No. 3154-028-E001

                                   ENDORSEMENT
                                   -----------

     Attached to and forming part of PROPERTY AND CASUALTY  CLASH EXCESS OF LOSS
     REINSURANCE AGREEMENT NO. 3154-0028 between PENN-AMERICA INSURANCE COMPANY,
     PENN-STAR INSURANCE COMPANY, both of Hatboro, Pennsylvania and PENN-PATRIOT
     INSURANCE  COMPANY of Richmond,  Virginia  (hereinafter  referred to as the
     `Company'),  and AMERICAN RE-INSURANCE COMPANY, a Delaware Corporation with
     administrative offices in Princeton, New Jersey (hereinafter referred to as
     the "Reinsurer").

     It is understood and agreed by the parties  hereto,  that  effective  12:01
     a.m.,  Eastern Standard Time, January 1, 2004, this Agreement is amended to
     read as follows:

     I.   The "Slender  Lady Program" is added as an exception to Exclusion C. 1
          of the EXCLUSIONS Article and the exclusion reads as follows:

          1.   Professional  Liability or Errors and  Omissions  Coverage  other
               than for the following:

                           a.   "Beau-T-Pak";
                           b.    Barbers;
                           c.    Opticians;
                           d.    Veterinarians that treat household pets;
                           e.    Morticians;
                           f.    Clergy;
                           g.    Employee Benefits Liability (E&O Coverage);
                           h.    Druggists;
                           i.   "Day Care Pak";
                           j.   "Adult Day Care";
                           k.   "Health Club Pak";
                           l.   "Instructor Pak";
                           m.    In-Home Day Care;
                           n.   "Pet Pak";
                           o.   "Wellness Pak";
                           p.   "Massage Program"; or
                           q.   "Slender Lady Program".

     II.  Professional  Liability  maximum policy limits are amended and maximum
          limits  form the  "Slender  Lady  Program"  are  added to  ARTICLE  V,
          WARRANTY, and the Article reads as follows:


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                                                              No. 3154-028-E001



                                    ARTICLE X
                                    ---------

         WARRANTY
         --------

         Casualty
         --------


          A.   The maximum limits of liability for any one policy of the Company
               shall be deemed not to exceed the following:

               1.   General   Liability  -  $1,000,000   each   occurrence   and
                    $2,000,000  general  aggregate.  a) As respects Products and
                    Completed Operations - $1,000,000 in the aggregate.

               2.   Massage  Program - $2,000,000 each occurrence and $3,000,000
                    general aggregate.

               3.   Umbrella  and Excess  General  Liability-  The Company  will
                    purchase or so deemed umbrella  facultative  reinsurance and
                    excess   general   liability   reinsurance   covering  Extra
                    Contractual  Obligations and Excess  Judgments  liability as
                    defined  within this Agreement for an amount equal to and in
                    addition to the umbrella policy limit,  subject to an annual
                    aggregate  limit  of  $5,000,000.   Facultative  reinsurance
                    coverage for any umbrella extra  contractual  obligations or
                    excess  judgments  liability  shall  inure to the benefit of
                    this Agreement.

               4.   Professional  Liability -  $1,000,000  each  occurrence  and
                    $2,000,000 general aggregate.

               5.   Professional  Liability  "Slender Lady Program" - $1,000,000
                    each occurrence and $3,000,000 general aggregate.


         Property
         --------

          A.   It shall be deemed that the  company  will  purchase  facultative
               reinsurance on all risks in excess of $2,000,000.

          B.   It shall be deemed that the  company  will  purchase  catastrophe
               reinsurance  for  $29,000,000 in excess of $1,000,000 for any one
               occurrence.




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                                                              No. 3154-028-E001


     IN WITNESS  WHEREOF the parties  hereto have caused this  Endorsement to be
     executed in duplicate in Hatboro, Pennsylvania, this 10th day of September,
     2004;


         ACCEPTED:
         PENN-AMERICA INSURANCE COMPANY
         PENN-STAR INSURANCE COMPANY
         PENN-PATRIOT INSURANCE COMPANY





-----------------------------------
and in Princeton, New Jersey, this               9th Day of September 2004.

                                                AMERICAN RE-INSURANCE COMPANY



                                                -------------------------------
                                                Vice President


             DATED: August 9, 2004
             RG/rg