GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC.

                         Investment Management Agreement
                        --------------------------------



         This Agreement is made as of the 15th day of May, 2003, between

1. GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC., a corporation organized
under the laws of the State of Delaware ( "Manager"); and

2. PENN-AMERICA GROUP, INC., a corporation organized under the laws of the State
of Pennsylvania, and its affiliates listed on Schedule E, (collectively the
"Client").

         WHEREAS, Client desires to appoint Manager as the investment manager of
that portion of Client's assets constituting the Account (as defined below) for
fees agreed upon in Schedule A. III.;

         NOW THEREFORE, in consideration of the mutual agreements herein
contained, it is agreed as follows:

Section 1.        The Account

          The cash,  securities and other assets placed by Client in the account
to be managed under this Agreement (the "Account") are listed on Section I.A. of
Schedule  A. Assets may be added to the  Account at any time.  The Account  will
include  these  assets  and any  changes  in them  resulting  from  transactions
directed by Manager,  withdrawals made by Client, or dividends,  interest, stock
splits and other earnings, gains or losses on the assets.

          Assets  placed in the Account by the Client that are not to be managed
by Manager are separately identified on Schedule A ("Unmanaged Assets"). Manager
may include  these  assets in its periodic  reports to Client,  but will exclude
their value when calculating Manager's asset management fees.





                                       3
<PAGE>



Section 2.        Management of the Account

         Manager will make all investment decisions for the Account, in
Manager's sole discretion and without first consulting or notifying Client, in
accordance with the investment restrictions and guidelines which are attached as
Schedule B (the "Investment Guidelines"). If Manager manages only a portion of
Client's portfolio, unless otherwise specified by Client in writing, Investment
Guidelines' restrictions relate specifically to the assets managed by Manager.
Client may change these Investment Guidelines at any time, but Manager will be
bound by the changes only after it has received them in writing. Other than by
the Investment Guidelines and the terms of this Agreement, the investments made
by Manager on behalf of the Client will not be restricted in any manner, except
by operation of law.

          Manager will have full power and  authority,  on behalf of Client,  to
instruct  any  brokers,  dealers  or banks to buy,  sell,  exchange,  convert or
otherwise trade in all securities, futures or other investments for the Account.

          Manager will not be responsible for giving Client investment advice or
taking any other action with respect to Unmanaged Assets.

          Client appoints  Manager as the true and lawful attorney of the Client
for and in the name,  place  and  stead of  Client,  in  Manager's  unrestricted
discretion,  to operate and conduct the brokerage  accounts of the Client and to
do and perform all and every act and thing  whatsoever  requisite in furtherance
of the brokerage  account and of this Agreement,  including the execution of all
writings related to the purchase or sale,  assignments,  transfers and ownership
of any stocks, bonds, commodities,  or other derivatives or securities.  Manager
is hereby fully  authorized to act and rely on the authority  vested pursuant to
said power of attorney.

          Effective as of January 1, 2003,  and until  further  notice,  Manager
will provide investment  accounting  services for Client, and will assist Client
in preparing Client's statutory Schedule D, if applicable.  Client  acknowledges
that Manager  will  provide  accounting  data  according  to Manager's  standard
interpretation of accounting  principles,  unless expressly instructed otherwise
by Client's prior written notice.

Section 3.        Transactions for the Account

          Manager will arrange for securities transactions for the Account to be
executed  through  those  brokers,  dealers or banks that Manager  believes will
provide  best  execution.  In choosing a broker,  dealer or bank,  Manager  will
consider  the broker,  dealer or bank's  execution  capability,  reputation  and
access to the markets for the securities  being traded for the Account.  Manager
will seek  competitive  commission  rates,  but not necessarily the lowest rates
available.

          Manager  may also send  transactions  for the  Account to brokers  who
charge higher  commissions than other brokers,  provided that Manager determines
in good faith that the  amount of  commissions  Manager  pays is  reasonable  in
relation to the value of the brokerage and



                                       2
<PAGE>


          research services provided,  viewed in terms either of that particular
transaction or Manager's  overall  responsibilities  with respect to all clients
whose accounts Manager manages on a discretionary basis.

          Portfolio transactions for each client account generally are completed
independently.  However,  if  Manager  decides  to  purchase  or sell  the  same
securities  for Client and other  clients  at about the same time,  Manager  may
combine  Client's  order  with  those of other  clients  if  Manager  reasonably
believes  that it will be able to negotiate  better  prices or lower  commission
rates or transaction costs for the combined order than for Client's order alone.
Client  will pay the  average  price and  transaction  costs  obtained  for such
combined orders. Manager generally will allocate securities purchased or sold as
part of a combined  order to Client's  Account and to accounts of other  clients
according to the size of the order placed for each client.

          If  Manager  cannot  obtain  execution  for the  total  amount  of the
securities in the combined orders, adjustments to the allocation will be made on
a random number generator methodology. However, Manager may increase or decrease
the amounts of securities  allocated to each client if necessary to avoid having
odd or small  numbers of shares held for the account of any client.  Each client
that  participates  in a combined  order will  receive or pay the average  share
price and/or  transactions  costs for all  transactions  executed as part of the
combined order.

          If Client directs Manager to use particular brokers,  dealers or banks
to execute  transactions  for the Account,  Manager will do so, but Manager will
not seek better  execution  services  or prices for Client  from other  brokers,
dealers or banks,  and Client may pay higher  prices or  transaction  costs as a
result.  Manager  also may not be able to seek  better  execution  services  for
Client by combining Client's orders with those of other clients.

          Client may direct all  transactions  for the  Account to a  particular
broker,  dealer or bank, by writing the name and address of that broker,  dealer
or bank in the space provided on Schedule A.

          Client has the right to withdraw  cash at any time with prior  written
notice to Manager.

Section 4.        Transaction Confirmations

          Manager  will  instruct  the  brokers,  dealers  or banks who  execute
transactions  for the  Account  to send  Client all  transaction  confirmations,
unless Client chooses not to receive  confirmations.  If Client does not wish to
receive individual confirmations, this box should be checked. |X|

          Client may elect to receive  individual  confirmations  at any time by
giving Manager written notice.


                                       3
<PAGE>



Section 5.        Custody of Account Assets

          The assets in the  Account  will be held for  Client by the  custodian
named on  Schedule A (the  "Custodian").  Manager  will not have  custody of any
Account assets. Client will pay all fees of the Custodian.

          Client will authorize the Custodian to follow  Manager's  instructions
to make and accept payments for, and to deliver or to receive,  securities, cash
or other investments purchased, sold, redeemed, exchanged, pledged or loaned for
the Account.  Client also will instruct the Custodian to send Client and Manager
monthly  statements  showing the assets in and all  transactions for the Account
during the month, including any payments of Manager's fees.

          Client will  provide  Manager  with a copy of its  agreement  with the
Custodian,  and will give  Manager  reasonable  advance  notice of any change of
Custodian.

Section 6.        Reports to Client

          Both Parties agree that the Web Access Addendum attached as Schedule F
hereto  shall  govern  the  Manager's   provisions   and  Client's  use  of  the
electronically available tools and information.

          Manager  shall  prepare  1) monthly  appraisal  reports  and  detailed
holdings reports,  showing current book values, market values,  unrealized gains
and  losses,  book  yields  and  average  life;  and  2)  quality  and  maturity
distribution reports.

 Additionally, investment accounting reports generally include the following:

|_|      Investment Income Earned
|_|      Securities on Deposit - By State (provided Client provides Manager
         with pertinent information)
|_|      Summary of General Ledger Journal Entries
[ ]      Trial Balance
[ ]      Schedule D data, including NAIC Rating information

          Client  agrees to obtain  its  appraisals  and  investment  accounting
reports via Manager's website, GRNEAM.com.  However, both Parties agree that the
Client  has the right to receive  hard  copies  and that upon  Client's  written
request,  Manager  will  send  Client  hard  copies  of  the  appraisals  and/or
investment accounting reports.

          The Account's performance will be sent monthly,  quarterly or annually
upon Client request.  Ad hoc reports and presentation  materials are prepared as
directed by clients. Reports will be provided for each Client company portfolio,
combined insurance company portfolio, and all Client companies on a consolidated
basis.


                                       4
<PAGE>


Section 7.        Account Valuation

          Manager will value the  securities  in the Account  using  independent
pricing  sources.  All securities in the Account that are listed and traded on a
national  securities exchange or on NASDAQ shall be valued on the valuation date
at the closing price on the principal  market where the  securities  are traded.
All other securities shall be valued in accordance with any reasonable valuation
method selected by Manager,  consistent with industry accepted practices.  While
Manager does its best to obtain  representative market prices for all securities
in the Account, such prices do not always reflect the price actually received or
paid on the open market.

Section 8.        Manager's Fees

          For Manager's services,  Client will pay a percentage of the value, as
determined  under Section 7 of this  Agreement,  of all assets on a consolidated
portfolio  basis in the  Account  (excluding  Unmanaged  Assets)  as of the last
trading  day of each  calendar  month.  The fees are  payable at the end of each
calendar quarter for services provided by Manager during the prior three months.
The percentage amount of the fees is shown on Schedule A.

         In any partial quarter, the fees will be reduced pro rata based on the
number of days the Account was managed.

         Client will be billed directly by Manager and will pay Manager's fees
within 30 days of receiving the bill.

          If Manager invests in securities issued by money market funds or other
investment  companies for the Account,  these securities will be included in the
value of the Account when Manager's fees are calculated.  These same assets will
be subject to additional  investment  management and other fees that are paid by
the  investment  company  but  ultimately  borne  by  its  shareholders.   These
additional fees are described in each investment company's prospectus.

Section 9.        Proxy Voting

         Proxies for securities in the Account should be voted as follows:

         [ ] Client directs Manager not to vote proxies for securities held for
the Account.

         |X|      Client directs Manager to vote all proxies for securities held
                  for Client's Account in accordance with --

                                    |X|     Manager's own discretion
                                       or
                                    [ ]     Client's proxy voting guidelines
                                            attached as Schedule C.


                                       5
<PAGE>



          Client will direct  Custodian to send promptly all proxies and related
shareholder  communications  to Manager  and to  identify  them as  relating  to
Client's  Account.  Client  understands  that  Manager  will not be able to vote
proxies  if they are not  received  on a timely  basis  from  the  Custodian  as
properly  identified  as  relating  to Client's  Account.  Manager  shall not be
responsible for voting proxies of foreign  securities,  and will forward them to
Client for completion.

         These proxy voting instructions may be changed at any time by notifying
Manager in writing.

Section 10.       Legal Proceedings

          Manager is not the attorney  for, nor will it advise or act for Client
in any legal  proceedings,  including  bankruptcies or class actions,  involving
securities held in the Account or issuers of those securities.

Section 11.       Risk

          Subject  to  Section  12,  the  Manager  cannot  guarantee  the future
performance of the Account, promise any specific level of performance or promise
that its investment  decisions,  strategies or overall management of the Account
will be successful.  The investment  decisions  Manager will make for Client are
subject to various market, currency, economic, political and business risks, and
will not necessarily be profitable.

Section 12.       Standard of Care; Limitation of Liability

          Except as may otherwise be provided by law, Manager will not be liable
to Client for any loss (i) that Client may suffer as a result of Manager's  good
faith  decisions or actions where Manager  exercises the degree of care,  skill,
prudence and diligence that a prudent person acting in a like fiduciary capacity
would use; (ii) caused by following  Client's  instructions;  or (iii) caused by
the Custodian,  any broker, dealer or bank to which Manager directs transactions
for the Account or any other person.

          Federal and state  securities  laws impose  liabilities  under certain
circumstances  on persons who act in good  faith,  and this  Agreement  does not
waive or limit  Client's  rights under those laws,  except to the extent Manager
negligently  fails to comply with written  instructions  from Client relating to
Client's  investments in compliance with applicable  insurance investment or tax
laws.

          Manager will not be responsible  for Client's own compliance  with the
insurance  investment  laws  of  Client's  state  of  domicile  or for  Client's
compliance with applicable tax laws.

          In  managing  the  Account,   Manager  will  not  consider  any  other
securities, cash, or other investments or assets Client owns for diversification
or other  purposes.  Manager  shall have no  responsibility  whatsoever  for the
management  of the  Unmanaged  Assets or any  assets of  Client  other  than the
Account and shall  incur no  liability  for any loss or damage  which may result
from the management of such other assets.


                                       6
<PAGE>


Section 13.       Client Directions

          The names and specimen signatures of each individual who is authorized
to give  directions to Manager on Client's  behalf under this  Agreement are set
forth on Schedule D.  Directions  received by Manager from Client must be signed
by at least one such person.  If Manager  receives  directions from Client which
are not  signed by a person  designated  on  Schedule  D,  Manager  shall not be
required to comply with such  directions  until it verifies that the  directions
are properly authorized by Client.

          Manager shall be fully protected in relying upon any direction  signed
or given by a person  that is  designated  on  Schedule  D hereto  to give  such
directions on Client's behalf. Manager also shall be fully protected when acting
upon an instrument, certificate, or paper that Manager reasonably believes to be
genuine and to be signed or  presented  by any such  person or persons.  Manager
shall be under no duty to make any  investigation or inquiry as to any statement
contained in any writing and may accept the same as conclusive evidence of truth
and accuracy of statements contained therein.

Section 14.       Confidentiality

          Except as Client and Manager  otherwise agree or as may be required by
law, all  information  concerning  the Account and services  provided under this
Agreement shall be kept confidential.

Section 15.       Non-Exclusive Agreement

          Manager provides  investment advice to other clients and may give them
advice or take actions for them,  for  Manager's own accounts or for accounts of
persons  related to or  employed  by  Manager,  that is  different  from  advice
provided to or actions taken for Client.

          Manager  is not  obligated  to buy,  sell or  recommend  for  Client's
Account any security or other investment that Manager may buy, sell or recommend
for other  clients  or for the  account of  Manager  or its  related  persons or
employees. Manager will treat all clients fairly and equitably.

          If Manager obtains material,  non-public  information about a security
or its issuer that Manager may not  lawfully use or disclose,  Manager will have
no  obligation to disclose the  information  to Client or to use it for Client's
benefit.

Section 16.       Term of Agreement

          Either Client or Manager may cancel this Agreement at any time upon 30
days written notice.  Written notice is complete upon the date(s) of delivery of
same via fax  transmittal or US mail postage mark. This Agreement will remain in
effect until  cancelled.  Termination  of this Agreement will not affect (i) the
validity of any action that  Manager or Client has  previously  taken;  (ii) the
liabilities or obligations of Manager or Client for transactions  started before
termination; or (iii) Client's obligation to pay Manager's fees through the date
of termination.  Upon termination,  Manager will have no obligation to recommend
or take any action with regard to the  securities,  cash or other  assets in the
Account.


                                       7
<PAGE>


Section 17.       Agreement Not Assignable

          This  Agreement  may  not  be  assigned  within  the  meaning  of  the
Investment Advisers Act of 1940 (the "Advisers Act") by Manager without Client's
consent.

Section 18.       Governing Law

          The internal law of Connecticut  will govern this Agreement.  However,
nothing in this  Agreement  will be construed  contrary to any  provision of the
Advisers Act or the rules thereunder.

Section 19.       Miscellaneous

          If any provision of this Agreement is or becomes inconsistent with any
applicable law or rule,  the provision  will be deemed  rescinded or modified to
the extent  necessary  to comply with such law or rule.  In all other  respects,
this Agreement will continue in full force and effect.  This Agreement  contains
the  entire  understanding  between  Manager  and  Client and may not be changed
except in writing signed by both parties. Failure to insist on strict compliance
with this  Agreement or with any of its terms or any continued  conduct will not
be considered a waiver by either party under this Agreement.

         This Agreement supersedes all prior agreements between the parties as
of the Effective Date.

Section 20.       Notices

          All  notices  and  instructions  with  respect to the Account or other
matters  covered by this  Agreement  may be sent by U.S.  mail express  delivery
services,  facsimile,  e-mail or other electronic means to Client and to Manager
at the addresses at the end of this agreement or to another address  provided in
writing.

Section 21.       Representations of Client

          Client  represents  and  warrants  to  Manager  that (a) Client is the
beneficial owner of all assets in the Account and that there are no restrictions
on transfer or sale of any of those  assets;  (b) this  Agreement  has been duly
authorized,  executed, and delivered by Client and is Client's valid and binding
obligation;  (c) the names of the  individuals  who are  authorized to act under
this Agreement on behalf of Client have been given to Manager in writing; (d) no
government authorizations,  approvals, consents, or filings not already obtained
are required in connection with the execution,  delivery, or performance of this
Agreement by Client; and (e) Client certifies that it is not an employee benefit
plan subject to the Employee  Retirement Income Security Act of 1974, as amended
("ERISA")  or a plan  subject to Section  4975 of the  Internal  Revenue Code of
1986, as amended (the  "Code"),  nor a Person acting on behalf of any such plan.
Client  agrees to notify  Manager  in  writing  within  five (5) days  after the
occurrence of an event making the above statement no longer accurate.


                                       8
<PAGE>


          Client agrees to indemnify,  defend and hold harmless  Manager and its
officers,  directors,  agents, employees,  shareholders,  legal representatives,
successors  and assigns,  from and against any and all claims,  actions,  suits,
damages,  costs,  liabilities,  judgments,  losses, charges, costs and expenses,
including  attorneys'  fees,  of Manager  arising  from any failure by Client to
accurately  disclose its status under this Section or by reason of any defect in
Client's authority to appoint Manager under this Agreement.

Section 22.       Representations of Manager

          Manager  represents  and warrants  that this  Agreement  has been duly
authorized,  executed  and  delivered  by Manager  and is its valid and  binding
obligation.

Section 23.       Form ADV

          Client has received  and reviewed a copy of Part II of Manager's  Form
ADV and a copy of this Agreement.

Section 24.    Independent Contractor

          The  relationship  of Manager to Client is and shall remain during the
term of this Agreement that of  independent  contractor.  Manager and Client are
not  partners  or joint  venturers  with each other  under this  Agreement,  and
nothing in this  Agreement  shall be  construed  so as to make them  partners or
joint venturers, or to impose any liability as such on either of them.


AGREED TO AND ACCEPTED BY:

GENERAL RE - NEW ENGLAND                      PENN-AMERICA GROUP, INC.
ASSET MANAGEMENT, INC.


______________________________________      ____________________________________

By:  Gerard T. Lynch                                 By:
Its President                                        Its:

                                                     Principal Address:

Pond View Corporate Center                           420 South York Road
76 Batterson Park Road                               Hatboro, PA 19040
Farmington, Connecticut 06032

                                 Taxpayer Identification Number: 23-2731409


                                       9
<PAGE>






                         PENN-AMERICA INSURANCE COMPANY



                         ______________________________________
                         By:
                         Its:

                Taxpayer Idendification Number: 23-1997049




                         PENN-STAR INSURANCE COMPANY



                         ______________________________________
                         By:
                         Its:

                Taxpayer Idendification Number:  23-2865367________





                         PENN-PATRIOT INSURANCE COMPANY



                         ______________________________________
                         By:
                         Its:

                Taxpayer Idendification Number:  81-0605083_______


                                       10
<PAGE>


                                   SCHEDULE A

--------------------------------------------------------------------------------
I.       ACCOUNT ASSETS.

          A. Managed  Assets - Client has deposited  the  following  securities,
cash and other assets with the  Custodian  identified  below to be managed under
this Agreement: See attached list of holdings as of April 30, 2003.

          B.  Unmanaged  Assets - Client also  deposited  with the Custodian the
following assets which are not to be managed under this Agreement: None

--------------------------------------------------------------------------------
II. CUSTODY OF ACCOUNT ASSETS. The assets to be managed under this Agreement and
any Unmanaged Assets will be held by:

PNC Bank, N.A.                                      Custodial Account Number(s):
                                                      Refer to Schedule E
Institutional Custody Services
200 Stevens Drive, Suite 425
Lester, PA  19113

--------------------------------------------------------------------------------
II. FEES. Manager's fees for services provided under this Agreement shall be as
follows: Asset Management Fees (including Investment Accounting Fees):

For non-equity assets:

Annual fee of .20% (twenty hundredths of one percent) on the first $50 million
of market value of the non-equity invested assets under management in the
"Available for Sale" portfolios;

..15% (fifteen hundredths of one percent) on remaining market value of the
non-equity invested assets under management in the "Available for Sale"
portfolios; and

 .05% (five hundredths of one percent) of market value of the non-equity
invested assets under management in the "Held to Maturity" portfolios.

For equity assets:

Annual fee of .05% (five hundredths of one percent) on the market value of the
equity assets under management.

Manager reserves the right to charge additional fees upon mutual written
agreement between Client and Manager, on at least sixty (60) days notice to
Client.

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

                                       11
<PAGE>



                              SCHEDULE A Continued


Website Tools:
Manager may provide Client with access to their monthly reporting package and
miscellaneous analytical tools for Client's managed assets via Manager's
website.

Client may request to utilize the tools on unmanaged assets, subject to
Manager's approval and possible additional fees.


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




IV. BROKERAGE DIRECTION. Client directs Manager to cause all transactions for
the Account to be executed through the following broker, dealer or
Bank:___NONE_____________________



Client has read, understands and accepts the limitations that this direction
will place on Manager's ability to seek best execution for the Account. This
direction may be changed by Client at any time by notifying Manager in writing.


<TABLE>
<CAPTION>



-----------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>
V. NAME OF CLIENT:  PENN-AMERICA GROUP, INC.                                    VI. DATE:


By: ____________________________________________                             _________________________

---------------------------------------------------------------------------- -----------------------------------------
VII. NAME OF CLIENT:  PENN-AMERICA INSURANCE COMPANY                            VIII. DATE:


By: ____________________________________________                             _________________________

---------------------------------------------------------------------------- -----------------------------------------
IX. NAME OF CLIENT:  PENN-STAR INSURANCE COMPANY                                X. DATE:


By: ____________________________________________                             ___________________________



                                       12
<PAGE>

---------------------------------------------------------------------------- -----------------------------------------
XI. NAME OF CLIENT: XII. DATE: PENN-PATRIOT INSURANCE COMPANY


By: ____________________________________________                             ___________________________

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


</TABLE>


                                       13


<PAGE>





                                   SCHEDULE B




--------------------------------------------------------------------------------
INVESTMENT GUIDELINES: The investment guidelines to be followed by Manager in
managing Client's Account are set forth below:




                         See attached Investment Plan of
  Penn-America Group, Inc., Penn-America Insurance Company, Penn-Star Insurance
         Company and Penn-Patriot Insurance Company dated May 14, 2003.




--------------------------------------------------------------------------------
NAME OF CLIENT:                                   DATE:
PENN-AMERICA GROUP, INC.


By: ____________________________________          _____________________

--------------------------------------------------------------------------------
NAME OF CLIENT:                                   DATE:
PENN-AMERICA INSURANCE COMPANY


By: ____________________________________          _____________________

--------------------------------------------------------------------------------
NAME OF CLIENT:                                   DATE:
PENN-STAR INSURANCE COMPANY


By: ____________________________________          _____________________

--------------------------------------------------------------------------------
NAME OF CLIENT:                                   DATE:
PENN-PATRIOT INSURANCE COMPANY


By: ____________________________________          _____________________

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


                                       14
<PAGE>


                                   SCHEDULE C



--------------------------------------------------------------------------------
PROXY VOTING GUIDELINES: The proxy voting guidelines to be followed by Manager
in voting securities held in the Account are set forth below:

(If none, check here |X|.)






--------------------------------------------------------------------------------
NAME OF CLIENT:                                   DATE:
PENN-AMERICA GROUP, INC.


By: _____________________________________________ ____________________

--------------------------------------------------------------------------------
NAME OF CLIENT:                                   DATE:
PENN-AMERICA INSURANCE COMPANY


By: _____________________________________________ ____________________

--------------------------------------------------------------------------------
NAME OF CLIENT:                                   DATE:
PENN-STAR INSURANCE COMPANY


By: _____________________________________________ ____________________

--------------------------------------------------------------------------------
NAME OF CLIENT:                                   DATE:
PENN-PATRIOT INSURANCE COMPANY


By: _____________________________________________ ____________________
--------------------------------------------------------------------------------



                                       15
<PAGE>


                                   SCHEDULE D

                             SECRETARY'S CERTIFICATE
                             -----------------------

      I, Garland P. Pezzuolo,  the Secretary of  PENN-AMERICA  GROUP,  INC. (the
"Corporation"), a Corporation organized and existing under the laws of the State
of  Pennsylvania  hereby  certify  that each of the  following  officers  of the
Corporation,  acting  singly,  is  authorized  in the name and on  behalf of the
Corporation,  to give  instructions to General Re-New England Asset  Management,
Inc.  ("Manager") with respect to any and all matters,  including investment and
reinvestment of securities,  pertaining to the Investment  Management  Agreement
between  the  Corporation  and  Manager,  and to execute and deliver any and all
documents and to take any and all other action to carry out the purposes of said
Investment Management  Agreement.  I further certify that the specimen signature
set forth next to the names of such officers,  is the true and genuine signature
of such persons.

   Name of Officer                Title                          Signature


Irvin Saltzman             Chairman                          ___________________




Jon S. Saltzman            President & CEO                   ___________________




Joseph F. Morris           Sr. Vice President, CFO and       ___________________
                           Treasurer



Brian Riley                Vice President & Controller       ___________________


         This Certificate shall be in effect from the date hereof until written
notice is given on behalf of the Corporation to terminate or revise it.

         IN WITNESS WHEREOF, I set my hand and seal of the Corporation.


                    _________________________________        ___________________
(Corporate Seal)                Secretary                            Date




                                       16
<PAGE>

                                   SCHEDULE D

                             SECRETARY'S CERTIFICATE
                            ------------------------

         I, Garland P. Pezzuolo, the Secretary of PENN-AMERICA INSURANCE COMPANY
(the "Corporation"), a Corporation organized and existing under the laws of the
State of Pennsylvania hereby certify that each of the following officers of the
Corporation, acting singly, is authorized in the name and on behalf of the
Corporation, to give instructions to General Re-New England Asset Management,
Inc. ("Manager") with respect to any and all matters, including investment and
reinvestment of securities, pertaining to the Investment Management Agreement
between the Corporation and Manager, and to execute and deliver any and all
documents and to take any and all other action to carry out the purposes of said
Investment Management Agreement. I further certify that the specimen signature
set forth next to the names of such officers, is the true and genuine signature
of such persons.

  Name of Officer            Title                                 Signature


Irvin Saltzman             Chairman                        _____________________




Jon S. Saltzman            President & CEO                 _____________________




Joseph F. Morris           Sr. Vice President, CFO and     _____________________
                           Treasurer



Brian Riley                Vice President & Controller     _____________________


This Certificate shall be in effect from the date hereof until written notice is
given on behalf of the Corporation to terminate or revise it.

         IN WITNESS WHEREOF, I set my hand and seal of the Corporation.


                     ________________________________      ___________________
(Corporate Seal)            Secretary                            Date



                                       17
<PAGE>

                                   SCHEDULE D

                             SECRETARY'S CERTIFICATE
                          ---------------------------

      I, Garland P. Pezzuolo,  the Secretary of PENN-STAR INSURANCE COMPANY (the
"Corporation"), a Corporation organized and existing under the laws of the State
of  Pennsylvania  hereby  certify  that each of the  following  officers  of the
Corporation,  acting  singly,  is  authorized  in the name and on  behalf of the
Corporation,  to give  instructions to General Re-New England Asset  Management,
Inc.  ("Manager") with respect to any and all matters,  including investment and
reinvestment of securities,  pertaining to the Investment  Management  Agreement
between  the  Corporation  and  Manager,  and to execute and deliver any and all
documents and to take any and all other action to carry out the purposes of said
Investment Management  Agreement.  I further certify that the specimen signature
set forth next to the names of such officers,  is the true and genuine signature
of such persons.

 Name of Officer             Title                                 Signature


Irvin Saltzman             Chairman                        _____________________




Jon S. Saltzman            President & CEO                 _____________________




Joseph F. Morris           Sr. Vice President, CFO and     _____________________
                           Treasurer



Brian Riley                Vice President & Controller     _____________________


         This Certificate shall be in effect from the date hereof until written
notice is given on behalf of the Corporation to terminate or revise it.

         IN WITNESS WHEREOF, I set my hand and seal of the Corporation.


                           ___________________________________      ____________
(Corporate Seal)                      Secretary                           Date



                                       18
<PAGE>

                                   SCHEDULE D

                             SECRETARY'S CERTIFICATE
                          ----------------------------

      I, Garland P. Pezzuolo,  the Secretary of PENN-PATRIOT  INSURANCE  COMPANY
(the "Corporation"),  a Corporation organized and existing under the laws of the
State of Virginia  hereby  certify  that each of the  following  officers of the
Corporation,  acting  singly,  is  authorized  in the name and on  behalf of the
Corporation,  to give  instructions to General Re-New England Asset  Management,
Inc.  ("Manager") with respect to any and all matters,  including investment and
reinvestment of securities,  pertaining to the Investment  Management  Agreement
between  the  Corporation  and  Manager,  and to execute and deliver any and all
documents and to take any and all other action to carry out the purposes of said
Investment Management  Agreement.  I further certify that the specimen signature
set forth next to the names of such officers,  is the true and genuine signature
of such persons.

   Name of Officer               Title                      Signature


Irvin Saltzman             Chairman                       ______________________




Jon S. Saltzman            President & CEO                ______________________




Joseph F. Morris           Sr. Vice President, CFO and    ______________________
                           Treasurer



Brian Riley                Vice President & Controller    ______________________


         This Certificate shall be in effect from the date hereof until written
notice is given on behalf of the Corporation to terminate or revise it.

         IN WITNESS WHEREOF, I set my hand and seal of the Corporation.


                                 ____________________________        ___________
(Corporate Seal)                        Secretary                       Date


                                       19
<PAGE>

<TABLE>
<CAPTION>


                                   SCHEDULE E

----------------------- -------------- ----------------------------- ---------------- -----------------------------------
Name                    State of       Principal Business Address    Tax ID #         Custodian Information
                        Incorporation
----------------------- -------------- ----------------------------- ---------------- -----------------------------------
<S>                                    <C>                           <C>
Penn-America Group,     PA             420 South York Road           23-2731409       PNC Bank, N.A.
Inc.                                   Hatboro, PA  19040
                                                                                      Investment Account #
                                                                                      32 32 300 3030060
                                                                                      Penn-America Group, Inc.
----------------------- -------------- ----------------------------- ---------------- -----------------------------------
Penn-America            PA             420 South York Road           23-1997049       PNC Bank, N.A.
Insurance Company                      Hatboro, PA  19040
                                                                                      Custodian Account #:
                                                                                      32-32-3004030011
                                                                                      Penn-America Insurance Company

                                                                                      32-32-3004030095
                                                                                      Penn-America Insurance Company -
                                                                                      State of PA Deposits

                                                                                      32-32-3004030029
                                                                                      Penn-America Insurance Company -
                                                                                      Equity Account
----------------------- -------------- ----------------------------- ---------------- -----------------------------------
Penn-Star Insurance     PA             420 South York Road           23-2865367       PNC Bank, N.A.
Company                                Hatboro, PA  19040
                                                                                      Custodian Account #:
                                                                                      32-32-3004030053
                                                                                      Penn-Star Insurance Company

                                                                                      32-32-3004030176
                                                                                      Penn-Star Insurance Company -
                                                                                      PSIC Security Fund

                                                                                      32-32-3004030087
                                                                                      Penn-Star Insurance Company -
                                                                                      Equity Account

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





                                       20
<PAGE>

----------------------- -------------- ----------------------------- ---------------- -----------------------------------
Penn-Patriot            VA             420 South York Road           81-0605083       PNC Bank, N.A.
Insurance Company                      Hatboro, PA  19040
                                                                                      Investment Account #
                                                                                      32 32 300 3030078
                                                                                      Penn-Patriot Insurance Company

                                                                                      Security Fund #
                                                                                      32 32 300 3030086
                                                                                      Penn-Patriot Insurance Company
----------------------- -------------- ----------------------------- ---------------- -----------------------------------







----------------------- -------------- ----------------------------- ---------------- -----------------------------------
NAME OF CLIENT:                                                        DATE:
PENN-AMERICA GROUP, INC.


By: _________________________________________                          ________________________

---------------------------------------------------------------------- --------------------------------------------------
NAME OF CLIENT:                                                        DATE:
PENN-AMERICA INSURANCE COMPANY


By: _________________________________________                          ________________________

---------------------------------------------------------------------- --------------------------------------------------
NAME OF CLIENT:                                                        DATE:
PENN-STAR INSURANCE COMPANY


By: _________________________________________                          ________________________

---------------------------------------------------------------------- --------------------------------------------------
NAME OF CLIENT:                                                        DATE:
PENN-PATRIOT INSURANCE COMPANY


By: _________________________________________                          ________________________

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


</TABLE>

                                       21
<PAGE>



                                   SCHEDULE F
                               WEB ACCESS ADDENDUM


      This WEB ACCESS ADDENDUM  ("Addendum")  hereby  supplements the Investment
Management Agreement between Manager and Client.

      WHEREAS,  in addition to the  services to be provided by Manager to Client
pursuant to the Investment Management  Agreement,  Client desires to have access
to and to use Manager's proprietary suite of information and services for access
to on-line  investment  reports  concerning  Client's  Account  and the  on-line
analysis  of  investment  portfolios  and other  services,  which are more fully
described  on Exhibit A hereto and on  Schedule A to the  Investment  Management
Agreement; and

      WHEREAS,  Manager  has agreed to provide  such access to  information  and
services to Client on the terms and conditions set forth in this Addendum; and

      NOW THEREFORE in consideration of the foregoing and of the mutual promises
contained in the Investment  Management Agreement and this Addendum,  Client and
Manager agree as follows:

                                   ARTICLE I
                                   Definitions

Section 1.1   - "Client Data" has the meaning set forth in Section 6.1.

Section 1.2 "Confidential Information" has the meaning set forth in Section 8.1.

Section 1.3 "Documentation" means the specifications, user manuals, and
conditions for use published and updated from time to time by Manager and
designated as "Documentation".

Section 1.4 -"Eligible User(s)" shall mean those employees of Client set forth
on Exhibit B-1 and/or Exhibit B-2 hereto, or any authorized amendment to Exhibit
B-1 and/or Exhibit B-2 as provided in Section 3.2(b) hereto.

Section 1.5  -"Force Majeure Event" has the meaning set forth in ARTICLE XII.

Section 1.6 -"Manager Data" means data and models made available in any form by
Manager in connection with the Services, including any data obtained by Manager
from a Vendor.

      Section 1.7 -"Manager  Proprietary  System"  means the  Platform,  Manager
Data,  Services  and any other  proprietary  materials  of  Manager  as  further
provided in ARTICLE V.



                                       22
<PAGE>




Section 1.8   -"Indemnified Party" has the meaning set forth in Section 12.3.

Section 1.9   -"Indemnifying Party" has the meaning set forth in Section 12.3.

Section 1.10 "Losses" has the meaning set forth in Section 12.2.

Section 1.11 -"Platform" means a set of world wide web pages implemented by
Manager and through which Client's Eligible Users may access the Manager
Proprietary System over the Internet.

Section 1.12 -"Proprietary Rights" means any United States trademark, tradename,
copyright, or trade secret of a third party.

Section 1.13 "Service Data" means all data generated by an Internet server that
relates to the number of users having access through the Platform and similar
user-related usage data collected in connection with the Platform and Services.

Section 1.14      -"Services" has the meaning set forth in Section 3.1.

Section 1.15 -"Terms of Use" means the Legal Statement and any other terms and
conditions posted at http://www.grneam.com, as amended from time to time by
Manager governing the use of the Services by customers, including Client and
Eligible Users.

Section 1.16 -"Vendors" means certain third parties that have granted Manager
the right to use and distribute their data, software or other proprietary
materials.

                                   ARTICLE II
                                      Term

      The  term of this  Addendum  shall  be  coextensive  with  the term of the
Investment Management  Agreement,  unless terminated earlier pursuant to ARTICLE
XI (the "Term")

                                  ARTICLE III
                                  The Services

      Section 3.1 Services.  During the Term,  Manager shall make  accessible to
Client the Platform and the online information and services described in Exhibit
A (the "Services"). Manager will retain control over the form and content of the
Services,  as well as the  selection  of  Vendors  and Data  used in  connection
therewith, and may alter all or any portion of the Services from time to time in
its sole discretion.




                                       23
<PAGE>






Section 3.2       Grant of Rights; Eligible Users.

      (a) Manager hereby grants to Client a non-exclusive  and  non-transferable
license during the Term to allow  Eligible Users to access the Platform,  and to
utilize the Services  made  available  thereunder,  solely for use in connection
with Client's internal business purposes in accordance with the Terms of Use and
Documentation.

      (b) The initial Eligible Users for accessing  Client's  monthly  reporting
package shall be those employees of the Client listed on Exhibit B-1 hereto. The
initial Eligible Users for accessing  Manager's  investment tools shall be those
employees  of the  Client  listed on Exhibit  B-2  hereto.  Permission  to add a
non-employee  user may be  granted on a case by case  basis by  Manager.  In the
event that Client desires during the Term to add, subtract or change an Eligible
User,  Client's  Authorized Person or other individual whose name appears on the
Secretary's  Certificate  in Schedule D to the Investment  Management  Agreement
shall  promptly  provide to Manager,  an email notice or an amended  Exhibit B-1
and/or Exhibit B-2 with the name(s) of the discontinued Eligible User(s) and the
name(s) of the new or changed Eligible User(s), which amendment shall be subject
to the approval of Manager, which shall not be unreasonably withheld or delayed.

         Client further agrees to cooperate in reviewing and confirming in
writing the list of Eligible Users from time to time, upon request of the
Manager.

Section 3.3        Limitations On Use

      (a)  Notwithstanding  anything to the contrary contained in this Addendum,
Client shall not:

            (i)         provide access to the Platform to any person that is not
                        an Eligible User;

            (ii)        except  for  month-end   investment  reports,   publish,
                        display, distribute or transfer in any form to any third
                        party who is not an  employee  of Client,  unless  prior
                        permission  is granted by Manager,  any Manager  Data or
                        the  results of any  research,  information  or material
                        derived  from  the  use  of  the  Manager's  Proprietary
                        System;

            (iii)       resell,  make  available or distribute any Manager Data,
                        Services or  Documentation  (or any part thereof) to any
                        third party whether by license or by any other means;




                                       24
<PAGE>




            (iv)        except for  month-end  investment  reports,  incorporate
                        into, or warehouse on, any computer system of Client any
                        Manager  Data,  Services,   Documentation  or  Manager's
                        Proprietary System;

            (v)         copy, adapt, reverse engineer,  decompile,  disassemble,
                        or modify,  any portion of the Manager Data or Manager's
                        Proprietary System;

            (vi)        conceal,   remove   or  alter  any   title,   trademark,
                        copyright,  proprietary  or  restricted  rights  notices
                        incorporated in the Manager's Proprietary System;

            (vii)       use the  Manager's  Proprietary  System in breach of any
                        applicable laws, regulations or market conventions;

            (viii)      use Manager's name or service marks in connection with a
                        prospectus or the creation, issuance, offer or promotion
                        of a financial  instrument,  or in their  advertising or
                        marketing materials;

            (ix)        use the Manager's  Proprietary System for the benefit of
                        a third  party,  including,  but not  limited  to,  on a
                        time-share  basis  or  acting  as a  service  bureau  or
                        application service provider;

            (x)         use,  evaluate,  or view any Services for the purpose of
                        designing, modifying, or otherwise creating any software
                        program,   or  any  portion   thereof,   which  performs
                        functions  similar to or that compete with the functions
                        performed by any the Manager's Proprietary System;

            (xi)        or authorize any third party to do any of the foregoing.



                         Provided however,  the Client shall be entitled to use,
                         and publish to third parties,  Manager Data relating to
                         the  Client's  portfolio  for  purposes  of  regulatory
                         reporting,   preparation   of   financial   statements,
                         preparation   of  press   releases   and  other  public
                         announcements,  prospectuses  and  similar  reports and
                         releases.  Provided  further  that the Manager will not
                         unreasonably  withhold


                                       25
<PAGE>


                         its  consent  to the  inclusion  of its name or service
                         mark as described in subsection 3(a)(vii) above.

      (b) Each password  Manager  assigns  Client will be kept  confidential  by
Client  and by the  Eligible  Users.  If  Client  learns or  suspects  that such
confidentiality  or any  provision  of this  Section  3.3  has in any  way  been
breached, Client will immediately notify Manager, which may assign new passwords
or  restrict  the use of all or any portion of the  Platform or the  Services or
take other appropriate action, in Manager's sole discretion.

      (c) Client shall,  and shall ensure that the Eligible Users,  abide by and
are bound to all of the terms of the Legal Statement  published and amended from
time to time on Manager's  web site at  [http://www.grneam.com].  Manager  shall
provide Client with notice of any  amendments to the Legal  Statement on its web
site.

      Section 3.4  Non-exclusive  Services.  Nothing  contained  herein shall be
construed  as a limitation  on Manager's  ability to provide any Platform or the
Services (or any portion  thereof) or any similar or  identical  services to any
third party.

      Section 3.5 Service Maintenance,  Upgrades, New Versions. During the Term,
Manager  shall  provide  Client with such  maintenance  and service  upgrades as
Manager  may  release  from  time to time to its  other  customers  who  license
equivalent  services  from  Manager.  Manager  shall not be  required to provide
upgrades or new versions.  Manager shall have no obligation to provide new tools
hereunder, and reserves the right to charge additional fees for any new tools or
substantial  new  functionality  provided.  Nothing  in this  section  shall  be
construed  to require  Manager to provide any  additional  services,  customized
Services or Enhancement Services.

                                   ARTICLE IV
                             Client Responsibilities

      Section 4.1 Client  Cooperation.  Client will  cooperate  with Manager and
provide any necessary  assistance,  equipment,  access to Client's personnel and
information  to allow  Manager  to  perform  Manager's  obligations  under  this
Addendum, including without limitation,  making available in a timely manner, as
reasonably requested by Manager, such management  decisions,  personnel (whether
management, technical or user), information,  approvals and acceptances in order
that  Manager `s  provision  of Services  under this  Addendum  may be properly,
timely and efficiently accomplished.

      Section  4.2  Client's  Program  Administrator.  Client  will  designate a
qualified program administrator,  to be named on each of Exhibit B-1 and Exhibit
B-2, who will be authorized to make binding  decisions for Client regarding this
Addendum ("Client's Program Administrator"),  and shall, in a timely manner, (i)
provide all Client  information and data necessary for Manager's  performance of
Services and assume  responsibility  for the accuracy of the same;  (ii) arrange
for Manager's  access to Client's  staff,  facilities,  equipment and systems as
appropriate,  (iii) render


                                       26
<PAGE>


all  decisions  required  by  Manager in  connection  with this  Addendum,  (iv)
distribute  usernames and  passwords to Eligible  Users,  (v) provide  notice to
Manager in accordance with Section 3.2(b) of all changes to the list of Eligible
Users,  and (vi) take, or have taken,  all other action  required to be taken by
Client under this Addendum.

      Section 4.3 Client Responsible for Employees and User Access. Client shall
be  responsible  for the  actions of all  Eligible  Users and anyone who obtains
access to the Platform through or from Client or its Eligible Users,  whether or
not authorized by Client.

      Section 4.4 Consent to Electronic Signatures.  Client agrees that whenever
an Eligible User clicks on an "I Agree",  "I Consent" or other similarly  worded
"button" or entry field with a mouse,  keystroke or any other means communicable
via a computer  device,  the Eligible User's agreement or consent will be deemed
to have been  made on  behalf  of  Client,  and  shall be  legally  binding  and
enforceable on Client.

                                   ARTICLE V
                           Manager Proprietary System

      All software and related documentation  (including the Manager Proprietary
System) (i) owned by Manager prior to the  Effective  Date (ii) of which Manager
acquires  ownership  after the Effective Date, or (iii) which is developed by or
on behalf of Manager  after the Effective  Date for use in  connection  with the
Services,  or (iv) which is licensed or leased from a third party by Manager and
which will be used in connection  with the  Services,  shall be and shall remain
the  exclusive  property of Manager or its  respective  third  party  licensors.
Client shall have no rights or interests  therein or in any third party software
of Manager.  All Service Data shall be Manager's  Confidential  Information  and
Manager shall own all Service Data.

                                   ARTICLE VI
                                Data and Reports

      Section 6.1 Ownership of Client Data. All data and  information  submitted
to Manager by Client in connection  with the Services (the "Client Data") is and
shall remain the property of Client. Except as permitted by this Addendum or the
Investment  Management  Agreement  or as  reasonably  necessary  to provide  the
Services,  Manager  shall not use the  Client  Data or,  disclose  or  otherwise
provide the Client Data to third parties.

      Section  6.2  Reports.  Client may use the  Platform  to  produce  reports
presenting Client Data in accordance with Manager's  standard  reporting formats
as described in Exhibit A and in such other reporting formats as the parties may
agree (the "Reports").  Client may also be able to access its monthly  reporting
package for its Account via the  Platform.  If Client  prefers to receive  these
monthly  reporting  packages in hard copy,  the Client shall indicate by signing
the




                                       27
<PAGE>




hard copy preference on the signature page of this Addendum. The Client may
revoke this preference at any time, and/or can receive a hard copy of any of its
monthly reports by written notification to Manager.

      Section 6.3 Correction of Errors.  Client is responsible  for the accuracy
and completeness of the Client Data as well as any errors or inaccuracies in and
with respect to data obtained  from Manager due to any  inaccurate or incomplete
Client Data.


                                  ARTICLE VII
                                      Taxes

      Client  shall be  responsible  for all  applicable  taxes  related to this
Addendum  including  all  applicable  sales,  use,  value added or similar taxes
arising out of or in  connection  with this  Addendum.  If Manager pays any such
taxes on behalf of Client,  Client  shall  reimburse  Manager for such  payment.
Client shall not be responsible for taxes based upon Manager's income.

                                  ARTICLE VIII
                                 Confidentiality

      Section 8.1 Confidential Information. "Confidential Information" means any
and all information or materials of a party relating to the technology, business
or affairs of the  disclosing  party  revealed,  disclosed  or  furnished to the
receiving  party  either  orally,  in  writing  or  by  inspection,  that  could
reasonably  be  understood  by  the  receiving   party  to  be   proprietary  or
confidential  information  or materials of the  disclosing  party.  Confidential
Information  might  include,  but  is  not  limited  to  technical  information,
financial   information,   business   information,   billing   rates,   research
information,   human   resources,    personnel   information,    marketing/sales
information,  trade secrets,  and competitive  sensitive  information,  and such
other information as has been or may be disclosed,  revealed or furnished before
or after the date hereof by the  disclosing  party.  All  information of Manager
provided  hereunder,  all Manager  Data,  and all Client Data will be considered
Confidential  Information  regardless of whether (a) it is disclosed in tangible
form;   or  (b)  is   marked   "Confidential",   "Proprietary"   or  the   like.
Notwithstanding  the  foregoing,   Confidential  Information  does  not  include
information that (i) is or becomes generally  available to the public other than
as a result of a disclosure or improper  action by the receiving party or any of
its directors,  officers,  employees,  affiliates,  agents,  subcontractors,  or
consultants,  (ii) was  rightfully  disclosed to the receiving  party by a third
party  without  restriction,  provided the  receiving  party  complies  with any
restrictions imposed by the third party, or (iii) was independently developed by
the receiving party without use of or access to any Confidential  Information of
the disclosing party.

      Section 8.2  Preservation of Confidential  Information.  The parties shall
preserve in confidence  all  Confidential  Information,  received from the other
party using the same degree of care as it uses to preserve and safeguard its own
Confidential Information, but in no event less than a reasonable degree of care.


                                       28
<PAGE>


      Section 8.3 Return of  Confidential  Information.  Upon the  expiration or
termination of this Addendum,  Client shall return all Confidential  Information
and all copies of Confidential Information to the Manager.

                                   ARTICLE IX
                           Disclaimers and Limitations

      Section 9.1 Special Admonitions  Regarding Use of Financial Products.  The
Services  contain a number  of  analytical  tools  that  should  only be used by
sophisticated investment professionals. There is no assurance that the financial
instruments  identified  by the  Services  will  perform  in a  manner  that  is
consistent with their historical  characteristics or assure the profitability or
utility of forecasts or expected values. Neither Manager nor any Vendor shall be
deemed to be providing  investment  management,  broker-dealer,  supervision  or
advisory  services.  Furthermore,  Client  understands and acknowledges that all
content  and  materials  comprising  the  Services  are to be  used  solely  for
informational and research purposes, and that such content and materials are not
intended  to  provide  specific  investment,  financial,  tax or  legal  advice.
Information  provided  through the Services is not intended as advice  regarding
the  nature,  potential  value,  or  suitability  of  any  particular  security,
transaction,  or investment  strategy.  References to any specific securities do
not constitute a solicitation or an offer to buy or sell securities.

      Section 9.2 Electronic Access and Communications. Client acknowledges that
access to the Services and any electronic mail communications between Client and
Manager over the Internet are subject to possible  interception by third parties
during  transmission.  Manager shall not be responsible for the security of such
communications or the safety and security of Client Data during  transmission or
the prevention of access by unauthorized persons to Client Data transmitted over
the Internet. Manager shall not be responsible for any interruption in access to
the Services,  or inability to access the Services,  caused by the interruptions
in the availability of the Internet, or slowdowns thereto.

      Section  9.3  Services  Warranty  Disclaimer.  EXCEPT AS SET FORTH IN THIS
ADDENDUM,  THE SERVICES HEREUNDER ARE PROVIDED ON AN "AS IS" BASIS, AND CLIENT'S
AND ANY ELIGIBLE  USER'S USE THEREOF IS AT ITS OWN RISK.  MANAGER DOES NOT MAKE,
AND  HEREBY  DISCLAIMS  FOR ITSELF AND ON BEHALF OF ITS  CORPORATE  PARENTS  AND
AFFILIATES AND VENDORS,  ANY AND ALL EXPRESS AND IMPLIED WARRANTIES,  INCLUDING,
BUT  NOT  LIMITED  TO,   WARRANTIES  OF  ACCURACY,   ORIGINALITY,   CONSISTENCY,
TIMELINESS,  COMPLETENESS,  MERCHANTABILITY,  FITNESS FOR A PARTICULAR  PURPOSE,
NON-INFRINGEMENT AND TITLE, AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING,
USAGE OR TRADE PRACTICE. MANAGER DOES NOT WARRANT THAT THE SERVICES WILL PERFORM
AT A PARTICULAR  SPEED,  OR WILL BE  UNINTERRUPTED,  ERROR-FREE,  OR  COMPLETELY
SECURE OR FREE OF UNAUTHORIZED HIDDEN PROGRAMS,  TROJAN HORSES, WORMS OR VIRUSES
OR THAT THE  CALCULATIONS OR OTHER FUNCTIONS  PERFORMED ON CLIENT'S DATA WILL BE
CORRECT OR MEET CLIENT'S NEEDS OR  EXPECTATIONS.  NEITHER  MANAGER NOR MANAGER'S
VENDORS WILL BE  RESPONSIBLE  FOR LOSS OF PROPERTY OR INJURY  RESULTING FROM ANY



                                       29
<PAGE>

SERVICE OR FOR ANY FAILURE OR  INTERRUPTION  OF THE SERVICES  RESULTING FROM ANY
CIRCUMSTANCES  BEYOND MANAGER'S CONTROL.  MANAGER'S ONLY  RESPONSIBILITY FOR ANY
OTHER FAILURE OR  INTERRUPTION  OF THE SERVICES WILL BE TO RE-RUN CLIENT DATA OR
REPORTS  CAUSED BY A MALFUNCTION  OF THE  SERVICES.  IN NO EVENT WILL MANAGER OR
ANYONE ELSE WHO HAS BEEN INVOLVED IN THE  PERFORMANCE  OF ANY OF THE SERVICES BE
LIABLE TO CLIENT OR ANY OTHER PERSON FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL,
INDIRECT,  PUNITIVE,  EXEMPLARY,  OR OTHER SIMILAR  DAMAGES  INCLUDING,  BUT NOT
LIMITED TO, ANY LOST PROFITS OR SAVINGS,  OR COSTS  INCURRED AS A RESULT OF LOSS
OF  TIME,  LOSS  OF  DATA,  LOSS  OF THE  USE OF  SOFTWARE,  CLAIMS  BY  OTHERS,
INCONVENIENCE  OR SIMILAR COST, OR FOR THE FAILURE OF CLIENT TO PERFORM CLIENT'S
RESPONSIBILITIES, EVEN IF MANAGER HAS BEEN ADVISED, KNEW OR SHOULD HAVE KNOWN OF
THE POSSIBILITY OF SUCH DAMAGES.

                                    ARTICLE X
                                   Termination

      Section  10.1  Client  may,  in its  sole  option,  upon  written  notice,
terminate this Addendum.  Manager may in its sole option,  upon written  notice,
terminate this Addendum if Client:

      (a) has materially breached any of its material obligations hereunder, and
such breach is not cured within thirty (30) days after written notice thereof by
Manager to Client; or

      (b) becomes  insolvent or  institutes  or has  instituted  against  Client
voluntary or involuntary proceedings in bankruptcy or under any other insolvency
law,  or makes or  consents  to an  arrangement  with  creditors,  or  corporate
reorganization, receivership or dissolution, of Client; or

      (c) ceases to be an Asset Management Client of Manager.

      Section 10.2  Notwithstanding  the  provisions  of Section  10.1(b) to the
contrary,  Manager may  terminate  this Addendum upon ten day's notice if Client
breaches Section 3.3 or ARTICLE VIII of this Addendum.

      Section  10.3 In the event of the  termination  of this  Addendum,  Client
shall cease, and Manager may disable, all access to the Services.

                                   ARTICLE XI
                                  Force Majeure

      Neither Client nor Manager shall be liable for any failure or delay in the
performance  of its  obligations  pursuant to this  Addendum and such failure or
delay shall not be deemed a breach of this  Addendum or grounds for  termination
hereunder; provided that, such failure or delay could not have been prevented by
reasonable   precautions   and  cannot   reasonably  be   circumvented   by  the
non-performing  party  through the use of reasonably  available  and  economical
alternate  sources,  work-around  plans, or other means and if and to the extent
such  failure  or delay


                                       30
<PAGE>


is caused,  directly or  indirectly,  by fire,  flood,  earthquake,  elements of
nature or acts of God,  acts of war,  terrorism,  threatened  terrorism,  riots,
civil  disorders,   rebellions  or  revolutions,   strikes,  lockouts  or  labor
difficulties,  court order,  third party  nonperformance,  or any other  similar
cause  beyond  the  reasonable  control of such party  (each,  a "Force  Majeure
Event").  Upon the occurrence of a Force Majeure Event, the non-performing party
shall  be  excused  from any  further  performance  of those of its  obligations
pursuant to this  Addendum  affected by the Force  Majeure  Event for as long as
such Force Majeure Event continues.  The party whose performance is delayed by a
Force Majeure Event shall immediately notify the other party by telephone (to be
confirmed  by  written  notice  within  three (3) days of the  inception  of the
failure or delay) of the  occurrence  of a Force  Majeure  Event and describe in
reasonable detail the nature of the Force Majeure Event.

                                   ARTICLE XII
                                 Indemnification

      Section  12.1  Indemnification  by  Client.  Subject  to  the  conditions,
provisions and limitations of this Addendum,  Client hereby agrees to indemnify,
defend and hold harmless  Manager and its Affiliates from and against all Losses
asserted against, resulting to, imposed upon or incurred by Manager by reason of
or resulting from any of the following:

            (a)         Any use or  misuse  of the  Services  by  Client  or its
                        Eligible  Users  including,   without  limitation,   any
                        material  violation  by  Client  or  any  Client  of the
                        Manager Terms and Conditions or the Documentation; or

            (b)         Any  allegation  or claim  that any  Client  Data or any
                        other intellectual property used by Client in connection
                        with  the  transactions  contemplated  in this  Addendum
                        infringe or violate any Proprietary  Rights of any third
                        party.

      Section  12.2  Indemnification  by  Manager.  Subject  to the  conditions,
provisions and limitations of this Addendum, Manager hereby agrees to indemnify,
defend and hold harmless  Client from and against all actual and direct damages,
costs and  expenses,  including,  without  limitation,  interest,  penalties and
reasonable attorneys' fees and disbursements (collectively,  "Losses"), asserted
against,  resulting  to,  imposed  upon or  incurred  by  Client by reason of or
resulting from any  allegation or claim that the  intellectual  property  rights
owned by and  proprietary  to  Manager  that are  used in the  provision  of the
Services infringe any Proprietary Rights; provided,  however, that Manager shall
have no obligation or liability  with respect to any  infringement  claim to the
extent  such  alleged  infringement  is based on (a) the use of the  Services in
violation of this Addendum; (b) the combination, or use of the Services with any
service, product, equipment, program or data unless otherwise contemplated under
this Addendum;  or (c) the alteration,  modification or change of any portion of
the Services other than by Manager or its employees, agents or subcontractors or
with Manager's express prior written consent;  and provided further that Manager
may, in its sole  election and  expense,  but without any  obligation  to do so,
either (i)  procure for Client and its  Eligible  Users the right to continue to
make use of the allegedly  infringing  portion of the Services,  (ii) replace or
modify the  portion of the  Services  at issue with  substitute  matter  that is
non-infringing  but which  causes the portion of the  Services at issue to be of
substantially  equivalent  functionality  and  performance to the portion of the
Services alleged to be infringing, or (iii) terminate this Addendum.


                                       31
<PAGE>


      Section 12.3 Indemnification  Procedures.  The obligations and liabilities
of Manager and Client  hereunder  with respect to their  respective  indemnities
pursuant  to this  ARTICLE  XII,  resulting  from  any  claim,  demand  or other
assertion  of  liability  by  third  parties  (hereinafter  collectively  called
"Demands"), shall be subject to the following terms and conditions:

      (a) Subject to the consent of the party to be indemnified pursuant to this
ARTICLE XII (the  "Indemnified  Party")  (such  consent  not to be  unreasonably
withheld,  delayed or conditioned),  the indemnifying  party (the  "Indemnifying
Party") will have the right to undertake,  by counsel or  representatives of its
own choosing,  the defense,  compromise or settlement to be undertaken on behalf
of and for the account and risk of the Indemnifying Party.

      (b) In the event the Indemnifying  Party shall elect not to undertake such
defense by its own  representatives,  the  Indemnifying  Party shall give prompt
written notice of its election to the  Indemnified  Party,  and the  Indemnified
Party will  undertake the defense,  compromise or settlement  thereof by counsel
designated  by it whom  the  Indemnifying  Party  determines  in  writing  to be
satisfactory  for such purposes.  The consent of the  Indemnifying  Party to the
Indemnified  Party's  choice  of  counsel  shall not be  unreasonably  withheld,
delayed or conditioned.

      (c) No  settlement or compromise of any such Demand may be made by a Party
hereto without the prior express  written consent or approval of the other Party
hereto (such consent not to be unreasonably withheld, delayed or conditioned).

      (d) In the event that any Demand shall arise out of a transaction or cover
any  period or  periods  wherein  Client  and  Manager  each is or may be liable
hereunder for part of the liability or obligation arising  therefrom,  then such
Parties shall, each choosing its own counsel and bearing its own expense, defend
such Demand,  and no settlement or compromise of such Demand may be made without
the joint consent or approval of Manager and Client, except where the respective
liabilities  and  obligations  of Client and Manager are  clearly  allocable  or
attributable on the basis of objective facts.

      (e) The  agreements  to  indemnify  contained  in this  ARTICLE  XII shall
survive  termination  or  expiration  of this Addendum for a period of three (3)
years after the effective  date of such  termination  or  expiration;  provided,
however,  that with respect to any Demand or other matter  (including actual and
direct damages incurred other than as a result of a third party claim) for which
notice  has  been  timely  given   within  such  three  (3)  year  period,   the
indemnification  period  shall be extended  until the final  resolution  of such
Demand or other matter  (including actual and direct damages incurred other than
as a result of a third party claim).

      (f) A  party  having  reason  to  believe  that  it  may  be  entitled  to
indemnification  under this  ARTICLE XII shall give  reasonably  prompt  written
notice  to the  other  party  hereto  from  whom  indemnification  may be sought
specifying  in  reasonable  detail  the  nature and basis of any Demand or other
matter (including actual and direct damages incurred other than as a result of a
third party claim) which may give rise to such  indemnification  but such notice
shall not be a condition of such indemnification. The failure of the Indemnified
Party to provide  such notice  shall not relieve the  Indemnifying  Party of its
obligations  under this ARTICLE XII, unless the delay or failure to provide such
notice prejudices an Indemnifying Party in a manner that



                                       32
<PAGE>


demonstrably   results  in  additional   actual  and  direct   damages  to  such
Indemnifying  Party, in which event such Indemnifying Party shall be relieved of
such  obligations,  but only to the  extent  such  additional  actual and direct
damages can be proved.

                                  ARTICLE XIII
                            Limitations on Liability

      Section 13.1 Direct Damages.  In the event Manager shall be held liable to
Client,  for any  matter  arising  out of,  under,  or in  connection  with this
Addendum,  whether based on an action or claim in contract,  equity, negligence,
tort, or otherwise, the amount of direct damages recoverable against Manager for
all events, acts or omissions shall not exceed, in the aggregate,an amount equal
to the sum of all fees received by Manager pursuant to the Investment Management
Agreement  for a period of three (3) months prior to the date on which the claim
or claims arose.

      Section  13.2 No Indirect  Damages.  Neither  Client nor Manager  shall be
liable for any indirect, incidental, special, or consequential damages punitive,
exemplary,  or other similar damages or amounts for loss of income,  profits, or
savings arising out of or relating to this Addendum.

                                   ARTICLE XIV
                               General Provisions

      Section 14.1 Binding Effect.  Client may not assign this Addendum  without
the  prior  written  consent  of  Manager  which  may be  withheld  in its  sole
discretion,  and any  assignment in violation of this Addendum shall be null and
void.  This  Addendum  shall be  binding  upon and inure to the  benefit  of the
parties hereto and their  respective  heirs,  executors,  administrators,  legal
representatives, successors and permitted assigns.

      Section  14.2  Severability.   If  any  part  of  this  Addendum,  or  the
application  thereof  to any  person or  circumstance,  is for any  reason  held
invalid or  unenforceable,  it shall be deemed severable and the validity of the
remainder  of this  Addendum  or the  applications  of such  provision  to other
persons or circumstances shall not be affected thereby.

      Section 14.3 Export Regulations. Client acknowledges that the Services and
any  direct  products  thereof  may be  subject to United  States  export  laws,
statutes  and  regulations,  and that Client  will at all times  comply with the
provisions  of such laws,  statutes  and  regulations  including  obtaining  any
necessary  or  required  licenses.  Client  shall  not  export or  re-export  or
otherwise transmit,  directly or indirectly, the Services or any direct products
thereof into, or use the Services or any direct products thereof in, any country
prohibited  or  restricted   under  United  States  export  laws,   statutes  or
regulations or any other applicable laws.

      Section 14.4 Defined Terms. Any capitalized terms not defined herein shall
have the meaning set forth in the Investment Management Agreement.

      Section  14.5.  This  Addendum  supersedes  all prior and  contemporaneous
agreements (including any Beta Extranet Agreements), understandings, inducements
and conditions,  express or implied,  oral or written,  or any nature whatsoever
with respect to the subject matter hereof.


                                       33
<PAGE>


                                   ARTICLE XV
                                 Ongoing Testing

      Periodically,  GR-NEAM may ask Client to beta test  website  tools  and/or
services that GR-NEAM is developing. Client understands and acknowledges that in
such instances the tools and or services would be in a beta format and the final
format and content of the tool and/or  services may be  substantially  different
from the form presented to the Client. Additionally, Client acknowledges that as
a result of the beta  condition of such website tools and/or  services,  some of
the functionality may be impaired or nonexistent and the client as a beta tester
agrees to inform  GR-NEAM of any bugs,  glitches or other issues  affecting  the
website.



      IN WITNESS  WHEREOF,  the parties  hereto have caused this  Addendum to be
signed by their  duly  authorized  representatives  as of the day and year first
above written.


GENERAL RE-NEW ENGLAND ASSET MANAGEMENT, INC.     PENN-AMERICA GROUP, INC.



By: _____________________________
                                                  By___________________________
Its:                                              Its:

PENN-STAR INSURANCE COMPANY                       PENN-AMERICA INSURANCE COMPANY



By: _____________________________                 By___________________________
Its:                                              Its:


PENN-PATRIOT INSURANCE COMPANY



By: _____________________________
Its:

MONTHLY REPORTING PACKAGE:
Client hereby elects to receive the monthly reporting package for his Account
via email or hard copy, in lieu of access via the Platform.

By:_______________________


                                       34
<PAGE>



                                    Exhibits

Exhibit A. The Services
Exhibit B-1. List of Eligible Users and Program Administration -
 Monthly Reporting Package
Exhibit B-2. List of Eligible Users and Program Administration -
Investment Tools




                                       35
<PAGE>


                                    EXHIBIT A


Manager's CARATM system is an investment portfolio analytics system. It performs
a  wide  range  of  analytics  calculations  on  a  wide  range  of  securities,
portfolios, and indices. The system runs on central site computers (currently in
Trumbull,  CT). Eligible Users utilize a desktop  workstation or PC and Internet
Service Provider to access the system. Client supplies the desktop equipment and
Internet connection. The system includes:

       [ ]  Use of Central Site software
       [ ]  Access to Central Site Database (Indicative, Pricing, Historical)
       [ ]  Downloading capability of calculated data


COMMENCEMENT DATE FOR SERVICES: _________________

Website Tools:

Market Monitors: A collection of "rich/cheap" tools used to analyze broad market
indices, yield curves, spreads and specific asset classes.

Risk Reporting:  A full range of asset-level  risk statistics for evaluation and
identification of the sources of portfolio risk.

Investment  Accounting  Reports:  Ability to  electronically  receive  and print
monthly reporting package directly from the website.




                                       36
<PAGE>

                                   EXHIBIT B-1

                List of Eligible Users and Program Administrator
                             FOR GR-NEAM'S WEBSITE-
                       ACCESS TO MONTHLY REPORTING PACKAGE

                            PENN-AMERICA GROUP, INC.
                         PENN-AMERICA INSURANCE COMPANY
                           PENN-STAR INSURANCE COMPANY
                         PENN-PATRIOT INSURANCE COMPANY
                               420 South York Road
                                Hatboro, PA 19040

<TABLE>
<CAPTION>

------------------------------------- ----------------------------------- -----------------------------------
NAME                                  PHONE NUMBER                        E-MAIL ADDRESS
------------------------------------- ----------------------------------- -----------------------------------
Program Administrator:


------------------------------------- ----------------------------------- -----------------------------------
<S>                                   <C>   <C> <C>
Brian Riley                           (215) 443-3631                      riley@penn-america.com

------------------------------------- ----------------------------------- -----------------------------------
Mark Criger                           (215) 773-7742                      criger@penn-america.com

------------------------------------- ----------------------------------- -----------------------------------
Mike Rusas                            (215) 773-7757                      rusas@penn-america.com

------------------------------------- ----------------------------------- -----------------------------------
Joseph Morris                         (215) 443-3612                      morris@penn-america.com

------------------------------------- ----------------------------------- -----------------------------------
Jon S. Saltzman                       (215) 443-3671                      saltzman@penn-america.com

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


------------------------------------- ----------------------------------- -----------------------------------
PENN-AMERICA GROUP, INC,                          PENN-PATRIOT INSURANCE COMPANY


By: _____________________________                 By___________________________
Its:                                              Its:

PENN-STAR INSURANCE COMPANY                       PENN-AMERICA INSURANCE COMPANY



By: _____________________________                 By___________________________
Its:                                              Its:



                                       37
<PAGE>


                                   EXHIBIT B-2

                List of Eligible Users and Program Administrator
                             FOR GR-NEAM'S WEBSITE-
                           ACCESS TO INVESTMENT TOOLS

                            PENN-AMERICA GROUP, INC.
                         PENN-AMERICA INSURANCE COMPANY
                           PENN-STAR INSURANCE COMPANY
                         PENN-PATRIOT INSURANCE COMPANY
                               420 South York Road
                                Hatboro, PA 19040

---------------------------------------- -------------------------------- --------------------------------------------------
NAME                                     PHONE NUMBER                     E-MAIL ADDRESS
---------------------------------------- -------------------------------- --------------------------------------------------
Program Administrator:


---------------------------------------- -------------------------------- --------------------------------------------------
Brian Riley                              (215) 443-3631                   riley@penn-america.com

---------------------------------------- -------------------------------- --------------------------------------------------
Mark Criger                              (215) 773-7742                   criger@penn-america.com

---------------------------------------- -------------------------------- --------------------------------------------------
Mike Rusas                               (215) 773-7757                   rusas@penn-america.com

---------------------------------------- -------------------------------- --------------------------------------------------
Joseph Morris                            (215) 443-3612                   morris@penn-america.com

---------------------------------------- -------------------------------- --------------------------------------------------
Jon S. Saltzman                          (215) 443-3671                   saltzman@penn-america.com

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


---------------------------------------- -------------------------------- --------------------------------------------------
PENN-AMERICA GROUP, INC,                          PENN-PATRIOT INSURANCE COMPANY


                                                  By___________________________
By: _____________________________
Its:                                              Its:

PENN-STAR INSURANCE COMPANY                       PENN-AMERICA INSURANCE COMPANY


                                                  By___________________________
By: _____________________________
Its:                                              Its:



</TABLE>

                                       38
<PAGE>