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                                 EXHIBIT 10(f)
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                              HCI AGREEMENT NO. 439
                       PROPERTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE AGREEMENT
                    (hereinafter referred to as "Agreement")

                                     between

                       MERCHANTS MUTUAL INSURANCE COMPANY
               MERCHANTS INSURANCE COMPANY OF NEW HAMPSHIRE, INC.

                                Buffalo, New York
                   (hereinafter referred to as the "Company")

                                       and

                      The Subscribing Reinsurers executing
       the Interests and Liabilities Agreements attached to this Agreement
           (hereinafter collectively referred to as the "Reinsurers")

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

In consideration of the promises set forth in this Agreement, the parties agree
as follows:

ARTICLE I - SCOPE OF AGREEMENT

         As a condition precedent to the Reinsurers' obligations under this
Agreement, the Company shall cede to the Reinsurers the property business
described in this Agreement, and the Reinsurers shall accept such business as
reinsurance from the Company.

         This Agreement is comprised of Articles I through XXI and the Exhibits
listed below. The terms of the Articles and of the Exhibits shall determine the
rights and obligations of the parties. The terms of the Articles shall apply to
each Exhibit unless specifically amended therein.

           EXHIBIT A - FIRST EXCESS OF LOSS REINSURANCE (Catastrophe)

                                       of
                                PROPERTY BUSINESS

           EXHIBIT B - SECOND EXCESS OF LOSS REINSURANCE (Catastrophe)

                                       of
                                PROPERTY BUSINESS

           EXHIBIT C - THIRD EXCESS OF LOSS REINSURANCE (Catastrophe)

                                       of
                                PROPERTY BUSINESS


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ARTICLE II - PARTIES TO THE AGREEMENT

         This Agreement is solely between the Company and the Reinsurers. When
more than one Company is named as a party to this Agreement, the first Company
named shall be the agent of the other companies as to all matters pertaining to
this Agreement. Performance of the obligations of each party under this
Agreement shall be rendered solely to the other party. However, if the Company
becomes insolvent, the liability of the Reinsurers shall be modified to the
extent set forth in the article entitled INSOLVENCY OF THE COMPANY. In no
instance shall any insured of the Company or any claimant against an insured of
the Company have any rights under this Agreement.

ARTICLE III - TERM

         This Agreement shall apply to loss occurrences which commence during
the period from January 1, 1997 to December 31, 1997 both dates inclusive, at
the place of the loss occurrence.

         This Agreement shall not apply to loss occurrences which commence prior
to the effective date of this Agreement and continue during any part of the term
of this Agreement. However, this Agreement shall apply to loss occurrences which
commence during and continue beyond the term of this Agreement and in the
computation of the liability of the Reinsurers the entire ultimate net loss
resulting from each such loss occurrence shall be included, subject to the
limitations set forth in paragraph (f) of the article entitled DEFINITIONS.

ARTICLE IV - DEFINITIONS

         (a)      PROPERTY BUSINESS

                  This term shall mean insurance which is classified in the NAIC
                  form of annual statement as fire, allied lines, farmowners
                  multiple peril (section I), homeowners multiple peril (section
                  I), commercial multiple peril (section I, including section I
                  of business owners), inland marine, (including Section 1 of
                  boatowners), Earthquake, and automobile physical damage
                  (excluding collision but including water damage, fleet
                  dealers' and garagekeepers' legal liability), except those
                  lines specifically excluded in the article entitled
                  EXCLUSIONS, on risks wherever located in the United States of
                  America, its territories and possessions, and in Canada.

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         (b)      COMPANY RETENTION

                  This term shall mean the amount the Company shall retain for
                  its own account; however, this requirement shall be satisfied
                  if this amount is retained by the Company or its affiliated
                  companies under common management or common ownership.

         (c)      ULTIMATE NET LOSS

                  This term shall mean all payments by the Company of claims and
                  losses, within the limits of liability or amounts of insurance
                  of the policies of the Company, and adjustment expense, after
                  deduction of salvage and after deduction of amounts due from
                  all other reinsurance, whether collectible or not. If the
                  Company becomes insolvent, this definition shall be modified
                  to the extent set forth in the article entitled INSOLVENCY OF
                  THE COMPANY.

         (d)      ADJUSTMENT EXPENSE

                  This term shall mean expenditures by the Company, other than
                  for office expenses and for the salaries and expenses of
                  employees of the Company or of any subsidiary or related or
                  wholly owned Company of the Company, made in connection with
                  the disposition of a claim, loss, or legal proceeding
                  including investigation, negotiation, and legal expenses;
                  court costs; prejudgment interest or delayed damages; and
                  interest on any judgment or award.

         (e)      PREJUDGMENT INTEREST OR DELAYED DAMAGES

                  This term shall mean interest or damages added to a
                  settlement, verdict, award, or judgment based on the amount of
                  time prior to the settlement, verdict, award, or judgment
                  whether or not made part of the settlement, verdict, award, or
                  judgment.

         (f)      LOSS OCCURRENCE

                  This term shall mean the sum of all individual losses directly
                  occasioned by any one disaster, accident or loss or series of
                  disasters, accidents or losses arising out of one event which
                  occurs within the territorial limits of this Agreement.
                  However, the duration and extent of any one loss occurrence
                  shall be limited to all individual losses sustained by the
                  Company occurring during any period of 168 consecutive hours
                  arising out of and directly occasioned by the same event,
                  except that the term "Loss Occurrence" shall be further
                  defined as follows:

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                  (l)      As regards windstorm, hail, tornado, hurricane,
                           cyclone, including ensuing collapse and water damage,
                           all individual losses sustained by the Company
                           occurring during any period of 72 consecutive hours
                           arising out of and directly occasioned by the same
                           event. However, the event need not be limited to one
                           state or province or states or provinces contiguous
                           thereto;

                  (2)      As regards riot, riot attending a strike, civil
                           commotion, vandalism and malicious mischief, all
                           individual losses sustained by the Company occurring
                           during any period of 72 consecutive hours within the
                           area of one municipality or county and the
                           municipalities or counties contiguous thereto arising
                           out of and directly occasioned by the same event. The
                           maximum duration of 72 consecutive hours may be
                           extended in respect of individual losses which occur
                           beyond such 72 consecutive hours during the continued
                           occupation of an assured's premises by strikers,
                           provided such occupation commenced during the
                           aforesaid period;

                  (3)      As regards earthquake (the epicenter of which need
                           not necessarily be within the territorial confines
                           referred to in the opening paragraph of this
                           definition) and fire following directly occasioned by
                           earthquake, only those individual fire losses which
                           commence during the period of 168 consecutive hours
                           may be included in the Company's loss occurrence;

                  (4)      As regards "Freeze", only individual losses directly
                           occasioned by collapse, breakage of glass and water
                           damage (caused by bursting of frozen pipes and tanks)
                           may be included in the Company's loss occurrence.

                  The Company may choose the date and time when any such period
                  of consecutive hours commences provided that it is not earlier
                  than the date and time of the occurrence of the first recorded
                  individual loss sustained by the Company arising out of that
                  disaster, accident or loss and provided that only one such
                  period of 168 consecutive hours (or in the case of paragraph
                  (1) and (2) above, 72 consecutive hours) shall apply with
                  respect to one event.

                  No individual losses occasioned by an event that would be
                  covered by 72 hours clauses may be included in any "Loss
                  Occurrence" claimed under the 168 hours provision.

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         (g)      SUBJECT NET EARNED PREMIUM

                  This term shall mean the direct premiums earned by the Company
                  during the term of this Agreement on the business reinsured
                  hereunder after deduction of return premiums and after
                  deduction of premiums paid for reinsurance which inures to the
                  benefit of the Reinsurers.

                  For purposes of this Agreement, subject net earned premium
                  shall be deemed to be:

                  (1) 100% of fire, allied lines and inland marine policy
                      premiums;

                  (2) 85% of the total homeowners and farmowners policy
                      premiums;

                  (3) 40% of the total commercial multiple peril and business
                      owners policy premiums;

                  (4) 100% of automobile physical damage premium excluding
                      collision; and

                  (5) 100% of all other policy premiums for the business
                      reinsured hereunder.

ARTICLE V - EXCLUSIONS

         This Agreement shall not apply to:

         (a)      Reinsurance accepted by the Company other than:

                  (1) Facultative reinsurance on a share basis of risks accepted
                      individually and not forming part of any agreement, or

                  (2) Local agency reinsurance on a share basis accepted in the
                      normal course of business, or

                  (3) From its affiliates;

         (b)      Nuclear incident per the following clauses attached hereto:

                  (l)    Nuclear  Incident  Exclusion  Clause - Physical
                         Damage  Reinsurance-U.S.A.  NMA 1119;

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                  (2) Nuclear Incident Exclusion Clause - Physical Damage
                      Reinsurance-Canada NMA 1980;

         (c)      Any extra or non-contractual damages (including loss in excess
                  of policy limits) or legal fees and expense attendant to the
                  defense thereof, including but not limited to compensatory,
                  exemplary and punitive damages or fines or statutory penalties
                  which are awarded against the Company as a result of an act,
                  omission, or course of conduct committed by or on behalf of
                  the Company;

         (d)      Any loss or liability accruing to the Company directly or
                  indirectly from any insurance written by or through any pool
                  or association including pools or associations in which
                  membership by the Company is required under any statutes or
                  regulations; however, this exclusion shall not apply to:

                  (1)     The Alabama Insurance Underwriting Association;

                  (2)     The Florida Windstorm Underwriting Association;

                  (3)     The Louisiana Insurance Underwriting Association;

                  (4)     The Mississippi Windstorm Underwriting Association;

                  (5)     The New York Coastal Market Assistance Program (CMAP);

                  (6)     The North Carolina Insurance Underwriting Association;

                  (7)     The South Carolina Windstorm and Hail Underwriting
                          Association;

                  (8)     The Texas Catastrophe Property Insurance Association;

                  (9)     All "Fair Plan" and "Rural Risk Plan" business;

                  (10)    The Devco Mutual Association,

                  however, this Agreement shall not cover any increase in such
                  liability resulting from the inability of any other
                  participant in any such pool or plan to meet its liability;

        (e)       Any liability of the Company arising from its participation
                  or membership in any insolvency fund;

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(f)      Any loss or damage which is occasioned by war, invasion, hostilities,
         acts of foreign enemies, civil war, rebellion, insurrection, military
         or usurped power, or martial law or confiscation by order of any
         government or public authority; however, this exclusion shall not apply
         to any policy which contains a standard war exclusion;

(g)      Risks written on a layered basis, whether primary or excess of loss, or
         policies written with a deductible or franchise of more than $5,000;
         however, this exclusion shall not apply to policies which provide a
         percentage deductible or franchise in connection with windstorm;

(h)      Insurance against earthquake, except when written in conjunction with
         fire and otherwise eligible perils;

(i)      Insurance on growing crops;

(j)      Insurance against flood, surface water, waves, tidal water or tidal
         wave, overflow of streams or other bodies of water or spray from any of
         the foregoing, all whether driven by wind or not except when written in
         conjunction with fire and otherwise eligible perils;

(k)      Any loss in respect of overhead transmission and distribution lines and
         their supporting structures other than those on or within 1000 feet of
         the insured premises; however, this exclusion shall not apply to public
         utilities extension and/or suppliers extension and/or contingent
         business interruption coverages, provided that these are not part of a
         transmitters' or distributors' policy;

(l)      Business classified as fidelity;

(m)      Liability under coverage afforded for loss or damage resulting from
         failure to account or pay for any goods or merchandise sold on credit,
         delivered under deferred payment agreements, consigned for sale, or
         delivered under any trust or floor plan agreements, except under
         standard accounts receivable policies;

(n)      Any loss or damage caused by or resulting from explosion, rupture, or
         bursting of steam boilers, steam pipes, steam turbines, steam engines,
         or rotating parts of machinery caused by centrifugal force; if owned
         by, leased by, or actually operated under the control of the insured.
         This exclusion shall not apply to ensuing loss by fire not otherwise
         excluded;

(o)      Mortgage impairment insurance and similar kinds of insurance, howsoever
         styled, providing coverage to an insured with respect to

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         its mortgagee interest in property or its owner interest in
         foreclosed property;

(p)      Difference in conditions insurance and similar kinds of insurance,
         howsoever styled;

(q)      Risks which have a total insurable value of more than $250,000,000;
         however, this exclusion shall not apply if the Company writes 100% of
         the risk;

(r)      Any collection of fine arts with an insurable value of $5,000,000 or
         more;

(s)      Mobile homes;

(t)      Inland marine business with respect to the following:

         (l)      All bridges and tunnels;

         (2)      Cargo insurance when written as such with respect to ocean,
                  lake, or inland waterways vessels;

         (3)      Commercial negative film insurance and cast insurance;

         (4)      Drilling rigs;

         (5)      Furriers' customers policies;

         (6)      Garment contractors policies;

         (7)      Insurance on livestock under so-called "mortality policies";

         (8)      Jewelers' block policies and furriers' block policies;

         (9)      Mining equipment while underground;

         (10)     Motor truck cargo insurance written for common carriers
                  operating beyond a radius of 300 miles;

         (11)     Radio and television broadcasting towers;

         (12)     Registered mail insurance when the limit of any one addressee
                  on any one day is more than $50,000;

(u)      Watercraft, other than watercraft insured under a standard homeowners
         policy;

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(v)      Loss of, damage to, or failure of, or consequential loss resulting
         therewith (including but not limited to earnings and extra expense) of
         satellites, spacecraft, and launch vehicles, including cargo and
         freight carried therein, in all phases of operation (including but not
         limited to manufacturing, transit, pre-launch, launch, and in-orbit);

(w)      Coverage afforded by ISO Pollutant Clean Up and Removal Additional
         Aggregate Limit of Insurance Endorsement CP 04 07 (Ed. 4/86) or as
         subsequently amended or by any similar endorsement affording such
         coverage;

(x)      Pollutant clean up or removal, including time element coverage
         associated therewith, under any commercial property policy or any
         inland marine policy written by the Company which does not contain ISO
         Changes-Pollutants Endorsement CP 01 86 (Ed. 4/86) or as subsequently
         amended; however, this exclusion does not apply to any risk located in
         a jurisdiction which has not approved the Insurance Services Office
         exclusion or where other regulatory constraints prohibit the Company
         from attaching such endorsement. If the Company elects to file an
         endorsement independent of ISO, such endorsement will be deemed a
         suitable substitute provided the Company has submitted the wording to
         the Reinsurers and received the Reinsurers' prior approval.


Article VI - MANAGEMENT OF CLAIMS AND LOSSES

         The Company shall investigate and settle or defend all claims and
losses. When requested by the Reinsurers, the Company shall permit the
Reinsurers, at the expense of the Reinsurers, to be associated with the Company
in the defense or control of any claim, loss, or legal proceeding which involves
or is likely to involve the Reinsurers. All payments of claims or losses by the
Company within the limits of its policies which are within the limits set forth
in the applicable Exhibit shall be binding on the Reinsurers, subject to the
terms of this Agreement.

Article VII - RECOVERIES

         The Company shall pay to or credit the Reinsurers with the Reinsurers'
portion of any recovery obtained from salvage, subrogation, or other insurance.
Adjustment expenses for recoveries shall be deducted from the amount recovered.

         The Reinsurers shall be subrogated to the rights of the Company to the
extent of their loss payments to the Company. The Company agrees to enforce its
rights of salvage, subrogation, and its rights against insurers or to assign
these rights to the Reinsurers. Recoveries shall be distributed to the parties
in an order inverse to that in which their liabilities accrued.

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Article VIII - AUTOMATIC REINSTATEMENT

         The Limit of Liability of the Reinsurers under each Exhibit of this
Agreement with respect to each loss occurrence shall be reduced by an amount
equal to the amount of liability paid by the Reinsurers, but that part of the
liability of the Reinsurers that is so reduced shall be automatically reinstated
from the commencement of the loss occurrence for which payment is made; however,
the Limit of Liability of the Reinsurers with respect to all loss occurrences
commencing during the term of this Agreement shall not exceed the amount set
forth in the section entitled LIABILITY OF THE REINSURERS of each Exhibit of
this Agreement. In consideration of this automatic reinstatement, the Company
shall pay to the Reinsurers for each amount reinstated an additional reinsurance
premium that shall be the product of the reinsurance premium set forth in the
section entitled REINSURANCE PREMIUM of each Exhibit of this Agreement,
multiplied by the amount of the reinstated Limit of Liability of the Reinsurers
divided by the total Limit of Limit of Liability of the Reinsurers for each loss
occurrence irrespective of the time of the commencement of the loss occurrence.

         The Company shall pay such additional premium at the same time that the
Reinsurers make each payment of ultimate net loss. If the Company requests any
such payment of ultimate net loss before the actual reinsurance premium is
determined, the additional reinsurance premium shall be provisionally calculated
on 100% of the deposit reinsurance premium stipulated in the each Exhibit of
this Agreement. Such additional reinsurance premium shall be recalculated and
adjusted until both the reinsurance premium and the ultimate net loss are
finally determined.

Article IX - REPORTS AND REMITTANCES

         (a)      Claims and Losses

                  The Company shall report to the Reinsurers as soon as possible
                  but within 45 days of each loss occurrence, which in the
                  Company's opinion, may involve the reinsurance afforded by
                  this Agreement. The Company shall advise the Reinsurers of the
                  estimated amount of ultimate net loss in connection with each
                  loss occurrence and of any subsequent changes in such
                  estimate.

                  As soon as possible but within 45 days after receipt of a
                  definitive statement of ultimate net loss from the Company,
                  the Reinsurers shall pay to the Company the Reinsurers'
                  portion of ultimate net loss. Any subsequent changes in the
                  amount of ultimate net loss shall be reported by the Company
                  to the Reinsurers and the amount due either party shall be
                  remitted as soon as possible but within 45 days after receipt
                  of such report

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         (b)      P.C.S. CATASTROPHE BULLETINS

                  The Company shall furnish to the Reinsurers, upon request, the
                  following information with respect to each catastrophe set
                  forth in the Catastrophe Bulletins published by the Property
                  Claim Services:

                  (l) The preliminary estimate of the amount recoverable from
                      the Reinsurers;

                  (2) The Reinsurers' portion of claims, losses, and adjustment
                      expense paid less salvage recovered during each calendar
                      quarter;

                  (3) The Reinsurers' portion of reserves for claims, losses,
                      and adjustment expense at the end of each calendar
                      quarter.

         (c)      GENERAL

                  In addition to the reports required by (a) and (b) above and
                  by the Exhibits, the Company shall furnish such other
                  information as may be required by the Reinsurers for the
                  completion of the Reinsurers' quarterly and annual statements
                  and internal records.

                  All reports shall be rendered on forms acceptable to the
                  Company and the Reinsurers.

Article X - CURRENCY

         Wherever the sign "$" is used in this Agreement it shall mean United
States Dollars. Premiums due the Reinsurers and loss payments due the Company
shall be remitted in United States Dollars.

Article XI - ERRORS AND OMISSIONS

         The Reinsurers shall not be relieved of liability because of an error
or accidental omission of the Company in reporting any claim or loss or any
business reinsured under this Agreement, provided that the error or omission is
rectified promptly after discovery. The Reinsurers shall be obligated only for
the return of the premium paid for business reported but not reinsured under
this Agreement.

Article XII - SPECIAL ACCEPTANCES

         Business not within the terms of this Agreement may be submitted to the

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Reinsurers for special acceptance and, if accepted by the Reinsurers, shall be
subject to all of the terms of this Agreement except as modified by the special
acceptance.

Article XIII - RESERVES AND TAXES

         The Reinsurers shall maintain the required reserves as to the
Reinsurers' portion of unearned premium, if any, claims, losses, and adjustment
expense.

         The Company shall be liable for all premium taxes on premium ceded to
the Reinsurers under this Agreement. If the Reinsurers are obligated to pay any
premium taxes on this premium, the Company shall reimburse the Reinsurers;
however, the Company shall not be required to pay taxes twice on the same
premium.

Article XIV - OFFSET

         The Company or the Reinsurers may offset any balance, whether on
account of premium, commission, claims or losses, adjustment expense, salvage,
or otherwise, due from one party to the other under this Agreement.

Article XV - INSPECTION OF RECORDS

         The Company shall allow the Reinsurers to inspect, at reasonable times,
the records of the Company relevant to the business reinsured under this
Agreement, including Company files concerning claims, losses, or legal
proceedings which involve or are likely to involve the Reinsurers.

Article XVI - ARBITRATION

         Any unresolved difference of opinion between any of the Reinsurers and
the Company shall be submitted to arbitration by three arbitrators. If more than
one Reinsurer is involved in the same dispute, all such Reinsurers shall
constitute and act as one party for purposes of this Article and communications
shall be made by the Company to each of the Reinsurers constituting the one
party; provided, however, that nothing herein shall impair the rights of such
Reinsurers to assert several, rather than joint, defenses of claims, nor be
construed as changing the liability of the Reinsurers under the terms of this
Agreement from several to joint.

         One arbitrator shall be chosen by the Reinsurer(s), and one shall be
chosen by the Company. The third arbitrator shall be chosen by the other two
arbitrators within ten (10) days after they have been appointed. If the two
arbitrators cannot agree upon a third arbitrator, each arbitrator shall nominate
three persons of whom the other shall reject two. The third arbitrator shall
then be chosen by drawing lots. If either party fails to choose an arbitrator
within thirty (30) days after receiving the written request of the other party
to

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do so, the latter shall choose both arbitrators, who shall choose the third
arbitrator. The arbitrators shall be impartial and shall be persons who are or
have been employed or engaged in a senior position in the insurance or
reinsurance business.

         The party requesting arbitration (the "Petitioner") shall submit its
brief to the arbitrators within thirty (30) days after notice of the selection
of the third arbitrator. Upon receipt of the Petitioner's brief, the other party
(the "Respondent") shall have thirty (30) days to file a reply brief. On receipt
of the Respondent's brief, the Petitioner shall have twenty (20) days to file a
rebuttal brief. Respondent shall have twenty (20) days from the receipt of
Petitioner's rebuttal brief to file its rebuttal brief. The arbitrators may
extend the time for filing of briefs at the request of either party.

         The arbitrators are relieved from judicial formalities and, in addition
to considering the rules of law and the customs and practices of the insurance
and reinsurance business, shall make their award with a view to effecting the
intent of this Agreement. The decision of the majority shall be final and
binding upon the parties. The costs of arbitration, including the fees of the
arbitrators, shall be shared equally unless the arbitrators decide otherwise.
The arbitration shall be held at the times and places agreed upon by the
arbitrators.

Article XVII - INSOLVENCY OF THE COMPANY

         In the event of the insolvency of the Company, the reinsurance proceeds
will be paid to the Company or the liquidator on the basis of the amount of the
claim allowed in the insolvency proceeding without diminution by reason of the
inability of the Company to pay all or part of the claim.

         The Reinsurers shall be given written notice of the pendency of each
claim against the Company on the policy(ies) reinsured hereunder within a
reasonable time after such claim is filed in the insolvency proceedings. The
Reinsurers shall have the right to investigate each such claim and to interpose,
at their own expense, in the proceeding where such claim is to be adjudicated,
any defenses which they may deem available to the Company or its liquidator. The
expense thus incurred by the Reinsurers shall be chargeable, subject to court
approval, against the insolvent Company as part of the expense of liquidation to
the extent of a proportionate share of the benefit which may accrue to the
Company solely as a result of the defense undertaken by the Reinsurers.

Article XVIII - LOSS RESERVES (U.S. Dollar Reinsurance Letters of Credit)

         (This Article applies only to those Reinsurers who do not quality for
         credit in any state or any other governmental authority having
         jurisdiction over the Company's loss reserves.)

         As regards all business coming within the scope of this Agreement, the
Company agrees that when it files with the Insurance Department or establishes
reserves for business

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<PAGE>   15

covered hereunder, as required by law, it will forward to the Reinsurers a
statement showing the proportion of such reserves which is applicable to them.
These reserves will consist of known outstanding losses that have been reported
to the Reinsurers, allocated loss adjustment expenses and unearned premiums.
Each such Reinsurer hereby agrees to apply for and secure delivery to the
Company of a clean, unconditional and irrevocable Letter of Credit, with a
minimum term of one year, that is in a format, and is issued or confirmed, and
presentable and payable in the United States by a bank that is a member of the
Federal Reserve and approved by the NAIC Securities Valuation Office or, at the
option of such Reinsurer, provide a cash advance in an amount equal to such
Reinsurer's proportion of said reserves. No reserves established in accordance
with the foregoing shall include or be applied towards security for losses
incurred but not reported.

         The Company and the Reinsurers agree that the Letter of Credit provided
by the Reinsurers under this provision may be drawn upon at any time,
notwithstanding any other provisions in this Agreement, and be utilized by the
Company or any successor by operation of law of the Company, including, without
limitation, any liquidator, rehabilitator, receiver or conservator of such
Company for the following purposes:

         (a)      to reimburse the Company for the Reinsurers' share of premiums
                  returned to the owners of policies reinsured under this
                  Agreement on account of cancellations of such policies.

         (b)      to reimburse the Company for the Reinsurers' share of benefits
                  or losses paid by the Company under the terms and provisions
                  of the policies reinsured under this Agreement;

         (c)      to fund an account with the Company in an amount at least
                  equal to the deduction, for reinsurance ceded, from the
                  Company's liabilities for policies ceded under this Agreement.
                  Such amount shall include, but not be limited to, all case
                  reserves and loss adjustment expense, and unearned premiums;

         (d)      to pay any other amounts the Company claims are due under this

                  Agreement; and

         (e)      to return any amounts drawn down on Letters of Credit in
                  excess of the actual amounts required for (a), (b) and (d)
                  above, or in the case of (c) above, any amounts which are
                  subsequently determined not to be due.

         All of the foregoing should be applied without diminution because of
insolvency on the part of the Company or Reinsurers.

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Article XIX - SERVICE OF SUIT

         (This Article applies only to those Reinsurers who are domiciled
         outside the United States of America and also to Reinsurers
         unauthorized in the State of New York.)

         In the event of the failure of the Reinsurers to whom this Article
applies, or any one of them, to pay any amount claimed to be due hereunder, such
Reinsurers, at the request of the Company, will submit to the jurisdiction of
any court of competent jurisdiction within the United States, and will comply
with all requirements necessary to give such court jurisdiction, and all matters
arising hereunder shall be determined in accordance with the law and practice of
such court.

         Service of process in such suit may be made upon Messrs. Mendes and
Mount, 750 Seventh Avenue, New York, New York 10019-6829, and in any suit
instituted against any one of them upon this Agreement, the Reinsurers will
abide by the final decision of such court or any appellate court in the event of
an appeal.

         The above named are authorized and directed to accept service of
process on behalf of the Reinsurers in any such suit and/or upon the request of
the Company to give a written undertaking to the Company that they will enter a
general appearance on behalf of Reinsurers or any one of them in the event such
a suit shall be instituted.

         Further, pursuant to any statute of any state, territory, or district
of the United States which makes provisions therefor, the Reinsurers to whom
this Article applies hereby designate the Superintendent, Commissioner or
Director of Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as their true and lawful
attorney upon whom may be served any lawful process in any action, suit, or
proceeding instituted by or on behalf of the Company or any beneficiary
hereunder arising out of this Agreement, and hereby designate the above named
Mendes and Mount as the firm to whom the said officer is authorized to mail such
process or a true copy thereof.

Article XX - FEDERAL EXCISE TAX

         (This Article applies only to those Reinsurers domiciled outside the
         United States of America, excepting Reinsurers exempt from the Federal
         Excise Tax.)

         The Reinsurers have agreed to allow for the purpose of paying Federal
Excise Tax 1% of the premium payable hereon to the extent such premium is
subject to Federal Excise Tax.

         In the event of any return of premium becoming due hereon the
Reinsurers will deduct 1% from the amount of the return and the Company or its
Agent should take steps to recover the tax from the United States Government.

                                      -15-


<PAGE>   17

Article XXI - INTERMEDIARY

         Herbert Clough Inc. is hereby recognized as the Intermediary
negotiating this Agreement for all business hereunder. All communications
(including but not limited to notices, statements, premiums, return premiums,
commissions, taxes, losses, loss adjustment expense, salvages, and loss
settlements) relating thereto shall be transmitted to the Company or the
Reinsurers through Herbert Clough Inc., Financial Centre, P.O. Box 10216,
Stamford, Connecticut 06904-2216. Payments by the Company to the Intermediary
shall be deemed to constitute payment to the Reinsurers. Payments by the
Reinsurers to the Intermediary shall be deemed only to constitute payment to the
Company to the extent that such payments are actually received by the Company.

                                      -16-


<PAGE>   18

                                                      Effective: January 1, 1997

                                    EXHIBIT A

                         Attached to and made a part of
                              HCI Agreement No. 439

                       PROPERTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE AGREEMENT

                 FIRST EXCESS OF LOSS REINSURANCE (CATASTROPHE)

                                       of
                                PROPERTY BUSINESS

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

SECTION 1 - LIABILITY OF THE REINSURERS

         The Reinsurers shall pay to the Company, with respect to each loss
occurrence, 95% of the amount of ultimate net loss in excess of the Company
Retention of $5,000,000 but not exceeding the Limit of Liability of the
Reinsurer of 95% of the next $5,000,000 of ultimate net loss with respect to
such loss occurrence nor 95% of $10,000,000 with respect to all loss occurrences
commencing during the term of this Agreement.

         The Company shall retain net for its own account, with respect to each
loss occurrence, the remaining 5% of such ultimate net loss.

Section 2 - REINSURANCE PREMIUM

         As a condition precedent to the Reinsurers' obligations hereunder, the
Company shall pay to the Reinsurers 1.499% of the Company's subject net earned
premium during the term of the Agreement, subject to a minimum reinsurance
premium of $425,800 and a deposit reinsurance premium of $532,000.

Section 3 - REINSURANCE PREMIUM REPORTS AND REMITTANCES

         The Company shall pay to the Reinsurers the deposit reinsurance premium
stipulated in the section entitled REINSURANCE PREMIUM in equal quarterly
installments of $133,000 each on or before the beginning of each calendar
quarter during the term of this Agreement.

         Within 60 days after the expiration of this Agreement, the Company
shall render to the Reinsurers a report of the Company's subject net earned
premium during the term of the Agreement. The Company shall calculate the
reinsurance premium thereon, shall balance such amount against the deposit
reinsurance premium previously paid, and the amount due either party, subject to
the minimum reinsurance premium, shall be remitted within 60 days.


<PAGE>   19

                                                      Effective: January 1, 1997

                                    EXHIBIT B

                         Attached to and made a part of
                              HCI Agreement No. 439

                       PROPERTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE AGREEMENT

                 SECOND EXCESS OF LOSS REINSURANCE (CATASTROPHE)

                                       of
                                PROPERTY BUSINESS

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

SECTION 1 - LIABILITY OF THE REINSURERS

         The Reinsurers shall pay to the Company, with respect to each loss
occurrence, 95% of the amount of ultimate net loss in excess of the sum of:

         (a)      The Company Retention of $5,000,000; and

         (b)      The First Excess Cover of $5,000,000,

but not exceeding the Limit of Liability of the Reinsurer of 95% of the next
$10,000,000 of ultimate net loss with respect to such loss occurrence nor 95% of
$20,000,000 with respect to all loss occurrences commencing during the term of
this Agreement.

         The Company shall retain net for its own account, with respect to each
loss occurrence, the remaining 5% of such ultimate net loss.

SECTION 2 - REINSURANCE PREMIUM

         As a condition precedent to the Reinsurers' obligations hereunder, the
Company shall pay to the Reinsurers 1.861% of the Company's subject net earned
premium during the term of the Agreement, subject to a minimum reinsurance
premium of $528,000 and a deposit reinsurance premium of $660,000.

SECTION 3 - REINSURANCE PREMIUM REPORTS AND REMITTANCES

         The Company shall pay to the Reinsurers the deposit reinsurance premium
stipulated in the section entitled REINSURANCE PREMIUM in equal quarterly
installments of $165,000 each on or before the beginning of each calendar
quarter during the term of this Agreement.

         Within 60 days after the expiration of this Agreement, the Company
shall render to the Reinsurers a report of the Company's subject net earned
premium during the term of the


<PAGE>   20

Agreement. The Company shall calculate the reinsurance premium thereon, shall
balance such amount against the deposit reinsurance premium previously paid, and
the amount due either party, subject to the minimum reinsurance premium, shall
be remitted within 60 days.


<PAGE>   21

                                                      Effective: January 1, 1997

                                    EXHIBIT C

                         Attached to and made a part of
                              HCI Agreement No. 439

                       PROPERTY CATASTROPHE EXCESS OF LOSS
                              REINSURANCE AGREEMENT

                 THIRD EXCESS OF LOSS REINSURANCE (CATASTROPHE)

                                       of
                                PROPERTY BUSINESS

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

Section 1 - LIABILITY OF THE REINSURERS

         The Reinsurers shall pay to the Company, with respect to each loss
occurrence, 95% of the amount of ultimate net loss in excess of the sum of:

         (a)      The Company Retention of $5,000,000;

         (b)      The First Excess Cover of $5,000,000; and

         (c)      The Second Excess Cover of $10,000,000.

but not exceeding the Limit of Liability of the Reinsurer of 95% of the next
$20,000,000 of ultimate net loss with respect to such loss occurrence nor 95% of
$40,000,000 with respect to all loss occurrences commencing during the term of
this Agreement.

         The Company shall retain net for its own account, with respect to each
loss occurrence, the remaining 5% of such ultimate net loss.

Section 2 - REINSURANCE PREMIUM

         As a condition precedent to the Reinsurers' obligations hereunder, the
Company shall pay to the Reinsurers 2.115% of the Company's subject net earned
premium during the term of the Agreement, subject to a minimum reinsurance
premium of $599,000 and a deposit reinsurance premium of $748,000.

Section 3 - REINSURANCE PREMIUM REPORTS AND REMITTANCES

         The Company shall pay to the Reinsurers the deposit reinsurance premium
stipulated in the section entitled REINSURANCE PREMIUM in equal quarterly
installments of $187,000 each on or before the beginning of each calendar
quarter during the term of this Agreement.




<PAGE>   22



         Within 60 days after the expiration of this Agreement, the Company
shall render to the Reinsurers a report of the Company's subject net earned
premium during the term of the Agreement. The Company shall calculate the
reinsurance premium thereon, shall balance such amount against the deposit
reinsurance premium previously paid, and the amount due either party, subject to
the minimum reinsurance premium, shall be remitted within 60 days.



<PAGE>   23

     NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - USA

     (1) This Agreement does not cover any loss or liability accruing to the
Company directly or indirectly and whether as Insurer or Reinsurer, from any
Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or
Nuclear Energy risks.

     (2) Without in any way restricting the operation of paragraph (1) of this
Clause, this Agreement does not cover any loss or liability accruing to the
Company, directly or indirectly and whether as Insurer or Reinsurer, from any
insurance against Physical Damage (including business interruption or
consequential loss arising out of such Physical Damage) to:

     (i)   Nuclear reactor power plants including all auxiliary property on the
           site, or

     (ii)  Any other nuclear reactor installation, including laboratories
           handling radioactive materials in connection with reactor
           installations, and "critical facilities" as such, or

     (iii) Installations for fabricating complete fuel elements or for
           processing substantial quantities of "special nuclear material", and
           for reprocessing, salvaging, chemically separating, storing or
           disposing of "spent" nuclear fuel or waste materials, or

     (iv)  Installations other than those listed in paragraph (2) (iii) above
           using substantial quantities of radioactive isotopes or other
           products of nuclear fission.

     (3) Without in any way restricting the operations of paragraphs (1) and (2)
hereof, this Agreement does not cover any loss or liability by radioactive
contamination accruing to the Company, directly or indirectly, and whether as
Insurer or Reinsurer, from any insurance on property which is on the same site
as a nuclear reactor power plant or other nuclear installation and which
normally would be insured therewith except that this paragraph (3) shall not
operate:

     (a)  where the Company does not have knowledge of such nuclear reactor
          power plant or nuclear installation, or

     (b)  where said insurance contains a provision excluding coverage for
          damage to property caused by or resulting from radioactive
          contamination, however caused. However on and after 1st January 1960
          this sub-paragraph (b) shall only apply provided the said radioactive
          contamination exclusion provision has been approved by the
          Governmental Authority having jurisdiction thereof.

     (4) Without in any way restricting the operations of paragraphs (1),(2) and
(3) hereof, this Agreement does not cover any loss or liability by radioactive
contamination accruing to the Company, directly or indirectly, and whether as
Insurer or Reinsurer, when such radioactive contamination is a named hazard
specifically insured against.

       (5) It is understood and agreed that this Clause shall not extend to
risks using radioactive isotopes in any form where the nuclear exposure is not
considered by the Company to be the primary hazard.

       (6) The term "special nuclear material" shall have the meaning given it
in the Atomic Energy Act of 1954 or by any law amendatory thereof.

       (7)    The Company to be sole judge of what constitutes:

       (a)    substantial quantities, and

       (b)    the extent of installation, plant or site.

Note:  Without in any way restricting the operation of paragraph (1) hereof,
       it is understood and agreed that:

        (a)    all policies issued by the Company on or before 31st December
               1957 shall be free from the application of the other provisions
               of this Clause until expiry date or 31st December 1960 whichever
               first occurs whereupon all the provisions of this Clause shall
               apply.

        (b)    with respect to any risk located in Canada policies issued by the
               Company on or before 31st December 1958 shall be free from the
               application of the other provisions of this Clause until expiry
               date or 31st December 1960 whichever first occurs whereupon all
               the provisions of this Clause shall apply.

<PAGE>   24

      NUCLEAR INCIDENT EXCLUSION CLAUSE-PHYSICAL DAMAGE-REINSURANCE-CANADA

        (1) This Agreement does not cover any loss or liability accruing to the
Company directly or indirectly and whether as Insurer or Reinsurer, from any
Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or
Nuclear Energy risks.

        (2) Without in any way restricting the operation of paragraph (1) of
this Clause, this Agreement does not cover any loss or liability accruing to the
Company, directly or indirectly and whether as Insurer or Reinsurer, from any
insurance against Physical Damage (including business interruption or
consequential loss arising out of such Physical Damage) to:

        (i)     Nuclear reactor power plants including all auxiliary property on
                the site, or

        (ii)    Any other nuclear reactor installation, including laboratories
                handling radioactive materials in connection with reactor
                installations, and "critical facilities" as such, or

        (iii)   Installations for fabricating complete fuel elements or for
                processing substantial quantities of "prescribed substances",
                and for reprocessing, salvaging, chemically separating, storing
                or disposing of "spent" nuclear fuel or waste materials, or

        (iv)    Installations other than those listed in (2)(iii) above using
                substantial quantities of radioactive isotopes or other products
                of nuclear fission.

       (3) Without in any way restricting the operation of paragraphs (1) and
(2) of this Clause, this Agreement does not cover any loss or liability by
radioactive contamination accruing to the Company, directly or indirectly, and
whether as Insurer or Reinsurer, from any insurance on property which is on the
same site as a nuclear reactor power plant or other nuclear installation and
which normally would be insured therewith, except that this paragraph (3) shall
not operate:

              (a)   where the Company  does not have  knowledge of such  nuclear
                    reactor  power plant or nuclear installation, or

              (b)   where the said insurance contains a provision excluding
                    coverage for damage to property caused by or resulting from
                    radioactive contamination, however caused.

        (4) Without in any way restricting the operation of paragraphs (1), (2)
and (3) of this Clause, this Agreement does not cover any loss or liability by
radioactive contamination accruing to the Company, directly or indirectly, and
whether as Insurer or Reinsurer, when such radioactive contamination is a named
hazard specifically insured against.

        (5) This Clause shall not extend to risks using radioactive isotopes in
any form where the nuclear exposure is not considered by the Company to be the
primary hazard.

        (6) The term "prescribed substances" shall have the meaning given it by
the Atomic Energy Control Act or by any law amendatory thereof.

        (7) The Company to be sole judge of what constitutes:

            (a)   substantial quantities, and

            (b)   the extent of installation, plant or site.

        (8) Without in any way restricting the operation of paragraphs (1), (2),
(3) and (4) of this Clause, this Agreement does not cover any loss or liability
accruing to the Company, directly or indirectly, and whether as Insurer or
Reinsurer, caused:

            (a)   by any nuclear incident as defined in the Nuclear Liability
                  Act or any other nuclear liability act, law or statute, or any
                  law amendatory thereof or nuclear explosion, except for
                  ensuing loss or damage which results directly from fire,
                  lightning or explosion of natural, coal or manufactured gas;

            (b)   by contamination by radioactive material.

Note: Without in any way restricting the operation of paragraphs (1), (2), (3)
      and (4) of this Clause, paragraph (8) of this Clause shall only apply to
      all original contracts of the Company whether new, renewal or replacement
      which become effective on or after December 31, 1992.


<PAGE>   25


POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE
---------------------------------------------------


SECTION A
---------

Excluding:

            (a)   All Business derived directly or indirectly from any Pool,
                  Association or Syndicate which maintains its own reinsurance
                  facilities.

            (b)   Any Pool or Scheme (whether voluntary or mandatory) formed
                  after March 1, 1968 for the purpose of insuring Property
                  whether on a country-wide basis or in the respect of
                  designated areas. This exclusion shall not apply to so-called
                  Automobile Insurance Plans or other pools formed to provide
                  coverage for Automobile Physical damage.

SECTION B
---------

It is agreed that business written by the Company for the same perils, which is
known at the time to be insured by, or in excess of underlying amounts placed in
the following Pools, Associations or Syndicates, whether by way of insurance or
reinsurance, is excluded hereunder:

         Industrial Risk Insurers (formerly Factory Insurance Association
         and Oil Insurance Association), including Underwriters Grain Division.
         Associated Factory Mutual.
         Improved Risk Mutuals.
         Any Pool, Association or Syndicate formed for the purpose of writing
         Oil, Gas or Petro-Chemical  Plants and/or Oil or Gas Drilling Rigs.
         Nuclear Energy Property Insurance Association.
         Nuclear Energy Liability Insurance Association.
         Mutual Atomic Energy Reinsurance Pool.
         Mutual Atomic Energy Liability Underwriters.
         United States Aircraft Insurance Group.
         Canadian Aircraft Insurance Group.
         Associated Aviation Underwriters.
         American Aviation Underwriters.

Section B does not apply:

         (a)  Where the Total Insured value over all interests of the risk in
              question is less than $250,000,000.

         (b)  To interests traditionally underwritten as Inland Marine or Stock
              and/or Contents written on a Blanket basis.

                                  -1-
<PAGE>   26

         (c)  To Contingent Business Interruption, except when the Company is
              aware that the key location is known at the time to be insured in
              any Pool, Association or Syndicate named above, other than as
              provided for under Section B (a).

         (d)  To risks as follows: Offices, Hotels, Apartments, Hospitals,
              Educational Establishments, Public Utilities (other than Railroad
              Schedules) and Builders Risks on the classes of risks specified in
              this subsection (d) only.

         Where this Clause attaches to Catastrophe Excesses, the following
         SECTIONS C and D are added:

SECTION C
---------


NEVERTHELESS the Reinsurers specifically agree that liability accruing to the
Company from its participation in residual market mechanisms including but not
limited to:

         (1)      The following so-called "Coastal Pools"

                  ALABAMA INSURANCE UNDERWRITING ASSOCIATION
                  FLORIDA WINDSTORM UNDERWRITING ASSOCIATION
                  LOUISIANA INSURANCE UNDERWRITING ASSOCIATION
                  MISSISSIPPI WINDSTORM UNDERWRITING ASSOCIATION
                  NORTH CAROLINA INSURANCE UNDERWRITING ASSOCIATION
                  SOUTH CAROLINA WINDSTORM AND HAIL UNDERWRITING ASSOCIATION
                  TEXAS CATASTROPHE PROPERTY INSURANCE ASSOCIATION

                  and

         (2)      All "Fair Plan" and "Rural Risk Plan" Business, including but
                  not limited to:

                  Florida Windstorm Underwriting Association (FWUA)
                  Florida Property and Casualty Joint Underwriting Association
                  (FPCJUA)
                  Residential Property and Casualty Joint Underwriting
                  Association (RPCJUA)

         for all perils otherwise protected hereunder shall not be excluded,
         except that this reinsurance does not include any increase in such
         liability resulting from:

         (i)      The inability of any other participant in such Residual Market
                  Mechanism including but not limited to "Coastal Pool" and/or
                  "Fair Plan" and/or "Rural Risk Plan" to meet its liability.

                                      -2-

<PAGE>   27

         (ii)     Any claim against such Residual Market Mechanism including but
                  not limited to "Coastal Pool" and/or "Fair Plan" and/or "Rural
                  Risk Plan" or any participant therein, including the Company,
                  whether by way of subrogation or otherwise, brought by or on
                  behalf of any insolvency fund.

SECTION D
---------

NOTWITHSTANDING Section C above, in respect of the FWUA, FPCJUA, and RPCJUA,
where an assessment is made against the Company by the FWUA, the FPCJUA, the
RPCJUA, or any combination thereof, the maximum loss that the Company may
include in the Ultimate Net Loss in respect of any loss occurrence hereunder
shall nor exceed the lesser of:

1.       The Company's  assessment from the relevant entity (FWUA,  FPCJUA and/
         or RPCJUA) for the accounting year in which the loss occurrence
         commenced, or

2.       The product of the following:

         a)   The Company's percentage participation in the relevant entity
              for the accounting year in which the loss occurrence
              commenced, and

         b)   The relevant entity's total losses in such loss occurrence.

         Any assessments for accounting years subsequent to that in which the
loss occurrence commenced may not be included in the Ultimate Net Loss
hereunder. Moreover, notwithstanding Section C above, in respect of the FWUA,
the FPCJUA and/or the RPCJUA, the Ultimate Net Loss hereunder shall not include
any monies expended to purchase or retire bonds as a consequence of being a
member of the FWUA, the FPCJUA and/or the RPCJUA. For the purposes of this
Agreement, the Company may not include in the Ultimate Net Loss any assessment
or any percentage assessment levied by the FWUA, the FPCJUA and/or the RPCJUA to
meet the obligations of any insolvent insurer member or other party, or to meet
any obligations arising from the deferment by the FWUA, FPCJUA and/or RPCJUA of
the collection of monies.

--------------------------------------------------------------------------------
NOTES:   Wherever used herein the terms:

         "Company"    shall be understood to mean "Reinsured", "Reassured" or
                      whatever other term is used in the attached reinsurance
                      document to designate the reinsured company or companies.

         "Contract"   shall be understood to mean "Agreement", "Policy" or
                      whatever other term is used to designate the attached
                      reinsurance document.

                                      -3-

<PAGE>   28

         "Reinsurers" shall be understood to mean "Underwriters" or whatever
                      other term is used in the attached reinsurance document to
                      designate the reinsurer or reinsurers.

                                      -4-