<PAGE>

                                                                    Exhibit 10.2

                                                                    (SWISS LOGO)

                                 ADDENDUM NO. 3

                                     to the

                             PROPERTY EXCESS OF LOSS
                            AGREEMENT OF REINSURANCE
                                 NO. TP1600E,F
                  (hereinafter referred to as the "Agreement")

                                     between

                         PHILADELPHIA INDEMNITY COMPANY
                         PHILADELPHIA INSURANCE COMPANY
                            One Bala Plaza, Suite 100
                         Bala Cynwyd, Pennsylvania 19004
                   (hereinafter referred to as the "Company")

                                       and

                      SWISS REINSURANCE AMERICA CORPORATION
                                Armonk, New York
                  (hereinafter referred to as the "Reinsurer")

It is understood and agreed that as respects policies in force at 12:01 a.m.,
Eastern Standard Time, January 1, 2006, and new and renewal policies becoming
effective on and after said date, this Agreement is amended as follows:

1.   Agreement No. TP1600E,F shall be renumbered as Agreement No.
     POR-376354/376357.

2.   Paragraph C is added to Article III - Commencement And Termination:

     C.   If this Agreement expires while a Loss Occurrence covered hereunder is
          in progress, the Reinsurer's liability hereunder shall, subject to the
          other terms and conditions of this Agreement, be determined as if the
          entire Loss Occurrence had occurred prior to the expiration of this
          Agreement, provided that no part of such Loss Occurrence is claimed
          against any renewal or replacement of this Agreement.

3.   Paragraph C. of Article V - Definitions is revised to read:

     C.   Adjustment Expense

          This term shall mean expenditures by the Company within the terms of
          its policies in the direct defense of claims and in connection with
          Losses in Excess of Policy Limits and in connection with Extra
          Contractual Obligations and as allocated


                                1. No. TP1600E,F
                                 Addendum No. 3

<PAGE>

                                                                    (SWISS LOGO)

          to an individual claim or loss (other than for office expenses and for
          the salaries and expenses of employees of the Company or of any
          subsidiary or related or wholly owned company of the Company) made in
          connection with the disposition of a claim, loss, or legal proceeding
          including investigation, negotiation, and legal expenses; court costs;
          prejudgment interest; and postjudgment interest.

          Notwithstanding the provisions of the article entitled Management of
          Claims and Losses, this term shall also be deemed to include
          Declaratory Judgment Expenses incurred by the Company in connection
          with a declaratory judgment action brought to determine the Company's
          defense and/or indemnification obligations that are allocable to a
          specific claim under a policy (or coverage part thereof) reinsured
          hereunder. However, the amount of any declaratory judgment expense
          that may be included in computation of Adjustment Expense shall not
          exceed the lesser of the amount of insurance under the policy or the
          Reinsurer's Limit of Liability for each Risk under this Agreement.

          The date on which a declaratory judgment expense is incurred by the
          Company shall be deemed, in all circumstances, to be the date of the
          original Occurrence.

4.   Paragraph D. of Article V - Definitions is revised to read:

     D.   Losses in Excess of Policy Limits and Extra Contractual Obligations

          1.   The term "Loss in Excess of Policy Limits" shall mean a payment
               made to a third party claimant in excess of policy limit which
               the Company is legally obligated to pay resulting from an action
               taken by the insured or assignee arising from a third party
               claimant being awarded an amount in excess of the Company's
               policy limit as a result of the Company's failure to settle
               within the policy limit of the Company's alleged or actual
               negligence or bad faith in rejecting an offer of settlement or in
               the preparation of the defense or in the trial of any action
               against its insured or in the preparation or prosecution of an
               appeal consequent upon such action.

          2.   The term "Extra Contractual Obligation" shall mean a loss which
               the Company is legally obligated to pay, which is not covered
               under any other provision of this Agreement and which arises from
               the Company's handling of any claim on the policies reinsured
               hereunder which have limits of liability greater than the Company
               Retention.


                                2. No. TP1600E,F
                                 Addendum No. 3

<PAGE>

                                                                    (SWISS LOGO)

          The date on which a Loss in Excess of Policy Limits or an Extra
          Contractual Obligation is incurred by the Company shall be deemed, in
          all circumstances, to be the date of the original Occurrence.

          There shall be no coverage hereunder where the Loss in Excess of the
          Policy Limit or the Extra Contractual Obligation has been incurred due
          to the fraud or criminal conduct of a member of the Board of
          Directors, a corporate officer of the Company, or any other employee
          of the Company, acting individually or collectively or in collusion
          with any individual or corporation or any other organization or party
          involved in the investigation, defense or settlement of any claim
          covered hereunder.

          Any insurance or reinsurance, whether collectible or not, which
          indemnifies or protects the Company against claims which are the
          subject matter of this definition and any contribution, subrogation,
          or recovery shall inure to the benefit of the Reinsurer and shall be
          deducted to arrive at the amount of the Company's Net Loss.

          If any provision of this Paragraph D. shall be rendered illegal or
          unenforceable by the laws, regulations or public policy of any
          jurisdiction, such provision shall be considered void in such
          jurisdiction, but this shall not affect the validity or enforceability
          of any other provision of this Paragraph D. or the enforceability of
          such provision in any other jurisdiction.

5.   Exclusions Y and Z, as amended by Addendum No. 1, are deleted in their
     entirety.

6.   Paragraph A. of Article VIII - Reinsurance Premium is revised to read:

     A.   The Company shall pay to the Reinsurer a premium for the reinsurance
          provided under the First and Second Excess of Loss Layers at a rate
          set forth below. Such rates shall be applied to the Company's Subject
          Earned Premium for the calendar year under calculation.

<TABLE>
<CAPTION>
                                                Rate
                                                ----
<S>                                             <C>
First Excess (Accounting Code No. POR376354)    .60%
Second Excess (Accounting code No. POR376357)   .67%
</TABLE>


                                3. No. TP1600E,F
                                 Addendum No. 3

<PAGE>

                                                                    (SWISS LOGO)

7.   Article XX - Participation is added to and made a part of the Agreement:

     ARTICLE XX - PARTICIPATION

     A.   This Agreement obligates the Reinsurer for the following shares in the
          of the interests and liabilities set forth under this Agreement.

<TABLE>
<S>                                             <C>
First Excess (Accounting Code No. POR376354)    50%
Second Excess (Accounting Code No. POR376357)   50%
</TABLE>

     B.   The participation of the Reinsurer in the interests and liabilities of
          this Agreement shall be separate and apart from the participations of
          other reinsurers and shall not be joint with those other reinsurers,
          and the Reinsurer shall in no event participate in the interests and
          liabilities of other reinsurers.

ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.


                                4. No. TP1600E,F
                                 Addendum No. 3

<PAGE>

                                                                    (SWISS LOGO)

IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
in duplicate, by their duly authorized representatives as of the following
dates:

In Bala Cynwyd, Pennsylvania, this 25th day of September, 2006.

ATTEST:                                 PHILADELPHIA INDEMNITY COMPANY
                                        PHILADELPHIA INSURANCE COMPANY


/s/ William A. Mckenna                  /s/ Christopher J. Maguire
-------------------------------------   ----------------------------------------
Name William A. Mckenna                 Name Christopher J. Maguire
Title Assistant Vice President          Title Executive Vice President &
                                              Chief Reinsurance Underwriting
                                              Officer

And in Armonk, New York, this 15th day of September, 2006.


ATTEST:                                 SWISS REINSURANCE AMERICA CORPORATION


/s/ Peter Thomson                       /s/ Gregory Schiffer
-------------------------------------   ----------------------------------------
Name Peter Thomson                      Name Gregory Schiffer
Title Vice President                    Title Vice President
      Member of Management              Member of Senior Management

bh
PHILPOR376354-A3


                                5. No. TP1600E,F
                                 Addendum No. 3