<PAGE>
                                                                   Exhibit 10.60


                        ALLIANCE CAPITAL MANAGEMENT L.P.


                   Discretionary Investment Advisory Agreement

                                      With

                     Platinum Underwriters Reinsurance, Inc.

                             Dated November 4, 2002
                                (Effective Date)

            Alliance Capital Management L.P. (the "Adviser") and the undersigned
hereby agree as of the above date that the Adviser shall act as discretionary
investment manager with respect to certain assets of Platinum Underwriters
Reinsurance, Inc. (the "Client") described below (the "Investment Account") on
the following terms and conditions:

      1. The Investment Account

            The Investment Account established for the Client refers to the
Trust Account defined in and subject to a certain Trust Agreement, by and among
the Client, St. Paul Fire and Marine Insurance Company ("St. Paul") and State
Street Bank and Trust Company, dated as of November 1, 2002, as amended,
modified or supplemented from time to time (the "Trust Agreement") and
established as a condition of the Retrocession Agreements (as defined in the
Trust Agreement). The Investment Account shall initially consist of cash, cash
equivalents, stocks, bonds and other securities placed in the Investment Account
by the Client or which shall become part of the Investment Account as a result
of transactions.

            All cash, securities and other assets in the Investment Account
shall be held by such other party as the Client shall designate as trustee or
custodian for such account (each, a "Custodian"). The Adviser shall not be
responsible for any custodial arrangements involving the assets of the
Investment Account or for the payment of any custodial charges and fees, nor
shall the Adviser have possession or custody of any such assets. All payments,
distributions and other transactions in cash, securities or other assets in
respect of the Investment Account shall be made directly to or from the
Custodian for such Investment Account, and the Adviser shall have no
responsibility or liability with respect to transmittal or safekeeping of such
cash, securities or other assets of an Investment Account, or the acts or
omissions of any Custodian or others with respect thereto. The Client may make
additions to or withdrawals from the Investment Account established for it,
provided the Adviser receives at least three (3) business days' prior written
notice of withdrawals. Should the Client fail to provide the Adviser with timely
written notice of any additions to or withdrawals from its Investment Account,
the Adviser shall not be liable for any resulting investment or other loss, if
any, which shall be incurred by or charged to the applicable Investment Account,
as the case may be. The Client agrees to provide or instruct the

<PAGE>

Custodian for its Investment Account to provide to the Adviser such information
as the Adviser may reasonably request as being necessary or appropriate to the
performance of the Adviser's responsibilities to the Client under this
Agreement.

      2. Services of Adviser

            By execution of this Agreement, the Adviser accepts its appointment
as investment manager for the Investment Account with full discretion and agrees
to supervise and direct the investments of the Investment Account in accordance
with the written investment objectives, policies and restrictions of the Client
previously furnished to the Adviser as the same may be amended by the Client
from time to time. In the performance of its services, the Adviser will not be
liable for any error in judgment or any acts or omissions to act except those
resulting from the Adviser's negligence, willful misconduct, malfeasance or
material breach of this Agreement. Nothing herein shall in any way constitute a
waiver or limitation of any right of any person under the Federal securities
laws or any state securities laws.

            The Adviser will make available to the Client a daily report on the
positions of each of the investments in the Investment Account and a monthly
written report of the inventory of investments in the Investment Account
established for the Client. It is agreed that the Adviser, in the maintenance of
its records, does not assume responsibility for the accuracy of information
furnished by any Client or any other person.

      3. Funding Policy

            The Client shall from time to time inform the Adviser in writing of
the funding policy applicable to it and of its cash disbursement requirements.
The Adviser shall make its investment decisions for an Investment Account in
accordance with such funding policy and requirements.

      4. Investment Objectives, Policies and Restrictions

            It will be the responsibility of the Client to notify the Adviser in
writing of any modifications to Schedule A. The Client is also required to
notify the Adviser in writing of specific restrictions governing its Investment
Account under the current or future laws of any jurisdiction or by virtue of the
terms of any other contract or instrument purporting to bind the Client or the
Adviser.

      5. Delivery of Client Documentation

            No later than the date of this Agreement, the Client will provide
the Adviser with copies of all documents relevant to the Adviser's management of
the Investment Account established for the Client, (i.e. trust agreement,
pension plan documents, by-laws, etc.), including the Client's written statement
of investment objectives, policies and restrictions referred to above. The
Client further agrees to promptly deliver to the Adviser true and complete
copies of


                                       2
<PAGE>

all amendments or supplements to such documents. The Client will indemnify and
hold harmless the Adviser against any and all losses, costs, claims and
liabilities which it may suffer or incur arising out of any failure by the
Client to provide to the Adviser the documents required to be furnished in
accordance with the above provisions.

      6. Discretionary Authority

            The Adviser, whenever it deems appropriate may (i) buy, sell,
exchange, convert, liquidate or otherwise trade in any stock, bonds and other
securities (including money market instruments) and contracts relating to the
same, and (ii) subject to its duty to seek best execution, place orders for the
execution of such transactions with or through such brokers, dealers or issuers
as the Adviser in its absolute discretion may select.

            It is understood that, to the extent permitted by Schedule A, the
Adviser or Alliance Capital Global Derivatives Corporation, an affiliate of the
Adviser, may also effect transactions for the Investment Account of the Client
in options and futures and other commodity contracts. In such event, the Client
will execute any additional documentation which the Adviser deems necessary to
enable it or its affiliate to engage in such transactions on behalf of its
Investment Account. The Client represents and warrants that it is familiar with
the requirements of the Commodity Exchange Act and the National Futures
Association pertaining to commodity pool operators and has determined that it is
in compliance with such requirements, to the extent applicable.

      7. Brokerage Transactions

            Fixed-income securities transactions for the Investment Account will
generally be effected in dealer markets where the Adviser will act as agent for
the Client in the purchase or sale of fixed-income securities at a net price
that includes a mark-up from the dealer. The Adviser will issue instructions to
such issuers, brokers and dealers for the placement of orders for the Investment
Account and instruct such dealers to forward to the Client copies of all
confirmations promptly after the execution of transactions for the Client's
Investment Account.

      8. Aggregation of Transactions

            The Client authorizes the Adviser in its discretion to aggregate
purchases and sales of securities for its Investment Account with purchases and
sales of securities of the same issuer for other clients of the Adviser
occurring on the same day. When transactions are so aggregated, the actual
prices applicable to the aggregated transactions will be averaged, and the
Investment Account and the accounts of other participating clients of the
Adviser will be deemed to have purchased or sold their proportionate share of
the securities involved at the average price so obtained.

      9. Transaction Procedures

            All transactions will be settled by payment to, or delivery by, the
applicable Custodian of all cash, securities or other assets due to or from the
Investment Account. The

                                       3
<PAGE>

Adviser may issue such instructions to a Custodian as may be appropriate in
connection with the settlement of transactions initiated by the Adviser.
Instructions of the Adviser to a Custodian shall be transmitted in writing or,
at the option of the Adviser, orally and confirmed in writing as soon as
practical thereafter. The Adviser will take reasonable measures to insure that
broker-dealers and issuers selected by the Adviser perform their obligations
with respect to the Investment Account.

      10. Fees

            The compensation of the Adviser for its services under this
Agreement shall be calculated and paid by the Client in respect of the
Investment Account established for it, in accordance with the Fee Schedule
attached hereto as Exhibit A, as the same may be amended from time to time by
mutual agreement between the Client and the Adviser. It is understood that, in
the event that such fees are to be billed to and paid by the Custodian for the
Investment Account, the Client will provide written authorization to the
Custodian to pay the fees of the Adviser directly from the Investment Account.
The Client shall be responsible solely for the fee due to the Adviser in respect
of the Investment Account established for such Client.

      11. Confidential Relationship

            All information provided by the Client or a Custodian to the Adviser
shall be held as confidential by the Adviser; provided, however, as is necessary
to carry out the purposes of this Agreement or as may be required by law, the
Adviser shall be permitted to disclose or communicate to a proper party any
information received from the Client or a Custodian or developed by the Adviser
under the terms of this Agreement. All recommendations, advice and other work
product of the Adviser developed under the terms of this Agreement and disclosed
to the Client or a Custodian shall be held as confidential, except as required
by law. Notwithstanding the foregoing, Client hereby authorizes the Adviser to
disclose through whatever means it deems appropriate (CHECK THE APPROPRIATE
BOXES BELOW):

      (a) Yes [X] No [ ] that the Client is an investment management client of
                         the Adviser;

      (b) Yes [X] No [ ] the type of assets that the Adviser is managing for the
                         Client from time to time (e.g., fixed-income assets);
                         and/or

      (c) Yes [X] No [ ] solely in the limited context of the Adviser's
                         responses to Request for Proposals ("RFPs"), the
                         Adviser is also authorized by the Client to disclose in
                         such RFPs, the value of the assets managed for the
                         Client by the Adviser from time to time.

If the Client does not check either "yes" or "no" to any of the requested
disclosure authorizations indicated in (a) through (c) above, the Client shall
be deemed to have no objection to the Adviser

                                       4
<PAGE>

disclosing the indicated information. The Client may revoke these authorizations
in respect of itself, at any time by written notice to the Adviser.

      12. Services to Other Clients

            It is understood that the Adviser performs investment advisory
services for various clients including investment companies. The Client agrees
that the Adviser may give advice and take action with respect to any of its
other clients which may differ from advice given, or the timing or nature of
action taken, with respect to the Investment Account established for it, so long
as it is the Adviser's policy, to the extent practical, to allocate investment
opportunities to the Investment Account over a period of time on a fair and
equitable basis relative to other clients.

            Nothing in this Agreement shall limit or restrict the Adviser or any
of its directors, officers, affiliates or employees from buying, selling or
trading in any securities or other assets for its or their own account or
accounts, and the Client acknowledges that the Adviser, its directors, officers,
affiliates and employees, and other clients of the Adviser, may at any time
have, acquire, increase, decrease or dispose of positions in investments which
are at the same time being acquired, held or disposed of for the Investment
Account.

            The Adviser will not have the obligation to initiate the purchase or
sale, or to recommend for purchase or sale, for the Investment Account any
security or other asset which the Adviser, its directors, officers, affiliates
or employees may purchase, hold or sell for its or their own accounts or for the
accounts of any other clients of the Adviser.

      13. Non-Public Information

            The Adviser will have no obligation to purchase or sell for the
Investment Account the securities of any issuer on the basis of any material
non-public information as may come into its possession.

      14. Representations by the Client

            The Client represents and warrants that the appointment of the
Adviser as discretionary investment adviser entitled to give entitlement orders
or other instructions and communications to the Custodian is authorized by the
governing documents (including, but not limited to the Retrocession Agreements,
the Trust Agreement and all documents related thereto) relating to the
Investment Account and that the terms of this Agreement do not violate any
provisions thereof or any obligation by which it is bound, whether arising by
contract, operation of law or otherwise. The Client represents and warrants that
(i) this Agreement has been duly authorized by appropriate action and when
executed and delivered will be binding upon it in accordance with its terms; and
(ii) it will deliver to the Adviser such evidence of such authority as the
Adviser may reasonably require, whether by way of a certified resolution or
otherwise.

      15. Representations by Adviser


                                       5
<PAGE>


            The Adviser represents that (i) it is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Advisers
Act") and (ii) that it has all other regulatory authority and capacity to enter
into this Agreement and perform its duties hereunder.

      16. Indemnification

            The Adviser agrees to indemnify and hold the Client harmless from
any and all expenses, damages, costs and fees, including reasonable attorney's
fees, which may be incurred by reason of the Adviser's negligence, willful
misconduct, malfeasance, material breach of this Agreement or violation of
applicable law.

      17. Valuation

            In computing the market value of any security held in the Investment
Account, the Adviser shall value such security through independent, recognized
pricing services utilized by the Adviser for pricing securities held in its
advisory accounts generally. Any other security or asset shall be valued in a
manner determined in good faith by the Adviser to reflect its fair market value.

      18. Receipt of Disclosure Statement

            The Client acknowledges receipt of Part II of the Adviser's current
Form ADV in compliance with Rule 204-3(b) under the Advisers Act more than forty
eight (48) hours prior to the date of execution of this Agreement.

      19. Notices

            Unless otherwise specified herein, all notices, instructions and
advice with respect to security transactions or any other matters contemplated
by this Agreement shall be deemed duly given when received by the Client and the
Adviser, as applicable, at their addresses appearing below. In respect of the
Investment Account, the Adviser may rely upon any notice (written or oral) from
any person whom the Adviser reasonably believes to be an authorized
representative of the Client.

      20. Specimen Signatures

            The Adviser will forward from time to time to the Client and the
Custodian for the Investment Account, a list of names and specimen signatures of
persons authorized to act on behalf of the Adviser. The Client will forward to
the Adviser a list of names and specimen signatures of persons authorized to act
on behalf of the Client and shall cause the Custodian of its Investment Account
to forward a like list and specimen signatures to the Adviser.

      21. Invalid Provisions


                                       6
<PAGE>


            If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future law, such provision shall be fully
severable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or its severance from this Agreement.

      22. Termination; Assignment; Amendment

            This Agreement may be terminated at any time by the Client in
respect of its Investment Account by giving to the Adviser at least thirty (30)
days' prior written notice of such termination. This Agreement may be terminated
at any time by the Adviser in respect of the Investment Account by giving to the
Client at least thirty (30) days' prior written notice of such termination. Fees
paid in advance of the effectiveness of the termination will be prorated to the
date of termination specified in the notice of termination, and any unearned
portion thereof will be refunded to the Client. No assignment, as that term is
defined in the Advisers Act, shall be made by the Adviser without the written
consent of the Client. No assignment shall be deemed to result from changes in
the directors, officers or employees of the Adviser except as may be provided in
the Advisers Act. The Adviser agrees that it will notify the Client of any
change in the membership of the general partners of the Adviser within a
reasonable time after such change. This Agreement may be amended or modified at
any time by mutual agreement of the Client and the Adviser in writing.

      23. Counterparts

            This Agreement may be executed in two or more counterparts, each one
of which shall be deemed to be an original.

      24. Governing Law

            To the extent Federal law does not apply, this Agreement shall be
construed in accordance with and governed by the laws of the State of New York.

      25. Entire Agreement

            This Agreement constitutes the entire agreement of the parties with
respect to management of the Investment Account.


                                       7
<PAGE>



      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective representatives as of the date first above written.

                              PLATINUM UNDERWRITERS REINSURANCE, INC.

                              BY:       /s/ Michael D. Price
                                        ----------------------------------------
                                        Name: Michael D. Price
                                        Title: President

                              ADDRESS:  195 Broadway
                                        28th Floor
                                        New York, NY 10007
                                        Attention: General Counsel



                              ALLIANCE CAPITAL MANAGEMENT L.P.

                              BY:       Alliance Capital Management
                                        Corporation, its General Partner

                              BY:       /s/ Louis T. Mangan
                                        ----------------------------------------
                                        Louis T. Mangan
                                        Assistant Secretary

                              ADDRESS:  1345 Avenue of the Americas
                                        New York, New York 10105
                                        Attn:  Holly Spencer
                                   cc:  Managing Director, Institutional Asset
                                        Management


                                       8
<PAGE>



                            New Account Documentation

                                       for


                     Platinum Underwriters Reinsurance, Inc.

The Adviser will require the documents identified below to establish its
investment management relationship with Platinum Underwriters Reinsurance, Inc.

1.    Fully executed advisory agreement (with fee schedule attached).

2.    Accurate list of securities to be transferred to new account unless
      initially consisting of cash or cash equivalents.

3.    Written statement of investment objectives, guidelines and restrictions,
      if any.

4.    Form W-9/W-8, as applicable.

5.    List of Authorized Signatories.

6.    Certified resolution of the Board of Directors or appropriate Committee
      authorizing appointment of the Adviser as investment adviser.


                                       9
<PAGE>





                                    EXHIBIT A

                        ALLIANCE CAPITAL MANAGEMENT L.P.

                  FIXED INCOME INSURANCE ASSET MANAGEMENT FEES
                                  PREPARED FOR


                     Platinum Underwriters Reinsurance, Inc.


FOR MINIMUM FIXED INCOME ACCOUNT SIZE OF $1 BILLION

<TABLE>
<CAPTION>
            Fee                             Assets
            ---                             ------
<S>                     <C>                 <C>
            0.19%       on the first        $100 million
            0.14%       on the next         $150 million
            0.11%       on the next         $250 million
            0.10%       on the balance
</TABLE>


FOR FIXED INCOME ASSETS LESS THAN $1 BILLION

<TABLE>
<CAPTION>
            Fee                             Assets
            ---                             ------
<S>                     <C>                 <C>
            0.20%       on the first        $100 million
            0.15%       on the next         $150 million
            0.12%       on the next         $250 million
            0.10%       on the balance
</TABLE>







<PAGE>


                                   SCHEDULE A

                              INVESTMENT GUIDELINES


<PAGE>





                              INVESTMENT GUIDELINES
                     PLATINUM UNDERWRITERS REINSURANCE, INC.

INVESTMENT OBJECTIVE:

The Fund's assets are managed to provide a high degree of investment income
subject to risk, guidelines, appropriate liquidity considerations, and tax
efficiency. Other objectives include to maintain or enhance the Platinum Group's
[Financial/Credit] rating and to generate a superior long-term total rate of
return versus a benchmark. The Fund's assets will be managed in accordance with
the investment provisions of Title 5 Subtitle 6 of the Maryland Insurance
Article, a summary of which is attached as Exhibit 1.

PORTFOLIO DURATION:

The targeted duration of the portfolio will be that of the liability stream,
which Platinum will provide as needed. If no liability stream is available, a
duration target of 3.5 years will apply. The portfolio could deviate as much as
+/- one year away from this target. There is no limitation placed on the
duration of individual securities.

PORTFOLIO CREDIT QUALITY:

The average quality of the managed fund should be no less than A/A2.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
ADDITIONAL SECURITY PARAMETERS:                                            DIVERSIFICATION
      For Investments permitted under the Maryland Insurance code              LIMITS
                         SECURITY:                            RATING:
-------------------------------------------------------------------------------------------
<S>                   <C>                                     <C>         <C>
I.    GOVERNMENT      Government securities issued by                      100% per issuer
                      United States                                       100% of portfolio
-------------------------------------------------------------------------------------------
II.   MONEY           Repurchase and reverse repurchase       A/P1 or       3% per issuer
      MARKETS         agreements                               better     100% of portfolio
                      ---------------------------------------------------------------------
                      Negotiable Certificates of Deposit      A-/A3 or      3% per issuer
                      and Time Deposits, and Demand Notes      better     100% of portfolio
                      ---------------------------------------------------------------------
                      Commercial paper, including finance     A1/P1 or      3% per issuer
                      company paper and asset-backed           better     100% of portfolio
                      commercial paper
-------------------------------------------------------------------------------------------
III.  MORTGAGE        Agency (FNMA, FHLMC or GNMA)            A/A2 or      10% per issuer
      BACKED          mortgage backed securities               better     30% of portfolio
      SECURITIES      (pass-throughs and CMOs)
      AND             ---------------------------------------------------------------------
      ASSET-          Asset-backed securities (an             A/A2 or       5% per issuer
      BACKED          asset-backed security issued by a        better     20% of portfolio
      SECURITIES      discreet master trust will be
                      thought of as an individual issuer)
                      - Public and 144a asset-backed
                      securities
                      ---------------------------------------------------------------------
                      Publicly issued private label           A/A2 or       5% per issuer
                      pass-throughs and CMOs (excluding        better     30% of portfolio
                      I/Os and P/Os)
-------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


<TABLE>
<S>                   <C>                                     <C>         <C>
-------------------------------------------------------------------------------------------
IV. COMMERCIAL        Commercial mortgage backed              A/A2 or       3% per issuer
    MORTGAGE          securities (including REITS)             better     10% of portfolio
    BACKED
    SECURITIES
-------------------------------------------------------------------------------------------
V. MUNICIPAL          Municipal securities, including         A-/A3 or      3% per issuer
   BONDS              "general obligation" and "revenue"       better     100% of portfolio
                      bonds (see "Other Qualifications"
                      below)
                                                            -------------------------------
                                                              Greater       3% per issuer
                                                                than      10% of portfolio
                                                            BBB-/Baa3,less
                                                             than A-/A3
-------------------------------------------------------------------------------------------
VI. CORPORATE         Notes, debentures, medium term notes    A-/A3 or      3% per issuer
    SECURITIES        or secured securities                    better     100% of portfolio
                                                            -------------------------------
                                                             less than      3% per issuer
                                                               A-/A3       20% of portfolio
                                                              greater
                                                                than
-------------------------------------------------------------------------------------------
VII. PREFERRED        Preferred Stocks including             BBB-/Baa3     2.5% per issuer
     STOCKS           Perpetual, Sinking Fund, Adjustable    BBB-/Baa3     10% of portfolio
                      Rate and Fixed Rate                    or better
-------------------------------------------------------------------------------------------
VIII. SOVEREIGN       Sovereign securities                   AA-/Aa3 or     3% per issuer
      AND                                                      better      10% of portfolio
      SUPRANATIONAL                                         -------------------------------
      SECURITIES                                             less than      3% per issuer
                                                               AA-/Aa3      5% of portfolio
                                                              greater
                                                                than
                                                             BBB-/Baa3
                      ---------------------------------------------------------------------
                      Supranational securities               AA-/Aa3 or     3% per issuer
                                                               better      5% of portfolio
-------------------------------------------------------------------------------------------
</TABLE>


CERTAIN QUANTITATIVE LIMITATIONS

-     The per issuer limitations are a function of the market value of the
      combined accounts (US).

-     Sovereign securities will not exceed 10% of admitted assets.

-     The maximum percentage for all securities rated below A-/A3 is 20% of the
      portfolio.

OTHER QUALIFICATIONS

-     Futures and options are permitted, provided the instrument is used as a
      hedge, with specific prior approval from Platinum.

      -     Swaps

      -     Futures

      -     Exchange traded options

      -     Over-the-counter options

-     Structured securities or securities with embedded options are permitted.
      Leverage is not permitted.

-     In the case of a split rating, the lower of the ratings available shall
      apply.

<PAGE>


-     Should a security be downgraded below investment grade (i.e. below
      BBB-/Baa3) the manager must notify and consult with Platinum as soon as
      reasonably practicable, regarding the optimal timing of the disposal.

-     For securities with variable principal repayment, the estimated duration
      should be used with respect to the duration restrictions.

-     All holdings must be denominated in the base currency of the relevant
      portfolio.

-     General obligation bonds are secured by the issuer's pledge of its full
      faith, credit and taxing power for the payment of principal and interest.
      Revenue or special tax bonds are payable only from the revenues derived
      from a particular facility or class of facilities but not from general tax
      revenues. Excluded will be revenue bonds where the revenues are derived
      solely from special or other excise taxes. Municipal bonds will be
      utilized when there is an after-tax benefit to the portfolio.

<PAGE>



                                                                       EXHIBIT 1

                             INVESTMENT GUIDELINES
                     PLATINUM UNDERWRITERS REINSURANCE, INC.

      The memorandum was prepared by Dewey Ballantine, LLP, counsel to Platinum
Underwriters Reinsurance, Inc., and provides a broad overview of the investment
limitations applicable to Maryland domiciled insurers and, as such, particular
investments may need to be reviewed against the requirement of the code.

      1. AUTHORIZATION OF INVESTMENTS

      The Board of Directors or a committee authorized by the Board of Directors
to supervise or make investments will approve the Investment Guidelines and
ratify all investments made pursuant to such Investment Guidelines.

      2. MINIMUM CAPITAL INVESTMENTS

      Before investing in other types of securities, the company will invest its
funds in an amount equal in value to the minimum capital and surplus
requirements. The permissible investments for such funds are limited to those
set forth in Section 5-607(b) of the Code and include (i) bonds or other debt of
the United States or an agency of the United States (if the obligation is
guaranteed by the United States); (ii) bonds or other debt that is the direct
obligation of Maryland or of a county, district or municipal corporation of
Maryland; (iii) bonds or other debt of another state; (iv) mortgage loans or
deeds of trust as specified in Section 5-608(j) and (k) of the Code on property
located in Maryland and (v) ground rents as specified in Section 5-608(m) of the
Code. At least 60% of the total amount of the required minimum investments must
consist of the types listed in (i) and (ii) above.

      3. RESERVE INVESTMENTS

      After satisfying the minimum investment requirements, the company will
invest in cash or the classes of reserve investments set forth in Section 5-608
of the Code to bring its investments up to an amount not less than 50% of the
aggregate amount of its unearned premium and loss reserves. These investments
are referred to as reserve investments. Except for real property acquired under
Section 5-608(n) of the Code, a security or investment is not eligible as a
reserve investment unless (i) the security or investment is interest-bearing,
interest-accruing or divided or income-paying; (ii) the insurer is entitled to
the interest or income on the security or investment.

      The reserve investments of an insurer may include the following classes of
assets set forth in Section 5-608(d), (e), (f), (g), (h), (i), (j), (k), (l),
(m), (n), (q), (r) and (s) of the Code:

            Obligations of Certain Banks. Obligations issued or guaranteed by
the African Development Bank, Asian Development Bank, International Bank for
Reconstruction and Development or International Finance Corporation, however, an
insurer may not invest more than 5% of its total admitted assets in such
obligations.

            Government Securities. Bonds or other debt that are not in default,
are valid and legally authorized obligations, issued, assumed or guaranteed by
the United States, a state, or other specified municipalities, which are payable
from taxes levied on all taxable property or all taxable income within the
jurisdiction of the governmental unit or other special revenues pledged or
appropriated by law provided for the purpose of the payment obligations and are
not payable solely out of special assessments on properties benefited by local
improvements.

            Secured Fixed Interest Securities. Obligations that are not in
default, that are issued, assumed or guaranteed by a solvent institution created
or existing under the laws of the United States or a state and that (i) are
secured by adequate collateral security (as defined in Section
5-608(e)(2)(iv)(3)) and bear fixed interest and during each of any 3, including
either of the last 2, of the 5 fiscal years immediately preceding the date of
acquisition by the insurer, the net earnings available for fixed charges of the
issuing, assuming or guaranteeing institution must have been not less than 1.25
times the total of the institution's fixed charges for the year or (ii) at the
date of acquisition by the insurer, are adequately secured and have investment
qualities and characteristics in which speculative elements are not predominant.

            Unsecured Fixed Interest Securities. Obligations that are not in
default, that are issued, assumed or guaranteed by a solvent institution created
or existing under the laws of the United States or a state and that are
unsecured obligations that bear fixed interest for which the net earnings
available for fixed charges of the issuing, assuming or guaranteeing institution
(i) for a period of 5 fiscal years immediately preceding the date of acquisition
by the insurer, averaged each year not less than 1.5 times the
<PAGE>

institution's average annual fixed charges applicable to the period and (ii)
during the last year of the 5-year period, must have been not less than 1.5
times the institution's fixed charges for the year.

            Contingent Interest Obligations. Obligations that are not in
default, that are issued, assumed or guaranteed by a solvent institution created
or existing under the laws of the United States or a state and that are
adjustment, income or other contingent interest obligations for which the net
earnings available for fixed charges of the issuing, assuming or guaranteeing
institution for a period of 5 fiscal years immediately preceding the date of
acquisition by the insurer (i) averaged each year not less than 1.5 times the
sum of the institution's average annual fixed charges plus the institution's
average annual maximum contingent interest applicable to the period and (ii)
during each of the last 2 years of the 5-year period, must have been not less
than 1.5 times the sum of the institution's fixed charges plus maximum
contingent interest for the year.

            Preferred or Guaranteed Stock. Preferred or guaranteed stock of a
solvent institution, created or existing under the laws of the United States or
a state, if (i) all prior obligations, and prior preferred stock, if any, of the
institution at the date of acquisition by the insurer are eligible investments
under Section 5-608; (ii) for preferred stock (1) the net earnings of the
institution available for fixed charges for a period of 5 fiscal years
immediately preceding the acquisition by the insurer must have averaged each
year not less than 1.5 times the sum of any average annual fixed charges, any
average annual maximum contingent interest, and the average annual preferred
dividend requirement applicable to the period; and (2) during either of the last
2 years of the 5-year period, the net earnings must have been not less than 1.5
times the sum of the institution's fixed charges, contingent interest, and
preferred dividend requirement for the year; and (iii) for guaranteed stock, the
assuming or guaranteeing institution meets the requirements of 5-608 (e)(2)(iii)
(described above in the "Unsecured Fixed Interest Securities" paragraph)
construed to include as a fixed charge the amounts of guaranteed dividends or
the rental covering the guarantee of the dividends.

            Secured Obligations Issued by Trustees or Receivers. Certificates,
notes or other obligations, adequately secured, issued by trustees or receivers
of an institution created or existing under the laws of the United States or a
state, that, or the assets of which, are being administered under the direction
of a court. (See Section 5-608(g)).

            Equipment Trust Certificates. Equipment trust obligations or

            certificates that are adequately secured or other adequately secured
obligations that evidence (1) an interest in transportation equipment located
wholly or partly in the United States; and (2) a right to receive determined
parts of rental, purchase, or other fixed obligatory payments for the use of the
transportation equipment.

            Bills of Exchange. Bank and bankers' acceptance and other bills of
exchange of the kind and maturities made eligible by law for purchase in the
open market by federal reserve banks.

            Bonds Secured by Mortgage or Deed on US Property. Bonds or other
debt secured by first mortgages or deeds of trust on unencumbered fee-simple or
improved leasehold real property located in the United States and otherwise
meeting the requirements of Section 5-608(j). Except as otherwise provided in
Section 5-608, an insurer may not invest in or loan on the security of any one
property more than the greater of $25,000 or 2% of its total admitted assets.
The total investments of an insurer under this paragraph may not exceed 40% of
its total admitted assets.

            Purchase-Money Mortgages. Purchase-money mortgages or like
securities received by an insurer on the sale or exchange of real property
acquired under subsection 5-608(n).

            Bonds Secured by Mortgages Guaranteed by the US. Bonds, notes or
other debt secured by mortgages or deeds of trust that are guaranteed or insured
by an instrumentality of the United States under the National Housing Act,
Serviceman's Readjustment Act of 1944, or Bankhead-Jones Farm Tenant Act.

            Stock or Debentures of Housing Authority. Stock or debentures or
both of a housing authority organized under the housing law of Maryland, to the
extent and on the conditions that the Commissioner authorizes, if all of the
stock of the housing authority has been or will be issued to one or more
insurers.

            Investments in Savings and Loan Association. Shares or deposits in a
savings and loan association or building and loan association to the extent that
the investment or account is insured by the Federal Deposit Insurance
Corporation.

            Common Stock. Dividend-paying common stock of a corporation created
or existing under the laws of the United States, Canada, a state, or a province
of Canada. (See Section 5-608(s)).

      4. QUANTITATIVE LIMITATIONS ON RESERVE INVESTMENTS

      To the extent necessary to satisfy the reserve investment requirements,
the company will not have more than (i) 10% of its total admitted assets in
preferred stock under Section 5-608(f); (ii) 10% of its total admitted assets in
common stock under Section 5-608(s); or (iii) 5% of its total admitted assets in
the stock of one corporation. (See Section 5-608(s)(2)).

<PAGE>


      5. OTHER INVESTMENTS

      Once the minimum investment requirements of Section 5-607 of the Code are
satisfied, the company may invest the remainder of its funds in any of the
classes of investments eligible under Section 5-608 or which are not prohibited
by the Code. In addition to investments specifically set forth as reserve
investments, Section 5-608 includes the following permissible types of
investments:

            Canadian Securities. The company may invest in Canadian securities
and investments that are substantially of the same kinds, classes, and
investments grades as those eligible for investment under Sections 5-601 through
5-609 of the Code.

            Investment of Foreign Authorized Insurers. If the company is
authorized to do business in a foreign country or possession of the United
States or that has outstanding insurance or reinsurance contracts on risks
located in a foreign country or possession of the United States the company may
invest in or otherwise acquire securities and investments in the foreign country
or possession that are substantially of the kinds, classes and investment grades
as those eligible for investment under Sections 5-601 through 5-609 of the Code.
The aggregate amount of such investments and of the currency of the foreign
country or possession held by the company may not exceed 1.5 times the greater
of (i) the amount of the reserves of the insurer and other obligations under any
outstanding insurance contracts or reinsurance contracts in that country or
possession; and (ii) the amount that the company is required by law to invest in
that country or possession.

            Investments Not Otherwise Prohibited. The investments of the company
may include any other investments not otherwise prohibited if (i) the aggregate
amount of the investments does not exceed 4% of the amount of admitted assets of
the insurer at the end of the previous year; (ii) the investment does not
violate any limitations on allowed investments and (iii) the investments comply
with the limitation established in Exhibit I, "Additional Limitations."

      6. PROHIBITED INVESTMENTS

                  In addition to other excluded investments, the following are
prohibited investments: (1) obligations, stock, or other securities of insolvent
corporations (unless specifically permitted); (2) a mortgage or deed of trust,
or real property or an interest in real property other than as specified in
Sections 5-608(j), (k), (l) and (m); (3) the capital stock of the company; (4)
stocks, bonds or other securities issued by a corporation, other than an
insurer, if a majority of the stock having voting powers of the issuing
corporation is owned directly or indirectly by or for the benefit of one or more
officers or directors of the insurer; or (5) an investment that the Commissioner
finds is against public policy or designed to evade a prohibition on investment.

      The company may not directly or indirectly invest in stocks, bonds or
other securities issued by a corporation, if a majority of the outstanding stock
of the corporation, or a majority of the stock having voting powers of the
corporation, is or will be after the acquisition directly or indirectly owned:
(i) by the company or by or through one or more of the company's officer's or
director's holding the stock for the benefit of the insurer or its stockholders;
(ii) by a parent corporation or subsidiary of the company, the parent
corporation or subsidiary of the parent corporation; or (iii) by any combination
of the company, its parent corporation, its subsidiaries or its stockholders.

      7. OTHER LIMITATIONS

      Securities of One Issuer. Except as otherwise specifically provided, the
company may not have more than 10% of its total admitted assets in the
securities of one person other than (i) governmental obligations eligible for
minimum capital investments or (ii) investments in the stock of other insurers.

      Foreign Investments. The company may invest in stocks, shares, bonds or
obligations of a person or governmental or business unit of or in a foreign
country or subdivision thereof, if the foreign investments conform substantially
with the limitations imposed by domestic investments. However, the aggregate
amount of foreign investments held under 5-605(c)(1) and under 5-608(o) and (p)
may not exceed the greater of (i) 10% of the company's total admitted assets;
(ii) 1.5 times the amount of the company's reserves and other obligations under
the insurance or reinsurance contracts in that country and (iii) the amount
necessary to transact business in the foreign country, directly or through a
subsidiary corporation.

      Subsidiaries. Generally, the company may not invest in a subsidiary an
amount which exceeds the lesser of 10% of the company's assets and 50% of the
domestic insurer's surplus as regards policyholders. In addition, after the
investment the company must have remaining surplus as regards policyholders that
bears a reasonable relation to the company's outstanding liabilities and is
adequate to meet the company's financial needs.

<PAGE>


      High Yield and High Risk Obligations. Without the prior approval of the
Commissioner, the company may not acquire a high yield / high risk obligation
if, after such acquisition, the aggregate cost of the acquisition plus the
admitted value of all other high yield / high risk obligations then held by the
company would exceed 20% of the company's admitted assets.