E. W. BLANCH CO.
R:\98R\14128.DOC                             Reinsurance Services
                                                           Page 2

         External Third through Sixth Catastrophe Excess
                      Reinsurance Contract
                   Effective:  January 1, 1998

                            issued to

           Associated International Insurance Company
                   Woodland Hills, California
                    Calvert Insurance Company
                       Hoboken, New Jersey
                               and
         any additional company established or acquired
by Associated International Insurance Company, Calvert Insurance
                             Company
         or Gryphon Holdings, Inc., New York, New York,
                    to be included hereunder






















                        E. W. Blanch Co.

                      Reinsurance Services

                      3500 West 80th Street

                  Minneapolis, Minnesota  55431
                        Table of Contents


Article                                                      Page

     I    Classes of Business Reinsured                        3
    II    Term                                                 3
   III    Territory                                            4
    IV    Exclusions                                           4
     V    Retention and Limit                                  7
    VI    Other Reinsurance                                    7
   VII    Definitions                                          8
  VIII    Reinstatement                                        9
    IX    Loss Notices and Settlements                        10
     X    Special Provisions                                  10
    XI    Salvage and Subrogation                             10
   XII    Premium                                             11
  XIII    Offset (BRMA 36C)                                   12
   XIV    Access to Records (BRMA 1D)                         12
    XV    Net Retained Lines (BRMA 32E)                       12
   XVI    Errors and Omissions (BRMA 14F)                     12
  XVII    Currency (BRMA 12A)                                 12
 XVIII    Taxes (BRMA 50C)                                    13
   XIX    Federal Excise Tax (BRMA 17A)                       13
    XX    Unauthorized Reinsurers                             13
   XXI    Insolvency                                          14
  XXII    Arbitration                                         15
 XXIII    Service of Suit (BRMA 49C)                          16
  XXIV    Agency Agreement                                    17
   XXV    Intermediary (BRMA 23A)                             17
          Schedule A



         External Third through Sixth Catastrophe Excess
                      Reinsurance Contract
                   Effective:  January 1, 1998

                            issued to

           Associated International Insurance Company
                   Woodland Hills, California
                    Calvert Insurance Company
                       Hoboken, New Jersey
                               and
         any additional company established or acquired
by Associated International Insurance Company, Calvert Insurance
                             Company
         or Gryphon Holdings, Inc., New York, New York,
                    to be included hereunder
     (hereinafter referred to collectively as the "Company")

                               by

           The Subscribing Reinsurer(s) Executing the
             Interests and Liabilities Agreement(s)
                         Attached Hereto
          (hereinafter referred to as the "Reinsurer")



Article I - Classes of Business Reinsured

By this Contract the Reinsurer agrees to reinsure the excess
liability which may accrue to the Company under its policies,
contracts and binders of insurance or reinsurance (hereinafter
called "policies") in force at the effective date hereof or
issued or renewed on or after that date, and classified by the
Company as Property business underwritten by Associated
International Insurance Company, Woodland Hills, California,
subject to the terms, conditions and limitations set forth herein
and in Schedule A attached to and forming part of this Contract.


Article II - Term

A. This Contract shall become effective on January 1, 1998, with
   respect to losses arising out of loss occurrences commencing
   on or after that date, and shall remain in force until
   December 31, 1998, both days inclusive.

B. If this Contract expires while a loss occurrence covered
   hereunder is in progress, the Reinsurer's liability hereunder
   shall, subject to the other terms and conditions of this
   Contract, be determined as if the entire loss occurrence had
   occurred prior to the expiration of this Contract, provided
   that no part of such loss occurrence is claimed against any
   renewal or replacement of this Contract.


Article III - Territory

As respects the External Third and Fourth Excess Catastrophe
Reinsurance layers hereunder and subject to all other terms and
conditions of this Contract, this Contract shall apply to the
territorial limits of the Company's policies reinsured hereunder.
As respects the External Fifth and Sixth Excess Catastrophe
Reinsurance layers hereunder and subject to all other terms and
conditions of this Contract, this Contract shall apply to losses
occurring anywhere within the State of California.


Article IV - Exclusions

A. This Contract does not apply to and specifically excludes the
   following:

      1.   Loss or liability excluded under the provisions of
      the "Pools, Associations and Syndicates Exclusion Clause"
      attached to and forming part of this Contract.

      2.   Nuclear risks as defined in the "Nuclear Incident
      Exclusion Clause - Physical Damage - Reinsurance (U.S.A.)"
      and the "Nuclear Incident Exclusion Clause - Physical
      Damage - Reinsurance (Canada)" attached to and forming
      part of this Contract.

      3.   All reinsurance assumed, with the exception of intra-
      company reinsurance and specific insureds whose
      reinsurance is written through their own captive company
      and quoted by a non-related entity.

      4.   Risks of war, whether or not declared, invasion,
      civil war, insurrection, rebellion, revolution or
      confiscation by duly constituted governmental or civil
      authority as excluded under a standard policy containing a
      standard War Exclusion Clause.

      5.   Hail insurance or reinsurance covering growing,
      drying or standing crops when written as such.

      6.   Flood when written as such; however, this exclusion
      shall not apply to flood when included in Difference in
      Conditions, Inland Marine and All Risk policies.

      7.   All armored car business except when written in
      excess of $500,000.

      8.   Credit, financial or insolvency guarantees.

      9.   Livestock insurance or reinsurance when written as
      such.

      10.  Third Party Bodily Injury and Property Damage
      Liability, Medical Payments, Workers' Compensation,
      Fidelity and Surety, whether written separately or as part
      of a Multiple Peril policy.  However, nothing herein
      contained shall be construed as excluding liability for
      damage to property in an insured's care, custody or
      control or for which the insured may be liable.

      11.  Ocean Marine when written as such.

      12.  Aircraft, meaning direct damage to hulls insured
      under Aircraft Hull policies, but not to exclude aircraft
      hulls insured under regular Fire, Inland Marine and All
      Risk policies (other than Aircraft Hull policies).  In no
      event shall any liability attach to the Reinsurer
      hereunder in respect of aircraft while in flight or
      taxiing.

      13.  Offshore drilling rigs.

      14.  Automobile risks insured under Automobile policies.

      15.  Boiler and Machinery when written as such.

      16.  Space and space related risks for the intention of
      ignition of the launch vehicle which includes taxiing
      within the launch site area and in flight.

      17.  Grain elevators.

      18.  Mechanical breakdowns when written as such.

      19.  Petrochemical risks and refineries.

      20.  Underground mining.

      21.  Inland Marine policies covering jewelers block and
      motor truck cargo.

      22.  Mortgage Impairment insurance.

      23.  All liability of the Company arising by contract,
      operation of law, or otherwise, from its participation or
      membership, whether voluntary or involuntary, in any
      insolvency fund.  "Insolvency fund" includes any guaranty
      fund, insolvency fund, plan, pool, association, fund or
      other arrangement, however denominated, established or
      governed, which provides for any assessment of or payment
      or assumption by the Company of part or all of any claim,
      debt, charge, fee or other obligation of an insurer, or
      its successors or assigns, which has been declared by any
      competent authority to be insolvent, or which is otherwise
      deemed unable to meet any claim, debt, charge, fee or
      other obligation in whole or in part.

      24   Kidnap and Ransom.

      25.  Residual Value and Credit insurance.

      26.  Crop insurance.

      27.  Burglary and Theft when written as such.

      28.  Strike insurance.

      29.  Product impairment, recall and tampering.

      30.  Data processing companies whose sole purpose is to
      provide data processing services to other companies which
      include media exposures defined as material on which data
      is to be or is already stored (i.e., disks, magnetic and
      paper tapes, drums, cores and programs).

      31.  Transmission and distribution lines.

      32.  Onshore drilling rigs.

      33.  Course of Construction risks covering dams, bridges,
      tunnels, subways, construction work over water, or any
      project involving water, unless the aforementioned
      projects are incidental to the insured's total
      construction project.

      34.  Rolling stock owned or operated by a railroad, but
      this exclusion shall not apply to interests while
      contained in buildings owned or leased by an insured.

      35.  Risks excluded under the provisions of the "Total
      Insured Value Exclusion Clause" attached to and forming
      part of this Contract.

      36.  Extra contractual obligations (i.e., any punitive,
      exemplary, compensatory or consequential damages paid or
      payable by the Company as a result of an action against it
      by its insured or its insured's assignee, which action
      alleges negligence or bad faith on the part of the Company
      in handling a claim under a policy subject to this
      Contract).

      37.  Loss in excess of policy limits (i.e., any amount
      paid or payable by the Company in excess of its policy
      limits, but otherwise within the terms of its policy, as a
      result of an action against it by its insured or its
      insured's assignee to recover damages the insured is
      legally obligated to pay to a third party claimant because
      of the Company's alleged or actual negligence or bad faith
      in rejecting a settlement within policy limits, or in
      discharging its duty to defend or prepare the defense in
      the trial of an action against its insured, or in
      discharging its duty to prepare or prosecute an appeal
      consequent upon such an action).

B. Notwithstanding the foregoing, any exclusion set forth in
   paragraph A (except subparagraphs 2, 3, 4, 6, 8, 11, 12, 13,
   16, 23, 36 and 37 shall be waived automatically when, in the
   opinion of the Company, the exposure excluded therein is
   incidental to the principal exposure on the risk in question.

C. As regards business underwritten in the General E&S Division
   of the Company:

      1.   Exclusions 15, 18, 33 and 34 of paragraph A shall be
      waived.

      2.   Exclusion 35(Total Insured Value) and Section B of
      Exclusion 1 (Pools, Associations) of paragraph A shall be
      waived except for risks with total insured values greater
      than $300,000,000 in the State of California.  This
      exception contained in this paragraph only applies to
      risks in the State of California.

      3.   Exclusion 14 (Automobile) of paragraph A shall be
      waived as regards Automobile Floor Plans.


Article V - Retention and Limit

A. As respects each excess layer of reinsurance coverage provided
   by this Contract, the Company shall retain and be liable for
   the first amount of ultimate net loss, shown as "Company's
   Retention" for that excess layer in Schedule A attached
   hereto, arising out of each loss occurrence.  The Reinsurer
   shall then be liable (subject to the provisions of paragraph B
   below), as respects each excess layer, for the amount by which
   such ultimate net loss exceeds the Company's applicable
   retention, but the liability of the Reinsurer under each
   excess layer shall not exceed the amount, shown as
   "Reinsurer's Per Occurrence Limit" for that excess layer in
   Schedule A attached hereto, as respects any one loss
   occurrence.

B. No claim shall be made under any excess layer of reinsurance
   coverage provided by this Contract in any one loss occurrence
   unless at least two risks insured or reinsured by the Company
   are involved in such loss occurrence.  "Risk" to be defined as
   all the values at one location unless otherwise stated in the
   Company's risk file but not less than all the values within
   four walls.  For purposes of this Article, the Company shall
   be the sole judge of what constitutes one risk, except that in
   no event shall a building and its contents be considered more
   than one risk.


Article VI - Other Reinsurance

A. The Company shall be permitted to carry underlying excess
   catastrophe reinsurance, recoveries under which shall inure
   solely to the benefit of the Company and be entirely
   disregarded in applying all of the provisions of this
   Contract.

B. As regards DIC business, the Company shall purchase or be
   deemed to have purchased inuring excess per risk and/or pro
   rata facultative reinsurance to limit its ultimate net loss on
   any one risk, each loss (exclusive of extra contractual
   obligations) to $100,000 subject to the following occurrence
   limits by layer of inuring excess per risk reinsurance:

<TABLE>
<CAPTION>

      Layer       Limit         Retention     Occurrence Limit
      <S>         <C>           <C>           <C>
      1           4,900,000     100,000       12,500,000 Per Occurrence
      2           5,000,000     5,000,000     10,000,000 Per Occurrence
</TABLE>

C. As regards business underwritten in the General E&S division,
   the Company shall be permitted to purchase inuring coverage as
   follows:

      1.   West Coast earthquake incurred loss shall be ceded to
      the DIC Excess Per Risk noted in paragraph B above.

      2.   As regards all other incurred loss, $12,000,000
      excess $500,000 per risk; subject to a per occurrence
      limit of $20,000,000.

      3.   The only exception to subparagraph 1 above is Course
      of Construction (COC) policies written in the General E&S
      division.  The California earthquake portions of those
      policies are ceded 100% to the E&S treaty.


Article VII - Definitions

A. "Ultimate net loss" as used herein is defined as the sum or
   sums (including litigation expenses, interest on judgments and
   all other loss adjustment expenses, including a pro rata share
   of the salaries and expenses of the Company's field employees
   according to the time occupied adjusting the loss and expenses
   of the Company's officials incurred in connection with the
   loss, but excluding office expenses and salaries of the
   Company's officials and any normal overhead charges) paid or
   payable by the Company in settlement of claims and in
   satisfaction of judgments rendered on account of such claims,
   after deduction of all salvage, all recoveries and all claims
   on inuring insurance or reinsurance, whether collectible or
   not.  Nothing herein shall be construed to mean that losses
   under this Contract are not recoverable until the Company's
   ultimate net loss has been ascertained.

B. The term "loss occurrence" 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 anywhere in the world
   but limited in the United States of America and Canada to the
   area of one state of the United States or province of Canada
   and states or provinces contiguous thereto and to one another.
   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:

      1.   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 epicentre of which need
      not necessarily be within the territorial confines
      referred to in the introductory portion of this paragraph)
      and fire following directly occasioned by the 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 frozen pipes and tanks) may be
      included in the Company's "loss occurrence."

   For all "loss occurrences," 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 shall apply with respect to one event
   except for those "loss occurrences" referred to in
   subparagraphs 1 and 2 above where only one such period of
   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.

C. "Net earned premium" as used herein is defined as the
   Company's gross earned premium on the classes of business
   subject to this Contract, less only the earned portion of
   premiums, if any, ceded by the Company for reinsurance which
   inures to the benefit of this Contract.


Article VIII - Reinstatement

A. In the event all or any portion of the reinsurance under any
   excess layer of reinsurance coverage provided by this Contract
   is exhausted by loss, the amount so exhausted shall be
   reinstated immediately from the time the loss occurrence
   commences hereon. For each amount so reinstated the Company
   agrees to pay additional premium equal to the product of the
   following:

      1.   The percentage of the occurrence limit for the excess
      layer reinstated (based on the loss paid by the Reinsurer
      under that excess layer); times

      2.   The earned reinsurance premium for the excess layer
      reinstated for the term of this Contract (exclusive of
      reinstatement premium).

B. Whenever the Company requests payment by the Reinsurer of any
   loss under any excess layer hereunder, the Company shall
   submit a statement to the Reinsurer of reinstatement premium
   due the Reinsurer for that excess layer. If the earned
   reinsurance premium for any excess layer for the term of this
   Contract has not been finally determined as of the date of any
   such statement, the calculation of reinstatement premium due
   for that excess layer shall be based on the annual deposit
   premium for that excess layer and shall be readjusted when the
   earned reinsurance premium for that excess layer for the term
   of this Contract has been finally determined. Any
   reinstatement premium shown to be due the Reinsurer for any
   excess layer as reflected by any such statement (less prior
   payments, if any, for that excess layer) shall be payable by
   the Company concurrently with payment by the Reinsurer of the
   requested loss for that excess layer. Any return reinstatement
   premium shown to be due the Company shall be remitted by the
   Reinsurer as promptly as possible after receipt and
   verification of the Company's statement.

C. Notwithstanding anything stated herein, the liability of the
   Reinsurer under any excess layer of reinsurance coverage
   provided by this Contract shall not exceed either of the
   following:

      1.   The amount, shown as "Reinsurer's Per Occurrence
      Limit" for that excess layer in Schedule A attached
      hereto, as respects loss or losses arising out of any one
      loss occurrence; or

      2.   The amount, shown as "Reinsurer's Annual Limit" for
      that excess layer in Schedule A attached hereto, in all
      during the term of this Contract.


Article IX - Loss Notices and Settlements

A. Whenever losses sustained by the Company appear likely to
   result in a claim hereunder, the Company shall notify the
   Reinsurer, and the Reinsurer shall have the right to
   participate in the adjustment of such losses at its own
   expense.

B. All loss settlements made by the Company, provided they are
   within the terms of this Contract, shall be binding upon the
   Reinsurer, and the Reinsurer agrees to pay all amounts for
   which it may be liable upon receipt of reasonable evidence of
   the amount paid (or scheduled to be paid) by the Company.


Article X - Special Provisions

As respects loss or damage or costs or expenses arising from
asbestos or seepage and/or pollution and/or contamination, other
than contamination from smoke damage, the maximum sublimit shall
be $25,000 per risk, each loss, or so deemed.  Nevertheless, this
does not preclude payment of the cost of removal of debris of
property damaged by a loss otherwise covered hereunder.


Article XI - Salvage and Subrogation

The Reinsurer shall be credited with salvage (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and
settlements involving reinsurance hereunder. Salvage thereon
shall always be used to reimburse the excess carriers in the
reverse order of their priority according to their participation
before being used in any way to reimburse the Company for its
primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss
was sustained by the Reinsurer, and to prosecute all claims
arising out of such rights.


Article XII - Premium

A. As premium for each excess layer of reinsurance coverage
   provided by this Contract, the Company shall pay the Reinsurer
   the greater of the following:

      1.   The amount, shown as "Annual Minimum Premium" for
      that excess layer in Schedule A attached hereto; or

      2.   An amount equal to the sum of the percentages shown
      as "DIC" and "AOP" percentages for that excess layer in
      Schedule A attached hereto, of the Company's net earned
      premium for the DIC business and AOP business respectively
      for the term of this Contract.

B. The Company shall pay the Reinsurer an annual deposit premium
   for each excess layer of an amount, shown as "Annual Deposit
   Premium" for that excess layer in Schedule A attached hereto,
   in two equal installments of an amount, shown as "Semiannual
   Deposit Premium" for that excess layer in Schedule A attached
   hereto, on January 1 and July 1 of 1998.

C. Within 60 days after the expiration of this Contract, the
   Company shall provide a report to the Reinsurer setting forth
   the premium due hereunder for each excess layer, computed in
   accordance with paragraph A, and any additional premium due
   the Reinsurer or return premium due the Company for each such
   excess layer shall be remitted promptly.

D. As respects the Third and/or Fourth Excess Catastrophe
   reinsurance layers hereunder, in the event that no claims
   arise under this Contract, certain reinsurers participating
   hereunder on the Third and/or Fourth Excess Catastrophe
   reinsurance layers shall pay the Company a no claims bonus
   equal to 20.0% of the adjusted premium under this Contract
   subject to the following:

      1.   The Company shall only be entitled to the no claims
      bonus if this Contract and the two prior renewals are loss
      free for a continuous period of three years.

      2.   When such no claims bonus is calculated, it shall be
      calculated on the premium for this Contract and for the
      prior and subsequent renewals.  Payment of the no claims
      bonus by the reinsurers to the Company shall constitute a
      commutation of this Contract and such payment once
      effected shall constitute a full and final release of the
      reinsurers from all liability hereunder.

      3.   Should the Reinsurer decline to offer a renewal of
      this Contract at similar terms as expiring in relation to
      the exposure presented, the no claims bonus shall be
      calculated for the years actually reinsured subject to the
      above provisions.

   It is understood that these no claims bonus provisions shall
   only apply to certain reinsurers hereunder participating on
   the Third and/or Fourth Excess Catastrophe reinsurance layers.
   The figures listed under "With `No Claims Bonus'" in
   Schedule A attached to and forming part of this Contract shall
   apply to such reinsurers.  The figures listed under "Without
   `No Claims Bonus'" in Schedule A attached to and forming part
   of this Contract shall apply to the remaining reinsurers on
   those layers.


Article XIII - Offset (BRMA 36C)

The Company and the Reinsurer shall have the right to offset any
balance or amounts due from one party to the other under the
terms of this Contract. The party asserting the right of offset
may exercise such right any time whether the balances due are on
account of premiums or losses or otherwise.


Article XIV - Access to Records (BRMA 1D)

The Reinsurer or its designated representatives shall have access
at any reasonable time to all records of the Company which
pertain in any way to this reinsurance.


Article XV - Net Retained Lines (BRMA 32E)

A. This Contract applies only to that portion of any policy which
   the Company retains net for its own account (prior to
   deduction of any underlying reinsurance specifically permitted
   in this Contract), and in calculating the amount of any loss
   hereunder and also in computing the amount or amounts in
   excess of which this Contract attaches, only loss or losses in
   respect of that portion of any policy which the Company
   retains net for its own account shall be included.

B. The amount of the Reinsurer's liability hereunder in respect
   of any loss or losses shall not be increased by reason of the
   inability of the Company to collect from any other
   reinsurer(s), whether specific or general, any amounts which
   may have become due from such reinsurer(s), whether such
   inability arises from the insolvency of such other
   reinsurer(s) or otherwise.


Article XVI - Errors and Omissions (BRMA 14F)

Inadvertent delays, errors or omissions made in connection with
this Contract or any transaction hereunder shall not relieve
either party from any liability which would have attached had
such delay, error or omission not occurred, provided always that
such error or omission is rectified as soon as possible after
discovery.


Article XVII - Currency (BRMA 12A)

A. Whenever the word "Dollars" or the "$" sign appears in this
   Contract, they shall be construed to mean United States
   Dollars and all transactions under this Contract shall be in
   United States Dollars.

B. Amounts paid or received by the Company in any other currency
   shall be converted to United States Dollars at the rate of
   exchange at the date such transaction is entered on the books
   of the Company.


Article XVIII - Taxes (BRMA 50C)

In consideration of the terms under which this Contract is
issued, the Company will not claim a deduction in respect of the
premium hereon when making tax returns, other than income or
profits tax returns, to any state or territory of the United
States of America, the District of Columbia or Canada.


Article XIX - Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at
Lloyd's London and other reinsurers exempt from Federal Excise
Tax, who are domiciled outside the United States of America.)

A. The Reinsurer has agreed to allow for the purpose of paying
   the Federal Excise Tax the applicable percentage of the
   premium payable hereon (as imposed under Section 4371 of the
   Internal Revenue Code) to the extent such premium is subject
   to the Federal Excise Tax.

B. In the event of any return of premium becoming due hereunder
   the Reinsurer will deduct the applicable percentage from the
   return premium payable hereon and the Company or its agent
   should take steps to recover the tax from the United States
   Government.


Article XX - Unauthorized Reinsurers

A. If the Reinsurer is unauthorized in any state of the United
   States of America or the District of Columbia, the Reinsurer
   agrees to fund its share of the Company's ceded United States
   outstanding loss and loss adjustment expense reserves by:

      1.   Clean, irrevocable and unconditional letters of
      credit issued and confirmed, if confirmation is required
      by the insurance regulatory authorities involved, by a
      bank or banks meeting the NAIC Securities Valuation Office
      credit standards for issuers of letters of credit and
      acceptable to said insurance regulatory authorities;
      and/or

      2.   Escrow accounts for the benefit of the Company;
      and/or

      3.   Cash advances;

   if, without such funding, a penalty would accrue to the
   Company on any financial statement it is required to file with
   the insurance regulatory authorities involved. The Reinsurer,
   at its sole option, may fund in other than cash if its method
   and form of funding are acceptable to the insurance regulatory
   authorities involved.

B. If the Reinsurer is unauthorized in any province or
   jurisdiction of Canada, the Reinsurer agrees to fund 115% of
   its share of the Company's ceded Canadian outstanding loss and
   loss adjustment expense reserves by:

      1.   A clean, irrevocable and unconditional letter of
      credit issued and confirmed, if confirmation is required
      by the insurance regulatory authorities involved, by a
      Canadian bank or banks meeting the NAIC Securities
      Valuation Office credit standards for issuers of letters
      of credit and acceptable to said insurance regulatory
      authorities, for no more than 15/115ths of the total
      funding required; and/or

      2.   Cash advances for the remaining balance of the
      funding required;

   if, without such funding, a penalty would accrue to the
   Company on any financial statement it is required to file with
   the insurance regulatory authorities involved.

C. With regard to funding in whole or in part by letters of
   credit, it is agreed that each letter of credit will be in a
   form acceptable to insurance regulatory authorities involved,
   will be issued for a term of at least one year and will
   include an "evergreen clause," which automatically extends the
   term for at least one additional year at each expiration date
   unless written notice of non-renewal is given to the Company
   not less than 30 days prior to said expiration date. The
   Company and the Reinsurer further agree, notwithstanding
   anything to the contrary in this Contract, that said letters
   of credit may be drawn upon by the Company or its successors
   in interest at any time, without diminution because of the
   insolvency of the Company or the Reinsurer, but only for one
   or more of the following purposes:

      1.   To reimburse itself for the Reinsurer's share of
      losses and/or loss adjustment expense paid under the terms
      of policies reinsured hereunder, unless paid in cash by
      the Reinsurer;

      2.   To reimburse itself for the Reinsurer's share of any
      other amounts claimed to be due hereunder, unless paid in
      cash by the Reinsurer;

      3.   To fund a cash account in an amount equal to the
      Reinsurer's share of any ceded outstanding loss and loss
      adjustment expense reserves funded by means of a letter of
      credit which is under non-renewal notice, if said letter
      of credit has not been renewed or replaced by the
      Reinsurer 10 days prior to its expiration date;

      4.   To refund to the Reinsurer any sum in excess of the
      actual amount required to fund the Reinsurer's share of
      the Company's ceded outstanding loss and loss adjustment
      expense reserves, if so requested by the Reinsurer.

   In the event the amount drawn by the Company on any letter of
   credit is in excess of the actual amount required for C(1) or
   C(3), or in the case of C(2), the actual amount determined to
   be due, the Company shall promptly return to the Reinsurer the
   excess amount so drawn.


Article XXI - Insolvency

A. In the event of the insolvency of one or more of the reinsured
   companies, this reinsurance shall be payable directly to the
   company or to its liquidator, receiver, conservator or
   statutory successor immediately upon demand, with reasonable
   provision for verification, on the basis of the liability of
   the company without diminution because of the insolvency of
   the company or because the liquidator, receiver, conservator
   or statutory successor of the company has failed to pay all or
   a portion of any claim. It is agreed, however, that the
   liquidator, receiver, conservator or statutory successor of
   the company shall give written notice to the Reinsurer of the
   pendency of a claim against the company indicating the policy
   or bond reinsured which claim would involve a possible
   liability on the part of the Reinsurer within a reasonable
   time after such claim is filed in the conservation or
   liquidation proceeding or in the receivership, and that during
   the pendency of such claim, the Reinsurer may investigate such
   claim and interpose, at its own expense, in the proceeding
   where such claim is to be adjudicated, any defense or defenses
   that it may deem available to the company or its liquidator,
   receiver, conservator or statutory successor. The expense thus
   incurred by the Reinsurer shall be chargeable, subject to the
   approval of the Court, against the company as part of the
   expense of conservation or liquidation to the extent of a pro
   rata share of the benefit which may accrue to the company
   solely as a result of the defense undertaken by the Reinsurer.

B. Where two or more reinsurers are involved in the same claim
   and a majority in interest elect to interpose defense to such
   claim, the expense shall be apportioned in accordance with the
   terms of this Contract as though such expense had been
   incurred by the company.

C. It is further understood and agreed that, in the event of the
   insolvency of one or more of the reinsured companies, the
   reinsurance under this Contract shall be payable directly by
   the Reinsurer to the company or to its liquidator, receiver or
   statutory successor, except as provided by Section 4118(a) of
   the New York Insurance Law or except (1) where this Contract
   specifically provides another payee of such reinsurance in the
   event of the insolvency of the company or (2) where the
   Reinsurer with the consent of the direct insured or insureds
   has assumed such policy obligations of the company as direct
   obligations of the Reinsurer to the payees under such policies
   and in substitution for the obligations of the company to such
   payees.


Article XXII - Arbitration

A. As a condition precedent to any right of action hereunder, in
   the event of any dispute or difference of opinion hereafter
   arising with respect to this Contract, it is hereby mutually
   agreed that such dispute or difference of opinion shall be
   submitted to arbitration.  One Arbiter shall be chosen by the
   Company, the other by the Reinsurer, and an Umpire shall be
   chosen by the two Arbiters before they enter upon arbitration,
   all of whom shall be active or retired disinterested executive
   officers of insurance or reinsurance companies or Lloyd's
   London Underwriters.  In the event that either party should
   fail to choose an Arbiter within 30 days following a written
   request by the other party to do so, the requesting party may
   choose two Arbiters who shall in turn choose an Umpire before
   entering upon arbitration.  If the two Arbiters fail to agree
   upon the selection of an Umpire within 30 days following their
   appointment, each Arbiter shall nominate three candidates
   within 10 days thereafter, two of whom the other shall
   decline, and the decision shall be made by drawing lots.

B. Each party shall present its case to the Arbiters within 30
   days following the date of appointment of the Umpire.  The
   Arbiters shall consider this Contract as an honorable
   engagement rather than merely as a legal obligation and they
   are relieved of all judicial formalities and may abstain from
   following the strict rules of law.  The decision of the
   Arbiters shall be final and binding on both parties; but
   failing to agree, they shall call in the Umpire and the
   decision of the majority shall be final and binding upon both
   parties.  Judgment upon the final decision of the Arbiters may
   be entered in any court of competent jurisdiction.

C. 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 one party,
   provided, however, that nothing herein shall impair the rights
   of such reinsurers to assert several, rather than joint,
   defenses or claims, nor be construed as changing the liability
   of the reinsurers participating under the terms of this
   Contract from several to joint.

D. Each party shall bear the expense of its own Arbiter, and
   shall jointly and equally bear with the other the expense of
   the Umpire and of the arbitration.  In the event that the two
   Arbiters are chosen by one party, as above provided, the
   expense of the Arbiters, the Umpire and the arbitration shall
   be equally divided between the two parties.

E. Any arbitration proceedings shall take place at Woodland
   Hills, California, unless otherwise mutually agreed.


Article XXIII - Service of Suit (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United
States of America, and/or is not authorized in any State,
Territory or District of the United States where authorization is
required by insurance regulatory authorities)

A. It is agreed that in the event the Reinsurer fails to pay any
   amount claimed to be due hereunder, the Reinsurer, at the
   request of the Company, will submit to the jurisdiction of a
   court of competent jurisdiction within the United States.
   Nothing in this Article constitutes or should be understood to
   constitute a waiver of the Reinsurer's rights to commence an
   action in any court of competent jurisdiction in the United
   States, to remove an action to a United States District Court,
   or to seek a transfer of a case to another court as permitted
   by the laws of the United States or of any state in the United
   States.

B. Further, pursuant to any statute of any state, territory or
   district of the United States which makes provision therefor,
   the Reinsurer hereby designates the party named in its
   Interests and Liabilities Agreement, or if no party is named
   therein, 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 its 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 Contract.


Article XXIV - Agency Agreement

Associated International Insurance Company shall be deemed the
agent of the other reinsured companies for purposes of sending or
receiving notices required by the terms and conditions of this
Contract, and for purposes of remitting or receiving any monies
due any party.


Article XXV - Intermediary (BRMA 23A)

E. W. Blanch Co. is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All
communications (including but not limited to notices, statements,
premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer
through E. W. Blanch Co., Reinsurance Services, 3500 West 80th
Street, Minneapolis, Minnesota 55431. Payments by the Company to
the Intermediary shall be deemed to constitute payment to the
Reinsurer. Payments by the Reinsurer to the Intermediary shall be
deemed to constitute payment to the Company only to the extent
that such payments are actually received by the Company.

In Witness Whereof, the Company by its duly authorized
representative has executed this Contract as of the date
undermentioned at:

Woodland Hills, California,this _______ day of ________________199___.

                __________________________________________________
                Associated International Insurance Company
                Calvert Insurance Company


<TABLE>
                                   Schedule A
                 External Third through Sixth Catastrophe Excess
                              Reinsurance Contract
                           Effective:  January 1, 1998

                                    issued to

                   Associated International Insurance Company
                           Woodland Hills, California
                            Calvert Insurance Company
                               Hoboken, New Jersey
                                       and
                 any additional company established or acquired
    by Associated International Insurance Company, Calvert Insurance Company
                 or Gryphon Holdings, Inc., New York, New York,
                            to be included hereunder

<CAPTION>

                         Third Excess            Fourth Excess            Fifth        Sixth
                                                                         Excess       Excess
                   With "No      Without     With "No      Without
                    Claims      "No Claims    Claims      "No Claims
                    Bonus"        Bonus"      Bonus"        Bonus"
<S>                <C>          <C>          <C>          <C>          <C>          <C>
Company's          $17,500,000  $17,500,000  $22,500,000  $22,500,000  $32,500,000  $ 65,000,000
Retention

Reinsurer's Per    $ 5,000,000  $ 5,000,000  $10,000,000  $10,000,000  $32,500,000  $ 78,000,000
Occurrence Limit

Reinsurer's        $10,000,000  $10,000,000  $20,000,000  $20,000,000  $65,000,000  $156,000,000
Annual Limit

Annual Minimum     $   780,000  $   700,000  $ 1,240,000  $ 1,080,000  $ 2,405,000  $  3,744,000
Premium

Rate-DIC/CA EQ          2.925%       2.625%       4.649%       4.049%       9.017%       14.037%
Business "DIC"

Rate=General E&S        0.540%       0.540%       0.833%       0.833%       1.854%        2.887%
Business "AOP"

Annual Deposit     $   975,000  $   875,000  $ 1,550,000  $ 1,350,000  $ 3,006,250  $  4,680,000
Premium

Semiannual         $   487,500  $   437,500  $   775,000  $   675,000  $ 1,503,125  $  2,340,000
Deposit Premium
</TABLE>

The figures listed above for each exess layer shall apply to each
Subscribing Reinsurer in the percentage share for that excess layer
as expressed in the Interests and Liabilities Agreement attached
hereto.