    Company, has continuously served as a servicing carrier for the South 
    Carolina Reinsurance Facility since inception in 1974 to date. Since this 
    residual market mechanism is under the aegis of the South Carolina 
    Department of Insurance; the Director of Insurance is the Chairman of the 
    Governing Board of the Facility; and the bid and contract process for our 
    role as servicing carrier were conducted by you under legislative 
    directive we relied too heavily on these facts and did not believe that 
    additional independent verification was required. We apologize for this 
    oversight and attach the following additional documentation:

         1.   Letter from the current Manager, S.C. Reinsurance Facility, 
              certifying our service as a servicing carrier;

         2.   Copies of Annual Underwriting and Claims Audits by the South 
              Carolina Reinsurance Facility from 1993 through 1997 referenced 
              in our Memorandum at page 13 of the proposal; (1)

---------------

1 Our original proposal memorandum referenced an "in compliance" result for 
the 1994 underwriting audit. This is in error because no underwriting audits 
were performed in 1994 due to the bid awards and resulting changes in books 
of business.

<PAGE>

              3.   Copies of our contracts with the South Carolina Reinsurance 
                   Facility dated August 25, 1983 (first written contract); 
                   October 1, 1991 (shifting to Catawba); and October 1, 1994 
                   (result of bid award);

              4.   Copy of the North Carolina Reinsurance Facility Joint Report 
                   of the Claims and Audit Managers for 1995, the last year we 
                   acted as a servicing carrier for that residual market 
                   pooling mechanism;

              5.   Copy of letter from the Federal Emergency Management 
                   agency ("FEMA") certifying our role as a servicing carrier 
                   ("WYO Company") in the National Flood Insurance Program;

              6.   Copy of our current contract to act as a WYO Company 
                   signed by the Federal Insurance Administrator.

         -    If any additional documentation is required to validate the 
              representations as to our Past Performance and Commitment as a 
              servicing carrier for residual market pooling mechanisms, please 
              advise and we will be happy to supply whatever materials or 
              documentation you require.

         "FINALLY, WE ARE UNABLE TO LOCATE ANY STATEMENT IN YOUR PROPOSAL 
         WHICH STATES THAT THE PROPOSAL IS VALID UNTIL THE NOTIFICATION OF 
         AWARD IS ISSUED. PLEASE DIRECT MY ATTENTION TO THE SECTION OF THE 
         PROPOSAL WHICH ADDRESSES THIS ISSUE OR FORWARD THE CERTIFICATION 
         STATEMENT TO ME BY THE ESTABLISHED DEADLINE."

-   We respectfully direct your attention to the "Duration of Offer" at page 
    20 of the proposal which specifically addresses this requirement. For 
    your convenience, a duplicate copy of page 20 is attached hereto. Please 
    let us know if this statement is not sufficient to satisfy you as an 
    appropriate response.

This letter and the information submitted herewith supplements and amends
the proposal submitted as if originally incorporated within that document. 
South Carolina Insurance Company expressly agrees to be bound by the terms 
of this letter, its proposal dated September 9, 1998, as well as all of the 
terms and conditions of the RFP. The writer also expressly represents that he 
is an officer (Chief Financial Officer) of South Carolina Insurance Company 
and authorized to contractually bind it by the terms and conditions as stated 
herein.

Sincerely,



/s/ R. Thomas Savage, Jr.
-------------------------
R. Thomas Savage, Jr.
Chief Financial Officer




<PAGE>


                                  [Letterhead]






                                September 23, 1998

                           NOTIFICATION OF CONTRACT AWARD

DESCRIPTION:   Request for Proposals for a person to act as the servicing 
               carrier for the private passenger automobile insurance coverages 
               offered by the South Carolina Associated Auto Insurers Plan.

RFP NUMBER:    98-002 PPAI

ORGANIZATION SOLICITING THE PROPOSAL(S):  South Carolina Associated Auto
                                          Insurers Plan
                                          Post Office Box 11099
                                          Columbia, South Carolina 29211

CONTRACTS AWARDED TO:  The Seibels Bruce Group, Inc.
                       c/o South Carolina Insurance Company
                       Post Office Box One
                       Columbia, South Carolina 29202
                       (800) 525-8835/(803) 748-2000
                       Amount Awarded: 50%

                       Bankers Insurance Company
                       360 Central Avenue
                       St. Petersburg, Florida 33701
                       (727) 823-4000 extension 4200
                       Fax:  (727) 823-6518
                       Amount Awarded: 50%

THIS IS A STATEMENT OF INTENT TO AWARD A CONTRACT AND BECOMES THE OFFICIAL 
STATEMENT OF AWARD EFFECTIVE, OCTOBER 5, 1998, AT 5:00 P.M., UNLESS OTHERWISE 
MODIFIED, SUSPENDED OR CANCELED.




                                          /s/ Lee P. Jedziniak
                                         ---------------------------------------
                                         Lee P. Jedziniak
                                         Director
                                         South Carolina Department of Insurance


<PAGE>

                               PROPOSAL LETTER

We propose to furnish and deliver any and all of the services named in the 
Request for Proposals, Proposal Notice No. 98-002/PPAJ. The prices proposed 
herein shall apply for the period of time stated in the RFP.

It is understood that this proposal constitutes an offer and when signed by 
the authorized party will, with RFP, exhibits, and any amendments thereto, 
constitute a valid and legal contract between the undersigned respondent and 
the South Carolina Associated Auto Insurers Plan.

We acknowledge that we have read and understand the requirements of the RFP 
and represent that this proposal is made in accordance with the terms and 
conditions of the RFP. By signing this proposal, we guarantee and certify 
that all items included in this proposal meet or exceed any and all such 
terms and conditions. We also affirm, by signing this proposal, that we have 
reviewed all exhibits attached and that we have used this documentation as a 
basis for submitting our proposal. We understand and agree that this 
solicitation does not guarantee an award of a contract.

We agree, if awarded the contract, to deliver goods or services which meet or 
exceed the requirements of this RFP.

/s/ R. Thomas Savage, Jr.                                9/9/98
-----------------------------------------------------    ------
Signature of Authorized Representative/Corporate Seal    Date


NOTICE OF AWARD

Proposal Accepted By:

/s/ Lee P. Jedziniak                                     October 13, 1998
-----------------------------------------------------    ----------------
Director                                                 Date