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                                                                   EXHIBIT 10.54

                   AVERAGE EXISTING CLAIM SEVERITY AGREEMENT
                          Effective: December 31, 1997


Parties:       Zurich Reinsurance (North America), Inc., a Connecticut domiciled
               company ("Zurich Re") and Superior National Insurance Company and
               Superior Pacific Casualty Company, each a California domiciled
               company (hereinafter individually or collectively "Superior")

Coverage:      Claims arising under Superior's Policies occurring prior to
               January 1, 1998 and closing subsequent to December 31, 1997.

Term:          Continuous, effective 11:59 A.M., Standard Time, December 31,
               1997 until terminated by either party in accordance with the
               provisions herein.

               "Standard Time" shall be defined in accordance with the original
               Policies.

Territory:     As per the original Policies.

Exclusions:    1. Claims which Superior has fully and finally settled and paid
               prior to January 1, 1998.

               2. Claims for which Superior has determined the final settlement
               amount but which have not been fully and finally closed prior to
               January 1, 1998.

Protection
Amounts:       To pay up to $4,166 each Average Covered Existing Claim in excess
               of $39,912 each Average Covered Existing Claim, but not to exceed
               $30,000,000 in the aggregate for all Average Covered Existing
               Claims during the entire term of this Agreement.

Consideration: $100,000 shall be payable on the date that this Agreement is
               executed.

Termination:   This Agreement may be terminated by mutual agreement of the
               parties. Further, this Agreement may also be terminated in
               accordance with the Special Termination Article, attached
               hereto.

               Termination shall constitute a complete and final release of
               Zurich Re in respect of any and all of its obligations of any
               nature whatsoever to Superior under or related to this Agreement.
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SPECIAL CONDITIONS:  1.  In the event that Superior enters into any transaction,
                         agreement or commitment regarding structured
                         settlements or other similar arrangements or purchases
                         insurance or reinsurance that materially affects the
                         payout patterns of claims, as contemplated by Zurich Re
                         (any of the foregoing transactions, agreements or
                         commitments individually or collectively referred to as
                         the "Transaction"), any such Transaction shall have no
                         effect whatsoever in determining the liability of
                         Zurich Re as respects the calculation of Average
                         Covered Existing Claims.

                     2.  Superior shall not materially change its underwriting
                         and claims administration practices, policies and
                         procedures in place at the inception of this Agreement
                         without Zurich Re's prior written consent.

                     3.  Superior hereby acknowledges that it has entered into
                         a claims/medical management and administration
                         services agreement with Risk Enterprise Management
                         Limited to provide such services for Superior's claims
                         arising under its Policies, and this Agreement is
                         contingent upon the continuation of the agreement with
                         Risk Enterprise Management Limited.

DEFINITIONS:         1.  "Covered Existing Claim" shall mean any claim for
                         indemnity, including claims for medical expense and/or
                         allocated loss adjustment expense, under Superior's
                         Policies which occurs prior to January 1, 1998 and
                         which closes subsequent to December 31, 1997.

                     2.  "Average Covered Existing Claim" shall be determined
                         by the fraction whose numerator is the total amount
                         paid by Superior in respect of all Covered Existing
                         Claims during the term of this Agreement, after the
                         deduction of recoveries by Superior from any
                         reinsurance applicable to such Covered Existing
                         Claims, whether or not such amount is actually
                         recoverable. For purposes of this calculation, the
                         maximum amount of any one Covered Existing Claim shall
                         not exceed $500,000, before the deduction of any
                         inuring reinsurance and regardless of the number of
                         claimants, insureds, policies or risks involved in an
                         occurrence giving rise to a Covered Existing Claim;
                         and whose denominator is the greater of: (i) 70,089;
                         or (ii) the actual number of ultimate Covered Existing
                         Claims paid by Superior during the term of this
                         Agreement; less 62,888. Notwithstanding anything to
                         the contrary herein, Covered Existing Claims under
                         this Agreement shall be not be recoverable from Zurich
                         Re until the amount of Superior's ultimate Average
                         Covered Existing Claims are known and fully and
                         finally determined.

                     3.  "Policy" shall mean all policies, binders, contracts
                         or certificates of insurance written and classified by
                         Superior as workers' compensation, including
                         employers' liability.
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General Provisions:           Access to Records (as per clause attached)
                              Arbitration (Venue: New York, New York)
                              Errors and Omissions
                              Insolvency
                              Salvage and Subrogation (as per clause attached)
                              Offset (as per clause attached)
                              Overdue Payments (as per clause attached)
                              Special Termination (as per clause attached)
                              No Third Party Rights

Signed in New York, New York
For and on behalf of                 Zurich Reinsurance (North America), Inc.

Signed by:                           /s/ [illegible]
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Signed in Calabasas, CA
For and on behalf of                 Superior National Insurance Company
                                     Superior Pacific Casualty Company

Signed by:                           /s/ [illegible]
                                     ----------------------------------
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                                     OFFSET

Zurich Re and Superior may offset at any time or from time to time any balances
or amounts due from one party to the other under this Agreement or any other
contract heretofore or hereafter entered into between said parties whether
acting as assuming or ceding insurer or otherwise.

The offset rights as set forth above shall not be contingent upon the exercise
of such rights or affected in any manner whatsoever by the insolvency of any
party to this Agreement.
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                               ACCESS TO RECORDS

Zurich Re or its designated representatives shall have access, at any
reasonable time during the currency of this Agreement and at any time
thereafter, to all records of Superior which pertain in any way to this
Agreement.

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SALVAGE AND SUBROGATION

Zurich Re shall be credited with its proportionate share of salvage or
subrogation recoveries on account of claims or settlements involving the
protection hereunder. Salvage or subrogation recoveries shall mean
reimbursement obtained or recovery made by Superior, less the actual cost,
excluding salaries of officials and employees of Superior, of obtaining such
reimbursement or making such recovery.
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                                OVERDUE PAYMENTS

Interest rate as determined by the one year United States Treasury Bill, (as
quoted in the Wall Street Journal on the first business day of the month for
which the calculation is made) plus 1% per month, as calculated on a daily
basis, shall be payable by Superior or Zurich Re on any consideration or claims
unpaid more than fifteen (15) days after the dates provided for herein.
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                              SPECIAL TERMINATION

This Agreement may be terminated in the event that:

a.   Any legal authority orders Superior or Zurich Re to cease writing business.

b.   The Employment status of J. Chris Seaman, Executive Vice President & Chief
     Financial Officer or William Gentz, President & Chief Executive Officer of
     Superior have materially and adversely changed in any manner whether by
     reassignment, relocation, termination or otherwise and whether for cause or
     otherwise.

c.   Superior's surplus falls below 200% of the required amount of Risk Based
     Capital in accordance with the Company Action Level, as defined by the
     National Association of Insurance Commissioners.

d.   The agreement with Risk Enterprise Management Limited to provide
     claims/medical management and administration services is not continued.

As respects the events set forth above, the non-breaching party shall have the
right to terminate this Agreement by giving not less than thirty (30) days
notice of its intention to do so. Any notice of termination pursuant to the
foregoing provisions above shall be sent by certified mail return receipt
requested. Such notice period shall commence upon the date that such notice of
termination was dispatched.