<PAGE>


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                   CREDIT AGREEMENT

                       between

       SUPERIOR NATIONAL INSURANCE GROUP, INC.

                         and

       THE CHASE MANHATTAN BANK, LONDON BRANCH

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

            Dated as of November 12, 1996

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



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

<PAGE>

                  TABLE OF CONTENTS


                                                                            Page


SECTION 1.  Amount and Terms of Credit....................................  1
  1.01      Commitments...................................................  1
  1.02      Notice of Borrowing...........................................  2
  1.03      Disbursement of Funds.........................................  2
  1.04      Notes.........................................................  2
  1.05      Interest......................................................  3
  1.06      Compensation..................................................  3

SECTION 2.  Fees; Commitments.............................................  3
  2.01      Fees..........................................................  3
  2.02      Voluntary Reduction of Commitments............................  4
  2.03      Mandatory Termination of Commitments..........................  4

SECTION 3.  Payments......................................................  4
  3.01      Voluntary Prepayments.........................................  4
  3.02      Mandatory Repayments..........................................  4
  3.03      Method and Place of Payment...................................  5
  3.04      Net Payments..................................................  5

SECTION 4.  Conditions Precedent..........................................  6
  4.01      Effectiveness; Notes..........................................  6
  4.02      No Default; Representations and Warranties....................  6
  4.03      Officer's Certificate.........................................  6
  4.04      Opinions of Counsel...........................................  6
  4.05      Corporate Proceedings.........................................  6
  4.06      Litigation....................................................  7
  4.07      Transfer of Reinsurance Receivables...........................  7
  4.08      Security Agreement............................................  7
  4.09      Put Agreement.................................................  8
  4.10      Asset Transfer Agreement......................................  8
  4.11      Approvals.....................................................  8
  4.12      Payment of Fees...............................................  9
  4.13      Notice of Borrowing...........................................  9
  4.14      Centre Re Letter..............................................  9
  4.15      Subordinated Loan Agreement...................................  9
  4.16      Bank Certificate..............................................  9

SECTION 5.  Representations, Warranties and 


                         (i)

<PAGE>

              Agreements..................................................  9
  5.01      Corporate Status.............................................. 10
  5.02      Corporate Power and Authority................................. 10
  5.03      No Violation.................................................. 10
  5.04      Litigation.................................................... 11
  5.05      Use of Proceeds............................................... 11
  5.06      Governmental Approvals........................................ 11
  5.07      Investment Company Act........................................ 11
  5.08      Public Utility Holding Company Act............................ 11
  5.09      True and Complete Disclosure.................................. 12
  5.10      Financial Statements; Financial Condition; Undisclosed 
              Liabilities; etc............................................ 12
  5.11      Security Interests............................................ 12
  5.12      Subsidiaries.................................................. 12
  5.13      Compliance with Statutes, etc................................. 13

SECTION 6.  Affirmative Covenants......................................... 13
  6.01      Information Covenants......................................... 13
  6.02      Books, Records and Inspections................................ 15
  6.03      Corporate Franchises.......................................... 15
  6.04      Compliance with Statutes, etc................................. 15

SECTION 7.  Negative Covenants............................................ 16
  7.01      Consolidation, Merger, Sale or Purchase of Assets, etc........ 16
  7.02      Liens......................................................... 16
  7.03      Modifications of Agreements, etc.............................. 16

SECTION 8.  Events of Default............................................. 16
  8.01      Payments...................................................... 17
  8.02      Representations, etc.......................................... 17
  8.03      Covenants..................................................... 17
  8.04      Bankruptcy, etc............................................... 17
  8.05      Security Agreement............................................ 17
  8.06      Put Agreement................................................. 18
  8.07      Put Guaranty.................................................. 18
  8.08      Asset Transfer................................................ 18
  8.09      Ownership..................................................... 18

SECTION 9.  Definitions................................................... 19

SECTION 10. The Collateral Agent.......................................... 25
  10.01     Appointment................................................... 25
  10.02     Delegation of Duties.......................................... 25
  10.03     Exculpatory Provisions........................................ 26
  10.04     Reliance by Collateral Agent.................................. 26


                         (ii)

<PAGE>

  10.05     Notice of Default............................................. 27
  10.06     Non-Reliance on Collateral Agent.............................. 27
  10.07     Indemnification............................................... 28
  10.08     Collateral Agent in Its Individual
              Capacity.................................................... 29
  10.09     Resignation of the Collateral Agent; Successor 
              Collateral Agent............................................ 29

SECTION 11. Miscellaneous................................................. 29
  11.01     Payment of Expenses, etc...................................... 29
  11.02     Right of Setoff............................................... 30
  11.03     Notices....................................................... 30
  11.04     Benefit of Agreement.......................................... 31
  11.05     No Waiver; Remedies Cumulative................................ 32
  11.06     Calculations; Computations.................................... 32
  11.07     Governing Law; Submission to
              Jurisdiction; Venue......................................... 33
  11.08     Counterparts.................................................. 34
  11.09     Effectiveness................................................. 34
  11.10     Headings Descriptive.......................................... 34
  11.11     Amendment or Waiver........................................... 34
  11.12     Survival...................................................... 34
  11.13     Confidentiality............................................... 34
  11.14     Waiver of Jury Trial.......................................... 35
  11.15     Subordinated Loan Agreement................................... 35
  11.16     Transfer Restrictions......................................... 35


ANNEX I     --   List of Banks and Commitments
ANNEX II    --   Bank Addresses


EXHIBIT A   --   Form of Notice of Borrowing
EXHIBIT B-1 --   Form of A Note
EXHIBIT B-2 --   Form of B Note
EXHIBIT C-1 --   Form of Opinion of Counsel to Borrower
EXHIBIT C-2 --   Form of Opinion of in-house Counsel to Borrower
EXHIBIT C-3 --   Form of Opinion of outside Counsel to Centre Re
EXHIBIT C-4 --   Form of Opinion of in-house Counsel to Centre Re
EXHIBIT D   --   Form of Officers' Certificate
EXHIBIT E   --   Form of Security Agreement
EXHIBIT F-1 --   Form of Put Agreement
EXHIBIT F-2 --   Form of Put Guaranty


                        (iii)

<PAGE>

EXHIBIT G   --   Form of Asset Transfer Agreement
EXHIBIT H   --   Form of Assignment and Assumption
                   Agreement
EXHIBIT I   --   Form of Centre Re Letter
EXHIBIT J   --   Form of Certification of Non-U.S. Ownership


                         (iv)

<PAGE>

       CREDIT AGREEMENT, dated as of November 12, 1996, between SUPERIOR
NATIONAL INSURANCE GROUP, INC. a California corporation (the "Borrower"), THE
CHASE MANHATTAN BANK, LONDON BRANCH (together with its successors and assigns
pursuant to Section 11.04(b), the "Bank") and THE CHASE MANHATTAN BANK, as
Collateral Agent (together with any successor collateral agent pursuant to
Section 10.09, the "Collateral Agent").  Unless otherwise defined herein, all
capitalized terms used herein and defined in Section 9 are used herein as so
defined.


                W I T N E S S E T H :


       WHEREAS, subject to and upon the terms and conditions set forth
herein, the Bank is willing to make available to the Borrower the credit
facilities provided for herein.


       NOW, THEREFORE, IT IS AGREED:

       SECTION 1.     AMOUNT AND TERMS OF CREDIT.

       1.01 COMMITMENTS.  Subject to and upon the terms and conditions herein
set forth, the Bank agrees to make the following loans (each a "Loan" and,
collectively, the "Loans") to the Borrower, which Loans shall be drawn under the
A Loan Facility and the B Loan Facility, as set forth below:

       (a)  The Loan under the A Loan Facility (the "A Loan") (i) shall be
     made pursuant to a single drawing, which shall be on the Closing Date and
     (ii) shall not exceed for at the time of incurrence thereof that aggregate
     amount which equals the A Loan Commitment of the Bank at such time.  Once
     repaid, the A Loan may not be reborrowed.

       (b)  The Loan under the B Loan Facility (the "B Loan") (i) shall be
     made pursuant to a single drawing, which shall be on the Closing Date and
     (ii) shall not exceed for at the time of incurrence thereof that aggregate
     amount which equals the B Loan Commitment of the Bank at such time.  Once
     repaid, B Loans may not be reborrowed.

<PAGE>

       1.02 NOTICE OF BORROWING.  (a)  In connection with its incurrence of
Loans on the Closing Date, the Borrower shall give the Bank at its Notice
Office, prior to 12:00 Noon (New York time), at least one Business Day's prior
written notice (or telephonic notice promptly confirmed in writing).  Such
notice (the "Notice of Borrowing") shall be irrevocable, and, in the case of a
written notice and a confirmation of telephonic notice, shall be in the form of
Exhibit A hereto, appropriately completed to specify (i) the Facility pursuant
to which each Borrowing is to be made, (ii) the aggregate principal amount of
the Loans to be made pursuant to such Borrowing and (iii) the date of such
Borrowing (which shall be a Business Day).

       (b)  Without in any way limiting the obligation of the Borrower to
confirm in writing any notice it may give hereunder by telephone, the Bank may
act prior to receipt of written confirmation without liability upon the basis of
such telephonic notice, believed by the Bank in good faith to be from an
Authorized Officer of the Borrower.  In each such case the Borrower hereby
waives the right to dispute the Bank's record of the terms of any such
telephonic notice.

       1.03 DISBURSEMENT OF FUNDS.  Subject to the terms and conditions
herein set forth, no later than 11:00 A.M. (New York time) on the Closing Date,
the Bank will make available to the Borrower each Borrowing requested to be made
on such date in U.S. dollars and immediately available funds by transferring
such amount to the Borrower as the Borrower shall direct.

       1.04 NOTES.  (a)  The Borrower's obligation to pay the principal of,
and interest on, all the Loans made to it shall be evidenced (i) if the A Loan,
by a promissory note substantially in the form of Exhibit B-1 with blanks
appropriately completed in conformity herewith (the "A Note") and (ii) if the B
Loan, by a promissory note substantially in the form of Exhibit B-2 with blanks
appropriately completed in conformity herewith (the "B Note").

       (b)  The A Note issued to the Bank shall (i) be executed by the
Borrower, (ii) be in bearer form, (iii) be payable to the order of the Bearer
and be dated the Closing Date, (iv) be payable in accordance with Sections
3.02(a) and 3.03, (v) mature on the A Maturity Date and (vi) be entitled to the
benefits of this Agreement and the other Credit Documents.


                         -2-


<PAGE>

       (c)  The B Note issued to the Bank shall (i) be executed by the
Borrower, (ii) be in bearer form, (iii) be payable to the order of the Bearer
and be dated the Closing Date, (iv) be payable in accordance with Sections
3.02(b) and 3.03, (v) mature on the B Maturity Date and (vi) be entitled to the
benefits of this Agreement and the other Credit Documents.

       (d)  The Bank will record on its internal records the amount of each
Loan made by it and each payment in respect thereof and will, prior to any
transfer of any of its Notes, endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby and the interest in
respect thereof.  Failure to make any such notation or any error in any such
notation shall not affect the Borrower's obligations in respect of such Loans or
interest.

       1.05 INTEREST.  (a)  Overdue amounts payable under Section 3.02 shall
bear interest at a rate per annum equal to the Base Rate in effect from time to
time plus 2%, which interest shall be payable on demand.

       (b)  All computations of interest hereunder shall be made in
accordance with Section 11.06(b).

       1.06 COMPENSATION.  The Borrower shall compensate the Bank, upon its
written request (which request shall set forth the basis for requesting such
compensation), for all reasonable losses, expenses and liabilities (including,
without limitation, any loss, expense or liability incurred by reason of the
liquidation or reemployment of deposits or other funds required by the Bank to
fund the Loans but excluding any loss of anticipated profit with respect to the
Loans) which the Bank may sustain if for any reason (other than a default by the
Bank) a Borrowing of Loans does not occur on a date specified therefor in a
Notice of Borrowing.

       SECTION 2.     FEES; COMMITMENTS.

       2.01 FEES.  (a)  The Borrower shall pay to the Bank, for the account
of the Bank, when and as due, such fees as have been, or are from time to time,
separately agreed upon between the Borrower and the Bank.  All such fees shall
be payable as the Bank shall direct, provided that in any event such fees shall
be payable outside the United States of America and its possessions.

       (b)  The total amount of all fees, charges, costs and expenses of any
kind payable by the Borrower to the Bank 


                         -3-


<PAGE>

in connection with this Agreement and the other Credit Documents on the Closing
Date is $986,049.47.

       2.02 VOLUNTARY REDUCTION OF COMMITMENTS.  Upon at least three Business
Days' prior written notice (or telephonic notice promptly confirmed in writing)
given by the Borrower prior to the Closing Date to the Bank at its Notice
Office, the Borrower shall have the right, without premium or penalty, to
terminate, in whole but not in part, the Total Commitment.

       2.03 MANDATORY TERMINATION OF COMMITMENTS.  (a)  The Total Commitment
shall be terminated at 5:00 p.m. (New York time) on the Expiration Date unless
the Closing Date has occurred on or before such date.

       (b)  The Total Commitment shall be terminated on the Closing Date,
after giving effect to the incurrence of Loans on such date.

       SECTION 3.     PAYMENTS.

       3.01 VOLUNTARY PREPAYMENTS.  The Borrower shall have the right in its
sole and absolute discretion to prepay the Loans, in whole but not in part, from
time to time on the following terms and conditions: (i) the Borrower shall give
the Bank at its Notice Office written notice (or telephonic notice promptly
confirmed in writing) of its intent to prepay the Loans in whole, which notice
shall be given by the Borrower no later than 12:00 Noon (New York time) five
Business Days prior to the date of such prepayment; and (ii) the amount owing by
the Borrower in respect of such prepayment shall be equal to the aggregate
principal amount of the Loans plus interest accrued and unpaid on such principal
amount to the date of such prepayment, plus the market value of the Interest
Rate Agreement (if any) entered into by the Bank in respect of the Loans, if the
Bank is "out-of-the-money" in respect of such Interest Rate Agreement at the
time of such prepayment (or minus the market value of any such Interest Rate
Agreement if the Bank is "in-the- money" in respect of such Interest Rate
Agreement at the time of such prepayment).

       3.02 MANDATORY REPAYMENTS. (a)  On each date set forth below (each an
"A Loan Repayment Date"), the Borrower shall be required to make principal and
interest payments in respect of the A Loans in the amounts which are set forth
opposite such date:


                         -4-


<PAGE>
<TABLE>
<CAPTION>

                                                                     Aggregate
   Repayment Date              Principal          Interest            Payment 
   --------------              ---------          --------           ---------
   <S>                       <C>                 <C>                <C>
   January 15, 1997          $2,969,460          $   30,540         $ 3,000,000
   April 15, 1997            $2,925,658          $   74,342         $ 3,000,000
   July 15, 1997             $2,881,787          $  118,213         $ 3,000,000
   October 15, 1997          $2,837,440          $  162,560         $ 3,000,000
   January 15, 1998          $2,792,987          $  207,013         $ 3,000,000
   April 15, 1998            $9,164,443          $  835,557         $10,000,000
   July 15, 1998             $9,017,949          $  982,053         $10,000,000
   October 15, 1998          $8,870,155          $1,129,845         $10,000,000
   January 15, 1999          $8,723,208          $1,276,792         $10,000,000
   April 15, 1999            $6,006,274          $  993,726         $ 7,000,000
   July 15, 1999             $5,906,536          $1,093,464         $ 7,000,000
   October 15, 1999          $5,806,704          $1,193,296         $ 7,000,000
   January 15, 2000          $5,704,649          $1,295,351         $ 7,000,000
   April 15, 2000            $4,111,425          $1,019,575         $ 5,131,000
   July 15, 2000             $4,041,644          $1,089,356         $ 5,131,000
   October 15, 2000          $3,972,623          $1,158,377         $ 5,131,000
   
   
</TABLE>


      (b)  On each date set forth below (each a "B Loan Repayment Date"),
the Borrower shall be required to make principal and interest payments in
respect of the B Loans in the amounts which are set forth opposite such date:
   
<TABLE>
<CAPTION>


                                                                      Aggregate
   Repayment Date             Principal            Interest            Payment 
   --------------             ---------            --------           ---------
   <S>                           <C>                 <C>                <C>
   July 15, 2004             $4,267,953          $2,924,160          $7,192,113
   October 15, 2004          $4,190,959          $3,001,154          $7,192,113
   
   </TABLE>


      3.03 METHOD AND PLACE OF PAYMENT.  Except as otherwise specifically
provided herein, all payments under this Agreement and the Notes shall be made
to the Bearer not later than 1:00 P.M. (New York time) on the date when due and
shall be made in immediately available funds and in lawful money of the United
States of America at the Bearer's Payment Office.  Any payments under this
Agreement which are made later than 1:00 P.M. (New York time) shall be deemed to
have been made on the next succeeding Business Day.  Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Business Day,
the due date thereof shall be the next preceding Business Day.

      3.04 NET PAYMENTS.  All payments required to be made by the Borrower
hereunder will be made without setoff or counterclaim.  


                         -5-


<PAGE>

      SECTION 4.     CONDITIONS PRECEDENT.  The obligation of the Bank to
make Loans to the Borrower hereunder is subject, at the time of the making of
such Loans, to the satisfaction of the following conditions:

      4.01 EFFECTIVENESS; NOTES.  This Agreement shall have become effective
as provided in Section 11.09 and there shall have been delivered to the Bank the
appropriate Notes executed by the Borrower in the amount, maturity and as
otherwise provided herein.

      4.02 NO DEFAULT; REPRESENTATIONS AND WARRANTIES.  At the time of the
making of the Loans and also after giving effect thereto, (i) there shall exist
no Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the Closing Date, unless stated to relate
to a specific earlier date, in which case such representations and warranties
shall be true and correct in all material respects as of such earlier date.

      4.03 OFFICER'S CERTIFICATE.  On the Closing Date, the Bank shall have
received a certificate dated such date, signed by an appropriate officer of the
Borrower, stating that all of the applicable conditions set forth in Sections
4.02 and 4.06 exist as of such date.

      4.04 OPINIONS OF COUNSEL.  On the Closing Date, the Bank shall have
received an opinion, or opinions, in form and substance reasonably satisfactory
to the Bank, addressed to the Bank and dated the Closing Date, from (i) Lewis,
D'Amato, Brisbois & Bisgaard LLP, counsel to the Borrower and SNIC, which
opinion shall cover the matters contained in Exhibit C-1 hereto, (ii) from
Robert Nagle, in-house counsel to the Borrower, which opinion shall cover the
matters contained in Exhibit C-2 hereto, (iii)  Appleby, Spurling & Kempe,
counsel to Centre Re and Centre Re (Bermuda), which opinion shall cover the
matters contained in Exhibit C-3 hereto and (iv) Joseph Magnano, in-house
counsel to Zurich Centre Resource Limited, an affiliate of Centre Re and Centre
Re (Bermuda), which opinion shall cover the matters contained in Exhibit C-4
hereto.

      4.05 CORPORATE PROCEEDINGS. (a)  On the Closing Date, the Bank shall
have received a certificate from each Credit Party, dated the Closing Date,
signed by the President or any Vice President of such Credit Party, and attested
to 


                         -6-


<PAGE>

by the Secretary or any Assistant Secretary of such Credit Party, in the form of
Exhibit D hereto with appropriate insertions, together with copies of the
Certificate of Incorporation and By-Laws and resolutions of such Credit Party
and the other documents referred to in such certificate, and the foregoing shall
be reasonably satisfactory to the Bank.

      (b)  All corporate and legal proceedings and all instruments and
agreements in connection with the transactions contemplated by this Agreement
and the other Credit Documents shall be reasonably satisfactory in form and
substance to the Bank, and the Bank shall have received all information and
copies of all certificates, documents and papers, including records of corporate
proceedings and governmental approvals, if any, which the Bank reasonably may
have requested in connection therewith, such documents and papers where
appropriate to be certified by proper corporate or governmental authorities.

      4.06 LITIGATION.  On the Closing Date, there shall be no actions,
suits or proceedings pending or threatened (a) with respect to this Agreement or
any other Credit Document or the transactions contemplated herein or therein, or
(b) which in the judgment of the Bank could reasonably be expected to have a
Material Adverse Effect.

      4.07 TRANSFER OF REINSURANCE RECEIVABLES.  On or prior to the Closing
Date, SNIC shall have transferred to the Borrower all of the Reinsurance
Receivables in a manner and pursuant to documentation satisfactory in form and
substance to the Bank.

      4.08 SECURITY AGREEMENT.  On or prior to the Closing Date, the
Borrower shall have duly authorized, executed and delivered the Security
Agreement in the form of Exhibit E hereto (the "Security Agreement") covering
all the Borrower's present and future Collateral, together with:

      (a)  acknowledgment copies of proper financing statements (Form UCC-1)
    duly filed under the UCC of each jurisdiction as may be necessary or, in
    the opinion of the Collateral Agent, desirable to perfect the security
    interests purported to be created by the Security Agreement;

      (b)  certified copies of requests for information or copies (Form
    UCC-11), or equivalent reports, listing the financing statements referred
    to in clause (a) above 


                         -7-


<PAGE>

    and all other effective financing statements that name the Borrower as
    debtor and that are filed in the jurisdictions referred to in said clause
    (a), together with copies of such other financing statements (none of which
    shall cover the Collateral);

      (c)  evidence of the completion of all other recordings and filings
    of, or with respect to, the Security Agreement as may be necessary or, in
    the opinion of the Collateral Agent, desirable to perfect the security
    interests purported to be created by the Security Agreement; and

      (d)  evidence that all other actions necessary or, in the opinion of
    the Collateral Agent, desirable to perfect and protect the security
    interests purported to be created by the Security Agreement have been
    taken.

      4.09 PUT AGREEMENT.  On or prior to the Closing Date, (i) Centre Re
shall have duly authorized, executed and delivered the Put Agreement in the form
of Exhibit F-1 hereto (the "Put Agreement"), and the Put Agreement shall be in
full force and effect, and the Borrower and SNIC shall have executed the Put
Agreement, consenting to the terms thereof and (ii) Centre Re (Bermuda) shall
have duly authorized, executed and delivered the Put Guaranty in the form of
Exhibit F-2 hereto (the "Put Guaranty"), thereby guaranteeing the obligations of
Centre Re under the Put Agreement, and the Put Guaranty shall be in full force
and effect.

      4.10 ASSET TRANSFER AGREEMENT.  On or prior to the Closing Date, the
Borrower, SNIC, Centre Re, the Bank and the Collateral Agent shall have duly
authorized, executed and delivered the Asset Transfer Agreement in the form of
Exhibit G hereto (the "Asset Transfer Agreement").

      4.11 APPROVALS.  On the Closing Date, all necessary and material
governmental and third party approvals and filings in connection with the
transactions contemplated by this Agreement and the other Credit Documents and
otherwise referred to herein or therein (including, without limitation, the
written approval of the Insurance Department of the State of California) shall
have been obtained and remain in full force and effect or (in the case of
filings) shall have been made, and all applicable waiting periods shall have
expired, in each case without any action being taken by any competent authority
which restrains, prevents or imposes, in the judgment of the Bank, materially
adverse 


                         -8-


<PAGE>

conditions upon the consummation of any such agreement or transaction.

      4.12 PAYMENT OF FEES.  On the Closing Date, all fees, charges, costs
and expenses set forth in Section 2.01(b) shall have been paid.

      4.13 NOTICE OF BORROWING.  The Bank shall have received a Notice of
Borrowing satisfying the requirements of Section 1.02 with respect to all
Borrowings of Loans on the Closing Date.

      4.14 CENTRE RE LETTER.  On the Closing Date, Centre Re shall have
delivered a letter to the Borrower in the form of Exhibit I.

      4.15 SUBORDINATED LOAN AGREEMENT.  The Subordinated Loan Agreement
shall have been amended, or certain provisions thereof waived, in a manner
satisfactory to the Bank to permit the transactions contemplated by this
Agreement and the other Credit Documents.

      4.16 BANK CERTIFICATE.  On the Closing Date, the Bank shall have
delivered to the Borrower a Certificate in the form of Exhibit J.

      The acceptance of the benefits of the Loans on the Closing Date shall
constitute a representation and warranty by the Borrower to the Bank that all of
the conditions specified above exist or have been satisfied as of such date. 
All of the certificates, legal opinions and other documents and papers referred
to in this Section 4, unless otherwise specified, shall be delivered to the Bank
at its Notice Office and shall be reasonably satisfactory in form and substance
to the Bank.

      SECTION 5.     REPRESENTATIONS, WARRANTIES AND AGREEMENTS.  In order
to induce the Bank to enter into this Agreement and to make the Loans provided
for herein, the Borrower makes the following representations and warranties to,
and agreements with, the Bank, all of which shall survive the execution and
delivery of this Agreement and the making of the Loans (with the making of the
Loans being deemed to constitute a representation and warranty that the matters
specified in this Section 5 are true and correct in all material respects on and
as of the date of the making of the Loans (after giving effect to the
consummation of the transactions contemplated herein and in the other Credit
Documents on such date) unless such representation and 


                         -9-


<PAGE>

warranty expressly indicates that it is being made as of any specific date in 
which case such representation and warranty shall be true and correct in all 
material respects as of such specified date):

      5.01 CORPORATE STATUS.  Each of the Borrower and SNIC (i) is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction of its organization and has the corporate or other
organizational power and authority to own its property and assets and to
transact the business in which it is engaged and presently proposes to engage
and (ii) has duly qualified and is authorized to do business and is in good
standing in all jurisdictions where it is required to be so qualified and where
the failure to be so qualified would have a Material Adverse Effect.

      5.02 CORPORATE POWER AND AUTHORITY.  Each of the Borrower and SNIC has
the corporate power and authority to execute, deliver and carry out the terms
and provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Credit Documents to which it is a party.  Each of the Borrower and SNIC
has duly executed and delivered each Credit Document to which it is a party and
each such Credit Document constitutes the legal, valid and binding obligation of
the Borrower and/or SNIC, as the case may be, enforceable in accordance with its
terms except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and by general equitable principles (regardless of
whether the issue of enforceability is considered in a proceeding in equity or
at law).

      5.03 NO VIOLATION.  Neither the execution, delivery and performance by
the Borrower or SNIC of the Credit Documents to which it is a party nor
compliance with the terms and provisions thereof, nor the consummation of the
transactions contemplated therein (i) will contravene any applicable provision
of any law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will conflict or be inconsistent
with or result in any breach of any of the terms, covenants, conditions or
provisions of, or constitute a default under, or (other than pursuant to the
Security Agreement) result in the creation or imposition of (or the obligation
to create or impose) any Lien upon any of the property or assets of the Borrower
or SNIC pursuant to the 


                         -10-


<PAGE>

terms of, any indenture, mortgage, deed of trust, material agreement or other
material instrument to which the Borrower or SNIC is a party or by which it or
any of its property or assets are bound or to which it may be subject or (iii)
will violate any provision of the charter or By-Laws of the Borrower or SNIC.

      5.04 LITIGATION.  There are no actions, suits or proceedings pending
or, to the Borrower's knowledge threatened, with respect to the Borrower or SNIC
that could reasonably be expected to have a Material Adverse Effect.

      5.05 USE OF PROCEEDS. (a)  The proceeds of all Loans shall be utilized
(i) to purchase Reinsurance Receivables under the Reinsurance Agreement from
SNIC, (ii) to pay certain fees and expenses relating thereto and (iii) for other
corporate purposes of the Borrower.

      (b)  No part of the proceeds of any Loan will be used to purchase or
carry any Margin Stock or to extend credit for the purpose of purchasing or
carrying any Margin Stock.

      5.06 GOVERNMENTAL APPROVALS.  Except for the approval of the Insurance
Department of the State of California referred to in Section 4.11 (which has
been obtained and remains in full force and effect), no order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any foreign or domestic governmental or
public body or authority, or any subdivision thereof, is required to authorize
or is required in connection with (i) the execution, delivery and performance of
any Credit Document or (ii) the legality, validity, binding effect or
enforceability of any Credit Document.

      5.07 INVESTMENT COMPANY ACT.  Neither the Borrower nor SNIC is an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.

      5.08 PUBLIC UTILITY HOLDING COMPANY ACT.  Neither the Borrower nor
SNIC is a "holding company," or a "subsidiary company" of a "holding company,"
or an "affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.


                         -11-


<PAGE>

      5.09 TRUE AND COMPLETE DISCLOSURE.  There is no fact known to the
Borrower which could reasonably be expected to have a Material Adverse Effect
which has not been disclosed herein or in such other documents, certificates and
statements furnished to the Bank for use in connection with the transactions
contemplated hereby.

      5.10 FINANCIAL STATEMENTS; FINANCIAL CONDITION; UNDISCLOSED
LIABILITIES; ETC.  The consolidated and consolidating statements of financial
condition of the Borrower and its Consolidated Subsidiaries at December 31, 1995
and June 30, 1996, and the related consolidated and consolidating statements of
income and retained earnings and changes in financial position of the Borrower
and its Consolidated Subsidiaries for the fiscal year or 6-month period, as the
case may be, ended on such date and heretofore furnished to the Bank present
fairly the consolidated and consolidating financial condition of the Borrower
and its Consolidated Subsidiaries at the date of such statements of financial
condition and the consolidated and consolidating results of the operations of
the Borrower and its Consolidated Subsidiaries for such fiscal year or 6-month
period, as the case may be.  All such financial statements have been prepared in
accordance with GAAP except for, with respect to the financial statements for
the 6-month period ended on June 30, 1996, normal year-end audit adjustments. 
Since December 31, 1995, there has been no material adverse change in the
business, operations or financial condition of the Borrower or of the Borrower
and its Subsidiaries taken as a whole.

      5.11 SECURITY INTERESTS.  On and after the Closing Date, the Security
Agreement creates, as security for the Obligations, a valid and enforceable
perfected security interest in and Lien on all of the Collateral, superior to
and prior to the rights of all third persons and subject to no other Liens, in
favor of the Collateral Agent for the benefit of the Bank.  At all times on or
after the Closing Date, the Borrower has good and marketable title to all
Collateral free and clear of all Liens (except as created pursuant to the
Security Agreement).  No filings or recordings are required in order to perfect
the security interests created under the Security Agreement except for filings
or recordings which shall have been made, or provided for, upon or prior to the
Closing Date.

      5.12 SUBSIDIARIES.  SNIC is the sole Material Subsidiary of the
Borrower existing on the Closing Date.  SNIC is a Wholly-Owned Subsidiary of the
Borrower.


                         -12-


<PAGE>

      5.13 COMPLIANCE WITH STATUTES, ETC.  Each of the Borrower and SNIC is
in compliance with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property, except such noncompliances as would not, in the aggregate, have a
Material Adverse Effect.

      SECTION 6.     AFFIRMATIVE COVENANTS.  The Borrower hereby covenants
and agrees that on the Closing Date and thereafter, for so long as this
Agreement is in effect and until the Loans, together with interest, Fees and all
other Obligations incurred hereunder, are paid in full:

      6.01 INFORMATION COVENANTS.  The Borrower will furnish to the Bank:

      (a)  ANNUAL FINANCIAL STATEMENTS. (i)  As soon as available and in any
    event within 90 days after the close of each fiscal year of the Borrower,
    the consolidated balance sheet of the Borrower and its Subsidiaries as at
    the end of such fiscal year and the related consolidated statements of
    income, of stockholder's equity and of cash flows for such fiscal year,
    examined by independent certified public accountants of recognized national
    standing whose opinion shall not be qualified as to the scope of audit or
    as to the status of the Borrower or any of its Subsidiaries as a going
    concern, together with a certificate of such accounting firm stating that
    in the course of its regular audit of the business of each of the Borrower
    and its Subsidiaries, which audit was conducted in accordance with
    generally accepted auditing standards, such accounting firm has obtained no
    knowledge of any Default or Event of Default which has occurred and is
    continuing or, if in the opinion of such accounting firm such a Default or
    Event of Default has occurred and is continuing, a statement as to the
    nature thereof.  

      (ii) As soon as available and in any event within 120 days after the
    close of each fiscal year of SNIC, the Annual Statement of SNIC and its
    Subsidiaries (prepared in accordance with SAP) for such fiscal year and as
    filed with the Insurance Department of the State of California, together
    with the opinion thereon of the Chief Financial Officer or other Authorized
    Officer of SNIC, stating that such Annual Statement presents the financial
    condition and results of operations of SNIC, in accordance with SAP.


                         -13-


<PAGE>

      (b)  QUARTERLY FINANCIAL STATEMENTS. (i)  As soon as available and in
    any event within 45 days after the close of each of the first three
    quarterly accounting periods in each fiscal year of the Borrower, the
    consolidated balance sheet of each of the Borrower and its Subsidiaries as
    at the end of such quarterly period and the related consolidated statements
    of income, of stockholders' equity and of cash flows for such quarterly
    period and for the elapsed portion of the fiscal year ended with the last
    day of such quarterly period, setting forth comparative figures for the
    related periods in the prior fiscal year, and all of which shall be
    certified by the Chief Financial Officer or other Authorized Officer of the
    Borrower, subject to changes resulting from normal year-end audit
    adjustments.

      (ii) As soon as available and in any event within 45 days after the
    close of each of the first three quarterly accounting periods in each
    fiscal year of SNIC, quarterly financial statements of SNIC and its
    Subsidiaries (prepared in accordance with SAP) for such fiscal period and
    as filed with the Insurance Department of the State of California, together
    with the opinion thereon of the Chief Financial Officer or other Authorized
    Officer of SNIC, stating that such financial statements present the
    financial condition and results of operations of SNIC, in accordance with
    SAP.

      (c)  OFFICER'S CERTIFICATES.  At the time of the delivery of the
    financial statements provided for in Sections 6.01(a)(i) and (b)(i), a
    certificate of the Chief Financial Officer or other Authorized Officer of
    the Borrower to the effect that no Default or Event of Default exists or,
    if any Default or Event of Default does exist, specifying the nature and
    extent thereof.

      (d)  NOTICE OF DEFAULT OR LITIGATION.  Promptly, and in any event
    within three Business Days after the Borrower or any of its Subsidiaries
    obtains knowledge thereof, notice of the occurrence of any event which
    constitutes a Default or Event of Default, which notice shall specify the
    nature thereof, the period of existence thereof and what action the
    Borrower proposes to take with respect thereto.

      (e)  AUDITORS' REPORTS.  Promptly upon receipt thereof, a copy of each
    other report or "management letter" submitted to the Borrower or SNIC or
    any of their respective Subsidiaries by their independent 


                         -14-


<PAGE>

    accountants or independent actuaries in connection with any annual, interim
    or special audit made by them of the books of the Borrower or SNIC or any
    of their respective Subsidiaries.

      (f)  OTHER INFORMATION.  Promptly upon transmission thereof, copies of
    any filings and registrations with, and reports to, the SEC by the Borrower
    or SNIC or any of their respective Subsidiaries (other than any
    registration statement on Form S-8) and copies of all financial statements,
    proxy statements, notices and reports as the Borrower or SNIC or any of
    their respective Subsidiaries shall send to analysts or the holders of
    their capital stock in their capacity as such holders (in each case to the
    extent not theretofore delivered to the Banks pursuant to this Agreement)
    and, with reasonable promptness, such other information or documents
    (financial or otherwise) as the Bank may reasonably request from time to
    time.

      6.02 BOOKS, RECORDS AND INSPECTIONS.  The Borrower will, and will
cause each of its Material Subsidiaries to, permit, upon at least two Business
Days' notice to the Chief Financial Officer or any other Authorized Officer of
the Borrower, officers and designated representatives of the Bank to visit and
inspect any of the properties or assets of the Borrower and any of its Material
Subsidiaries in whomsoever's possession (but only to the extent the Borrower or
such Material Subsidiary has the right to do so to the extent in the possession
of another Person), and to examine the books of account of the Borrower and any
of its Material Subsidiaries and discuss the affairs, finances and accounts of
the Borrower and of any of its Material Subsidiaries with, and be advised as to
the same by, its and their officers and independent accountants and independent
actuaries, if any, all at such reasonable times and intervals and to such
reasonable extent as the Agent or the Required Banks may request.

      6.03 CORPORATE FRANCHISES.  The Borrower will do, and will cause each
Material Subsidiary to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its corporate existence, rights and authority;
PROVIDED that any transaction permitted by Section 7.01 will not constitute a
breach of this Section 6.03.

      6.04 COMPLIANCE WITH STATUTES, ETC.  The Borrower will, and will cause
each Material Subsidiary to, comply with all applicable statutes, regulations
and orders of, and all 


                         -15-


<PAGE>

applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property (including applicable statutes, regulations, orders and restrictions
relating to environmental standards and controls) other than those the
non-compliance with which would not have a Material Adverse Effect.

      SECTION 7.     NEGATIVE COVENANTS.  The Borrower hereby covenants and
agrees that on the Closing Date and thereafter, for so long as this Agreement is
in effect and until the Loans together with interest, Fees and all other
Obligations incurred hereunder, are paid in full:

      7.01 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC.  The
Borrower will not, and will not permit any Material Subsidiary to, wind up,
liquidate or dissolve its affairs, or enter into any transaction of merger or
consolidation, sell or otherwise dispose of all or substantially all of its
property or assets, or any property or asset which is material to the business
of the Borrower or such Material Subsidiary (but excluding any sale or
disposition of property or assets in the ordinary course of business).

      7.02 LIENS.  The Borrower will not, and will not permit SNIC to,
create, incur, assume or suffer to exist any Lien upon or with respect to the
Collateral or any Reinsurance Receivables.

      7.03 MODIFICATIONS OF AGREEMENTS, ETC.  The Borrower will not, and
will not permit any Material Subsidiary to, amend, modify or change in any
manner (i) which could reasonably be expected to have a Material Adverse Effect
the Certificate of Incorporation (including, without limitation, by the filing
of any certificate of designation) or By-Laws of the Borrower or such Material
Subsidiary or any other agreement entered into by the Borrower or such Material
Subsidiary with respect to its capital stock, or enter into any new agreement
with respect to the capital stock of the Borrower or such Material Subsidiary
which could reasonably be expected to have a Material Adverse Effect or (ii) the
Reinsurance Agreement.

      SECTION 8.     EVENTS OF DEFAULT.  Upon the occurrence of any of the 
following specified events (each an "Event of Default"):

                         -16-


<PAGE>

      8.01 PAYMENTS.  The Borrower shall (i) default, and such default shall
continue for one or more Business Days, in the payment when due of any amount
payable pursuant to Section 3.02 or (ii) default, and such default shall
continue for five or more Business Days, in the payment when due of any Fees or
any other amounts owing hereunder or under any other Credit Document; or

      8.02 REPRESENTATIONS, ETC.  Any representation, warranty or statement
made or deemed made by the Borrower or any of its Subsidiaries herein or in any
other Credit Document or in any statement or certificate delivered or required
to be delivered pursuant hereto or thereto shall prove to be untrue in any
material respect on the date as of which made or deemed made; or

      8.03 COVENANTS.  The Borrower shall (a) default in the due performance
or observance by it of any term, covenant or agreement contained in Section 7,
or (b) default in the due performance or observance by it of any term, covenant
or agreement (other than those referred to in Sections 8.01, 8.02 or clause (a)
of this Section 8.03) contained in this Agreement and such default shall
continue unremedied for a period of at least 30 days after notice to the
Borrower by the Bank; or

      8.04 BANKRUPTCY, ETC.  The Borrower or SNIC shall commence a voluntary
case concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against the Borrower or
SNIC and the petition is not controverted within 10 days, or is not dismissed
within 60 days, after commencement of the case; or a custodian (as defined in
the Bankruptcy Code) is appointed for, or takes charge of, all or substantially
all of the property of the Borrower or SNIC; or the Borrower or SNIC commences 
(including by way of applying for or consenting to the appointment of, or the
taking of possession by, a rehabilitator, receiver, custodian, trustee, 
conservator or liquidator (collectively, a "conservator") of itself or all or
any substantial portion of its property) any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency, liquidation, rehabilitation, conservatorship or similar law of any
jurisdiction whether now or hereafter in effect relating to the Borrower or
SNIC; or

      8.05 SECURITY AGREEMENT.  The Security Agreement shall cease to be in
full force and effect, or shall cease to 


                         -17-


<PAGE>

give the Collateral Agent the Liens, rights, powers and privileges purported to
be created thereby (including, without limitation, a first priority perfected
security interest in, and Lien on, all of the Collateral subject thereto, in
favor of the Collateral Agent, superior to and prior to the rights of all third
Persons and subject to no other Liens), or the Borrower or any other pledgor
thereunder shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to the
Security Agreement; or

      8.06 PUT AGREEMENT.  Except with the prior written consent of the
Bank, the Put Agreement shall cease to be in full force and effect, or Centre Re
shall default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to the Put Agreement;
or

      8.07 PUT GUARANTY.  Except with the prior written consent of the Bank,
the Put Guaranty shall cease to be in full force and effect, or Centre Re
(Bermuda) shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to the
Put Guaranty; or

      8.08 ASSET TRANSFER AGREEMENT.  The Asset Transfer Agreement shall
cease to be in full force and effect, or any of the parties thereto shall
default in the due performance or observance of any term, covenant or agreement
on its part to be performed or observed pursuant to the Asset Transfer 
Agreement; or

      8.09 OWNERSHIP.  The Borrower shall cease to own, directly, 100% of
the capital stock of SNIC;

then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Bank may, by written notice to the Borrower, take
any or all of the following actions, without prejudice to the rights of the Bank
to enforce its claims against the Borrower, except as otherwise specifically
provided for in this Agreement (PROVIDED that if an Event of Default specified
in Section 8.04 shall occur with respect to the Borrower, the result which would
occur upon the giving of written notice by the Agent as specified in clauses (i)
and (ii) below shall occur automatically without the giving of any such notice):
(i) declare the Total Commitment terminated, whereupon the A Loan Commitment and
the B Loan Commitment of the Bank shall forthwith terminate immediately; (ii)
declare the principal 


                         -18-


<PAGE>

of and any accrued interest, together with the loss (if any) incurred by the
Bank in terminating the Interest Rate Agreement (if any) entered into by the
Bank in respect of the Loans, in respect of all Loans and all Obligations owing
hereunder and under the other Credit Documents to be, whereupon the same shall
become, forthwith due and payable by the Borrower without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; and/or (iii) direct the Collateral Agent to enforce any or all of the
Liens and security interests created pursuant to the Security Agreement.

      SECTION 9.     DEFINITIONS.  As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:

      "A Loan" shall have the meaning provided in Section 1.01(a).

      "A Loan Commitment" shall mean the amount set forth in Annex I hereto
directly below the column entitled "A Loan Commitment," as the same may be
reduced or terminated pursuant to Sections 2.02, 2.03 and/or 8.

      "A Loan Facility" shall mean the Facility evidenced by the A Loan
Commitment.

      "A Loan Repayment Date" shall have the meaning provided in Section
3.02(a).

      "A Maturity Date" shall mean October 15, 2000.

      "A Note" shall have the meaning provided in Section 1.04(a).

      "Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.

      "Asset Transfer Agreement" shall have the meaning provided in Section
4.10.

      "Authorized Officer" shall mean any senior officer of the Borrower
designated as such in writing by the Borrower to, and found acceptable by, the
Agent.


                         -19-


<PAGE>

      "B Loan" shall have the meaning provided in Section 1.01(b).

      "B Loan Commitment" shall mean the amount set forth in Annex I hereto
directly below the column entitled "B Loan Commitment," as the same may be
reduced or terminated pursuant to Sections 2.02, 2.03 and/or 8.

      "B Loan Facility" shall mean the Facility evidenced by the B Loan
Commitment.

      "B Loan Repayment Date" shall have the meaning provided in Section
3.02(b).

      "B Maturity Date" shall mean October 15, 2004.

      "B Note" shall have the meaning provided in Section 1.04(a).

      "Bank" shall have the meaning provided in the first paragraph of this
Agreement.

      "Bankruptcy Code" shall have the meaning provided in Section 8.04.

      "Base Rate" at any time shall mean the higher of (x) the rate which is
1/2 of 1% in excess of the Federal Funds Effective Rate and (y) the Prime
Lending Rate as in effect from time to time.

      "Bearer" shall mean, as to either Note, the Person in legal possession
of such Note.

      "Borrower" shall have the meaning provided in the first paragraph of
this Agreement.

      "Borrowing" shall mean the incurrence pursuant to a single Facility of
a Loan by the Borrower from the Bank on a given date.

      "Business Day" shall mean any day excluding Saturday, Sunday and any
day which shall be in the City of New York a legal holiday or a day on which
banking institutions are authorized by law or other governmental actions to
close.

      "Centre Re" shall mean Centre Reinsurance Limited, a Bermuda 
corporation.


                         -20-


<PAGE>

      "Centre Re (Bermuda)" shall mean Centre Reinsurance (Bermuda) Limited,
a Bermuda corporation.

      "Chase" shall mean The Chase Manhattan Bank, and any successor thereto
by merger.

      "Closing Date" shall mean the date upon which the Loans are incurred
hereunder.

      "Collateral" shall mean all of the Collateral as defined in the
Security Agreement. 

      "Collateral Agent" shall mean Chase acting as collateral agent for the
Bank, and any successor collateral agent pursuant to Section 10.09.

      "Consolidated Subsidiaries" shall mean, as to any Person, all 
Subsidiaries of such Person which are consolidated with such Person for 
financial reporting purposes in accordance with GAAP or SAP.

      "Credit Documents" shall mean this Agreement, the Notes, the Security
Agreement, the Put Agreement, the Put Guaranty, the Asset Transfer Agreement and
any Assignment Agreement (a form of which is set forth as Exhibit H) delivered
pursuant to Section 11.04.

      "Credit Parties" shall mean the Borrower and SNIC.

      "Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.

      "Effective Date" shall have the meaning provided in Section 11.09.

      "Event of Default" shall have the meaning provided in Section 8.

      "Expiration Date" shall mean November 30, 1996.

      "Facility" shall mean either of the two facilities established under
this Agreement, I.E., the A Loan Facility and the B Loan Facility.

      "Federal Funds Effective Rate" shall mean for any period, a 
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal Funds transactions with members of the
Federal 


                         -21-


<PAGE>

Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Chase from three Federal Funds brokers of recognized
standing selected by the Agent.

      "Fees" shall mean all amounts payable pursuant to, or referred to in,
Section 2.01.

      "GAAP" shall mean generally accepted accounting principles 
consistently applied in the United States of America.

      "Interest Rate Agreement" shall mean any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
hedging agreement or other similar agreement or arrangement.

      "Lien" shall mean any mortgage, pledge, security interest, 
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).

      "Loan" shall mean each and every loan made by the Bank hereunder,
including the A Loan or the B Loan.

      "Material Adverse Effect" shall mean a material adverse effect on (x)
the business operations or financial condition of the Borrower and its 
Subsidiaries taken as a whole, (y) the transactions contemplated herein or in
any other Credit Document or (z) the rights or remedies of the Bank or the
Collateral Agent hereunder or under any other Credit Document or on the ability
of the Borrower to perform its obligations to the Bank hereunder or under any
other Credit Document.

      "Material Subsidiary" shall mean, at any time, each Subsidiary of the
Borrower the aggregate fair market value of whose assets is at least 20% of the
fair market value of the assets of the Borrower and its Subsidiaries taken as a
whole at such time; PROVIDED that whether or not the foregoing test is 
satisfied, SNIC shall constitute a Material Subsidiary of the Borrower at all
times and for all purposes.


                         -22-


<PAGE>

      "Margin Stock" shall have the meaning provided in Regulation U.

      "NAIC" shall mean the National Association of Insurance Commissioners
or any successor organization thereto.

      "Notes" shall mean the A Note and the B Note.     

      "Notice of Borrowing" shall have the meaning provided in Section 1.02.

      "Notice Office" shall mean such office of the Bank as the Bank may
designate to the Borrower from time to time.

      "Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
the Bank or the Collateral Agent pursuant to the terms of this Agreement or any
other Credit Document.

      "Payment Office" shall mean, as to any Bearer, such office of such
Bearer as such Bearer may designate to the Borrower from time to time; provided,
that in no event shall any Payment Office be within the United States of America
or any of its possessions.

      "Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.

      "Prime Lending Rate" shall mean the rate which Chase announces from
time to time as its prime commercial lending rate, the Prime Lending Rate to
change when and as such prime commercial lending rate changes.  The Prime
Lending Rate is a reference rate and does not necessarily represent the lowest
or best rate actually charged to any customer.  Chase may make commercial loans
or other loans at rates of interest at, above or below the Prime Lending Rate.

      "Put Agreement" shall have the meaning provided in Section 4.09.

      "Put Guaranty" shall have the meaning provided in Section 4.09.

      "Reinsurance Agreement" shall mean the Aggregate Excess of Loss Cover
dated as of August 30, 1991 between 


                         -23-


<PAGE>

Centre Re and the Borrower, as amended on or prior to the Closing Date but
without giving effect to any further amendment, waiver or other modification
thereof unless consented to in writing by the Bank.

      "Reinsurance Receivables" shall mean all amounts owing by Centre Re
under the Reinsurance Agreement.

      "Repayment Date" shall mean each A Loan Repayment Date and B Loan
Repayment Date.

      "SAP" shall mean, with respect to SNIC, the accounting procedures and
practices prescribed or permitted by the Insurance Department of the State of
California.

      "SEC" shall mean the Securities and Exchange Commission or any
successor thereto.

      "Security Agreement" shall have the meaning provided in Section 4.08.

      "SNIC" shall mean Superior National Insurance Company, a California
corporation.

      "Subordinated Loan Agreement" shall mean the Loan Agreement, dated as
of June 30, 1994, between the Borrower and Superior National Capital, L.P., as
amended, modified or supplemented from time to time.

      "Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the 
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries, (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries has more than a 50% equity or voting interest at the time and (iii)
SNIC.  Unless otherwise expressly provided, all references herein to 
"Subsidiary" shall mean a Subsidiary of the Borrower.

      "Total Commitment" shall mean the sum of the A Loan Commitment and the
B Loan Commitments of the Bank.

      "Triggering Event" shall have the meaning provided in the Put 
Agreement.


                         -24-


<PAGE>

      "UCC" shall mean the Uniform Commercial Code.

      "Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of
such Person to the extent all of the capital stock or other ownership interests
in such Subsidiary, other than directors' or nominees' qualifying shares, is
owned directly or indirectly by such Person.

      "Written" or "in writing" shall mean any form of written communication
or a communication by means of telex, facsimile device, telegraph or cable.

      SECTION 10.    THE COLLATERAL AGENT.

      10.01  APPOINTMENT.  The Bank hereby irrevocably designates and
appoints Chase as Collateral Agent of the Bank to act as specified herein and in
the other Credit Documents, and the Bank hereby irrevocably authorizes Chase as
the Collateral Agent for such Bank to take such action on its behalf under the
provisions of this Agreement and the other Credit Documents and to exercise such
powers and perform such duties as are expressly delegated to the Collateral
Agent by the terms of this Agreement and the other Credit Documents, together
with such other powers as are reasonably incidental thereto.  The Collateral
Agent agrees to act as such upon the express conditions contained in this
Section 10.  Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Collateral Agent shall not have any duties or responsibilities,
except those expressly set forth herein or in the other Credit Documents, or any
fiduciary relationship with the Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Collateral Agent.  The provisions of
this Section 10 are solely for the benefit of the Collateral Agent and the Bank,
and the Borrower shall have no rights as a third party beneficiary of any of the
provisions hereof.  In performing its functions and duties under this Agreement,
the Collateral Agent shall act solely as the agent of the Bank and the 
Collateral Agent does not assume, nor shall it be deemed to have assumed, any
obligation or relationship of agency or trust with or for the Borrower or any of
its Subsidiaries.

      10.02  DELEGATION OF DUTIES.  The Collateral Agent may execute any of
its duties under this Agreement or any other Credit Document by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel 
concerning all matters pertaining to such duties.  The Collateral Agent shall
not be responsible for the negligence or misconduct of 


                         -25-


<PAGE>

any agents or attorneys-in-fact selected by it with reasonable care except to
the extent otherwise required by Section 10.03.

      10.03  EXCULPATORY PROVISIONS.  None of the Collateral Agent nor any
of its officers, directors, employees, representatives, agents, attorneys-
in-fact or affiliates shall be (i) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to the Bank for any recitals,
statements, representations or warranties made by the Borrower, any Subsidiary
or any of their respective officers contained in this Agreement, any other
Credit Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Collateral Agent under or in
connection with, this Agreement or any other Credit Document or for any failure
of the Borrower or any Subsidiary or any of their respective officers to perform
its obligations hereunder or thereunder.  The Collateral Agent shall not be
under any obligation to the Bank to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Borrower or any
Subsidiary.  The Collateral Agent shall not be responsible to any Bank for the
effectiveness, genuineness, validity, enforceability, collectibility or 
sufficiency of this Agreement or any Credit Document or for any representations,
warranties, recitals or statements made herein or therein or made in any written
or oral statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith 
furnished or made by the Collateral Agent to the Bank or by or on behalf of the
Borrower to the Collateral Agent or the Bank or be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or of the existence or possible existence of any
Default or Event of Default.

      10.04  RELIANCE BY COLLATERAL AGENT.  The Collateral Agent shall be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, facsimile, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by 


                         -26-


<PAGE>

the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Collateral Agent.  The Collateral
Agent shall be fully justified in failing or refusing to take or continue to
take any action under this Agreement or any other Credit Document unless it
shall first receive such advice or concurrence of the Bank as it deems
appropriate or it shall first be indemnified to its satisfaction by the Bank
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.  The Collateral Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Credit Documents in accordance with a request of the
Bank, and such request and any action taken or failure to act pursuant thereto
shall be binding upon the Bank.

      10.05  NOTICE OF DEFAULT.  The Collateral Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Collateral Agent has received notice from the Bank or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default."  In the event
that the Collateral Agent receives such a notice, the Collateral Agent shall
give prompt notice thereof to the Bank.  The Collateral Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Bank, PROVIDED that, unless and until the Collateral Agent shall
have received such directions, the Collateral Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Bank.

      10.06  NON-RELIANCE ON COLLATERAL AGENT.  The Bank expressly 
acknowledges that none of the Collateral Agent nor any of its officers, 
directors, employees, agents, representatives, attorneys-in-fact or affiliates
has made any representations or warranties to it and that no act by the 
Collateral Agent hereinafter taken, including any review of the affairs of the
Borrower or any Subsidiary (including SNIC and its Subsidiaries), shall be
deemed to constitute any representation or warranty by the Collateral Agent to
the Bank. The Bank represents to the Collateral Agent that it has, independently
and without reliance upon the Collateral Agent, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and 
investigation into the business, assets, operations, property, 


                         -27-


<PAGE>

financial and other conditions, prospects and creditworthiness of the Borrower
and its Subsidiaries (including SNIC and its Subsidiaries) and made its own
decision to make its Loans hereunder and enter into this Agreement.  The Bank
also represents that it will, independently and without reliance upon the
Collateral Agent, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other conditions, prospects and 
creditworthiness of the Borrower and its Subsidiaries.  The Collateral Agent
shall not have any duty or responsibility to provide the Bank with any credit or
other information concerning the business, operations, assets, property,
financial and other conditions, prospects or creditworthiness of the Borrower or
any Subsidiary (including SNIC and its Subsidiaries) which may come into the
possession of the Agent or any of its officers, directors, employees, agents,
representatives, attorneys-in-fact or affiliates.

      10.07  INDEMNIFICATION.  The Bank agrees to indemnify the Collateral
Agent in its capacity as such from and against any and all liabilities, 
obligations, losses, damages, penalties, actions, judgments, suits, costs,
reasonable expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against the Collateral Agent
in its capacity as such in any way relating to or arising out of this Agreement
or any other Credit Document, or any documents contemplated by or referred to
herein or the transactions contemplated hereby or any action taken or omitted to
be taken by the Collateral Agent under or in connection with any of the 
foregoing, but only to the extent that any of the foregoing is not paid by the
Borrower or any of its Subsidiaries, PROVIDED that the Bank shall not be liable
to the Collateral Agent for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross negligence or willful
misconduct of the Collateral Agent. If any indemnity furnished to the Collateral
Agent for any purpose shall, in the opinion of the Collateral Agent, be 
insufficient or become impaired, the Collateral Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished. The agreements in 


                         -28-


<PAGE>

this Section 10.07 shall survive the payment of all Obligations.

      10.08  COLLATERAL AGENT IN ITS INDIVIDUAL CAPACITY.   The Collateral 
Agent and its affiliates may make loans to, accept deposits from and 
generally engage in any kind of business with the Borrower and its affiliates 
(including SNIC and its Subsidiaries) as though the Collateral Agent were not 
the Collateral Agent hereunder.  With respect to the Loans made by it and all 
Obligations owing to it, the Collateral Agent shall have the same rights and 
powers under this Agreement as the Bank and may exercise the same as though 
it were not the Collateral Agent and the terms "Bank" shall include the 
Collateral Agent in its individual capacity.

      10.09  RESIGNATION OF THE COLLATERAL AGENT; SUCCESSOR COLLATERAL
AGENT.  The Collateral Agent may resign as the Collateral Agent upon 20 days'
notice to the Bank.  Upon the resignation of the Collateral Agent, the Bank
shall appoint a successor Collateral Agent for the Bank subject to prior
approval by the Borrower (such approval not to be unreasonably withheld),
whereupon such successor agent shall succeed to the rights, powers and duties of
the Collateral Agent, and the term "Collateral Agent" shall include such
successor agent effective upon its appointment, and the resigning Collateral
Agent's rights, powers and duties as the Collateral Agent shall be terminated,
without any other or further act or deed on the part of such former Collateral
Agent or any of the parties to this Agreement.  After the resignation of the
Collateral Agent hereunder, the provisions of this Section 10 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Collateral Agent under this Agreement.

      SECTION 11.    MISCELLANEOUS.

      11.01  PAYMENT OF EXPENSES, ETC.  The Borrower agrees to:  (i) whether
or not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Collateral Agent and the Bank in
connection with the negotiation, preparation, execution and delivery of the
Credit Documents and the documents and instruments referred to therein 
(including, without limitation, the reasonable fees and disbursements of White &
Case); (ii) pay all reasonable out-of-pocket costs and expenses of the 
Collateral Agent and the Bank in connection with any amendment, waiver or
consent relating to any of the Credit Documents (including, without limitation,
the reasonable fees and disbursements of White & Case); (iii) pay all reasonable


                         -29-


<PAGE>

out-of-pocket costs and expenses of the Collateral Agent and the Bank in
connection with the enforcement of the Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and disbursements of counsel for the Collateral Agent and for the Bank);
and (iv) indemnify the Collateral Agent and the Bank, and their respective
officers, directors, employees, representatives and agents (each, an 
"indemnified person") from and hold each of them harmless against any and all
losses, liabilities, claims, damages or expenses (collectively, "Claims")
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any breach or default by the Borrower hereunder or under
any other Credit Document, including, without limitation, the reasonable fees
and disbursements of counsel (but excluding any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified.

      11.02  RIGHT OF SETOFF.  In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, the Bank is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by the Bank (including, without 
limitation, by branches and agencies of the Bank wherever located) to or for the
credit or the account of the Borrower against and on account of the Obligations
and liabilities of the Borrower to the Bank under this Agreement or under any of
the other Credit Documents, and all other claims of any nature or description
arising out of or connected with this Agreement or any other Credit Document,
irrespective of whether or not the Bank shall have made any demand hereunder and
although said Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured.

      11.03  NOTICES.  Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to the Borrower, at
the address specified opposite its signature below; if to the Bank, at its
address specified on Annex II hereto; or, at such other address as shall be
designated by 


                         -30-


<PAGE>

any party in a written notice to the other parties hereto. All such notices and
communications shall be mailed, telegraphed, telexed, telecopied, cabled or sent
by overnight courier and shall be effective when received. 

      11.04  BENEFIT OF AGREEMENT. (a)  This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; PROVIDED that the Borrower may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of the Bank.  The Bank may at any time grant participations in any of
its rights hereunder or under any of its Notes to another financial institution,
which participations shall not be required to be PRO RATA among the Facilities;
PROVIDED that in the case of any such participation, the participant shall not
have any rights under this Agreement or any of the other Credit Documents (the
participant's rights against the Bank in respect of such participation to be
those set forth in the agreement executed by the Bank in favor of the
participant relating thereto) and all amounts payable by the Borrower hereunder
shall be determined as if the Bank had not sold such participation.

      (b)  Notwithstanding the foregoing, on the terms set forth in this
Section 11.04(b), the Bank may assign all or a portion of its rights and
obligations hereunder and under the other Credit Documents (including, without
limitation, the right to receive payments of Reinsurance Receivables pursuant to
Sections 1.1 and 1.2 of the Asset Transfer Agreement) to one or more commercial
banks, other financial institutions or other lenders (including, without
limitation, Centre Re pursuant to the Put Agreement), which assignments shall
not be required to be PRO RATA among the Facilities.   Any such assignment
(other than to Centre Re) shall require the consent of Centre Re (such consent
not to be unreasonably withheld); PROVIDED that if Centre Re shall have
defaulted on any of its obligations under the Put Agreement, no such consent
shall be required so long as the assigning Bank gives Centre Re 15 days prior
notice of any such assignment.  If the Bank so sells or assigns all or a part of
its rights hereunder or under the Notes, any reference in this Agreement or the
Notes to such assigning Bank shall thereafter refer to such Bank and to the
respective assignee to the extent of their respective interests and the
respective assignee shall have, to the extent of such assignment (unless
otherwise provided therein), the same rights and benefits as it would if it were
such assigning Bank.  Each assignment pursuant to this Section 11.04(b) shall be
effected by (i) the assigning Bank transferring to the assignee Bank the
respective Note or 


                         -31-


<PAGE>

Notes and (ii) the assigning Bank and the assignee Bank executing an Assignment
and Assumption Agreement substantially in the form of Exhibit H (appropriately
completed).  At the time of any such assignment, Annex I shall be deemed to be
amended to reflect the Commitments, if any, and outstanding Loans of the
respective assignee (which shall result in a direct reduction to the
Commitments, if any, and outstanding Loans of the assigning Bank) and of the
other Banks.  Nothing in this Section 11.04 shall prevent or prohibit the Bank
from pledging its Loans or Notes hereunder to a Federal Reserve Bank in support
of borrowings made by the Bank from such Federal Reserve Bank.

      (c)  Notwithstanding any other provisions of this Section 11.04, no
transfer or assignment of the interests or obligations of the Bank hereunder or
any grant of participations therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration statement
with the SEC or to qualify the Loans under the "Blue Sky" laws of any State.

      11.05  NO WAIVER; REMEDIES CUMULATIVE.  No failure or delay on the
part of the Collateral Agent or the Bank in exercising any right, power or
privilege hereunder or under any other Credit Document and no course of dealing
between the Borrower and the Collateral Agent or the Bank shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder.  The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Collateral
Agent or the Bank would otherwise have.  No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the
Collateral Agent or the Bank to any other or further action in any circumstances
without notice or demand.

      11.06  CALCULATIONS; COMPUTATIONS. (a)  The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with GAAP or SAP, as the case may be, consistently applied throughout the
periods involved (except as set forth in the notes thereto or as otherwise
disclosed in writing by the Borrower to the Bank).


                         -32-


<PAGE>

      (b)  All computations of interest hereunder shall be made on the
actual number of days elapsed over a year of 360 days.  

      11.07  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a)  THIS
AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Agreement or any other Credit Document may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, the
Borrower hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts.  The
Borrower hereby further irrevocably waives any claim that any such courts lack
jurisdiction over the Borrower and agrees not to plead or claim, in any legal
action or proceeding with respect to this Agreement or any other Credit Document
brought in any of such aforesaid courts, that any such court lacks jurisdiction
over the Borrower.  The Borrower further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Borrower at its address for notices pursuant to Section 11.03,
such service to become effective 30 days after such mailing.  The Borrower
hereby irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any legal action or
proceeding commenced hereunder or under any other Credit Document that service
of process was in any way invalid or ineffective.  Nothing herein shall affect
the right of the Collateral Agent or the Bank to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against the Borrower in any other jurisdiction.

      (b)  The Borrower hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or any other
Credit Document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.


                         -33-


<PAGE>

      11.08  COUNTERPARTS.  This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of 
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Bank.

      11.09  EFFECTIVENESS.  This Agreement shall become effective on the
date (the "Effective Date") on which the Borrower and the Bank shall have signed
a copy hereof (whether the same or different copies) and shall have delivered
the same to the Bank at the Bank's Notice Office.  The Bank will give the
Borrower prompt written notice of the occurrence of the Effective Date.

      11.10  HEADINGS DESCRIPTIVE.  The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.

      11.11  AMENDMENT OR WAIVER.  Neither this Agreement nor any other
Credit Document nor any terms hereof or thereof may be changed, waived, 
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrower, the Bank and Centre Re, PROVIDED that no such
change, waiver, discharge or termination shall, without the consent of the
Collateral Agent, modify the rights, duties or obligations of the Collateral
Agent.  Any purported change, waiver, discharge or termination of this Agreement
or any other Credit Document which is not agreed to in writing by the Borrower,
the Bank and Centre Re shall have no force or effect.

      11.12  SURVIVAL.  All indemnities set forth herein including, without
limitation, in Section 10.07 or 11.01 shall survive the execution and delivery
of this Agreement and the making of the Loans, the repayment of the Obligations
and the termination of the Total Commitment.

      11.13  CONFIDENTIALITY.   The Bank shall hold all non-public 
information furnished by or on behalf of the Borrower in connection with the
Bank's evaluation of whether to become a Bank  hereunder or obtained by the Bank
pursuant to the requirements of this Agreement, which has been identified as
such by the Borrower ("Confidential Information"), in accordance with its
customary procedure for handling confidential information of this nature and in
accordance with 


                         -34-

<PAGE>

safe and sound banking or lending practices and in any event may make disclosure
reasonably required by any bona fide actual or contemplated transferee or
participant in connection with an actual or contemplated transfer of any Loans
or participation therein or as required or requested by any governmental agency
or representative thereof or pursuant to legal process or to the Bank's
attorneys or independent auditors; PROVIDED that unless specifically prohibited
by applicable law or court order, the Bank shall notify the Borrower of any
request or requirement by any governmental agency or representative thereof
(other than any such request or requirement in connection with an examination of
the financial condition of the Bank by such governmental agency) or pursuant to
legal process for disclosure of any such non-public information prior to
disclosure of such information; and PROVIDED FURTHER, that in no event shall the
Bank be obligated or required to return any materials furnished by the Borrower
or any Subsidiary of the Borrower.  The Bank agrees that it will not provide to
prospective assignees, transferees or participants any of the Confidential
Information unless such Person has executed an agreement containing provisions
substantially identical to those contained in this Section 11.13.

      11.14  WAIVER OF JURY TRIAL.  Each of the parties to this Agreement
hereby irrevocably waives all right to a trial by jury in any action, proceeding
or counterclaim arising out of or relating to this Agreement, the Credit
Documents or the transactions contemplated hereby or thereby.

      11.15  SUBORDINATED LOAN AGREEMENT.  All Obligations shall be senior
in right of payment to the Loan under and as defined in the Subordinated Loan
Agreement and shall constitute "Senior Indebtedness" for all purposes of the
Subordinated Loan Agreement.

      11.16  TRANSFER RESTRICTIONS.  The Bank hereby represents, warrants
and agrees as follows:

      (1)  Except to the extent permitted under U.S. Treasury Regulations
Section 1.163-5(c)(2)(i)(D) (the "D Rules"), (a) the Bank has not offered or
sold, and during the restricted period will not offer or sell, any Note in
bearer form to a person who is within the United States or its possessions or to
a United States person, and (b) the Bank has not delivered and will not deliver
within the United States or its possessions any Note in bearer form that is sold
during the restricted period; and


                         -35-


<PAGE>

      (2)  The Bank represents and agrees that it has and throughout the
restricted period will have in effect procedures reasonably designed to ensure
that the Bank's employees or agents who are directly engaged in selling Notes in
bearer form are aware that such Notes may not be offered or sold during the
restricted period to a person who is within the United States or its possessions
or to a United States person, except as permitted by the D Rules.

      Terms used in this Section 11.16 have the meanings given to them by
the U.S. Internal Revenue Code of 1986, as amended and the Treasury Regulations
issued thereunder, including the D Rules. 


               *           *          *


                         -36-


<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.


                               SUPERIOR NATIONAL 
                                 INSURANCE GROUP, INC.


                               By /s/ J. Chris Seaman        
                                 ----------------------------
                                 Title: CFO



                               THE CHASE MANHATTAN BANK,
                                 LONDON BRANCH


                               By /s/ Robert Foster          
                                 ----------------------------
                                 Title: Vice President



                               THE CHASE MANHATTAN BANK,
                                 as Collateral Agent

                               By /s/ Robert Foster          
                                 ----------------------------
                                 Title: Vice President

<PAGE>

                                                                         ANNEX I



            LIST OF BANKS AND COMMITMENTS


                          A Loan              B Loan
Name of Bank              Commitment          Commitment
------------              ----------          ----------
The Chase Manhattan
  Bank, London Branch     $85,732,941         $8,458,912


Total:                    $85,732,941         $8,458,912
                          -----------         ----------
                          -----------         ----------

<PAGE>

                                                                        ANNEX II



                    BANK ADDRESSES


BANK                      ADDRESS

The Chase Manhattan       125 London Wall
 Bank, London Branch      London, England EC2Y 5AJ
                          Attention:  Neil McVity
                          Telephone:  011-44-171-962-5812

<PAGE>

                                                                     EXHIBIT B-1


IT IS INTENDED THAT THIS OBLIGATION WILL BE IN BEARER FORM AND AS SUCH ANY
UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS
UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN
SECTION 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. 


                        A NOTE


                                                              _________, 1996   


      FOR VALUE RECEIVED, SUPERIOR NATIONAL INSURANCE GROUP, INC., a
California corporation (the "Borrower"), hereby promises to make payments to the
order of Bearer, in lawful money of the United States of America in immediately
available funds, at the Bearer's direction (provided, however, that all payments
must be payable only outside the United States of America and its possessions),
on the dates and in the amounts set forth in Section 3.02(a) of the Agreement
referred to below.

      This Note is the A Note referred to in the Credit Agreement, dated as
of November 12, 1996, among the Borrower, The Chase Manhattan Bank, London
Branch, and The Chase Manhattan Bank, as Collateral Agent (as from time to time
in effect, the "Agreement") and is entitled to the benefits thereof.  This Note
is secured by and entitled to the benefits of the Security Agreement (as defined
in the Agreement) and is entitled to the benefits of the other Credit Documents
(as defined in the Agreement).  As provided in the Agreement, this Note is
subject to voluntary prepayment, in whole but not in part.

      In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, all amounts due in respect of the A Loan evidenced by this
Note may become or be declared to be due and payable in the manner and with the
effect provided in the Agreement.

      The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.

<PAGE>

                                                                     EXHIBIT B-1
                                                                          Page 2


      THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.

                               SUPERIOR NATIONAL INSURANCE GROUP, INC.


                               By
                                 ---------------------------------
                                 Title:

<PAGE>

                                                                     EXHIBIT B-2


IT IS INTENDED THAT THIS OBLIGATION WILL BE IN BEARER FORM AND AS SUCH ANY
UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS
UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN
SECTION 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. 


                        B NOTE


                                                              New York, New York
                                                                 _________, 1996


      FOR VALUE RECEIVED, SUPERIOR NATIONAL INSURANCE GROUP, INC., a
California corporation (the "Borrower"), hereby promises to make payments to the
order of Bearer, at the Bearer's direction (provided, however, that all payments
must be payable only outside the United States of America and its possessions),
on the dates and in the amounts set forth in Section 3.02(b) of the Agreement
referred to below.

      This Note is the B Note referred to in the Credit Agreement, dated as
of November 12, 1996, among the Borrower,  The Chase Manhattan Bank, London
Branch, and The Chase Manhattan Bank, as Collateral Agent (as from time to time
in effect, the "Agreement") and is secured by and entitled to the benefits of
the Security Agreement (as defined in the Agreement) and is entitled to the
benefits of the other Credit Documents (as defined in the Agreement).  As
provided in the Agreement, this Note is subject to voluntary prepayment, in
whole but not in part.

      In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, all amounts due in respect of the B Loan evidenced by this
Note may become or be declared to be due and payable in the manner and with the
effect provided in the Agreement.

      The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.

<PAGE>

                                                                     EXHIBIT B-2
                                                                          Page 2


      THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.

                               SUPERIOR NATIONAL INSURANCE GROUP, INC.


                               By
                                 ---------------------------------
                                 Title:

<PAGE>

                                                                  EXECUTION COPY





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




                                SECURITY AGREEMENT


                                    between


                     SUPERIOR NATIONAL INSURANCE GROUP, INC.

                                      and

                           THE CHASE MANHATTAN BANK,

                             as Collateral Agent



                        Dated as of November 12, 1996




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

<PAGE>

                              TABLE OF CONTENTS


                                                                         PAGE


ARTICLE I  SECURITY INTERESTS............................................  2
 1.1.      Grant of Security Interests...................................  2
 1.2.      Power of Attorney.............................................  2

ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS.............  3
 2.1.      Necessary Filings.............................................  3
 2.2.      No Liens......................................................  3
 2.3.      Other Financing Statements....................................  3
 2.4.      Chief Executive Office; Records...............................  4
 2.5.      Recourse......................................................  4
 2.6.      Maintenance of Records........................................  4
 2.7.      Modification of Terms; etc....................................  5
 2.8.      Collection....................................................  5
 2.9.      Instruments...................................................  5
 2.10.     Assignor to Remain Liable Under Receivables...................  6
 2.11.     Assignor to Remain Liable Under the Contract..................  6
 2.12.     Protection of the Creditors' Security.........................  7
 2.13.     Further Actions...............................................  7
 2.14.     Financing Statements..........................................  7

ARTICLE III  REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT..................8
 3.1.      Remedies; Obtaining the Collateral Upon Default...............  8
 3.2.      Remedies; Disposition of the Collateral.......................  8
 3.3.      Waiver of Claims..............................................  9
 3.4.      Application of Proceeds....................................... 10
 3.5.      Remedies Cumulative........................................... 11
 3.6.      Discontinuance of Proceedings................................. 11

ARTICLE IV INDEMNITY..................................................... 12
 4.1.      Indemnity..................................................... 12
 4.2.      Indemnity Obligations Secured by Collateral; Survival......... 13

ARTICLE V  DEFINITIONS................................................... 14

ARTICLE VI MISCELLANEOUS................................................. 16
 6.1.      Notices....................................................... 16
 6.2.      Waiver; Amendment............................................. 17
 6.3.      Obligations Absolute.......................................... 17


                                      (i)

<PAGE>

                                                                         PAGE

 6.4.      Successors and Assigns........................................ 17
 6.5.      Headings Descriptive.......................................... 17
 6.6.      Governing Law................................................. 17
 6.7.      Assignor's Duties............................................. 17
 6.8.      Termination................................................... 18
 6.9.      Counterparts.................................................. 18


ANNEX A    Schedule of Covered Contract Rights/
             Receivables
ANNEX B    Schedule of Chief Executive Offices and other
             Record Locations


                                      (ii)

<PAGE>

                              SECURITY AGREEMENT


      SECURITY AGREEMENT, dated as of November 12, 1996, between Superior
National Insurance Group, Inc. (the "Assignor") and The Chase Manhattan Bank, as
Collateral Agent (the "Collateral Agent") for the Secured Creditors (as defined
below).  Except as otherwise defined herein, terms used herein and defined in
the Credit Agreement (as defined below) shall be used herein as therein defined.


                            W I T N E S S E T H :


      WHEREAS, the Assignor, the Collateral Agent and The Chase Manhattan
Bank, London Branch (together with its successors and assigns thereunder, the
"Bank" and together with the Collateral Agent, the "Creditors") have entered
into a Credit Agreement, dated as of November 12, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement") providing for the making
of Loans to the Assignor as contemplated therein;

      WHEREAS, the Assignor desires to incur the Loans under the Credit
Agreement;

      WHEREAS, it is a condition precedent to the making of Loans to the
Assignor under the Credit Agreement that the Assignor shall have executed and
delivered to the Collateral Agent this Agreement;

      WHEREAS, the Assignor desires to execute this Agreement to satisfy the
conditions described in the 
preceding paragraph;


      NOW, THEREFORE, in consideration of the benefits accruing to the
Assignor, the receipt and sufficiency of which are hereby acknowledged, the
Assignor hereby makes the following representations and warranties to the
Collateral Agent and hereby covenants and agrees with the Collateral Agent as
follows:

<PAGE>

                                   ARTICLE I
 
                               SECURITY INTERESTS

      1.1. GRANT OF SECURITY INTERESTS.  (a)  As security for the prompt and
complete payment and performance when due of all of the Obligations, the
Assignor does hereby assign and transfer unto the Collateral Agent, and does
hereby pledge, hypothecate and grant to the Collateral Agent, a continuing
security interest of first priority in, all of its right, title and interest in,
to and under all of the following, whether now existing or hereafter from time
to time acquired:  (i) the Contract, together with all Contract Rights arising
thereunder (to the extent representing the right to receive payments in the
amounts and on the dates set forth on Annex A hereto), (ii) each and every
Receivable (to the extent representing the right to receive payments in the
amounts and on the dates set forth on Annex A hereto), (iii) the Collateral
Account and all monies, securities and instruments deposited or required to be
deposited in such Collateral Account, and (iv) all Proceeds (including, without
limitation, each and every payment made under the Contract) and products of any
and all of the foregoing (all of the above, collectively, the "Collateral").

      (b)  The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of this
Agreement which the Assignor may acquire at any time during the continuation of
this 
Agreement.

      1.2. POWER OF ATTORNEY.  The Assignor hereby constitutes and appoints
the Collateral Agent its true and lawful attorney, irrevocably, with full power
after the occurrence of and during the continuance of an Event of Default (in
the name of the Assignor or otherwise) to act, require, demand, receive,
compound and give acquittance for any and all monies and claims for monies due
or to become due to the Assignor under or arising out of the Collateral, to
endorse any checks or other instruments or orders in 
connection therewith and to file any claims or take any action or institute any
proceedings which the Collateral Agent may deem to be necessary or advisable to
its interests, which appointment as attorney is coupled with an interest.

<PAGE>

                                  ARTICLE II

               GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

      The Assignor represents, warrants and covenants, which representations, 
warranties and covenants shall survive execution and delivery of this 
Agreement, as follows:

      2.1. NECESSARY FILINGS.  All filings, registrations and recordings
necessary or appropriate to create, preserve and protect the priority of the
security interest granted by the Assignor to the Collateral Agent hereby in
respect of the Collateral have been accomplished and the security interest
granted to the Collateral Agent pursuant to this Agreement in and to the
Collateral creates a valid and enforceable security interest therein prior to
the rights of all other Persons therein and subject to no other Liens and is
entitled to all the rights, priorities and benefits afforded by California and
New York law to first priority interests.

      2.2. NO LIENS.  The Assignor is, and as to Collateral acquired by it
from time to time after the date hereof the Assignor will be, the owner of, or
has rights in, all Collateral free from any Lien, security interest, encumbrance
or other right, title or interest of any Person, and the Assignor shall defend
the Collateral to the extent of its rights therein against all claims and
demands of all Persons at any time claiming the same or any interest therein
adverse to the Collateral Agent.

      2.3. OTHER FINANCING STATEMENTS.  As of the date hereof, there is no
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) covering or purporting to cover any interest of any
kind in the Collateral, and so long as the Total Commitment has not been
terminated or any Note remains unpaid or any of the Obligations remain unpaid,
the Assignor will not execute or authorize to be filed in any public office any
financing statement (or similar statement or instrument of registration under
the law of any jurisdiction) or statements relating to the Collateral, except
financing statements and charges filed or to be filed in respect of and covering
the security interests granted hereby by the Assignor.

      2.4. CHIEF EXECUTIVE OFFICE; RECORDS.  The chief executive office of
the Assignor is located at the address indicated on Annex B hereto.  The
Assignor will not move its chief executive office except to such new location as
it may establish in accordance with the last sentence of this Section 2.4.  The
originals of all documents evidencing all Receivables and Contract Rights of the
Assignor and the only 

<PAGE>

original books of account and records of the Assignor relating thereto are, and
will continue to be, kept at such chief executive office or at such new location
as the Assignor may establish in accordance with the last sentence of this
Section 2.4.  All Receivables and Contract Rights of the Assignor are, and will
continue to be, maintained at, and controlled and directed (including, without
limitation, for general accounting purposes) from, the office location described
above or such new location established in accordance with the last sentence of
this Section 2.4.  The Assignor shall not establish a new location for such
office until (i) it shall have given to the Collateral Agent not less than 30
days' prior written notice of its intention to do so, clearly describing such
new location and providing such other information in connection therewith as the
Collateral Agent may reasonably request and (ii) with respect to such new
location, it shall have taken all action, satisfactory to the Collateral Agent,
to maintain the first priority security interest of the Collateral Agent in the
Collateral intended to be granted hereby at all times in full force and effect.

      2.5. RECOURSE.  This Agreement is made with full recourse to the
Assignor and pursuant to and upon all the warranties, representations, covenants
and agreements on its part contained herein, in the other Credit Documents and
otherwise in writing in connection herewith or therewith.

      2.6. MAINTENANCE OF RECORDS.  The Assignor will keep and maintain at
its own cost and expense accurate records of its Receivables, records of all
payments received, all credits granted thereon, and all other dealings 
therewith, and the Assignor will make the same available on its premises to the
Collateral Agent for inspection, at the Assignor's own cost and expense, at any
and all reasonable times upon prior notice to an Authorized Officer of the
Assignor.  Upon the occurrence and during the continuance of an Event of Default
and at the request of the Collateral Agent, the Assignor shall, at its own cost
and expense, deliver all tangible evidence of its Receivables and Contract
Rights (including, without limitation, all documents evidencing the Receivables
and the Contract) and such books and records to the Collateral Agent or to its
representatives (copies of which evidence and books and records may be retained
by the Assignor).  Upon the occurrence and during the continuance of an Event of
Default and if the Collateral Agent so directs, the Assignor shall legend, in
form and manner satisfactory to the Collateral Agent, the Receivables and the
Contract, as well as books, records and documents (if any) of the Assignor
evidencing or pertaining to such Receivables and Contract with an appropriate
reference to the 

<PAGE>

fact that such Receivables and Contract have been assigned to the Collateral
Agent and that the Collateral Agent has a security interest therein.

      2.7. MODIFICATION OF TERMS; ETC.  The Assignor shall not rescind or
cancel any indebtedness or other obligations evidenced by any Receivable or
under the Contract, or modify any term thereof or make any adjustment with
respect thereto, or extend or renew the same, or compromise or settle any
dispute, claim, suit or legal proceeding relating thereto, or sell any 
Receivable or the Contract, or interest therein, without the prior written
consent of the Collateral Agent.  The Assignor will duly fulfill all obligations
on its part to be fulfilled under or in connection with the Receivables and
Contract and will do nothing to impair the rights of the Collateral Agent in the
Receivables or the Contract.

      2.8. COLLECTION.  The Assignor shall endeavor in accordance with
reasonable business practices to cause to be collected from Centre Re, as and
when due (including, without limitation, amounts which are delinquent, such
amounts to be collected in accordance with generally accepted lawful collection
procedures) any and all amounts owing under or on account of each Receivable or
Contract, and apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Receivable or under such Contract.

      2.9. INSTRUMENTS.  If the Assignor owns or acquires any Instrument
constituting Collateral, it will within 10 Business Days notify the Collateral
Agent thereof, and upon request by the Collateral Agent will promptly deliver
such Instrument to the Collateral Agent appropriately endorsed to the order of
the Collateral Agent as further security hereunder.

      2.10.     ASSIGNOR TO REMAIN LIABLE UNDER RECEIVABLES.  Anything
herein to the contrary notwithstanding, the Assignor shall remain liable under
each of the Receivables to observe and perform all of the conditions and
obligations to be observed and performed by it thereunder, if any, all in
accordance with the terms of any agreement giving rise to such Receivables.  The
Collateral Agent shall not have any obligation or liability under any Receivable
(or any agreement giving rise thereto) by reason of or arising out of this
Agreement or the receipt by the Collateral Agent of any payment relating to such
Receivable pursuant hereto, nor shall the Collateral Agent be obligated in any
manner to perform any of the obligations of the Assignor under or pursuant to
any Receivable (or any agreement giving rise thereto), to make any payment, to
make any inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party under any Receivable
(or any agreement giving rise 

<PAGE>

thereto), to present or file any claim, to make any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.

      2.11.     ASSIGNOR TO REMAIN LIABLE UNDER THE CONTRACT.  Anything
herein to the contrary notwithstanding, the Assignor shall remain liable under
the Contract to observe and perform all of the conditions and obligations to be
observed and performed by it thereunder, if any, all in accordance with and
pursuant to the terms and provisions of the Contract.  The Collateral Agent
shall not have any obligation or liability under the Contract by reason of or
arising out of this Agreement or the receipt by the Collateral Agent of any
payment relating to such contract pursuant hereto, nor shall the Collateral
Agent be obligated in any manner to perform any of the obligations of the
Assignor under or pursuant to the Contract, to make any payment, to make any
inquiry as to the nature or the sufficiency of any performance by any party
under the Contract, to present or file any claim, to make any action to enforce
any performance to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.

      2.12.     PROTECTION OF THE CREDITORS' SECURITY.  The Assignor will do
nothing to impair the rights of the Creditors in the Collateral.  The Assignor
assumes all liability and responsibility in connection with the Collateral
acquired by it and the liability of the Assignor to pay the Obligations shall in
no way be affected or diminished by reason of the fact that such Collateral may
be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to
it.

      2.13.     FURTHER ACTIONS.  The Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such lists, descriptions and designations of its Collateral,
invoices, schedules, confirmatory assignments, financing statements, charge
registrations, powers of attorney, certificates, reports and other assurances or
instruments and take such further steps relating to the Collateral and other
property or rights covered by the security interest hereby granted, which the
Collateral Agent deems reasonably appropriate or advisable to preserve or
protect its first priority security interest in the Collateral.

<PAGE>

      2.14.     FINANCING STATEMENTS.  The Assignor agrees to execute and
deliver to the Collateral Agent such financing statements or similar filings, in
form reasonably acceptable to the Collateral Agent, as the Collateral Agent may
from time to time reasonably request or as are necessary or desirable in the
opinion of the Collateral Agent to establish and maintain a valid, enforceable,
first priority security interest in the Collateral as provided herein and the
other rights and security contemplated hereby all in accordance with the Uniform
Commercial Code as enacted in any and all relevant jurisdictions or any other
relevant law.  The Assignor will pay any applicable filing fees, recordation
taxes and related expenses relating to its Collateral.  The Assignor hereby
authorizes the Collateral Agent to file any such financing statements or similar
filings without the signature of the Assignor where permitted by law.


                                  ARTICLE III

                  REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT

      3.1. REMEDIES; OBTAINING THE COLLATERAL UPON DEFAULT.  The Assignor
agrees that, if any Event of Default shall have occurred and be continuing, then
and in every such case, the Collateral Agent, in addition to any rights now or
hereafter existing under applicable law, shall have all rights as a secured
creditor under the Uniform Commercial Code in all relevant jurisdictions and
may:

      (i)   instruct the obligor or obligors on any agreement, instrument or
    other obligation (including, without limitation, the Receivables and the
    Contract) constituting the Collateral to make any payment required by the
    terms of such agreement, instrument or other obligation directly to the
    Collateral Agent;

      (ii)  withdraw all monies, securities and instruments in the
    Collateral Account for application to the Obligations in accordance with
    Section 3.4 hereof; and/or

      (iii) sell, assign or otherwise liquidate any or all of the Collateral
    or any part thereof in accordance with Section 3.2 hereof, or direct the
    Assignor to sell, assign or otherwise liquidate any or all of the
    Collateral or any part thereof, and, in each case, take possession of the
    proceeds of any such sale or liquidation; 

it being understood that the Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement 

<PAGE>

and that, accordingly, upon application to a court of equity having 
jurisdiction, the Collateral Agent shall be entitled to a decree requiring
specific performance by the Assignor of said obligation.  

      3.2. REMEDIES; DISPOSITION OF THE COLLATERAL.  Any Collateral 
repossessed by the Collateral Agent under or pursuant to Section 3.1 hereof and
any other Collateral whether or not so repossessed by the Collateral Agent, may
be sold, assigned, leased or otherwise disposed of under one or more contracts
or as an entirety, and without the necessity of gathering at the place of sale
the property to be sold, and in general in such manner, at such time or times,
at such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable.

      3.3. WAIVER OF CLAIMS.  Except as otherwise provided in this 
Agreement, THE ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE 
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE ASSIGNOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES,
OF ANY STATE THEREOF OR ANY OTHER JURISDICTION, and the Assignor hereby further
waives, to the extent permitted by law:

      (i)   all damages occasioned by such taking of possession except any
    damages which are the direct result of the Collateral Agent's gross
    negligence or willful misconduct;

      (ii)  all other requirements as to the time, place and terms of sale
    or other requirements with respect to the enforcement of the Collateral
    Agent's rights hereunder; and

      (iii) all rights of redemption, appraisement, valuation, stay,
    extension or moratorium now or hereafter in force under any applicable law
    in order to prevent or delay the enforcement of this Agreement or the
    absolute sale of the Collateral or any portion thereof, and the Assignor,
    for itself and all who may claim under it, insofar as it or they now or
    hereafter lawfully may, hereby waives the benefit of all such laws.

Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either 

<PAGE>

at law or in equity, of the Assignor therein and thereto, and shall be a
perpetual bar both at law and in equity against the Assignor and against any and
all Persons claiming or attempting to claim the Collateral so sold, optioned or
realized upon, or any part thereof, from, through and under the Assignor.

      3.4. APPLICATION OF PROCEEDS.  (a)  All moneys collected by the
Collateral Agent upon any sale or other disposition of the Collateral, together
with all other moneys received by the Collateral Agent hereunder, shall be
applied as follows:

      (i)   first, to the payment of all Obligations owing the Collateral
    Agent of the type provided in clauses (ii) and (iii) of the definition of
    Obligations;

      (ii)  second, to the extent proceeds remain after the application
    pursuant to the preceding clause (i), an amount equal to the outstanding
    Obligations shall be paid to the Creditors as provided in Section 3.4(d)
    hereof with each Creditor receiving an amount equal to its outstanding
    Obligations or, if the proceeds are insufficient to pay in full all such
    Obligations, its Pro Rata Share (as defined below) of the amount remaining
    to be distributed; and

      (iii) third, to the extent proceeds remain after the application
    pursuant to the preceding clauses (i) and (ii) and following the 
    termination of this Agreement pursuant to Section 6.8 hereof, to the
    Assignor or, to the extent directed by the Assignor or a court of competent
    jurisdiction, to whomever may be lawfully entitled to receive such surplus.

      (b)  For purposes of this Agreement, "Pro Rata Share" shall mean, when
calculating a Creditor's portion of any distribution or amount, that amount
(expressed as a percentage) equal to a fraction the numerator of which is the
then unpaid amount of such Creditor's Obligations and the denominator of which
is the then outstanding amount of all Obligations.

      (c)  It is understood that the Assignor shall remain liable to the
extent of any deficiency between the amount of the proceeds of the Collateral
and the aggregate amount of the sums referred to in clause (a) of this Section
3.4.

<PAGE>

      (d)  All payments required to be made to the Creditors hereunder shall
be made to the Agent under the Credit Agreement for the account of the
Creditors.

      (e)  For purposes of applying payments received in accordance with
this Section 3.4, the Collateral Agent shall be entitled to rely upon the Bank
for a determination (which the Bank shall agree to provide upon request of the
Collateral Agent) of the outstanding Obligations owed to the Creditors.  Unless
it has actual knowledge (including by way of written notice from a Creditor) to
the contrary, the Bank under the Credit Agreement, in furnishing information
pursuant to the preceding sentence, and the Collateral Agent, in acting
hereunder, shall be entitled to assume that no Obligations other than principal,
interest and regularly accruing fees are owing to any Creditor.

      3.5. REMEDIES CUMULATIVE.  Each and every right, power and remedy
hereby specifically given to the Collateral Agent shall be in addition to every
other right, power and remedy specifically given under this Agreement, the other
Credit Documents or now or hereafter existing at law, in equity or by statute
and each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Collateral Agent.  All
such rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others.  No delay or omission of the Collateral Agent in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or an acquiescence
therein.  No notice to or demand on the Assignor in any case shall entitle it to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Collateral Agent to any other or
further action in any circumstances without notice or demand.  In the event that
the Collateral Agent shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit the Collateral Agent may
recover reasonable expenses, including attorneys' fees, and the amounts thereof
shall be included in such judgment.

      3.6. DISCONTINUANCE OF PROCEEDINGS.  In case the Collateral Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Agreement by foreclosure, sale, entry or otherwise, and such proceeding
shall have been discontinued or abandoned for any reason or 

<PAGE>

shall have been determined adversely to the Collateral Agent, then and in every
such case the Assignor, the Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.


                                 ARTICLE IV

                                 INDEMNITY

      4.1. INDEMNITY.  (a)  The Assignor agrees to indemnify, reimburse and
hold the Collateral Agent and its successors, permitted assigns, employees,
agents and servants (hereinafter in this Section 4.1 referred to individually as
"Indemnitee," and collectively as "Indemnitees") harmless from any and all
liabilities, obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs, expenses or disbursements
(including attorneys' fees and expenses) (for the purposes of this Section 4.1
the foregoing are collectively called "expenses") of whatsoever kind and nature
imposed on, asserted against or incurred by any of the Indemnitees in any way
relating to or arising out of this Agreement or any other document executed in
connection herewith or in any other way connected with the administration of the
transactions contemplated hereby or thereby or the enforcement of any of the
terms of, or the preservation of any rights under any thereof, or in any way
relating to or arising out of the ownership, control, possession, or use of the
Collateral, the violation of the laws of any country, state or other 
governmental body or unit, any tort, or contract claim; provided that no
Indemnitee shall be indemnified pursuant to this Section 4.1(a) for losses,
damages or liabilities to the extent caused by the gross negligence or willful
misconduct of such Indemnitee.  The Assignor agrees that upon written notice by
any Indemnitee of the assertion of such a liability, obligation, damage, injury,
penalty, claim, demand, action, suit or judgment, it shall assume full 
responsibility for the defense thereof.  Each Indemnitee agrees to use its best
efforts to notify promptly the Assignor of any such assertion of which such
Indemnitee has knowledge.

      (b)  Without limiting the application of Section 4.1(a) hereof, the
Assignor agrees to pay, or reimburse the Collateral Agent for any and all
reasonable fees, costs and expenses of whatever kind or nature incurred in
connection with the creation, preservation or protection of the 

<PAGE>

Collateral Agent's Liens on, and security interest in, the Collateral, 
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral and all
other fees, costs and expenses in connection with protecting, maintaining or
preserving the Collateral and the Collateral Agent's interest therein, whether
through judicial proceedings or otherwise, or in defending or prosecuting any
actions, suits or proceedings arising out of or relating to the Collateral.

      (c)  Without limiting the application of Section 4.1(a) or (b) hereof,
the Assignor agrees to pay, indemnify and hold each Indemnitee harmless from and
against any loss, costs, damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any misrepresentation by any
Assignor in this Agreement, any other Credit Document or in any writing 
contemplated by or made or delivered pursuant to or in connection with this
Agreement or any other Credit Document.

           (d)  If and to the extent that the obligations of the Assignor under
this Section 4.1 are unenforceable for any reason, the Assignor hereby agrees to
make the maximum contribution to the payment and satisfaction of such 
obligations which is permissible under applicable law.

      4.2. INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL.  Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral.  The
indemnity obligations of the Assignor contained in this Article IV shall
continue in full force and effect notwithstanding the full payment of the Notes
issued under the Credit Agreement and the payment of all other Obligations and
notwithstanding the discharge thereof.


                               ARTICLE V

                              DEFINITIONS

      The following terms shall have the meanings herein specified.  Such
definitions shall be equally applicable to the singular and plural forms of the
terms defined.

      "Agreement" shall mean this Security Agreement as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.

<PAGE>

      "Assignor" shall have the meaning provided in the first paragraph of
this Agreement.

      "Bank" shall have the meaning provided in the recitals of this
Agreement.

      "Collateral" shall have the meaning provided in Section 1.1(a) of this
Agreement.

      "Collateral Agent" shall have the meaning provided in the first
paragraph of this Agreement.

      "Collateral Account" shall mean an account maintained with, and in the
sole dominion and control of, the Collateral Agent.

      "Contract" shall mean, collectively, (i) the Aggregate Excess Loss
Cover between Centre Re and SNIC, dated August 30, 1991 (as amended, modified or
supplemented from time to time, including pursuant to the Asset Transfer
Agreement (the "Asset Transfer Agreement"), among SNIC, the Assignor, Centre Re,
the Bank and the Collateral Agent, dated November 12, 1996) and (ii) the Asset
Transfer Agreement (as amended, modified or supplemented from time to time).

      "Contract Rights" shall mean all rights of the Assignor under the
Contract, including, without limitation, (i) any and all rights to receive and
demand payments under the Contract, (ii) any and all rights to receive and
compel performance under the Contract and (iii) any and all other rights,
interests and claims now existing or in the future arising in connection with
the Contract.

      "Credit Agreement" shall have the meaning provided in recitals of this
Agreement.

      "Creditors" shall have the meaning provided in the recitals of this
Agreement.

      "Default" shall mean any event which, with notice or lapse of time, or
both, would constitute an Event of Default.

      "Event of Default" shall mean any Event of Default under, and as
defined in, the Credit Agreement and shall in any event, without limitation,
include any payment default on any of the Obligations after the expiration of
any applicable grace period.

      "Indemnitee" shall have the meaning provided in Section 4.1 of this
Agreement.

<PAGE>

      "Instrument" shall have the meaning provided in the Uniform Commercial
Code as in effect on the date hereof in the State of New York.

      "Liens" shall mean any security interest, mortgage, pledge, lien,
claim, charge, encumbrance, title retention agreement, lessor's interest in a
financing lease or analogous instrument, in, of, or on the Assignor's property.

      "Obligations" shall mean (i) the full and prompt payment when due
(whether at the stated maturity, by acceleration or otherwise) of all 
obligations and liabilities of the Assignor, now existing or hereafter incurred
under, arising out of or in connection with any Credit Document to which it is a
party and the due performance and compliance by the Assignor with the terms of
each such Credit Document; (ii) any and all sums advanced by the Collateral
Agent in order to preserve the Collateral or preserve its security interest in
the Collateral; (iii) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities of the Assignor
referred to in clause (i), after an Event of Default shall have occurred and be
continuing, the reasonable expenses of re-taking, holding, preparing for sale or
lease, selling or otherwise disposing of or realizing on the Collateral, or of
any exercise by the Collateral Agent of its rights hereunder, together with
reasonable attorneys' fees and court costs; and (iv) all amounts paid by any
Indemnitee as to which such Indemnitee has the right to reimbursement under
Section 4.1 of this Agreement.

       "Proceeds" shall have the meaning provided in the Uniform Commercial
Code as in effect in the State of New York on the date hereof or under other
relevant law and, in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
the Collateral Agent or the Assignor from time to time with respect to any of
the Collateral, (ii) any and all payments (in any form whatsoever) made or due
and payable to the Assignor from time to time in connection with any 
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.

      "Receivables" shall mean any "account" as such term is defined in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York, now or hereafter owned by the Assignor and arising under the Contract,
including 

<PAGE>

without limitation all of the Assignor's rights to payment pursuant to the
Contract.

      "SNIC" shall mean Superior National Insurance Company, a California
corporation.

      "Termination Date" shall have the meaning provided in Section 6.8 of
this Agreement.


                              ARTICLE VI

                             MISCELLANEOUS

      6.1. NOTICES.  Except as otherwise specified herein, all notices,
requests, demands or other communications to or upon the respective parties
hereto shall be deemed to have been duly given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed to the 
addresses listed opposite the signatures of the respective parties.

      6.2. WAIVER; AMENDMENT.  None of the terms and conditions of this
Agreement may be changed, waived, modified or varied in any manner whatsoever
unless in writing duly signed by the Assignor and the Collateral Agent. 

      6.3. OBLIGATIONS ABSOLUTE.  The obligations of the Assignor hereunder
shall remain in full force and effect without regard to, and shall not be
impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or 
privilege under or in respect of this Agreement or any other Credit Document; or
(c) any amendment to or modification of any Credit Document or any security for
any of the Obligations; whether or not the Assignor shall have notice or
knowledge of any of the foregoing.

      6.4. SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon the
Assignor and its successors and assigns and shall inure to the benefit of the
Collateral Agent and its successors and assigns; PROVIDED, that the Assignor may
not transfer or assign any or all of its rights or obligations hereunder without
the prior written consent of the Collateral Agent.

      6.5. HEADINGS DESCRIPTIVE.  The headings of the several sections of
this Agreement are inserted for conven-

<PAGE>

ience only and shall not in any way affect the meaning or construction of any
provision of this Agreement.

      6.6. GOVERNING LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.

      6.7. ASSIGNOR'S DUTIES.  It is expressly agreed, anything herein
contained to the contrary notwithstanding, that the Assignor shall remain liable
to perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Collateral Agent shall not have any obligations or 
liabilities with respect to any Collateral by reason of or arising out of this
Agreement, nor shall the Collateral Agent be required or obligated in any manner
to perform or fulfill any of the obligations of the Assignor under or with
respect to any Collateral.

      6.8. TERMINATION.  After the Termination Date,  this Agreement shall
terminate (provided that all indemnities set forth herein including, without
limitation, in Section 4.1 hereof shall survive such termination) and the
Collateral Agent, at the request and expense of the Assignor, will promptly
execute and deliver to the Assignor a proper instrument or instruments
acknowledging the satisfaction and termination of this Agreement, and will duly
assign, transfer and deliver to the Assignor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of the Collateral Agent and as has not theretofore been sold or otherwise
applied or released pursuant to this Agreement.  As used in this Agreement,
"Termination Date" shall mean the date upon which the Total Commitment has been
terminated, no Note is outstanding and all other Obligations (other than any
indemnities described in Section 4.1 hereof) have been paid in full.

      6.9. COUNTERPARTS.  This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.

Address:
                                    SUPERIOR NATIONAL INSURANCE
26601 Agoura Road                   GROUP, INC., as Assignor
Calabasas, California  91302

                                    By /s/ J. Chris Seaman 
                                      ----------------------------
Attn: Mr. Chris Seaman                     Title: CFO



1 Chase Manhattan Plaza             THE CHASE MANHATTAN BANK,
New York, New York  10081           as Collateral Agent
Attn: Mr. Robert Foster

                                    By /s/ Robert Foster      
                                      ----------------------------
                                           Title: Vice President

<PAGE>

                                                                        ANNEX A 
                                                                          to    
                                                                       SECURITY 
                                                                       AGREEMENT
                                                                       ---------

         SCHEDULE OF COVERED CONTRACT RIGHTS/RECEIVABLES
                           


 PAYMENT DATE                          AMOUNT
 ------------                          ------
 July 15, 1998                      $5,297,569
 October 15, 1998                  $10,000,000
 January 15, 1999                  $10,000,000
 April 15, 1999                     $7,000,000
 July 15, 1999                      $7,000,000
 October 15, 1999                   $7,000,000
 January 15, 2000                   $7,000,000
 April 15, 2000                     $5,131,000
 July 15, 2000                      $5,131,000
 October 15, 2000                   $5,131,000
 July  15, 2004                     $7,192,113
 October 15, 2004                   $7,192,113

<PAGE>

                                                                        ANNEX B 
                                                                          to    
                                                                       SECURITY 
                                                                       AGREEMENT
                                                                       ---------



                SCHEDULE OF CHIEF EXECUTIVE OFFICE
                     AND OTHER RECORD LOCATIONS
                           



CHIEF EXECUTIVE OFFICE:

26601 Agoura Road
Calabasas, California  91302



OTHER RECORD LOCATIONS:

None.

<PAGE>

                                                                  EXECUTION COPY




                               PUT AGREEMENT


      PUT AGREEMENT, dated as of November 12, 1996, made by and between
CENTRE REINSURANCE LIMITED, a corporation organized and existing under the laws
of Bermuda ("Centre Re") and THE CHASE MANHATTAN BANK, LONDON BRANCH (together
with its successors and assigns in its capacity as the "Bank" under and as
defined in the Credit Agreement referred to below, the "Bank").  Capitalized
terms used herein shall have the meanings set forth in Section 12 hereof.


                           W I T N E S S E T H :


      WHEREAS, Superior National Insurance Group, Inc. (the "Borrower"), the
Bank and The Chase Manhattan Bank, as Collateral Agent, have entered into a
Credit Agreement, dated as of November 12, 1996 (as modified, supplemented or
amended from time to time, the "Credit Agreement"), providing for the making of
Loans to the Borrower as contemplated therein;

      WHEREAS, it is a condition to the making of Loans to the Borrower
under the Credit Agreement that Centre Re shall have executed and delivered this
Put Agreement; and

      WHEREAS, Centre Re will obtain benefits as a result of the Loans made
to the Borrower under the Credit Agreement and, in consideration of the 
foregoing and for other consideration, the sufficiency of which is hereby
acknowledged, Centre Re desires to execute and deliver this Put Agreement in
order to satisfy the condition described in the preceding paragraph;


      NOW, THEREFORE, IT IS AGREED:

      1.  On the terms and subject to the conditions set forth herein,
Centre Re irrevocably and unconditionally agrees, upon one Business Day's notice
from the Bank that a Triggering Event has occurred, to purchase from the Bank,
in whole, for the price set forth in Section 2, the total amount of all 
outstanding Loans under the Credit Agreement (without recourse or warranty other
than that such Loans are free and 

<PAGE>

clear of any Liens), whether or not any such Loan is due and payable, together
with all other obligations and liabilities (including, without limitation,
indemnities, fees and interest thereon) of the Borrower now existing or 
hereafter incurred under, arising out of or in connection with the Credit
Agreement or any other Credit Document (all such Loans, interest, obligations
and liabilities, collectively, the "Put Obligations").  The purchase by Centre
Re of the Put Obligations will be consummated in the form of an assignment
pursuant to Section 11.04(b) of the Credit Agreement.  Centre Re hereby agrees
to execute and deliver an Assignment and Assumption Agreement in the form of
Exhibit H to the Credit Agreement to effect its purchase of the Put Obligations
pursuant to this Put Agreement.

      2.  The purchase price to be paid by Centre Re for the Put Obligations
shall be an amount equal to the aggregate outstanding principal amount of the
Loans at the time of such purchase, plus accrued but unpaid interest thereon,
plus the market value of the Interest Rate Agreement (if any) entered into by
the Bank in respect of the Put Obligations, if the Bank is "out-of-the-money" in
respect of such Interest Rate Agreement at the time that the purchase price is
to be paid (or minus the market value of any such Interest Rate Agreement if the
Bank is "in-the-money" in respect of such Interest Rate Agreement at the time of
such purchase), plus all other outstanding Put Obligations at such time;
PROVIDED, that if at any time following the payment by Centre Re to the Bank of
the amount provided above in this Section 2, the Bank shall be required to
return, disgorge or otherwise forfeit any payment received from the Borrower or
any of its Subsidiaries under or in connection with the Credit Agreement (as a
result of any applicable preferential payment statute or otherwise), upon notice
from the Bank, Centre Re will make a supplemental payment to the Bank in an
amount equal to such returned, disgorged or forfeited payment.  All amounts
owing by Centre Re hereunder shall be paid to the Bank in accordance with
Section 3.03 of the Credit Agreement.

      3.  The Bank may at any time and from time to time without the consent
of, or notice to Centre Re, without incurring responsibility to Centre Re and
without impairing or releasing the obligations of Centre Re hereunder, upon or
without any terms or conditions and in whole or in part:

      (a)  exercise or refrain from exercising any rights against the
    Borrower or others or otherwise act or refrain from acting (it being
    understood and agreed that, as provided in the Credit Agreement, no Credit
    Document may be amended, modified or supplemented without the consent of
    Centre Re); and/or

<PAGE>

      (b)  apply any sums by whomsoever paid or howsoever realized to any
    liability or liabilities of the Borrower to the Bank regardless of what
    liabilities of the Borrower remain unpaid (it being understood that
    Reinsurance Receivables paid to the Bank pursuant to the Asset Transfer
    Agreement shall be applied to the Put Obligations).


      4.  The obligations of Centre Re under this Put Agreement are absolute
and unconditional and shall remain in full force and effect without regard to,
and shall not be released, suspended, discharged, terminated or otherwise
affected by, any circumstance or occurrence whatsoever, including, without
limitation:  (a) any action or inaction by the Bank as contemplated in Section 3
of this Put Agreement; (b) any invalidity, irregularity or unenforceability of
all or part of the Put Obligations; or (c) any invalidity, irregularity,
unenforceability or failure to perfect any security for any of the Put 
Obligations.  This Put Agreement is a primary obligation of Centre Re, and
Centre Re shall be obligated to purchase the Put Obligations in accordance with
the terms hereof regardless of any set-off, counterclaim or defense it may have
with respect to the Borrower, SNIC or any other person.

      5.  In order to induce the Bank to make the Loans pursuant to the
Credit Agreement, Centre Re makes the following representations, warranties and
agreements:

      (a)  Centre Re (i) is a duly organized and validly existing 
    corporation in good standing under the laws of the jurisdiction of its
    incorporation, (ii) has the power and authority to own its property and
    assets and to transact the business in which it is engaged and (iii) is
    duly qualified as a foreign corporation and in good standing in each
    jurisdiction where the ownership, leasing or operation of property or the
    conduct of its business requires such qualification and where the failure
    to do so would have a material adverse effect on the financial condition or
    operations of Centre Re.

      (b)  Centre Re has the corporate power to execute, deliver and perform
    the terms and provisions of this Put Agreement and has taken all necessary
    corporate action to authorize the execution, delivery and performance by it
    of this Put Agreement.  Centre Re has duly executed and delivered this Put
    Agreement, and this Put Agreement constitutes its legal, valid and binding
    obligation enforceable in accordance with its terms except as the 
    enforceability thereof may be limited by applicable 

<PAGE>

    bankruptcy, insolvency, reorganization or other similar laws affecting
    creditors' rights generally and by general equitable principles (regardless
    of whether the issue of enforceability is considered in a proceeding in
    equity or at law).  

      (c)  Neither the execution, delivery or performance by Centre Re of
    this Put Agreement, nor compliance by it with the terms and provisions
    hereof, (i) will contravene any provision of any law, statute, rule or
    regulation or any order, writ, injunction or decree of any court or
    governmental instrumentality, (ii) will conflict or be inconsistent with or
    result in any breach of any of the terms, covenants, conditions or
    provisions of, or constitute a default under, or result in the creation or
    imposition of (or the obligation to create or impose) any Lien upon any of
    the property or assets of Centre Re pursuant to the terms of any indenture,
    mortgage, deed of trust, credit agreement, loan agreement or any other
    material agreement, contract or instrument to which Centre Re is a party or
    by which it or any of its property or assets is bound or to which it may be
    subject or (iii) will violate any provision of the Certificate of 
    Incorporation or By-Laws of Centre Re.

      (d)  No order, consent, approval, license, authorization or validation
    of, or filing, recording or registration with, or exemption by, any
    governmental or public body or authority, or any subdivision thereof, is
    required to authorize, or is required in connection with, (i) the 
    execution, delivery and performance of this Put Agreement or (ii) the
    legality, validity, binding effect or enforceability of this Put Agreement.

      (e)  There are no actions, suits or proceedings pending or, to the
    best knowledge of Centre Re, threatened with respect to this Put Agreement
    or the Reinsurance Agreement or the transactions contemplated hereby or
    thereby.

      (f)  The Reinsurance Agreement remains in full force and effect and
    Centre Re is not in default in the due performance or observance of any
    term, covenant or agreement on its part to be performed or observed
    pursuant to the Reinsurance Agreement.

      (g)  Centre Re is in compliance with all applicable statutes, 
    regulations and orders of, and all applicable restrictions imposed by, all
    governmental bodies, domestic or foreign, in respect of the conduct of its 

<PAGE>

    business and the ownership of its property (including applicable statutes,
    regulations, orders and restrictions relating to environmental standards
    and controls), except such noncompliance as would not, in the aggregate,
    have a material adverse effect on the ability of Centre Re to perform its
    obligations (including, without limitation, to purchase the Put 
    Obligations) in accordance with the terms of this Put Agreement.

      6.  All liabilities to which this Put Agreement applies or may apply
under the terms hereof shall be conclusively presumed to have been created in
reliance hereon.  No failure or delay on the part of the Bank in exercising any
right, power or privilege hereunder and no course of dealing between Centre Re
and any Bank shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights, powers and remedies herein expressly provided are cumulative and not
exclusive of any rights, powers or remedies which the Bank would otherwise have.
No notice to or demand on Centre Re in any case shall entitle Centre Re to any
other further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Bank to any other or further action in any 
circumstances without notice or demand.

      7.  This Put Agreement shall be binding upon Centre Re and its
successors and assigns and shall inure to the benefit of the Banks and their
successors and assigns; PROVIDED, that Centre Re may not assign or transfer any
of its rights or obligations hereunder without the prior written consent of the
Bank.

      8.  Neither this Put Agreement nor any provision hereof may be
changed, waived, discharged or terminated except as provided in Section 11.11 of
the Credit Agreement.  As provided in such Section 11.11, any purported change,
waiver, discharge or termination of this Put Agreement or any other Credit
Document which is not agreed to in writing by the Borrower, the Bank and Centre
Re shall have no force or effect.

      9.  Centre Re acknowledges that an executed (or conformed) copy of the
Credit Agreement has been made available to its principal executive officers and
such officers are familiar with the contents thereof.

      10.  All notices and other communications hereunder shall be made at
the addresses, in the manner and with the 

<PAGE>

effect provided in Section 11.03 of the Credit Agreement, provided that, for
this purpose, the address of Centre Re shall be the one specified opposite its
signature below.

      11.  (a)  This Put Agreement and the rights and obligations of the
Bank and Centre Re hereunder shall be construed in accordance with and governed
by the law of the State of New York.  Any legal action or proceeding with
respect to this Put Agreement may be brought in the courts of the State of New
York or of the United States for the Southern District of New York, and, by
execution and delivery of this Put Agreement, Centre Re hereby irrevocably
accepts for itself and in respect of its property, generally and 
unconditionally, the jurisdiction of the aforesaid courts.  Centre Re hereby
further irrevocably waives any claim that any such courts lack jurisdiction over
Centre Re and agrees not to plead or claim, in any legal action or proceeding
with respect to this Put Agreement or any other Credit Document brought in any
of such aforesaid courts, that any such court lacks jurisdiction over Centre Re.
Centre Re further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to Centre Re at
its address set forth opposite its signature below, such service to become
effective 30 days after such mailing.  Centre Re hereby irrevocably waives any
objection to such service of process and further irrevocably waives and agrees
not to plead or claim in any legal action or proceeding commenced hereunder or
under any other Credit Document that service of process was in any way invalid
or ineffective.  Nothing herein shall affect the right of the Bank to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against Centre Re in any other jurisdiction.  Centre Re hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Put Agreement brought in the courts referred to above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.

      (b)  Upon default by Centre Re in the payment when due of the purchase
price, the Bank may notify Centre Re that the Bank is holding the Loans for
account of Centre Re, whereupon the Loans will be deemed to have been tendered
and delivered to, and accepted by, Centre Re and Centre Re shall thereupon
become obligated to pay, and the Bank shall be entitled to proceed against
Centre Re for payment of, the purchase price.  Centre Re agrees that the Bank is
entitled 

<PAGE>

to specific performance of Centre Re's obligation to pay the purchase price and
Centre Re hereby waives, and agrees that it will not raise, any defense to such
an action for specific performance of Centre Re's obligation to pay the purchase
price based upon the Bank having an adequate remedy at law.

      12.  The terms defined in this Section 12, whenever used and 
capitalized in this Put Agreement, shall, unless the context otherwise requires,
have the respective meanings herein specified:

      "Asset Transfer Agreement" shall have the meaning provided in Section
9 of the Agreement.

      "Bankruptcy Event" shall mean the occurrence of any of the following: 
Centre Re or Centre Re (Bermuda) shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any 
proceeding shall be instituted by or against Centre Re or Centre Re (Bermuda)
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding-up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a rehabilitator, receiver, custodian, conservator,
liquidator, trustee or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 60 days or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against it or
the appointment of a receiver, trustee, custodian or other similar official for
it or for any substantial part of its property) shall occur; or Centre Re or
Centre Re (Bermuda) shall take any corporate action to authorize any of the
actions set forth above in this definition of "Bankruptcy Event".

      "Bank" shall have the meaning set forth in the first recital of this
Put Agreement.

      "Centre Re (Bermuda)" shall mean Centre Reinsurance (Bermuda) Limited,
a Bermuda corporation.

      "Change in Control" shall mean the failure of Zurich Insurance Company
to own, directly or indirectly, 100% of the capital stock of Centre Re 
(Bermuda).

<PAGE>

      "Claims Paying Ability" of Centre Re (Bermuda) shall mean the claims
paying rating assigned to Centre Re (Bermuda) by Standard & Poor's Ratings
Services or any successor thereto.

      "Consolidated Shareholders' Equity" of Centre Re (Bermuda) shall mean
all amounts which would be included under shareholders' equity on a consolidated
balance sheet of Centre Re (Bermuda) and its Consolidated Subsidiaries at such
time, determined on a consolidated basis in accordance with generally accepted
accounting principles in the United States.

      "Consolidated Subsidiaries" shall mean, as to Centre Re or Centre Re
(Bermuda), all Subsidiaries of Centre Re, or Centre Re (Bermuda) as the case may
be, which are consolidated with such Person for financial reporting purposes in
accordance with generally accepted accounting principles in the United States.

      "Credit Agreement" shall have the meaning set forth in the first
recital of this Put Agreement.

      "Credit Documents" shall have the meaning set forth in Section 9 of
the Credit Agreement.

      "Fundamental Business Change" shall mean the engagement (directly or
indirectly) by Centre Re (Bermuda) in any business other than the business in
which it is engaged on the date of this Put Agreement and businesses reasonably
related thereto.

      "Liens" shall have the meaning set forth in Section 9 of the Credit
Agreement.

      "Loans" shall have the meaning set forth in Section 9 of the Credit
Agreement.

      "Put Agreement" shall mean this Put Agreement, as amended, 
supplemented or otherwise modified from time to time.

      "Put Obligations" shall have the meaning set forth in Section 1 of
this Put Agreement.

      "Reinsurance Agreement" shall have the meaning set forth in Section 9
of the Credit Agreement.

      "Subsidiary" of any Person shall mean any corporation of which such
Person directly or indirectly owns or controls at least a majority of the
outstanding stock 

<PAGE>

having general voting power, including without limitation the right, under
ordinary circumstances, to vote for the election of a majority of the Board of
Directors of such corporation.  

      "Triggering Event" shall mean the occurrence of any of the following:

      (a)  the occurrence of a Default or an Event of Default under and as
defined in the Credit Agreement; or

      (b)  the failure of the Reinsurance Agreement to be in full force and
effect or the default by any party to such Reinsurance Agreement in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to the Reinsurance Agreement (including, without
limitation, the failure of Centre Re to make any payment owing under the
Reinsurance Agreement); or

      (c)  the failure by Centre Re (Bermuda) to maintain at all times
Consolidated Shareholders' Equity in an amount equal to or in excess of
$700,000,000; or

      (d)  the failure of Centre Re (Bermuda) to maintain its Claims Paying
Ability at a level of A or higher; or

      (e)  the occurrence of a Bankruptcy Event; or

      (f)  the occurrence of a Change in Control; or

      (g)  the occurrence of a Fundamental Business Change; or 

      (h)  at any time on or after December 23, 1996, SNIC shall fail to
have an A.M. Best rating of at least A-.

                      *   *    *

<PAGE>

      IN WITNESS WHEREOF, Centre Re has caused this Put Agreement to be
executed and delivered as of the date first above written.

ADDRESS

Cumberland House                    CENTRE REINSURANCE LIMITED
One Victoria Street
P.O. Box HM 1788
Hamilton HM HX Bermuda
                               By /s/ David Brown            
                                 ----------------------------
                                 Title: President



125 London Wall                THE CHASE MANHATTAN BANK,
London, England                  LONDON BRANCH
EC2Y 5AJ


                               By /s/ Robert Foster         
                                 ----------------------------
                                 Title: Vice President

<PAGE>

Each of the undersigned hereby acknowledges and consents to the Put Agreement
and hereby waives any defenses it may have relating to, or any other rights it
may have to object to, the exercise by the Bank of its right to require Centre
Re to purchase the Put Obligations pursuant to the Put Agreement.



SUPERIOR NATIONAL INSURANCE GROUP, INC.



By /s/ J. Chris Seaman            
  ---------------------------------
  Title: CFO



SUPERIOR NATIONAL INSURANCE COMPANY



By /s/ J. Chris Seaman            
  ---------------------------------
  Title: CFO

<PAGE>

                                                                  EXECUTION COPY




                       GUARANTY


      GUARANTY, dated as of November 12, 1996, made by CENTRE REINSURANCE
(BERMUDA) LIMITED, a corporation organized and existing under the laws of
Bermuda (the "Guarantor").  Capitalized terms used herein shall have the
meanings set forth in Section 18 hereof.


                W I T N E S S E T H :


      WHEREAS, Centre Reinsurance Limited (the "Put Party") and The Chase
Manhattan Bank, London Branch (together with its successors and assigns in its
capacity as the "Bank" under and as defined in the Credit Agreement referred to
below, the "Bank") have entered into a Put Agreement, dated as of November 12,
1996 (as modified, supplemented or amended from time to time, the "Put 
Agreement"), pursuant to which the Put Party has agreed, subject to and upon the
terms and conditions set forth therein, to purchase the Loans incurred by
Superior National Insurance Group, Inc. (the "Borrower") pursuant to the Credit
Agreement (the "Credit Agreement"), dated as of November 12, 1996, among the
Borrower, the Bank and The Chase Manhattan Bank, as Collateral Agent;

      WHEREAS, the Put Party is a wholly-owned Subsidiary of the Guarantor;

      WHEREAS, it is a condition to the making of the Loans under the Credit
Agreement that the Guarantor shall have executed and delivered this Guaranty;
and

      WHEREAS, the Guarantor desires to execute and deliver this Guaranty in
order to satisfy the condition described in the preceding paragraph;


      NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to the Guarantor, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby makes the following representations and
warranties to the Bank and hereby covenants and agrees with the Bank as follows:

<PAGE>

      1.  The Guarantor irrevocably and unconditionally guarantees the full
and prompt payment when due (whether by acceleration or otherwise) of all
amounts payable under the Put Agreement and of all other obligations and
liabilities of the Put Party now existing or hereafter incurred under, arising
out of or in connection with the Put Agreement and the due performance and
compliance with the terms of the Put Agreement by the Put Party (all such
amounts, obligations and liabilities, collectively, the "Guaranteed
Obligations").  

      2.  The Guarantor hereby waives notice of acceptance of this Guaranty
and notice of any liability to which it may apply, and waives presentment,
demand of payment, protest, notice of dishonor or nonpayment of any such
liability, suit or taking of other action by the Bank against, and any other
notice to, any party liable thereon (including such Guarantor or any other
guarantor).

      3.  The Bank may at any time and from time to time without the consent
of, or notice to the Guarantor, without incurring responsibility to the 
Guarantor and without impairing or releasing the obligations of the Guarantor
hereunder, upon or without any terms or conditions and in whole or in part:

      (a)  change the manner, place or terms of payment of, and/or change or
    extend the time of payment of, renew or alter, any of the Guaranteed
    Obligations, any security therefor, or any liability incurred directly or
    indirectly in respect thereof, and the guaranty herein made shall apply to
    the Guaranteed Obligations as so changed, extended, renewed or altered;

      (b)  sell, exchange, release, surrender, realize upon or otherwise
    deal with in any manner and in any order any property by whomsoever at any
    time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
    Obligations or any liabilities (including any of those hereunder) incurred
    directly or indirectly in respect thereof or hereof, and/or any offset
    thereagainst;

      (c)  exercise or refrain from exercising any rights against the Put
    Party or others or otherwise act or refrain from acting;

      (d)  settle or compromise any of the Guaranteed Obligations, any
    security therefor or any liability (including any of those hereunder)
    incurred directly or indirectly in respect thereof or hereof, and may
    subordinate the payment of all or any part thereof to the 

<PAGE>

    payment of any liability (whether due or not) of the Put Party to creditors
    of the Put Party other than the Bank and the Guarantor;

      (e)  apply any sums by whomsoever paid or howsoever realized to any
    liability or liabilities of the Put Party to the Bank regardless of what
    liabilities or liabilities of the Put Party remain unpaid;

      (f)  consent to or waive any breach of, or any act, omission or
    default under, the Put Agreement, or otherwise amend, modify or supplement
    the Put Agreement or any of such other instruments or agreements; and/or

      (g)  act or fail to act in any manner referred to in this Guaranty
    which may deprive the Guarantor of its right to subrogation against the Put
    Party to recover full indemnity for any payments made pursuant to this
    Guaranty.

      4.  The obligations of the Guarantor under this Guaranty are absolute
and unconditional and shall remain in full force and effect without regard to,
and shall not be released, suspended, discharged, terminated or otherwise
affected by, any circumstance or occurrence whatsoever, including, without
limitation:  (a) any action or inaction by the Bank as contemplated in Section 3
of this Guaranty; or (b) any invalidity, irregularity or unenforceability of all
or part of the Guaranteed Obligations or of any security therefor.  This
Guaranty is a primary obligation of the Guarantor.

      5.  If and to the extent that the Guarantor makes any payment to the
Bank or to any other Person pursuant to or in respect of this Guaranty, any
claim which the Guarantor may have against the Put Party by reason thereof shall
be subject and subordinate to the prior payment in full of the Guaranteed
Obligations.

      6.  In order to induce the Bank to make the Loans pursuant to the
Credit Agreement, the Guarantor makes the following representations, warranties
and agreements:

      (a)  The Guarantor (i) is a duly organized and validly existing
    corporation in good standing under the laws of the jurisdiction of its
    incorporation, (ii) has the power and authority to own its property and
    assets and to transact the business in which it is engaged and (iii) is
    duly qualified as a foreign corporation and in good standing in each
    jurisdiction where the ownership, leasing or operation of property or the
    conduct of its 

<PAGE>

    business requires such qualification and where the failure to do so would
    have a material adverse effect on the financial condition or operations of
    the Guarantor.

      (b)  The Guarantor has the corporate power to execute, deliver and
    perform the terms and provisions of this Guaranty and has taken all
    necessary corporate action to authorize the execution, delivery and
    performance by it of this Guaranty.  The Guarantor has duly executed and
    delivered this Guaranty, and this Guaranty constitutes its legal, valid and
    binding obligation enforceable in accordance with its terms except as the
    enforceability thereof may be limited by applicable bankruptcy, insolvency,
    reorganization or other similar laws affecting creditors' rights generally
    and by general equitable principles (regardless of whether the issue of
    enforceability is considered in a proceeding in equity or at law).

      (c)  Neither the execution, delivery or performance by the Guarantor
    of this Guaranty, nor compliance by it with the terms and provisions
    hereof, (i) will contravene any provision of any law, statute, rule or
    regulation or any order, writ, injunction or decree of any court or
    governmental instrumentality, (ii) will conflict or be inconsistent with or
    result in any breach of any of the terms, covenants, conditions or 
    provisions of, or constitute a default under, or result in the creation or
    imposition of (or the obligation to create or impose) any Lien upon any of
    the property or assets of the Guarantor pursuant to the terms of any
    indenture, mortgage, deed of trust, credit agreement, loan agreement or any
    other material agreement, contract or instrument to which the Guarantor is
    a party or by which it or any of its property or assets is bound or to
    which it may be subject or (iii) will violate any provision of the 
    Certificate of Incorporation or By-Laws of the Guarantor.

      (d)  No order, consent, approval, license, authorization or validation
    of, or filing, recording or registration with (except as have been obtained
    or made prior to the Effective Date), or exemption by, any governmental or
    public body or authority, or any subdivision thereof, is required to
    authorize, or is required in connection with, (i) the execution, delivery
    and performance of this Guaranty or (ii) the legality, validity, binding
    effect or enforceability of this Guaranty.

<PAGE>

      (e)  The Guarantor is in compliance with all applicable statutes,
    regulations and orders of, and all applicable restrictions imposed by, all
    governmental bodies, domestic or foreign, in respect of the conduct of its
    business and the ownership of its property (including applicable statutes,
    regulations, orders and restrictions relating to environmental standards
    and controls), except such noncompliance as would not, in the aggregate,
    have a material adverse effect on the business, operations, property,
    assets, condition (financial or otherwise) or prospects of the Guarantor
    and its Subsidiaries taken as a whole.

      (f)  The Guarantor owns, directly or indirectly, 100% of the capital
    stock of the Put Party.

      7.  The Guarantor hereby covenants and agrees that for so long as this
Guaranty is in effect the Guarantor will furnish to the Bank, with reasonable
promptness, such information or documents (financial or otherwise) as the Bank
may reasonably request from time to time.

      8.  This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon.  No failure or delay on the part of the
Bank in exercising any right, power or privilege hereunder and no course of
dealing between the Guarantor, the Put Party or the Bank shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.  The rights, powers and
remedies herein expressly provided are cumulative and not exclusive of any
rights, powers or remedies which the Bank would otherwise have.  No notice to or
demand on the Guarantor in any case shall entitle the Guarantor to any other
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Bank to any other or further action in any 
circumstances without notice or demand.

      9.  This Guaranty shall be binding upon the Guarantor and its 
successors and assigns and shall inure to the benefit of the Bank and its
successors and assigns; PROVIDED, that the Guarantor may not assign or transfer
any of its rights or obligations hereunder without the prior written consent of
the Bank.

      10.  Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except as provided in Section 11.11 of the
Credit Agreement.  As 

<PAGE>

provided in such Section 11.11, any purported change, waiver, discharge or
termination of this Guaranty or any other Credit Document which is not agreed to
in writing by the Borrower, the Bank and the Put Party shall have no force or
effect.

      11.  The Guarantor acknowledges that an executed (or conformed) copy
of each of the Put Agreement and the Credit Agreement has been made available to
its principal executive officers and such officers are familiar with the
contents thereof.

      12.  In addition to any rights now or hereafter granted under 
applicable law or otherwise, and not by way of limitation of any such rights,
upon the failure of the Put Party to timely honor its obligations under the Put
Agreement, the Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest, or other notice of any kind to the
Guarantor or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and apply any and all deposits (general or
special) and any other indebtedness at any time held or owing by the Bank
(including without limitation by branches and agencies of the Bank wherever
located) to or for the credit or the account of the Guarantor against and on
account of the obligations of the Guarantor to the Bank under this Guaranty,
irrespective of whether or not the Bank shall have made any demand hereunder and
although said obligations, or any of them, shall be contingent or unmatured.

      13.  All notices and other communications hereunder shall be made at
the addresses, in the manner and with the effect provided in Section 11.03 of
the Credit Agreement, provided that, for this purpose, the address of the
Guarantor shall be the one specified opposite its signature below.

      14.  If claim is ever made upon the Bank for repayment or recovery of
any amount or amounts received in payment or on account of any of the Guaranteed
Obligations and any of the aforesaid payees repays all or part of said amount by
reason of (a) any judgment, decree or order of any court or administrative body
having jurisdiction over such payee or any of its property or (b) any settlement
or compromise of any such claim effected by such payee with any such claimant
(including the Put Party), then and in such event the Guarantor agrees that any
such judgment, decree, order, settlement or compromise shall be binding upon it,
notwithstanding any revocation hereof or the cancellation of any instrument
evidencing any liability of the Put Party, and the Guarantor shall be and remain
liable to the aforesaid payees hereunder for the amount so repaid or recovered
to the 

<PAGE>

same extent as if such amount had never originally been received by any such
payee.

      15.  Any acknowledgment or new promise, whether by payment of any
amount or otherwise and whether by the Put Party or others (including the
Guarantor), with respect to any of the Guaranteed Obligations shall, if the
statute of limitations in favor of the Guarantor against the Bank shall have
commenced to run, toll the running of such statute of limitations, and if the
period of such statute of limitations shall have expired, prevent the operation
of such statute of limitations.

      16.  (a)  This Guaranty and the rights and obligations of the Bank and
the Guarantor hereunder shall be construed in accordance with and governed by
the law of the State of New York.  Any legal action or proceeding with respect
to this Guaranty may be brought in the courts of the State of New York or of the
United States for the Southern District of New York, and, by execution and
delivery of this Guaranty, the Guarantor hereby irrevocably accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts.  The Guarantor hereby further irrevocably waives any
claim that any such courts lack jurisdiction over the Guarantor and agrees not
to plead or claim, in any legal action or proceeding with respect to this
Guaranty brought in any of such aforesaid courts, that any such court lacks
jurisdiction over the Guarantor.  The Guarantor further irrevocably consents to
the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to the Guarantor at its address set forth opposite its
signature below, such service to become effective 30 days after such mailing. 
The Guarantor hereby irrevocably waives any objection to such service of process
and further irrevocably waives and agrees not to plead or claim in any legal
action or proceeding commenced hereunder or under the Put Agreement that service
of process was in any way invalid or ineffective.  Nothing herein shall affect
the right of the Bank to serve process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against the Guarantor in any
other jurisdiction.  The Guarantor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with the Guaranty brought
in the courts referred to above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.

<PAGE>

      (b)  Upon default by the Guarantor in the payment when due of the
Guaranteed Obligations, the Bank may notify the Guarantor that the Bank is
holding the Guaranteed Obligations for account of the Guarantor, whereupon the
Guaranteed Obligations will be deemed to have been tendered and delivered to,
and accepted by, the Guarantor and the Guarantor shall thereupon become 
obligated to pay, and the Bank shall be entitled to proceed against the 
Guarantor for payment of, the Guaranteed Obligations.  The Guarantor agrees that
the Bank is entitled to specific performance of the Guarantor's obligation to
pay the Guaranteed Obligations and the Guarantor hereby waives, and agrees that
it will not raise, any defense to such an action for specific performance of the
Guarantor's obligation to pay the Guaranteed Obligations based upon the Bank
having an adequate remedy at law.

      17.  The obligation of the Guarantor to make payment in U.S. Dollars
of any Guaranteed Obligations due hereunder shall not be discharged or satisfied
by any tender, or any recovery pursuant to any judgment, which is expressed in
or converted into any currency other than U.S. Dollars, except to the extent
such tender or recovery shall result in the actual receipt by the Bank at its
Payment Office of the full amount of U.S. Dollars expressed to be payable in
respect of any such Guaranteed Obligations.  The obligation of the Guarantor to
make payment in U.S. Dollars as aforesaid shall be enforceable as an alternative
or additional cause of action for the purpose of recovery in U.S. Dollars of the
amount, if any, by which such actual receipt shall fall short of the full amount
of U.S. Dollars expressed to be payable in respect of any such Guaranteed
Obligations, and shall not be affected by judgment being obtained for any other
sums due under this Guaranty.

      18.  The terms defined in this Section 18, whenever used and 
capitalized in this Guaranty, shall, unless the context otherwise requires, have
the respective meanings herein specified:

      "Bank" shall have the meaning set forth in the first recital paragraph
hereof.

      "Borrower" shall have the meaning set forth in the first recital
paragraph hereof.

      "Credit Agreement" shall have the meaning set forth in the first
recital paragraph hereof.

      "Effective Date" shall mean November 12, 1996.

<PAGE>

      "Loans" shall have the meaning set forth in Section 9 of the Credit
Agreement.

      "Put Agreement" shall have the meaning set forth in the first recital
paragraph hereof.

      "Put Party" shall have the meaning set forth in the first recital
paragraph hereof.

      "Subsidiary" shall mean any corporation of which the Guarantor
directly or indirectly owns or controls at least a majority of the outstanding
stock having general voting power, including without limitation the right, under
ordinary circumstances, to vote for the election of a majority of the Board of
Directors of such corporation.  

      "U.S. Dollar" or "U.S.$" shall mean the lawful currency of the United
States of America.

                      *   *   *

<PAGE>

      IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.

ADDRESS

Cumberland  House                CENTRE REINSURANCE (BERMUDA)
One Victoria Street              LIMITED
P.O. Box HM 1788          
Hamilton HM HX Bermuda

                               By /s/ David Brown
                                 ---------------------------------
                                 Title: Executive Vice President



Accepted and Agreed to:

THE CHASE MANHATTAN BANK, 
    LONDON BRANCH



By /s/ Robert Foster          
  ----------------------------
  Title: Vice President
<PAGE>

                                                                       EXHIBIT G


                               ASSET TRANSFER AGREEMENT

         ASSET TRANSFER AGREEMENT (hereinafter, "Agreement") is dated as of
November 12, 1996 by and among SUPERIOR NATIONAL INSURANCE GROUP, INC., a
California corporation; SUPERIOR NATIONAL INSURANCE COMPANY, a California
corporation; CENTRE REINSURANCE LIMITED, a Bermuda corporation; and THE CHASE
MANHATTAN BANK, LONDON BRANCH, the London branch of a New York banking
corporation; and THE CHASE MANHATTAN BANK, as Collateral Agent under the Loan
Documents referred to below (the "Collateral Agent") as follows:

                                       RECITALS

         A.   Superior National Insurance Group, Inc. (hereinafter, "SNIG") is
a corporation organized and existing under the laws of the State of California;
has its principal place of business in the State of California; and owns all of
the authorized, issued, and outstanding stock of Superior National Insurance
Company.

         B.   Superior National Insurance Company (hereinafter, "SNIC") is a
corporation organized and existing under the laws of the State of California;
has its principal place of business in the State of California; and is
authorized and licensed in and by the State of California to engage in the
business of insurance and reinsurance.

         C.   Centre Reinsurance Limited (hereinafter, "Centre Re") is a
corporation organized and existing under the laws of Bermuda; has its principal
place of business in Bermuda; and is authorized and licensed in and by Bermuda
to engage in the business of insurance and reinsurance.

         D.   The Chase Manhattan Bank, London Branch (hereinafter "Chase"), is
the London branch of a corporation organized and existing under the laws of the
State of New York; has its principal place of business in London; and is
authorized and licensed to engage in the business of banking.

         E.   The Collateral Agent is a corporation organized and existing
under the laws of the State of New York; has its principal place of business in
the State of New York; and is authorized and licensed in and by the State of New
York to engage in the business of banking.

         F.   On or about August 30, 1991, SNIC and Centre Re entered into a
reinsurance agreement known as "Aggregate Excess of Loss Cover," as amended
(hereinafter, the "Reinsurance Agreement"), pursuant to which agreement SNIC
ceded and Centre Re accepted reinsurance of certain policies, bonds, binders,
and other contracts of insurance and reinsurance as specifically set forth in
the Reinsurance Agreement, which is incorporated herein by reference and
attached hereto as Exhibit A.

<PAGE>

         G.   Pursuant to the Reinsurance Agreement, Centre Re is obligated to
pay reinsurance proceeds to SNIC, which are reinsurance receivables to SNIC from
Centre Re, in an amount which SNIC and Centre Re agree totals, as of the date
hereof, one hundred twelve million, seven hundred seventy-seven thousand, two
hundred twenty-six dollars ($112,777,226) (hereinafter, "Reinsurance
Receivables").

         H.   Contemporaneously with this Agreement, SNIG and Chase are
entering into a "Credit Agreement" (hereinafter, "Loan Agreement") and related
documents, exhibits, and schedules thereto, including, without limitation,
bearer promissory notes from SNIG, evidencing loans from Chase to SNIG
(hereinafter collectively referenced as "Loan Documents"), incorporated herein
by reference and attached hereto as Exhibit B.

         I.   Contemporaneously with this Agreement, Chase will, pursuant to
the Loan Documents, lend to SNIG the aggregate amount of ninety-four million,
one hundred ninety-one thousand, eight hundred fifty-three dollars ($94,191,853)
(hereinafter, the "Loans").

         J.   Contemporaneously with this Agreement, Centre Re and Chase are
entering into a "Put Agreement," incorporated herein by reference and attached
hereto as Exhibit C.

         K.   Pursuant to the terms and conditions of the Put Agreement, Centre
Re will INTER ALIA obligate itself to purchase the Loan upon Chase's exercise of
a demand to do so upon occurrence of a "Triggering Event" as defined in the Put
Agreement.

         L.   Pursuant to this Agreement, SNIC will sell to SNIG and SNIG will
purchase from SNIC, SNIC's right to receive all one hundred twelve million,
seven hundred seventy-seven thousand, two hundred twenty-six dollars
($112,777,226) of the Reinsurance Receivables (the "Sold Receivables").

         M.   The purchase price for the Sold Receivables which shall be paid
by SNIG to SNIC shall consist of (i) the amount of eighty-three million,
seventy-four thousand, seven hundred ninety-five dollars ($83,074,795) in cash,
plus (ii) SNIG's assumption of SNIC's liability to Superior Bermuda Limited
("SBL") in the amount of twenty-nine million, seven hundred two thousand, four
hundred thirty-one dollars ($29,702,431), for an aggregate purchase price of one
hundred twelve million, one hundred twelve million, seven hundred seventy-seven
thousand, two hundred twenty-six dollars ($112,777,226) (the "Purchase Price").

         N.   Contemporaneously with this Agreement, SNIG will, pursuant to the
Loan Documents, assign to the Collateral Agent as security for the Loan a
security interest in, INTER ALIA, eighty-three million, seventy-four thousand,
seven hundred ninety-five dollars ($83,074,795) of the Sold Receivables payable
on the payment dates July 15, 1998 through October 15, 2004, inclusive, pursuant
to the payment schedule as set forth in Section 1.1 hereof (the "Pledged
Receivables").


                                          2

<PAGE>

         O.   By this Agreement, SNIG and SNIC instruct Centre Re to make all
payments of all Reinsurance Receivables directly to Chase, as the Bank under the
Loan Agreement.

         P.   By this Agreement, it is the desire and agreement of all parties
hereto that any and all payments made by Centre Re to Chase pursuant to this
Agreement, in the amount(s) and to the extent actually and irrevocably paid,
shall (1) be deemed to be payment in satisfaction of a like amount of the Loan
and a like amount of all other obligations of Centre Re or SNIG to make
payment(s) to Chase under the Loan Documents; and (2) be deemed satisfaction and
discharge of a like amount of Centre Re's obligations to pay reinsurance
proceeds under the Reinsurance Agreement.

         Q.   All parties acknowledge that this Agreement, and the other
agreements and documents described here, are or may be subject to regulatory
review, approval, or disclosure, as the case may be under the relevant laws of
the State of California or Bermuda, including without limitation by the
California Department of Insurance.


                                      AGREEMENT

         THEREFORE, in consideration of the foregoing and the mutual promises
and covenants contained herein, and agreeing to be bound hereby, the parties
hereto hereby further agree as follows:


                 ARTICLE I.  INSTRUCTION TO PAY REINSURANCE PROCEEDS

         1.1  DIRECT PAYMENT INSTRUCTION.  SNIG and SNIC, each individually and
both jointly and severally, hereby irrevocably instruct Centre Re to pay any and
all reinsurance proceeds, otherwise required to be paid by Centre Re as
Reinsurance Receivables pursuant to the Reinsurance Agreement, directly to
Chase, as the Bank under the Loan Agreement ("Direct Payment Instruction"), at
such times and in such amounts as are set forth in the following schedule:


                                          3


<PAGE>

         PAYMENT SCHEDULE:

         Payment Date                       Amount
         ------------                       ------

         January 15, 1997                   $3,000,000
         April 15, 1997                      3,000,000
         July 15, 1997                       3,000,000
         October 15, 1997                    3,000,000
         January 15, 1998                    3,000,000
         April 15, 1998                     10,000,000
         July 15, 1998                       4,702,431
         July 15, 1998                       5,297,569*
         October 15, 1998                   10,000,000*
         January 15, 1999                   10,000,000*
         April 15, 1999                      7,000,000*
         July 15, 1999                       7,000,000*
         October 15, 1999                    7,000,000*
         January 15, 2000                    7,000,000*
         April 15, 2000                      5,131,000*
         July 15, 2000                       5,131,000*
         October 15, 2000                    5,131,000*
         July 15, 2004                       7,192,113*
         October 15, 2004                    7,192,113*
         --------------------              ---------------------
         TOTAL                            $112,777,226

         *  Denotes "Pledged Receivables"

         1.2.  ACKNOWLEDGMENT OF INSTRUCTION.  Centre Re and Chase, each
individually, hereby acknowledge and accept to irrevocable payment instruction
set forth in section 1.1 (relating to "Direct Payment Instruction"), and agree
to comply therewith and be bound thereby.

         1.3.  DISCHARGE OF PROMISSORY NOTE.  Except as provided in the last
sentence of this Section 1.3, to the extent and in the amount of Centre Re's
payment of Reinsurance Receivables as required by this Agreement to Chase, (a)
any and all amounts paid by Centre Re to Chase, at the times and in the amounts
required under this Agreement, shall be deemed to satisfy a like amount of the
obligations, if any, of SNIG to make payments (including principal and interest)
on the Loans for all purposes as if fully paid by and received directly from
SNIG; and (b) SNIG shall be released and discharged in respect of a like amount
of its obligations under the Loan Documents, and a like amount of its
obligations under the Loan Documents shall be deemed satisfied and extinguished.
Under no circumstances shall Chase be required to return to Centre Re, SNIG,
SNIC, or any other person any payment received by Chase from Centre Re under
this Agreement.  In the event that, notwithstanding the preceding sentence,
Chase is required to return or disgorge any payment received by Chase hereunder,
then to the extent and in the amount of such return or disgorgement SNIG's
obligations under the Loan Documents


                                          4


<PAGE>

shall be reinstated and shall not, to the extent and in the amount of such
return or disgorgement, be deemed satisfied, released, discharged, or
extinguished.

         1.4.  DISCHARGE OF REINSURANCE AGREEMENT.  To the extent and in the
amount of Centre Re's payment of Reinsurance Receivables as required by this
Agreement to Chase, (a) any and all amounts paid by Centre Re to Chase,
including without limitation payments under the Put Agreement, shall be deemed
to satisfy a like amount of its obligations of Centre Re to pay Reinsurance
Receivables under the Reinsurance Agreement; and (b) Centre Re shall be released
and discharged in respect of a like amount of its obligations under the
Reinsurance Agreement, and a like amount of its obligations shall be deemed
satisfied and extinguished, under the Reinsurance Agreement.  Centre Re hereby
acknowledges and confirms that as of the date hereof, the aggregate amount of
Reinsurance Receivables is one hundred twelve million, seven hundred
seventy-seven thousand, two hundred twenty-six dollars ($112,777,226).  All
payments made by Centre Re respecting Reinsurance Receivables to Chase shall
reduce by the same amount any and all liabilities and obligations Centre Re may
have, now or in the future, under the Reinsurance Agreement with respect to the
Reinsurance Receivables.

         1.5.  NO INTEREST CREATED FOR POLICYHOLDERS OR CLAIMANTS.
Notwithstanding anything in this Agreement or in any other agreement or document
described in this Agreement that may appear to the contrary, nothing in this
Agreement creates any right, title, or interest on the part of any person who is
a policyholder, bondholder, insured, named insured, additional insured, or
otherwise insured or who is a claimant, loss payee, applicant for benefits, or
any other type of claimant or recipient who claims or seeks insurance proceeds
under any policy, binder, endorsement, or other contract of insurance issued at
any time by SNIC.

         1.6.  PURCHASE AND SALE OF THE SOLD RECEIVABLES.  SNIC hereby sells to
SNIG, and SNIG hereby purchases from SNIC, effective upon the Closing under the
Loan Agreement, all of SNIC's right, title and interest in, to and under the
Sold Receivables.  On the Closing Date, SNIG shall pay to SNIC the Purchase
Price for the Sold Receivables.

         1.7.  ACKNOWLEDGMENT OF PURCHASE AND SALE.  Centre Re hereby
acknowledges and consents to the purchase and sale of the Sold Receivables
pursuant to Section 1.6.

         1.8.  ACKNOWLEDGMENT OF SECURITY INTEREST.  Centre Re hereby
acknowledges and consents to the grant by SNIG to the Collateral Agent of a
security interest in the Pledged Receivables pursuant to the Security Agreement,
which is one of the Loan Documents.

         1.9.  RESTRICTION ON TRANSFER.  SNIG and SNIC hereby agree not to
transfer, assign, or grant any security or other interest in, any of the
Reinsurance Receivables for the benefit of any person other than the Collateral
Agent under the Loan Documents.


                                          5


<PAGE>

                     ARTICLE II.  REPRESENTATIONS AND WARRANTIES

         2.1.  WARRANTIES TO CHASE.  SNIG, SNIC, and Centre Re, each
individually with respect to itself and not jointly and severally, hereby
represent and warrant to Chase and to each other the following as of the date
hereof:

              a.   It is a corporation validly existing and in good standing
    under the laws of the state or nation of its incorporation, with full power
    to enter into and perform this Agreement.

              b.   Its execution, delivery, and performance of and compliance
    with this Agreement do not and will not violate or conflict with (1) any
    provision of its articles of Incorporation or bylaws, or any amendments
    thereto; (2) any material terms of any mortgage, indenture, lien, lease,
    agreement, instrument, order, judgment, or decree to which such entity is a
    party or by which it is bound; or (3) to the actual knowledge of such
    entity, any provision of law, statute, ordinance, rule, or regulation.

              c.   Upon execution, this Agreement shall constitute a legal and
    valid obligation of such entity enforceable against it in accordance with
    its terms except insofar as enforceability may be limited by bankruptcy,
    insolvency, reorganization, or similar laws affecting the rights of
    creditors generally.

              d.   SNIC and Centre Re, each individually, has duly authorized,
    executed and delivered the Reinsurance Agreement, and the Reinsurance
    Agreement constitutes a legal, valid, and binding obligation between them,
    enforceable against each in accordance with the terms of said Reinsurance
    Agreement, except insofar as enforceability may be limited by bankruptcy,
    insolvency, reorganization, or similar laws affecting the rights of
    creditors generally.

              e.   The amounts and payment dates set forth in the payment
    schedule set forth in section 1.1 (relating to "Direct Payment
    Instruction") of this Agreement represent absolute and unconditional
    payment obligations of Centre Re that have arisen under the Reinsurance
    Agreement.  Such payment obligations are not subject to any setoff,
    adjustment, counterclaim, or defense of any kind, other than as set forth
    in Section 3.15 hereof.

         2.2.   WARRANTIES FROM CHASE.  Chase hereby represents and warrants to
SNIG, SNIC, and Centre Re, as follows as of the date hereof:


                                          6


<PAGE>

              a.   Chase is the London branch of a New York banking corporation
    which is validly existing and in good standing under the laws of the State
    of New York with full power to enter into and perform this Agreement.

              b.   Chase's execution, delivery, and performance of and
    compliance with this Agreement does not and will not violate or conflict
    with (1) any provision of its articles of incorporation or bylaws, or any
    amendments thereto; (2) any material terms of any mortgage, indenture,
    lien, lease, agreement, instrument, order, judgment, or decree to which
    such entity is a party or by which it is bound; or (3) to the actual
    knowledge of Chase, any provision of law, statute, ordinance, rule, or
    regulation.

              c.   Upon execution, this Agreement shall constitute a legal and
    valid obligation of Chase enforceable against it in accordance with its
    terms except insofar as enforceability may be limited by bankruptcy,
    insolvency, reorganization, or similar laws affecting the rights of
    creditors generally.


                           ARTICLE III. GENERAL PROVISIONS

         3.1.   EFFECTIVE DATE.  This Agreement shall take effect on the date
it is executed by all parties hereto.

         3.2.   NOTICES.  All notices required under this Agreement (1) shall
be personally delivered, sent by first-class mail with postage fully prepaid at
the following addresses, sent by a national or international courier service, or
sent by facsimile or telecopier transmission with confirmation to the following
numbers; (2) or delivered, sent, or transmitted to such other address(es) or
number(s) of a party that said party to this Agreement shall advise every other
party to this Agreement in accordance with the preceding clause (1):

              a.   If to SNIG, to the attention of J. Chris Seaman, C.P.A.,
    Senior Vice President and Chief Financial Officer, as follows:

         Superior National Insurance Group, Inc.
         26601 Agoura Road
         Calabasas, California  91302
         United States of America
         Facsimile transmission number:  (818) 880-8615
         Telephone number:  (818) 880-1600

    With a copy to the attention of Joseph K. Hegedus, Esq. as follows:


                                          7


<PAGE>

         Lewis, D'Amato, Brisbois & Bisgaard LLP
         221 North Figueroa Street, Suite 1200
         Los Angeles, California  90012
         United States of America
         Facsimile transmission number:  (213) 250-7900
         Telephone number:  (213) 250-1800

              b.   If to SNIC, to the attention of J. Chris Seaman, C.P.A.,
    Senior Vice President and Chief Financial Officer, with a copy to Joseph K.
    Hegedus, Esq., at the addresses and facsimile transmission numbers set
    forth in subsection a of this section.

              c.   If to Centre Re, to the attention of Mr. David Brown,
    President, as follows:

         Centre Reinsurance (Bermuda) Limited
         Cumberland House
         One Victoria Street
         PO HM 1788
         Hamilton HM HX
         Bermuda
         Facsimile transmission number:  (441) 295-3705
         Telephone number:  (441) 295-8501

    With a copy to the attention of Rolf Staub, Esq., General Counsel of
    Reinsurance, as follows:

         ZC Resource Ltd.
         One Chase Manhattan Plaza, 35th Floor
         New York, New York  10005
         United States of America
         Facsimile transmission number:  (212) 509-2228
         Telephone number:  (212) 898-5347

              d.   If to Chase, to the attention, of Mr. Neil McVity, as
    follows:

         The Chase Manhattan Bank, London Branch
         125 London Wall
         London, England
         EC2Y 5AJ
         Telephone number:  011 44 171 962-5812

    With a copy to the attention of David N. Koschik, Esq., as follows:


                                          8


<PAGE>

         White & Case
         1155 Avenue of the Americas
         New York, New York  10036-2787
         Facsimile transmission number:  (212) 354-8113
         Telephone number:  (212) 819-8241

              e.   If to the Collateral Agent, to the attention of Mr. Robert
    Foster, Vice President, as follows:

         The Chase Manhattan Bank
         One Chase Manhattan Plaza, 4th Floor
         New York, New York  10081
         Unites States of America
         Facsimile transmission number:  (212) 552-1999
         Telephone number:  (212) 552-5512

    With a copy to the attention of David N. Koschik, Esq., as follows:

         White & Case
         1155 Avenue of the Americas
         New York, New York  10036-2787
         Facsimile transmission number:  (212) 354-8113
         Telephone number:  (212) 819-8241

         3.3   COUNTERPARTS.  This Agreement, and any amendment, waiver,
consent, or supplement hereto, may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument.

         3.4.   WARRANTY OF SIGNATORIES.  Each signatory of this Agreement
warrants that he or she is (1) an officer of the party on whose behalf he or she
is signing this Agreement; (2) is legally competent and authorized to execute
this Agreement on behalf of the party whose name is subscribed at or above the
signatory's signature; and (3) has obtained all necessary corporate approval
from the party on whose behalf he or she is signing this Agreement.

         3.5.   REPRESENTATION BY ATTORNEYS.  Each party hereby acknowledges
that it has been fully, adequately, and competently represented by an attorney
or attorneys of that party's choice in connection with this Agreement.

         3.6.   TERMINATION OR AMENDMENT OF AGREEMENTS.  Except as otherwise
provided in Section 3.8 hereof, this Agreement may be terminated, amended,
modified, or otherwise changed only by an agreement in writing expressly
referring to this Agreement and executed by the all parties hereto, and in no
other manner; and no waiver of any provision of this


                                          9
<PAGE>

Agreement, estoppel of any party, custom or usage, or course of conduct shall 
be deemed to be an amendment, modification, or other change to this 
Agreement.  The Loan Documents, and the Put Agreement, may not be amended 
without the written consent of Centre Re.

         3.7.   WAIVER OF BREACH.  In the event of any breach or claimed 
breach by any party to this Agreement, the non-breaching party's or parties' 
failure to enforce such breach shall not be deemed a waiver thereof (subject 
to governing statutes of limitations and the doctrine of laches), and the 
non-breaching party's or parties' waiver of any breach of any provision of 
this Agreement by a breaching party shall not be deemed to be a waiver of any 
other provision of this Agreement or waiver of any other breach of the same 
provision.  No waiver of any provision of this Agreement shall be enforceable 
unless it is in a writing signed by the party to be charged.

         3.8.   TERMINATION.  This Agreement shall remain in effect until the
obligations set forth in the Loan Documents have been irrevocably paid in full.

         3.9.   GOVERNING LAW, CONSENT TO JURISDICTION, AND CHOICE OF FORUM.
This Agreement shall be governed by and construed in accordance with the laws of
the State of California, whether or not the laws governing choice of law of the
State of California or any other jurisdiction would apply the substantive law of
California; and any action brought to enforce or construe any provision of this
Agreement shall be brought in a court having jurisdiction over the subject
matter of the action and located within the County of Los Angeles, State of
California.  Each party to this Agreement hereby consents to personal
jurisdiction over that party by the courts of general trial jurisdiction within
the State of California and the County of Los Angeles.

         3.10.  SEVERABILITY.  In the event that any one or more of the
provisions of this Agreement shall be held invalid, illegal, or unenforceable,
then each such invalidity, illegality or unenforceability shall not affect any
other provision hereof, and this Agreement shall be construed by disregarding
the invalid, illegal, or unenforceable provision or provisions.

         3.11.  INUREMENT: ASSIGNMENT.  Subject to the restrictions on
assignment and delegation set forth herein, all of the provisions of this
Agreement shall be binding upon and inure to the benefit of each party hereto
and to that party's conservator, Liquidator, receiver, rehabilitator, successor,
trustee, and other similar representative, and permitted assigns and delegates.
No party hereto may assign any right or delegate any duty hereunder to any other
person or entity whatsoever, without the express prior written consent of all
other parties hereto, which consent may be given or withheld in each party's
sole and absolute discretion, and any purported assignment or delegation not in
full compliance herewith shall be null and void AB INITIO and of no force or
effect whatsoever: PROVIDED, HOWEVER, that in the event of any assignment of the
Loan by Chase in accordance with the Loan Documents (including without
limitation, as a result of the exercise of the right by Chase to cause Centre Re
to purchase the Put Obligations pursuant to the Put Agreement in accordance with
the provisions thereof), the



                                          10

<PAGE>

rights and obligations of Chase hereunder may be assigned and delegated to 
the respective assignee (including, without limitation Centre Re) without the 
necessity of any such consent.

         3.12.  CONSTRUCTION OF AGREEMENT.  The recitals and first paragraph of
this Agreement are material parts hereof.  As the context requires, the singular
shall be deemed to include the plural and VICE VERSA, and use of the masculine,
feminine, or neuter gender shall be deemed to include each other gender, as the
context requires.  The titles to and numbers of articles, sections, and
subsections of this Agreement are for reference only and do not constitute parts
of this Agreement.  In the event of conflict, the verbal description of any
article, section, or subsection shall control over the number of that provision.

         3.13.  MERGER.  Except for those Agreements and other documents
expressly referenced or described in this Agreement, including the recitals
herein, this Agreement constitutes the entire and exclusive agreement between
the parties hereto on the matters set forth herein, and any and all prior or
contemporaneous agreements, undertakings, promises, representations, warranties,
and covenants, whether written or oral and whether express, implied, or
apparent, are hereby deemed to be merged into and made a part of this Agreement.

         3.14.  INDEMNIFICATION.  SNIC and SNIG, on the one hand, and Centre
Re, on the other hand (each, an "Indemnifying Party"), hereby agree to indemnify
and hold one another, and their respective directors, officers, employees and
agents (each, an "Indemnitee" and collectively an "Indemnitee Group") from and
against any and all damages, claims, losses, liabilities, costs or expenses
(including, without limitation, reasonable attorneys' fees) (collectively,
"Claims") whatsoever which any Indemnitee may incur (or which may be claimed
against any Indemnitee by any person whatsoever) by reason of or in connection
with any breach by the Indemnifying Party of any representation, warranty,
covenant, term or condition, or the occurrence of any default by such
Indemnifying Party, under this Agreement, and any Loan Document to which such
Indemnifying Party is or hereafter becomes a party, including, without
limitation, all reasonable fees and expenses resulting from the settlement of or
defense of any claims or liabilities arising as a result of any such breach or
default: PROVIDED, HOWEVER, that an Indemnifying Party shall not be required to
indemnify any Indemnitee for any Claim to the extent that such Claim shall have
been caused by the willful misconduct or gross negligence of such Indemnitee or
any member of the Indemnitee Group.  In the event of the occurrence of any Claim
to which this Indemnity shall apply, the Indemnitee shall promptly notify the
Indemnifying Party of such Claim and may direct the Indemnifying Party to assume
the defense of such Claim and to pay all reasonable expenses incurred in
connection therewith, and if the Indemnifying Party shall fail or refuse to
assume such defense, then such Indemnitee may assume the defense of such Claim,
the reasonable costs of which shall be paid by the Indemnifying Party.

         3.15.  RIGHT OF SETOFF.  At any time and from time to time after the
exercise by Chase of the put option and the purchase of the Loans by Centre Re
pursuant to the Put Agreement, in addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
of such rights, Centre Re is hereby authorized, and SNIC and SNIG hereby agree
that Centre Re shall have the right, without presentment, demand,


                                          11

<PAGE>

protest or other notice of any kind to SNIC or SNIG, any such notice being 
hereby expressly waived, to the fullest extent permitted by law, to set off 
and appropriate and apply: (x) any amounts owed by Centre Re at such time 
with respect to the Reinsurance Receivables (as defined herein), irrespective 
of whether or not SNIG or SNIC shall have made demand with respect thereto 
and although said obligations with respect to the Reinsurance Receivables 
shall be contingent or unmatured: AGAINST (y) any "Obligations," as defined 
in the Loan Agreement, owed at any time, and from time to time, by SNIC or 
SNIG, directly or indirectly, to Centre Re, irrespective of whether or not 
Centre Re shall have made any demand hereunder or thereunder, and although 
said Obligations shall be contingent or unmatured.  To the extent and in the 
amount that Centre Re exercises this right of setoff, the Obligations 
referred to in clause (y) shall be deemed paid and satisfied.

         IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Transfer Agreement as of the date first written hereinabove.

SUPERIOR NATIONAL INSURANCE  CENTRE REINSURANCE LIMITED
GROUP, INC.



By /s/ J. Chris Seaman             By /s/ David Brown
  ---------------------------         -------------------------
    J. CHRIS SEAMAN                    DAVID BROWN
    Senior Vice President and          President
    Chief Financial Officer


SUPERIOR NATIONAL INSURANCE        THE CHASE MANHATTAN BANK,
COMPANY                            LONDON BRANCH



By /s/ J. Chris Seaman             By /s/ Robert Foster
  ---------------------------         -------------------------
    J. CHRIS SEAMAN                    ROBERT FOSTER
    Senior Vice President and          Vice President
    Chief Financial Officer


THE CHASE MANHATTAN BANK,
    as Collateral Agent


By /s/ Robert Foster
  -------------------------
    ROBERT FOSTER
    Vice President


                                          12

<PAGE>

                                                                       EXHIBIT H


             FORM OF ASSIGNMENT AGREEMENT


      ASSIGNMENT AGREEMENT (the "Assignment Agreement") dated as of 
____________ __, 19__ between ________________ ("Assignor") and ________________
("Assignee").  All capitalized terms used herein and not otherwise defined shall
have the respective meanings provided such terms in the Credit Agreement
referred to below.


                W I T N E S S E T H :


      WHEREAS, Assignor is a party to a Credit Agreement, dated as of
November 12, 1996 (as amended to the date hereof, the "Credit Agreement"), among
Superior National Insurance Group, Inc. (the "Borrower"), the Assignor and The
Chase Manhattan Bank, as Collateral Agent;

      WHEREAS, Assignor has outstanding A Loans under the Credit Agreement
of $________ and outstanding B Loans under the Credit Agreement of $________; 

      WHEREAS, Assignor and Assignee wish Assignor to assign to Assignee its
rights under the Credit Agreement with respect to a portion of its outstanding
Loans; and

      WHEREAS, Assignor and Assignee wish Assignee to assume the obligations
of Assignor under the Credit Agreement to the extent of the rights so assigned;


      NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:

      1.  ASSIGNMENT.  Assignor hereby assigns to Assignee, without
recourse, or representation or warranty (other than expressly provided herein)
and subject to Section 4(b) hereof, [x] [that principal amount listed on Annex 1
hereto as the "Amount of Assigned A Loans" of the outstanding A Loans held by
Assignor] [and (y)] [that amount listed on Annex 1 hereto as the "Amount of
Assigned B Loans" of the outstanding B Loans held by Assignor] (collectively,
the "Assigned Loans"), together with all of Assignor's rights, title and
interest arising under the Credit Agreement with 

<PAGE>

                                                                       EXHIBIT H
                                                                          Page 2


respect to the Assigned Loans and under the other Credit Documents (including,
without limitation, the right to receive payments of Reinsurance Receivables
pursuant to Sections 1.1 and 1.2 of the Asset Transfer Agreement).

      2.  ASSUMPTION.  Assignee hereby assumes from Assignor all of 
Assignor's obligations arising under the Credit Agreement relating to the
Assigned Loans.  It is the intent of the parties hereto that Assignor shall be
released from all of its obligations under the Credit Agreement relating to the
Assigned Loans pursuant to Section 11.04(b) of the Credit Agreement.

      3.  ASSIGNMENTS; PARTICIPATIONS.  Assignee may assign all or any part
of the rights granted to it hereunder, PROVIDED, that such assignment complies
with the provisions of Sections 11.04(b) and 11.04(c) of the Credit Agreement. 
Assignee may sell or grant participations in all or any part of the rights
granted to it hereunder in accordance with the provisions of Sections 11.04(a)
and 11.04(c) of the Credit Agreement.

      4.  PAYMENT OF INTEREST TO ASSIGNEE.  (a) Interest is payable by the
Borrower in respect of the Assigned Loans at the rates, and at the times set
forth in Sections 1.05 and 3.02 of the Credit Agreement, which interest, to the
extent payable after the Assignment Effective Date (as defined below), will be
payable for the account of the Assignee. 

      (b)  Notwithstanding anything to the contrary contained in this
Assignment Agreement, if and when Assignor receives or collects, in either case
after the Assignment Effective Date, any payment of interest on any of the
Assigned Loans which in any such case, is required to be paid to Assignee
pursuant to clause (a) above, Assignor shall distribute to Assignee such
payment.

      (c)  Notwithstanding anything to the contrary contained in this
Assignment Agreement, if and when Assignee receives or collects any payment of
interest on any Assigned Loan which, in any such case, is required to be paid to
Assignor pursuant to clause (a) above, Assignee shall distribute to Assignor
such payment.

<PAGE>

                                                                       EXHIBIT H
                                                                          Page 3


      5.  PAYMENTS ON ASSIGNMENT EFFECTIVE DATE.  In consideration of the
assignment by Assignor to Assignee of the Assigned Loans as set forth above,
Assignee agrees to pay to Assignor on or prior to the Assignment Effective Date
an amount specified by Assignor in writing on or prior to the Assignment
Effective Date which represents the [amount specified in the Put Agreement]
principal amount of the Assigned Loans outstanding on the Assignment Effective
Date [plus interest accrued thereon as of the Assignment Effective Date].(1)

      6.  EFFECTIVENESS.  This Assignment Agreement shall become effective
on the date (the "Assignment Effective Date") on which (i) Assignor and Assignee
shall have signed a copy hereof (whether the same or different copies) and, in
the case of Assignee, shall have delivered same to Assignor and (ii) Assignee
shall have paid to Assignor the amount set forth in Section 5(a).

      7.  AMENDMENT OF CREDIT AGREEMENT.  In accordance with the 
requirements of Section 11.04(b) of the Credit Agreement, on the Assignment
Effective Date the Credit Agreement shall be amended by deeming the signature of
Assignee herein as a signature to the Credit Agreement.  For purposes of Section
11.04(b) of the Credit Agreement, the Assignee shall be deemed a "Bank" for all
purposes under the Credit Agreement, and shall be subject to and shall benefit
from all of the rights and obligations of a Bank under the Credit Agreement and
the address of the Assignee for notice purposes shall be as set forth opposite
its signature below.

      8.  REPRESENTATIONS AND WARRANTIES.  Each of the Assignor and the
Assignee represents and warrants to the other party as follows:

      (a)  it has full power and authority, and has taken all action
    necessary, to execute and deliver this Assignment Agreement and to fulfill
    its obligations under, and to consummate the transactions contemplated by,
    this Assignment Agreement;

---------------
(1)  Include bracketed language if appropriate.

<PAGE>

                                                                       EXHIBIT H
                                                                          Page 4


      (b)  the making and performance by it of this Assignment Agreement and
    all documents required to be executed and delivered by it hereunder do not
    and will not violate any law or regulation of the jurisdiction of its
    incorporation or any other law or regulation applicable to it;

      (c)  this Assignment Agreement has been duly executed and delivered by
    it and constitutes its legal, valid and binding obligation, enforceable in
    accordance with its terms; and

      (d)  all consents, licenses, approvals, authorizations, exemptions,
    registrations, filings, opinions and declarations from or with any agency,
    department, administrative authority, statutory corporation or judicial
    entity necessary for the validity or enforceability of its obligations
    under this Assignment Agreement have been obtained, and no governmental
    authorizations other than any already obtained are required in
    connection with its execution, delivery and performance of this Assignment
    Agreement.

 The Assignor further represents and warrants that it is transferring the
Assigned Loans to the Assignee free and clear of all Liens.

      9.  EXPENSES.  The Assignor and the Assignee agree that each party
shall bear its own expenses in connection with the preparation and execution of
this Assignment Agreement.

      10.  MISCELLANEOUS.  (a) Assignor shall not be responsible to Assignee
for the execution (by any party other than the Assignor), effectiveness,
genuineness, validity, enforceability, collectibility or sufficiency of any of
the Credit Documents or for any representations, warranties, recitals or
statements made therein or in any written or oral statement or in any financial
or other statements, instruments, reports, certificates or any other documents
made or furnished or made available by Assignor to Assignee or by or on behalf
of the Borrower or any of its Subsidiaries to Assignor or Assignee in connection
with the Credit Documents and the transactions contemplated thereby.  Assignor
shall not be required to ascertain or inquire as to the performance 

<PAGE>

                                                                       EXHIBIT H
                                                                          Page 5


or observance of any of the terms, conditions, provisions, covenants or 
agreements contained in any of the Credit Documents or as to the use of the
proceeds of the Loans or as to the existence or possible existence of any
Default or Event of Default.

      (b)  Assignee represents and warrants that it has made its own
independent investigation of the financial condition and affairs of the Borrower
in connection with the making of the Loans and the assignment of the Assigned
Loans to Assignee hereunder and has made and shall continue to make its own
appraisal of the creditworthiness of the Borrower.  Assignor shall have no duty
or responsibility either initially or on a continuing basis to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any credit or other information with respect thereto, whether coming into
its possession before the making of the Loans or at any time or times thereafter
and shall further have no responsibility with respect to the accuracy of, or the
completeness of, any information provided to Assignee, whether by Assignor or by
or on behalf of the Borrower.

      (c)  THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS ASSIGNMENT
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

      (d)  No term or provision of this Assignment Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by both parties.

      (e)  This Assignment Agreement may be executed in one or more 
counterparts, each of which shall be an original but all of which, taken
together, shall constitute one and the same instrument.

      (f)  The Assignor may at any time or from time to time grant to others
assignments or participations in its Loans but not in the portions thereof
assigned to Assignee pursuant to this Assignment Agreement.  The Assignor
represents and warrants that it has not at any time prior to the Assignment
Effective Date encumbered or assigned the portion of its Loans being assigned
hereunder.

<PAGE>

                                                                       EXHIBIT H
                                                                          Page 6


      (g)  This Assignment Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. 
Neither of the parties hereto may assign or transfer any of its rights or
obligations under this Assignment Agreement without the prior consent of the
other party.  The preceding sentence shall not limit the right of the Assignee
to assign all or part of the Assigned Loans in the manner contemplated by the
Credit Agreement, subject to the provisions of Section 3 hereof.

      (h)  All representations and warranties made herein and indemnities
provided for herein shall survive the consummation of the transaction 
contemplated hereby.

      (i)  The Assignor shall promptly provide the Assignee with copies of
the documents received in connection with the transactions contemplated by the
Credit Documents and this Assignment Agreement.

      (j)  Neither the entering into of this Assignment Agreement nor the
transfer of the Assigned Loans pursuant hereto shall increase or reduce any of
the obligations of the Borrower or SNIC set forth in the Credit Documents,
except as otherwise expressly provided in [the Related Issues Agreement, dated
as of November 12, 1996, among the Borrower, SNIC, Centre Re and Centre Re
(Bermuda)](2) or in any other agreement to which the Borrower and/or SNIC is a
party.

      IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement as of the date first above written.

                               [NAME OF ASSIGNOR]


                               By
                                  ---------------------------
                                  Title:

                               [NAME OF ASSIGNEE]

                               By
                                  ---------------------------
                                  Title:

---------------
(2)  To be included if assignment is made to Centre Re.

<PAGE>

                                                                  ANNEX I       
                                                                     to         
                                                            ASSIGNMENT AGREEMENT



1.  BORROWER:  Superior National Insurance Group, Inc.

2.  DATE OF CREDIT AGREEMENT:  as of November 12, 1996

3.  ASSIGNEE:

4.  DATE OF ASSIGNMENT AGREEMENT:  ________________, 19__

5.  AMOUNT OF ASSIGNMENT:




    a.  Assignor's outstanding A
        Loans........................            $..........

    b.  Amount of Assigned A Loans...            $..........

    c.  Assignor's outstanding B 
        Loans........................            $.......... 

    d.  Amount of Assigned B Loans...            $..........




Accepted and Agreed:


[NAME OF ASSIGNOR]


By
   ---------------------------
   Title:


[NAME OF ASSIGNEE]


By
   ---------------------------
    Title: