Document:

<PAGE>

                                                                   EXHIBIT 10(f)

                                                                   No. 2521-0035

                        PROPERTY PER RISK EXCESS OF LOSS
                              REINSURANCE AGREEMENT

                                     between

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

                                       and

                          AMERICAN RE-INSURANCE COMPANY

<PAGE>

                                                                    No.2521-0035

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ARTICLE                                                                PAGE
-------                                                                ----
<S>                                                                    <C>
   I         EXHIBITS COVERED                                            1

   II        TERRITORY                                                   1

   III       EXCLUSIONS                                                  1

   IV        DEFINITIONS                                                 6

   V         ULTIMATE NET LOSS                                           9

   VI        EXTRA CONTRACTUAL OBLIGATIONS
             AND EXCESS JUDGMENTS                                       10

   VII       DECLARATORY JUDGMENT
             EXPENSES                                                   11

   VIII      CLAIMS                                                     12

   IX        SALVAGE AND SUBROGATION                                    12

   X         ACCESS TO RECORDS                                          13

   XI        ERRORS AND OMISSIONS                                       13

   XII       RESERVES AND TAXES                                         13

   XIII      INSOLVENCY                                                 14

   XIV       OFFSET AND SECURITY                                        14

   XV        COMMENCEMENT AND TERMINATION                               15
</TABLE>

<PAGE>

                                                                   No. 2521-0035

                        PROPERTY PER RISK EXCESS OF LOSS
                              REINSURANCE AGREEMENT

THIS AGREEMENT made and entered into by and between MERCHANTS MUTUAL INSURANCE
COMPANY, Buffalo, New York and MERCHANTS INSURANCE COMPANY OF NEW HAMPSHIRE,
INC., Concord, New Hampshire (hereinafter collectively referred to as "Company")
and the AMERICAN RE-INSURANCE COMPANY, a Delaware Corporation with
Administrative Offices in Princeton, New Jersey (hereinafter referred to as the
"Reinsurer").

WITNESSETH:

The Reinsurer hereby reinsures the Company to the extent and on the terms and
conditions and subject to the exceptions, exclusions and limitations hereinafter
set forth and nothing hereinafter shall in any manner create any obligations or
establish any rights against the Reinsurer in favor of any third parties or any
persons not parties to this Agreement.

                                    ARTICLE I

EXHIBITS COVERED

The Company will reinsure with the Reinsurer and the Reinsurer will accept
reinsurance from the Company as set forth in Exhibits A and B which are attached
hereto and made a part of this Agreement, such Exhibits being entitled for
purposes of identification as follows:

     EXHIBIT A:      FIRST PROPERTY EXCESS OF LOSS REINSURANCE COVER
     EXHIBIT B:      SECOND PROPERTY EXCESS OF LOSS REINSURANCE COVER

                                   ARTICLE II

TERRITORY

This Agreement applies only to Risks located in the United States of America,
its territories and possessions, the District of Columbia and the Commonwealth
of Puerto Rico, and Canada, except as respects Automobile Physical Damage,
Inland Marine and Multiple Peril Package business covered hereunder where the
territorial limits shall be those of the Policies reinsured.

                                   ARTICLE III

EXCLUSIONS

                                      -1-
<PAGE>

                                                                   No. 2521-0035

A.    The reinsurance provided under this Agreement is subject to the exclusions
      set forth below and shall not cover the excluded coverages, risks or
      exposures unless individually submitted by the Company to the Reinsurer
      for inclusion hereunder, and if specially accepted in writing by the
      Reinsurer, such business shall then be covered under the terms of this
      Agreement, except to the extent the terms of this Agreement are modified
      by the special acceptance.

B.    This Agreement shall not apply to:

      1.    Reinsurance accepted by the Company other than:

            a.    Facultative reinsurance on a share basis of Risks accepted
                  individually and not forming part of any agreement, or

            b.    Local agency reinsurance on a share basis accepted in the
                  normal course of business, or

            c.    From its affiliates;

      2.    Nuclear incident per the Nuclear Incident Exclusion - Physical
            Damage - Reinsurance attached hereto;

      3.    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 individual Risks under this Agreement
            which are assigned to the Company as a result of the business
            reinsured hereunder;

      4.    Any liability of the Company arising from its participation or
            membership in any insolvency fund;

      5.    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;

      6.    Policies written to apply in excess of underlying insurance or
            Policies written with a deductible or franchise of more than
            $25,000; however, this exclusion shall not apply to Policies which
            provide a percentage of deductibles or franchise in connection with
            windstorm;

                                      -2-
<PAGE>

                                                                   No. 2521-0035

      7.    Insurance against earthquake, except when written in conjunction
            with fire and otherwise eligible perils;

      8.    Insurance on growing crops;

      9.    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;

      10.   Business classified as fidelity;

      11.   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;

      12.   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;

      13.   Mortgage impairment insurance and similar kinds of insurance,
            howsoever styled, providing coverage to an insured with respect to
            its mortgagee interest in property or its owner interest in
            foreclosed property;

      14.   Difference in conditions insurance and similar kinds of insurance,
            howsoever styled, except when written in conjunction with fire and
            otherwise eligible perils;

      15.   Risks which have a total insurable value of more than $250,000,000;

      16.   Any collection of fine arts with an insurable value of $5,000,000 or
            more;

      17.   Mobile homes; however, this exclusion shall not apply to dealers'
            physical damage renewal business;

      18.   Inland marine business with respect to the following:

            a.    All bridges and tunnels;

                                      -3-
<PAGE>

                                                                   No. 2521-0035

            b.    Cargo insurance when written as such with respect to ocean,
                  lake, or inland waterways vessels, except transit insurance
                  with a limit of $100,000 each or less;

            c.    Commercial negative film insurance and cast insurance;

            d.    Oil drilling rigs;

            e.    Furriers' customers policies;

            f.    Garment contractors policies;

            g.    Insurance on livestock under so-called "mortality policies";

            h.    Jewelers block policies and furriers' block policies;

            i.    Mining equipment while underground;

            j.    Motor truck cargo insurance written for common carriers
                  operating beyond a radius of 300 miles;

            k.    Radio and television broadcasting towers in excess of 100 feet
                  in height;

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

            m.    Watercraft, other than watercraft insured under a standard
                  homeowners policy and non-owned watercraft up to 51 feet in
                  length for commercial policies;

      19.   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);

      20.   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;

      21.   Pollutant clean up or removal under any commercial property policy
            or any inland marine policy written by the Company which does not
            contain

                                      -4-
<PAGE>

                                                                   No. 2521-0035

            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 Reinsurer and received the Reinsurer's
            prior approval.

      22.   A.    Any loss, cost or expense arising out of or related to, either
                  directly or indirectly, any Terrorist Activity, as defined in
                  the DEFINITIONS Article, with respect to Risks with a Total
                  Insured Value at the time of loss greater than or equal to
                  $50,000,000 and the following risks, classes of business, or
                  accounts applicable to Policies reinsured hereunder:

                  (1)   Airports and Aircraft

                  (2)   Apartments/Condos/Co-Ops > 25 stories

                  (3)   Automobile Mfrs.

                  (4)   Bridges

                  (5)   Casinos and Casino Hotels

                  (6)   Chemical Mfg. and Distribution Cos.

                  (7)   Convention/Exhibition Centers

                  (8)   Cruise Lines

                  (9)   Dams

                  (10)  Defense/Aerospace Industries

                  (11)  Financial Institutions with more than 10 branch
                        locations

                  (12)  Government Buildings (Fed/State) and National Landmarks

                  (13)  High Tech Mfg. Cos.

                  (14)  Hospitals

                  (15)  Hotels > 25 stories

                  (16)  Internet Cos.

                  (17)  Major Media Cos.

                  (18)  Nuclear Facility exposures

                  (19)  Office Buildings > 25 stories

                  (20)  Petrochemical/Oil and Gas Cos.

                  (21)  Pipelines (oil and gas)

                  (22)  Port/Transit Authorities

                  (23)  Property Management Cos - High Rise exposure > 25
                        stories

                  (24)  Railroads

                  (25)  Enclosed Shopping Malls - property owner only

                  (26)  Stadiums

                                      -5-
<PAGE>

                                                                   No. 2521-0035

                  (27)  Tunnels

                  (28)  Universities

                  (29)  Utility Cos. - electric, gas, water and sewer

            B.    This exclusion applies regardless of any other cause or event
                  that in any way contributes concurrently or in any sequence to
                  loss, cost, or expense.

C.    If the Company is bound, without the knowledge of and contrary to the
      instructions of the Company's supervisory underwriting personnel, on any
      business falling within the scope of one or more of the exclusions set
      forth in Paragraph B. above, these exclusions, except 1. through 6., 10.,
      11., 16., 19., 20., 21., and 22., shall be suspended with respect to such
      business until 30 days after an underwriting supervisor of the Company
      acquires knowledge of such business.

                                   ARTICLE IV

DEFINITIONS

A.    Property Business

      The term "Property business" 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 and the Property section of Contractors Coverall), Inland Marine,
      and Automobile Physical Damage (including collision, water damage, fleet
      dealers' and garagekeepers' legal liability) except those lines
      specifically excluded in the EXCLUSIONS Article.

B.    Company Retention

      The term "Company Retention" 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.    Risk

      The Company shall establish what constitutes one Risk, provided:

      (1)   a building and its contents, including time element coverages, shall
            never be considered more than one Risk:

      (2)   when two or more buildings and their contents are situated at the
            same general location, the Company shall identify on its records at
            the time of

                                      -6-
<PAGE>

                                                                   No. 2521-0035

            acceptance by the Company those individual buildings and their
            contents that are considered to constitute each Risk; if such
            identification is not made, each Building and its contents shall be
            considered to be a separate Risk.

D.    Building

      The term "Building" shall mean each structure that is considered by the
      local fire insurance rating organization to be a separate building for
      rate making purposes. With reference to structures not rated specifically
      by the local fire insurance rating organization, the term "Building" shall
      mean each separately roofed structure enclosed within exterior walls.

E.    Automobile Physical Damage Risk

      The Company shall establish what constitutes one Automobile Physical
      Damage Risk, provided:

      (1)   a tractor and trailer(s) or a tractor and semi-trailer(s) shall
            never be considered more than one Risk;

      (2)   with respect to fleet dealers' business and garage keepers legal
            liability business, all vehicles housed in one Building shall never
            be considered more than one Risk;

      (3)   with respect to fleet dealers' business and garage keepers legal
            liability business, any location where all vehicles are situated
            out-of-doors shall never be considered more than one Risk.

F.    Loss Occurrence

      The term "Loss Occurrence" shall mean each occurrence or series of
      occurrences arising out of one event.

G.    Terrorist Activity

      The term "Terrorist Activity" shall mean any deliberate, unlawful act
      that:

      1.    is declared by any authorized governmental official to be or to
            involve terrorism, terrorist activity or acts of terrorism; or

      2.    includes, involves, or is associated with the use or threatened use
            of force, violence or harm against any person, tangible or
            intangible property, the

                                      -7-
<PAGE>

                                                                   No. 2521-0035

            environment, or any natural resources, where the act or threatened
            act is intended, in whole or in part, to

            a.    promote or further any political, ideological, philosophical,
                  racial, ethnic, social or religious cause or objective of the
                  perpetrator or any organization, association or group
                  affiliated with the perpetrator;

            b.    influence, disrupt or interfere with any government related
                  operations, activities or policies;

            c.    intimidate, coerce or frighten the general public or any
                  segment of the general public; or

            d.    disrupt or interfere with a national economy or any segment of
                  a national economy; or

      3.    includes, involves, or is associated with, in whole or in part, any
            of the following activities, or the threat thereof:

            a.    hijacking or sabotage of any form of transportation or
                  conveyance, including but not limited to spacecraft,
                  satellite, aircraft, train, vessel, or motor vehicle;

            b.    hostage taking or kidnapping;

            c.    the use of any biological, chemical, radioactive, or nuclear
                  agent, material, device or weapon;

            d.    the use of any bomb, incendiary device, explosive or firearm;

            e.    the interference with or disruption of basic public or
                  commercial services and systems, including but not limited to
                  the following services or systems: electricity, natural gas,
                  power, postal, communications, telecommunications,
                  information, public transportation, water, fuel, sewer or
                  waste disposal;

            f.    the injuring or assassination of any elected or appointed
                  government official or any government employee;

            g.    the seizure, blockage, interference with, disruption of, or
                  damage to any government buildings, institutions, functions,
                  events, tangible or intangible property or other assets; or

            h.    the seizure, blockage, interference with, disruption of, or
                  damage to tunnels, roads, streets, highways, or other places
                  of public transportation or conveyance.

      4.    Any of the activities listed in Section 3 above shall be considered
            Terrorist Activity except where the Company can conclusively
            demonstrate to the Reinsurer that the foregoing activities or
            threats thereof were motivated solely by personal objectives of the
            perpetrator that are unrelated, in whole or in part, to any
            intention to

                                      -8-
<PAGE>

                                                                   No. 2521-0035

            a.    promote or further any political, ideological, philosophical,
                  racial, ethnic, social or religious cause or objective of the
                  perpetrator or any organization, association or group
                  affiliated with the perpetrator;

            b.    influence, disrupt or interfere with any government related
                  operations, activities or policies;

            c.    intimidate, coerce or frighten the general public or any
                  segment of the general public; or

            d.    disrupt or interfere with a national economy or any segment of
                  a national economy.

         The term "chemical" as used herein shall mean any substance obtained by
         a chemical process or used for producing a chemical effect for the
         purposes of Terrorist Activity.

H.    Policy

      The term "Policy" shall mean each of the Company's binders, policies and
      contracts providing insurance on the Property business covered under this
      Agreement.

I.    Agreement Year

      The term "Agreement Year" shall refer to the period beginning January 1,
      2004, and ending December 31, 2004. Each Agreement Year thereafter shall
      be defined as each successive 12-month period.

                                    ARTICLE V

ULTIMATE NET LOSS

A.    The term "Ultimate Net Loss" as used herein shall be understood to mean
      the sum actually paid by the Company in settlement of losses for which it
      is held liable, including 90% of any Extra Contractual Obligations and/or
      Excess Judgments and/or Declaratory Judgment Expenses, in accordance with
      their respective articles, after making proper deductions for all
      recoveries, salvages, and claims upon other reinsurance which inures to
      the benefit of the Reinsurer under this Agreement whether collectible or
      not; provided, however, that in the event of the insolvency of the
      Company, "Ultimate Net Loss" shall mean the amount of loss which the
      Company has incurred or for which it is liable, and payment by the
      Reinsurer shall be made to the liquidator, receiver or statutory successor
      of the Company in accordance with the provisions of the INSOLVENCY
      Article.

                                      -9-
<PAGE>

                                                                   No. 2521-0035

B.    All expenses incurred by the Company which are included as part of the
      policy limit under the Company's Policies reinsured hereunder shall be
      included in "Ultimate Net Loss" as defined above.

C.    All office expenses of the Company and all salaries and expenses of its
      officials and employees shall be excluded under this Agreement, except
      that the Company may include the costs and expenses of its in-house
      counsel as provided in D. below.

D.    All expenses other than as provided in B. and C. above, including taxed
      court costs, prejudgment and postjudgment interest, and loss expenses
      incurred in investigation, adjustment and litigation, defense and
      settlement of claims made against the Company under its Policies reinsured
      hereunder, including the costs and expenses of the Company's in-house
      counsel while engaged in the litigation of claims covered hereunder, shall
      be apportioned in proportion to the respective interests of the parties
      hereto in the Ultimate Net Loss.

E.    Recoveries from catastrophe reinsurance shall be deemed not to reduce the
      amount required with respect to the Company Retention.

                                   ARTICLE VI

EXTRA CONTRACTUAL OBLIGATIONS AND/OR EXCESS JUDGMENTS

A.    This Agreement shall indemnify the Company, within the limits of this
      Agreement, for Extra Contractual Obligations and/or Excess Judgments
      awarded by a court of competent jurisdiction against the Company that
      arise from Policies that are reinsured hereunder. Such Extra Contractual
      Obligation and/or Excess Judgment shall be added to the amount of the loss
      within the Company's policy limit and the sum thereof shall be considered
      one loss subject to the exclusions and limitations set forth in this
      Agreement.

B.    "Extra Contractual Obligations" are defined as damages paid by the Company
      that are not covered under any other provision of this Agreement,
      including legal costs and expenses in connection therewith, that arise as
      a result of the Company's handling of any claim on the Policy reinsured
      hereunder, such liabilities arising because of, but not limited to, the
      following: failure by the Company to settle within the policy limit, or by
      reason of alleged or actual negligence or bad faith or alleged fraud in
      rejecting an offer of settlement or in the preparation of the defense or
      in the trial of any action against its insured or in the preparation or
      prosecution of an appeal consequent upon such action.

C.    "Excess Judgments" are defined as those damages paid by the Company which
      amounts are in excess of its policy limits, but otherwise within the
      coverage terms

                                      -10-
<PAGE>

                                                                   No. 2521-0035

      of the Policy reinsured hereunder, including legal costs and expenses in
      connection therewith, as a result of an action against it by its insured
      or its insured's assignee to recover damages awarded by a court of
      competent jurisdiction to a third party claimant, arising out of, but not
      limited to, the Company's alleged or actual negligence or bad faith or
      alleged fraud in rejecting a settlement, in discharging its duty to
      defend, in preparing the defense in an action against its insured or
      discharging its duty to prepare or prosecute an appeal consequent upon
      such action.

D.    The date on which an Extra Contractual Obligation and/or an Excess
      Judgment award is incurred by the Company shall be deemed, in all
      circumstances, to have arisen on the same date as the original loss
      occurrence that gave rise to the Extra Contractual Obligation and/or an
      Excess Judgment.

E.    However, this Article shall not apply where the loss has been incurred due
      to the fraud of a member of the Board of Directors or a corporate officer
      of the Company or any other employee of the Company with claims settlement
      authority acting individually or collectively or in collusion with any
      individual or corporation or any other organization or party involved in
      the presentation, defense or settlement of any claim covered hereunder.

F.    Recoveries, collectibles or retentions from any form of insurance and/or
      reinsurance, including but not limited to, deductibles or self-insured
      retentions, that protect the Company against claims the subject matter of
      this clause, will inure to the benefit of the Reinsurer and shall be
      deducted from the total amount of Extra Contractual Obligation and/or
      Excess Judgment award for purposes of determining the amount recoverable
      hereunder, whether collectible or not.

G.    If any provision of this Article shall be rendered illegal or
      unenforceable by the laws, regulations or public policy of any state, such
      provision shall be considered void in such state, but this shall not
      affect the validity or enforceability of any other provision of this
      Agreement or the enforceability of such provision in any other
      jurisdiction.

                                   ARTICLE VII

DECLARATORY JUDGMENT EXPENSES

A.    This Agreement shall indemnify the Company, within the limits of this
      Agreement, for Declaratory Judgment Expenses paid by the Company, as
      provided in this Agreement, under Policies reinsured hereunder.

B.    "Declaratory Judgment Expenses" as used herein shall mean legal expenses
      paid by the Company for the investigation, analysis, evaluation, and/or
      resolution of

                                      -11-
<PAGE>

                                                                   No. 2521-0035

      litigation of coverage by the Company and any other party to determine if
      there is coverage to indemnify and/or pay to its insured(s) under the
      Policies issued by the Company and reinsured hereunder for a specific loss
      which loss is not specifically excluded under this Agreement.

C.    Recoveries from any form of insurance and/or reinsurance that protect the
      Company against claims the subject matter of this clause will inure to the
      benefit of the Reinsurer and shall be deducted from the total amount of
      Declaratory Judgment Expenses for purposes of determining the amount
      recoverable hereunder.

                                  ARTICLE VIII

CLAIMS

A.    The Company shall advise the Reinsurer promptly in writing of all claims
      which may develop into losses involving reinsurance hereunder and any
      subsequent developments pertaining thereto.

B.    The Company has the obligation to investigate and, to the extent that may
      be required by the Policies reinsured hereunder, defend any claim
      affecting this reinsurance and to pursue such claim to final
      determination.

C.    It is understood that when so requested the Company will afford the
      Reinsurer an opportunity to be associated with the Company, at the expense
      of the Reinsurer, in the defense or control of any claim, suit or
      proceeding involving this reinsurance, and the Company and the Reinsurer
      shall cooperate in every respect in the defense or control of such claim,
      suit, or proceeding.

D.    Payment by the Reinsurer of its portion of Ultimate Net Loss and loss
      expense paid by the Company will be made by the Reinsurer to the Company
      promptly after proof of payment by the Company and coverage hereunder is
      received by the Reinsurer.

                                   ARTICLE IX

SALVAGE AND SUBROGATION

A.    The Reinsurer shall be subrogated, as respects any loss for which the
      Reinsurer shall actually pay or become liable, but only to the extent of
      the amount of payment by or the amount of liability to the Reinsurer, to
      all the rights of the Company against any person or other entity who may
      be legally responsible in damages for said loss. The Company hereby agrees
      to enforce such rights, but in case the Company shall refuse or neglect to
      do so the Reinsurer is hereby

                                      -12-
<PAGE>

                                                                   No. 2521-0035

      authorized and empowered to bring any appropriate action in the name of
      the Company or its policyholders, or otherwise to enforce such rights.

B.    Any subrogation, salvage or other amounts recovered applying to Risks
      covered under this Agreement shall always be used to reimburse the excess
      carriers (from the last to the first, beginning with the carrier of the
      last excess), according to their participation, before being used in any
      way to reimburse the Company for its primary loss.

C.    In the event there is any subrogation, salvage or other amounts recovered
      subsequent to a loss settlement, it is agreed that if the expenses
      incurred in obtaining such amounts are less than the amount recovered,
      such expenses shall be borne by each party in the proportion that each
      party benefits from the amount recovered, otherwise, the amount recovered
      shall first be applied to the reimbursement of the expense of recovery and
      the remaining expense shall be borne by the Company and the Reinsurer in
      proportion to the liability of each party for the loss before such
      recovery had been obtained. Expenses hereunder shall exclude all office
      expenses of the Company and all salaries and expenses of its officials and
      employees, except the costs and expenses of the Company's in-house counsel
      while engaged in obtaining such subrogation or salvage amounts.

                                    ARTICLE X

ACCESS TO RECORDS

The Company shall place at the disposal of the Reinsurer and the Reinsurer shall
have the right to inspect, through its authorized representatives, at all
reasonable times during the currency of this Agreement and thereafter, the
books, records, and papers of the Company pertaining to the reinsurance provided
hereunder.

                                   ARTICLE XI

ERRORS AND OMISSIONS

Errors or omissions on the part of the Company shall not invalidate the
reinsurance under this Agreement, provided such errors or omissions are
corrected promptly after discovery thereof, but the liability of the Reinsurer
under this Agreement or any exhibits or endorsements attached thereto shall in
no event exceed the limits specified therein, nor be extended to cover any
risks, perils or classes of insurance generally or specifically excluded
therein.

                                   ARTICLE XII

RESERVES AND TAXES

                                      -13-
<PAGE>

                                                                   No. 2521-0035

A.    The Reinsurer shall maintain legal reserves with respect to unearned
      premiums and claims hereunder.

B.    The Company will be liable for all taxes on premiums reported to the
      Reinsurer hereunder and will reimburse the Reinsurer for such taxes where
      the Reinsurer is required to pay the same.

                                  ARTICLE XIII

INSOLVENCY

(If more than one reinsured company is included in the designation of "Company"
this Article shall apply only to the insolvent company or companies)

In the event of the insolvency of the Company and the appointment of a
conservator, liquidator or statutory successor, the reinsurance provided by this
Agreement shall be payable by the Reinsurer directly to the Company or to its
liquidator, receiver or statutory successor on the basis of the liability of the
Company under the contract or contracts reinsured. Subject to the right of
offset and the verification of coverage, the Reinsurer shall pay its share of
the loss without diminution because of the insolvency of the Company. The
liquidator, receiver or statutory successor of the Company shall give written
notice of the pendency of each claim against the Company on a Policy or bond
reinsured within a reasonable time after such claim is filed in the insolvency
proceeding. During the pendency of such claim, the Reinsurer may, at its own
expense, investigate such claim and interpose in the proceeding where such claim
is to be adjudicated any defense or defenses which it may deem available to the
Company, its liquidator or receiver or statutory successor. Subject to court
approval, any expense thus incurred by the Reinsurer shall be chargeable against
the Company as part of the expense of liquidation to the extent of such
proportionate share of the benefit as shall accrue to the Company solely as a
result of the defense undertaken by the Reinsurer. The reinsurance shall be
payable as set forth above except where (i) the Agreement specifies another
payee of such reinsurance in the event of the insolvency of the Company and (ii)
the Reinsurer with the consent of the direct insureds has assumed such policy
obligations of the Company as its direct obligations to the payees under such
Policies, in substitution for the obligations of the Company to such payees; or
where the Reinsurer has guaranteed performance of a contract insuring against
physical damage to property for the benefit of mortgagees or other loss payees
named in this Agreement in accordance with Section 1114(c) of the New York
Insurance Law.

                                   ARTICLE XVI

                                      -14-
<PAGE>

                                                                   No. 2521-0035

OFFSET AND SECURITY

A.    Each party hereto has the right, which may be exercised at any time, to
      offset any amounts, whether on account of premiums or losses or otherwise,
      due from such party to another party under this Agreement or any other
      reinsurance agreement heretofore or hereafter entered into between them,
      against any amounts, whether on account of premiums or losses or otherwise
      due from the latter party to the former party. The party asserting the
      right of offset may exercise this right, whether as assuming or ceding
      insurer or in both roles in the relevant agreement or agreements.

B.    Each party hereby assigns and pledges to the other party (or to each other
      party, if more than one) all of its rights under this Agreement to receive
      premium or loss payments at any time from such other party ("Collateral"),
      to secure its premium or loss obligations to such other party at any time
      under this Agreement and any other reinsurance agreement heretofore or
      hereafter entered into by and between them ("Secured Obligations"). If at
      any time a party is in default under any Secured Obligation or shall be
      subject to any liquidation, rehabilitation, reorganization or conservation
      proceeding, each other party shall be entitled in its discretion, to
      apply, or to withhold for the purpose of applying in due course, any
      Collateral assigned and pledged to it by the former party and otherwise to
      realize upon such Collateral as security for such Secured Obligations.

C.    The security interest described herein, and the term "Collateral," shall
      apply to all payments and other proceeds in respect of the rights assigned
      and pledged. A party's security interest in Collateral shall be deemed
      evidenced only by the counterpart of this Agreement delivered to such
      party.

D.    Each right under this Article is a separate and independent right,
      exercisable, without notice or demand, alone or together with other
      rights, in the sole election of the party entitled thereto, and no waiver,
      delay, or failure to exercise, in respect of any right, shall constitute a
      waiver of any other right. The provisions of this Article shall survive
      any cancellation or other termination of this Agreement.

E.    In the event of the insolvency of a party hereto, offsets shall only be
      allowed in accordance with the laws of the insolvent party's state of
      domicile.

                                   ARTICLE XV

COMMENCEMENT AND TERMINATION

A.    This Agreement shall take effect as of 12:01 a.m. January 1, 2004, and
      shall remain in force on a continuous basis until cancelled, as
      hereinafter provided.

                                      -15-
<PAGE>

                                                                   No. 2521-0035

B.    Either party shall have the right to cancel this Agreement by giving not
      less than 90 days prior written notice.

C.    Upon cancellation of this Agreement, the Reinsurer's liability hereunder
      will terminate on a run-off basis. However, the Company may elect to have
      the Reinsurer's liability terminate on a cut-off basis. The phrases
      "run-off basis" and "cut-off basis" shall have the meanings set forth
      below:

      1.    Run-Off Basis

            Upon cancellation of this Agreement, the Reinsurer shall remain
            liable for losses occurring under the Company's Policies on Policies
            in force at the cancellation date of this Agreement, until the
            Policies' scheduled anniversary, expiration, cancellation, or
            non-renewal, whichever shall occur first, provided however, that in
            no event shall the Reinsurer be liable for more than 12 months from
            the date of cancellation of this Agreement.

      2.    Cut-Off Basis

            Upon cancellation of this Agreement, the Reinsurer shall pay to the
            Company the unearned premiums on the business in force hereunder as
            of the date of cancellation, less any commission allowed herein. The
            Reinsurer shall be discharged and released of all liability as of
            the date of cancellation of this Agreement for any losses occurring
            under the Company's Policies subsequent to the date of cancellation
            of this Agreement.

D.    Every notice of cancellation shall be given by certified or registered
      mail addressed to the other party stating when thereafter cancellation
      shall be effective. In determining whether the requisite number of days
      notice has been given in any case, the date of cancellation shall be
      counted but the date of mailing shall not.

E.    Notwithstanding the cancellation of this Agreement as hereinabove
      provided, the provisions of this Agreement shall continue to apply to all
      unfinished business hereunder respecting all losses occurring, under the
      Company's Policies prior to the cancellation date to the end that all the
      obligations and liabilities incurred by each party hereunder prior to such
      cancellation shall be fully performed and discharged.

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
in duplicate this                  day of                                , 2004.

ACCEPTED:

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

                                      -16-
<PAGE>

                                                                   No. 2521-0035

_____________________________________

and in Princeton, New Jersey, this           day of                    , 2004.

                                                 AMERICAN RE-INSURANCE COMPANY

                                                 _____________________________

DATED:  April 16, 2004
RG/rg
                                      -17-
<PAGE>

                                                                   No. 2521-0035

                                    EXHIBIT A

                          FIRST PROPERTY EXCESS OF LOSS
                                REINSURANCE COVER

                                    Section 1

BUSINESS COVERED

The Reinsurer agrees to indemnify the Company, on an excess of loss basis, for
Ultimate Net Loss paid by the Company as a result of losses occurring under the
Company's Policies on or after 12:01 a.m., January 1, 2004, as respects the
Company's Policies in force at 12:01 a.m., January 1, 2004, or new and renewal
Policies of the Company becoming effective on and after said time and date,
covering business underwritten and classified by the Company as Property
business as defined herein. However, the reinsurance provided herein shall be
subject to the terms, conditions, exclusions and limitations set forth in this
Agreement.

                                    Section 2

RETENTION AND LIMIT

A.    The Reinsurer shall be liable for that amount of Ultimate Net Loss each
      Risk, each loss in excess of the Company's retention of $500,000 Ultimate
      Net Loss, each Risk, each loss. However, the Reinsurer's liability shall
      never exceed $1,500,000 Ultimate Net Loss, each Risk, each loss, nor
      $3,000,000 as respects all Risks in any one Loss Occurrence.

B.    Homeowners Property Additional Coverage

      1.    As respects Homeowners' Property business included within Appendix
            A, the Reinsurer shall be liable for that amount of Ultimate Net
            Loss each Risk, each loss in excess of the Company's retention of
            $2,000,000 Ultimate Net Loss, each Risk, each loss. However, the
            Reinsurer's liability shall never exceed $1,500,000 Ultimate Net
            Loss, each Risk, each loss, nor $3,000,000 as respects all Risks in
            any one Loss Occurrence.

      2.    For Homeowner policies with TIV in excess of 2,000,000, the Company
            will provide the Reinsurer within 30 days after the close of each
            month a listing of all policies written, endorsed (limit changes
            only) or canceled. The report will amend Appendix A and will contain
            the insured Policy Number, Policy Term; and TIV in total and broken
            out by coverage part.

      3.    If the Company is bound without knowledge of and contrary to the
            instructions of the Company's supervisory underwriting personnel on
            a high

                                      -1-
<PAGE>

                                                                   No. 2521-0035

            value dwelling falling within the scope of one or more of the
            exclusions set forth in this Agreement and subject to being
            reinsured hereunder, the exclusions, except in Paragraph B. of the
            Exclusions Article, 1. through 6., 10., 11., 16., 19., 20., 21., and
            22., shall be suspended with respect to such business until 30 days
            after an underwriting supervisor of the Company acquires knowledge
            of such business.

C.    Notwithstanding the aforementioned, the following limits shall apply as
      respects all loss, cost or expense arising from or related to, either
      directly or indirectly, any Terrorist Activity, as defined in the
      DEFINITIONS Article:

      $3,000,000 Ultimate Net Loss each Loss Occurrence, and $6,000,000 Ultimate
      Net Loss in the aggregate as respects all such Loss Occurrences for each
      Agreement Year. However, the Reinsurer's liability shall be limited to
      $3,000,000 in the aggregate as respects all such Occurrences arising from
      loss as defined in Paragraph G.,3.,c, of the DEFINITIONS Article for each
      Agreement Year.

D.    If a Loss Occurrence takes place (1) which involves one Risk reinsured
      under this Agreement and the classes of business reinsured under the 1st
      Casualty Excess Cover of Casualty Excess of Loss Agreement No. 2521-0027
      (the "First Casualty Excess") in combination and (2) for which the
      combined Ultimate Net Loss under this Agreement and the First Casualty
      Excess exceeds $750,000, then the provisions of the "Combined Retention"
      paragraph of the Retention and Limit section of the First Casualty Excess
      shall apply.

                                    Section 3

REINSURANCE PREMIUM

A.    With respect to business in force, new and renewed at or after the
      effective time and date of this Agreement:

      1.    x.xx% of the Company's unearned premium on Homeowners Multiple Peril
            (Section I) after deducting that portion, if any, paid for share
            reinsurance, calculated on the monthly pro rata basis as of the
            effective time and date of this Agreement; and

      2.    xx.xx% of the Company's unearned premium on all other classes of
            business reinsured hereunder (except Automobile Physical Damage),
            after deducting that portion, if any, paid for share reinsurance,
            calculated on the monthly pro rata basis as of the effective time
            and date of this Agreement.

                                      -2-
<PAGE>

                                                                   No. 2521-0035

                                    Section 4

COMMISSION

A.    The Reinsurer shall allow the Company a xx% commission on the reinsurance
      premium ceded hereunder. The Company shall allow the Reinsurer return
      commission on return premiums at the same rate.

B.    It is expressly agreed that the ceding commission allowed the Company
      includes provision for all dividends, commissions, taxes, assessments and
      all other expenses of whatever nature, except loss expense.

                                    Section 5

REPORTS AND REMITTANCES

A.    Reinsurance Premium

      1.    In Force Premium:

            Within 25 days after the commencement of this Agreement, the Company
            shall report and pay to the Reinsurer the reinsurance premium with
            respect to the business of the Company in force at the effective
            time and date of this Agreement. The Company's report shall
            summarize the reinsurance premium by line of insurance, by term, and
            by month and year of expiration.

      2.    New and Renewal Premium:

            Within 25 days after the close of each month, the Company shall
            render to the Reinsurer a report of the reinsurance premium for the
            month with respect to business of the Company written during the
            month, summarizing the reinsurance premium by line of insurance; and
            the amount due either party shall be remitted within 60 days after
            the close of the month.

B.    Unearned Premium

      Within 25 days after the close of each calendar quarter, the Company shall
      render to the Reinsurer a report of the reinsurance premium unearned by
      line of insurance and the contribution for the quarter to the reinsurance
      premium in force by line of insurance, by term, and by month and year of
      expiration.

                                      -3-
<PAGE>

                                                                   No. 2521-0035

C.    General

      In addition to the reports required in A. and B., the Company shall
      furnish such other information as may be required by the Reinsurer for the
      completion of the Reinsurer's quarterly and annual statements and internal
      records. All reports shall be rendered in forms acceptable to the Company
      and the Reinsurer.

                                    Section 6

REINSTATEMENT

A.    Except as provided in Paragraph B. below, in the event of any portion of
      the liability under this Agreement being exhausted by loss, the amount so
      exhausted is automatically reinstated from the time of the occurrence of
      the loss without payment of additional premium; but nevertheless, the
      Reinsurer's liability shall not exceed $1,500,000 Ultimate Net Loss each
      Risk, each loss or $3,000,000 for all Risks in any one Loss Occurrence.

B.    With respect to any loss, cost or expense arising from or related to,
      either directly or indirectly, any Terrorist Activity, as defined in the
      DEFINITIONS Article, the limit of liability of the Reinsurer under this
      Agreement with respect to each Loss Occurrence shall be reduced by an
      amount equal to the amount of liability incurred by the Reinsurer
      hereunder with respect to said Loss Occurrence; but that part of the
      Reinsurer's liability that is so reduced shall be automatically reinstated
      from the time of the Loss Occurrence, subject to payment of an additional
      premium, due at the time of reinstatement and calculated as set forth
      below for each amount so reinstated:

      Amount Reinstated  x  Annual Reinsurance Premium
      -----------------
         $3,000,000

      Said additional premium is subject to a minimum additional premium of
      $xxx,xxx and a maximum additional premium of $xxx,xxx for each amount so
      reinstated.

      Nevertheless, the Reinsurer's limit of liability hereunder with respect to
      any loss, cost or expense arising out of or related to, either directly or
      indirectly, any Terrorist Activity shall in no event exceed $3,000,000
      Ultimate Net Loss each Loss Occurrence and $6,000,000 Ultimate Net Loss in
      the aggregate for all such Loss Occurrences for each Agreement Year.

This Exhibit A is attached to and forms part of Reinsurance Agreement No.
2521-0000 issued to MERCHANTS MUTUAL INSURANCE COMPANY and MERCHANTS INSURANCE
COMPANY OF NEW HAMPSHIRE, INC.

DATED:  April 16, 2004

                                      -4-
<PAGE>

                                                                   No. 2521-0035

RG/rg

                                      -5-
<PAGE>

                                                                   No. 2521-0035

                                    EXHIBIT B

                         SECOND PROPERTY EXCESS OF LOSS
                                REINSURANCE COVER

                                    Section 1

BUSINESS COVERED

The Reinsurer agrees to indemnify the Company, on an excess of loss basis, for
Ultimate Net Loss paid by the Company as a result of losses occurring under the
Company's Policies on or after 12:01 a.m., January 1, 2004, as respects the
Company's Policies in force at 12:01 a.m., January 1, 2004, or new and renewal
Policies of the Company becoming effective on and after said time and date,
covering business underwritten and classified by the Company as Commercial
Property business (i.e., commercial property policies for Fire, Allied Lines,
Commercial Multiple Peril (Section I including Section I of Business Owners and
the Property section of Contractors Coverall), Inland Marine, and Automobile
Physical Damage (including collision, water damage, fleet dealers' and
garagekeepers' legal liability)). However, the reinsurance provided herein shall
be subject to the terms, conditions, exclusions and limitations set forth in
this Agreement.

                                    Section 2

RETENTION AND LIMIT

A.    The Reinsurer shall be liable for that amount of Ultimate Net Loss each
      Risk, each loss in excess of the Company's retention of $2,000,000
      Ultimate Net Loss, each Risk, each loss. However, the Reinsurer's
      liability shall never exceed $3,000,000 Ultimate Net Loss, each Risk, each
      loss, nor $6,000,000 as respects all Risks in any one Loss Occurrence.

B.    Notwithstanding the aforementioned, the following limits shall apply as
      respects all loss, cost or expense arising from or related to, either
      directly or indirectly, any Terrorist Activity, as defined in the
      DEFINITIONS Article:

      $3,000,000 Ultimate Net Loss, each Loss Occurrence. However, the
      Reinsurer's liability shall never exceed $3,000,000 Ultimate Net Loss,
      each Risk, each loss, nor $3,000,000 as respects all Risks in any one
      Agreement Year.

C.    If a Loss Occurrence takes place (1) which involves one Risk reinsured
      under this Agreement and the classes of business reinsured under the 1st
      Casualty Excess Cover of Casualty Excess of Loss Agreement No. 2521-0027
      (the "First Casualty Excess") in combination and (2) for which the
      combined Ultimate Net Loss under

                                      -1-
<PAGE>

                                                                   No. 2521-0035

      this Agreement and the First Casualty Excess exceeds $750,000, then the
      provisions of the "Combined Retention" paragraph of the Retention and
      Limit section of the First Casualty Excess shall apply.

D.    Reinsurance recoveries under Exhibit A of this Agreement shall inure to
      the sole benefit of the Company in determining the Company's Ultimate Net
      Loss under this Exhibit.

                                    Section 3

REINSURANCE PREMIUM

A.    The premium for the reinsurance provided under this Exhibit shall be
      computed at the rate of x.xx% of the unearned premium on the business in
      force and business becoming effective at and after the effective time and
      date of this Agreement, on the business covered hereunder after deducting
      that portion, if any, paid for share reinsurance.

B.    The annual minimum and deposit premium for the reinsurance provided under
      this Exhibit is $xxx,000.

                                    Section 4

REPORTS AND REMITTANCES

A.    The annual deposit premium stipulated in the Premium Section in this
      Exhibit shall be paid in advance by the Company to the Reinsurer in equal
      installments on January 1, April 1, July 1, and October 1 of each
      Agreement Year.

B.    Within 25 days after the end of each Agreement Year and upon cancellation
      or termination, until all premiums are accounted for, the Company shall
      render to the Reinsurer a statement of the unearned premium during the
      Agreement Year and a calculation of the annual premium computed by the
      application of the rate set forth in the Premium Section of this Exhibit
      to the unearned premium. If the annual deposit premium previously paid is
      less than the actual annual premium owed to the Reinsurer under this
      Exhibit, such additional premium due the Reinsurer shall be forwarded to
      the Reinsurer with the statement. If the annual deposit premium exceeds
      the actual annual premium owed to the Reinsurer under this Exhibit, any
      return premium due the Company, subject to the annual minimum premium
      stipulated in the Premium Section of this Exhibit, shall be forwarded by
      the Reinsurer to the Company promptly upon receipt of the statement by the
      Reinsurer.

                                      -2-
<PAGE>

                                                                   No. 2521-0035

C.    General

      The Company shall furnish such other information as may be required by the
      Reinsurer for the completion of the Reinsurer's quarterly and annual
      statements and internal records. All reports shall be rendered in forms
      acceptable to the Company and the Reinsurer.

This Exhibit B is attached to and forms part of Reinsurance Agreement No.
2521-0000 issued to MERCHANTS MUTUAL INSURANCE COMPANY and MERCHANTS INSURANCE
COMPANY OF NEW HAMPSHIRE, INC.

DATED:  April 16, 2004
RG/rg

                                      -3-
<PAGE>

                                                                   No. 2521-0035

                       NUCLEAR INCIDENT EXCLUSION CLAUSE--
                       PHYSICAL DAMAGE--REINSURANCE--NO. 2

      (1) This Reinsurance does not cover any loss or liability accruing to the
Reassured, 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 Reinsurance does not cover any loss or liability accruing to the
Reassured, 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 Reinsurance does not cover any loss or liability by radioactive
contamination accruing to the Reassured, 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 Reassured 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 Reinsurance does not cover any loss or liability by
radioactive contamination accruing to the Reassured, 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 Reassured 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) Reassured 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 Reassured 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,

                                      -1-
<PAGE>

                                                                   No. 2521-0035

      (b) With respect to any risk located in Canada policies issued by the
      Reassured 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.

                                      -2-<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                                                   EXHIBIT 10(g)

            PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE AGREEMENT

<TABLE>
<CAPTION>
ARTICLE                                                                         PAGE
-------                                                                         ----
<S>                                                                             <C>
COVERAGE                                                                         2
TERM                                                                             2
TERRITORY                                                                        3
EXCLUSIONS                                                                       3
DEFINITIONS                                                                      6
LOSS OCCURRENCE                                                                  7
NET RETAINED LIABILITY                                                           8
SELF INSURED OBLIGATIONS                                                         9
OTHER REINSURANCE                                                                9
REPORTS AND REMITTANCES                                                          9
RESERVES AND FUNDING                                                            10
SPECIAL FUNDING/TERMINATION                                                     12
LOSS NOTICES AND SETTLEMENTS                                                    13
LATE PAYMENT PENALTY                                                            14
OFFSET                                                                          15
SALVAGE AND SUBROGATION                                                         15
DELAYS, ERRORS, OR OMISSIONS                                                    16
AMENDMENTS                                                                      16
ACCESS TO RECORDS                                                               16
INSOLVENCY                                                                      16
ARBITRATION                                                                     17
CONFLICT WITH LAW                                                               19
TAXES                                                                           20
FEDERAL EXCISE TAX                                                              20
CURRENCY                                                                        20
SERVICE OF SUIT                                                                 20
AGENCY                                                                          21
INTERMEDIARY                                                                    21

EXHIBIT A -- FIRST LAYER                                                        22

EXHIBIT B -- SECOND LAYER                                                       23

EXHIBIT C -- THIRD LAYER                                                        24
</TABLE>

                                       1

<PAGE>

            PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE AGREEMENT

      THIS AGREEMENT is made and entered into by and between MERCHANTS MUTUAL
INSURANCE COMPANY, a New York corporation, and MERCHANTS INSURANCE COMPANY OF
NEW HAMPSHIRE, INC., a New Hampshire corporation, and any and all insurance
companies which are now or hereafter come under the same ownership or management
as Merchants Mutual Insurance Company (hereinafter called the "Company") of the
one part, and the various Reinsurers as identified by the Interests and
Liabilities Agreements attaching to and forming a part of this Agreement
(hereinafter called the "Reinsurers") of the other part.

      The parties hereto agree as hereinbelow in consideration of the mutual
covenants contained in the following Articles and attached Exhibits and upon the
terms and conditions set forth therein:

COVERAGE

      The Reinsurers will indemnify the Company for any loss or losses occurring
during the term of this Agreement under all policies, classified by the Company
as:

            PROPERTY, INCLUDING BUT NOT LIMITED TO: FIRE, ALLIED LINES,
            FARMOWNERS, HOMEOWNERS, BUSINESS OWNERS, COMMERCIAL MULTIPLE PERIL,
            EARTHQUAKE, INLAND MARINE, BOILER AND MACHINERY, AUTOMOBILE PHYSICAL
            DAMAGE, BURGLARY AND THEFT, EXTENDED COVERAGE, AND GLASS.

      All reinsurance for which the Reinsurers will be obligated by virtue of
this Agreement will be subject to the same terms, conditions, interpretations,
waivers, modifications, and alterations as the respective policies of the
Company to which this Agreement applies. Nothing herein will in any manner
create any obligations or establish any rights against the Reinsurers in favor
of any third parties or any persons not parties to this Agreement except as
provided in the Insolvency Article.

TERM

      This Agreement will apply to all loss occurrences during the 12-month term
extending from 12:01 a.m. Eastern Standard Time on January 1, 2004 to 12:01 a.m.
Eastern Standard Time on January 1, 2005.

      Should this Agreement expire while a loss occurrence covered hereunder is
in progress, all losses arising from such loss occurrence will be deemed to have
been incurred prior to the expiration of this Agreement, subject to the other
conditions of this

                                       2

<PAGE>

Agreement, and provided that no part of said loss occurrence is claimed against
any renewal or replacement of this Agreement.

      Notwithstanding the expiration of this Agreement as hereinabove provided,
the provisions of this Agreement will continue to apply to all obligations and
liabilities of the parties incurred hereunder to the end that all such
obligations and liabilities will be fully performed and discharged.

TERRITORY

      The territorial scope of this Agreement will be worldwide and identical to
that of the Company's policies.

EXCLUSIONS

      This Agreement does not apply to and specifically excludes the following:

      A.    Liability assumed by the Company under any form of treaty
            reinsurance; however, group intra-company reinsurance, local agency
            reinsurance accepted in the normal course of business, and/or
            policies written by another carrier at the Company's request and
            reinsured 100% by the Company will not be excluded hereunder.

      B.    Liability accruing to the Company under:

            1.    Accident and Health policies, Personal and Bodily Injury
                  Liability policies, Workers Compensation policies/Employers'
                  Liability policies, Fidelity bonds and/or similar contracts of
                  insurance and/or reinsurance now written or which may
                  hereafter be written and coded and classified as Casualty
                  and/or Fidelity business.

            2.    Property Damage Liability policies and/or contracts of
                  insurance and/or reinsurance now written or which may
                  hereafter be written or coded and classified as Casualty
                  business.

            3.    Third Party Liability Coverages (including Medical Payments).

      C.    Business classified as crop hail insurance or multiple peril crop
            insurance and insurance of growing or standing timber.

      D.    Aircraft Hulls in flight.

      E.    Loss or liability excluded by the Pools, Associations, and
            Syndicates Exclusion Clause attached to this Agreement, except that
            notwithstanding

                                       3

<PAGE>

            the provisions of the attached Clause, this exclusion will not apply
            as respects Industrial Risk Insurers and FM Global.

      F.    All insurances written in co-insurance with Nuclear Pools and
            reinsurance thereof.

      G.    Mortgage Impairment insurances and similar kinds of insurances
            however styled, providing coverage to an insured as respects its
            mortgagee interest in property. However, this exclusion does not
            apply to the standard Errors and Omissions Form and any endorsement
            applicable thereto, attached to Fire policies nor to Mortgage
            Holder's Protection policies.

      H.    Loss or liability excluded by the following clauses attached to this
            Agreement:

            1.    Nuclear Energy Risks Exclusion Clause (Reinsurance) (1994)
                  (Worldwide excluding U.S.A. & Canada).

            2.    Nuclear Incident Exclusion Clauses--Physical
                  Damage--Reinsurance - U.S.A. & Canada.

      I.    Loss or liability excluded by the Insolvency Funds Exclusion Clause
            attached to this Agreement.

      J.    Loss and/or damage and/or costs and/or expenses arising from seepage
            and/or pollution and/or contamination, other than contamination from
            smoke damage. Nevertheless, this exclusion does not preclude any
            payment of the cost of the removal of debris of property damaged by
            a loss otherwise covered hereunder, but subject always to a limit of
            25% of the Company's property loss under the policy.

      K.    The interest of Public Utilities in overhead telephone and electric
            power transmission and distribution lines.

      L.    War Risks for all classes of business in accordance with the
            Coverage Article.

      M.    Financial Guarantee or Insolvency.

      N.    Loss or liability excluded by the Terrorism Exclusion Clause
            attached to this Agreement.

      O.    Any loss, damage, cost, expense or liability arising from fungi that
            is not directly caused by or does not arise directly from a loss
            event that is covered under this Agreement. "Fungi" means any type
            or form of

                                       4

<PAGE>

            fungus, mold or mildew and any mycotoxins, spores, scents or
            byproducts produced or released by fungi.

      P.    Extra contractual obligations and excess limits liability.

      If any risks reinsured hereunder as set forth in the Coverage Article but
falling within the scope of the above exclusions are assigned to the Company
under an Assigned Risk Plan the coverage afforded by this Agreement will apply
to such risks, but only for the policy limits prescribed by said Plan, and
subject to the limits of this Agreement.

      The exclusions enumerated above, with the exception of E., F., H., I., L.,
M., N., O. and P. will not apply when they are merely incidental to the main
operations of the insured, provided such main operations are covered by the
Company and are not themselves excluded from the scope of this Agreement. The
Company will be the sole judge of what is "incidental."

      Should the Company, by reason of an inadvertent act, error, or omission,
be bound to afford coverage excluded hereunder, the Reinsurers will waive the
exclusion(s) with the exception of E., F., H., I., L., M., N., O. and P. The
duration of said waiver will not extend beyond the time the notice of such
coverage has been received by the responsible underwriting authority of the
Company plus the minimum time period required thereafter for the Company to
terminate such coverage.

      The Company may submit to the Reinsurers, for special acceptance
hereunder, business not covered by this Agreement. In the event of agreement by
Lead Reinsurers, such special acceptance will be made and will be subject to the
terms hereof (except as modified by the special acceptance), and will be binding
on all Reinsurers with respect to their respective shares. In the event
agreement is not achieved, such special acceptance will be made only with
respect to the interests and liabilities of each Reinsurer who agrees to such
special acceptance, and will be subject to the terms hereof (except as modified
by the special acceptance), and will be binding on each such Reinsurer with
respect to its share. Any special acceptance business covered under the
reinsurance Agreement being replaced by this Agreement will be automatically
covered hereunder.

      Further, should Reinsurers become a party to this Agreement subsequent to
the acceptance of any business not normally covered hereunder, they will
automatically accept same as being a part of this Agreement.

      Should any judicial entity having jurisdiction invalidate any exclusion in
the Company's policy, any amount of loss for which the Company is liable because
of such invalidation will not be excluded hereunder.

                                       5

<PAGE>

DEFINITIONS

      The following definitions will apply to this Agreement:

      A.    "Gross net earned premium" will mean the gross earned premium of the
            Company for classes of business reinsured hereunder as specified in
            the Coverage Article, less the earned portion of premium for
            reinsurance as set forth in the Other Reinsurance Article. Further,
            the Company will include in the gross net earned premium hereunder,
            15% of its gross earned premium under Commercial Multiple Peril
            policies (Coverall), 35% as respects Commercial Multiple Peril
            policies (Non-Coverall), 40% as respects Businessowners policies,
            and 85% as respects Farmowners and Homeowners policies.

      B.    "Policies" will mean all policies, binders, contracts, or agreements
            of insurance or reinsurance, whether written or oral.

      C.    "Risk" will be subject to definition solely by the Company.

      D.    "Ultimate net loss" will mean the actual loss or losses sustained by
            the Company under its policies, after deduction of all salvages and
            recoveries, and inuring reinsurance whether recoverable or not.
            Ultimate net loss will be inclusive of loss expense arising from the
            settlement of claims, and a pro rata share of salaries and expenses
            of the Company's field employees while adjusting such claims, and
            expenses of the Company's officials incurred in connection with such
            claims (but excluding salaries of the Company's officials and office
            expenses of the Company). All salvages, recoveries, or reinsurance
            received subsequent to any loss settlement hereunder will be applied
            as if received prior to the settlement, and all necessary
            adjustments will be made by the parties hereto. Nothing in this
            definition, however, should be construed to mean that losses under
            this Agreement are not recoverable until the Company's ultimate net
            loss has been ascertained.

            As respects any one loss occurrence, all recoveries from the
            Company's underlying reinsurance programs, will inure to the benefit
            of Reinsurers unless otherwise indicated in this Article or in the
            Retention and Limit sections of the attached Exhibits.

            At the Company's option, ultimate net loss may include the actual
            loss expenses arising from the settlement of all claims or a flat 7%
            factor may be applied to the actual losses in lieu of the actual
            loss expense.

                                       6

<PAGE>

LOSS OCCURRENCE

      "Loss occurrence" as used in this Agreement will 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 area of one state of the United States or province of Canada and
states or provinces contiguous thereto and to one another. However, the
territorial limitation of "loss occurrence" to one state of the United States or
province of Canada and states or provinces contiguous thereto will not apply to
loss occurrences involving Hawaii, Puerto Rico, or territories outside the
United States and Canada. The duration and extent of any one "loss occurrence"
will 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" will be
further defined as follows:

      A.    As regards windstorm, hail, tornado, hurricane, and 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. The event need not be limited to one state or province or
            states or provinces contiguous thereto.

      B.    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 that occur
            beyond such 72 consecutive hours during the continued occupation of
            an insured's premises by strikers, provided such occupation
            commenced during the aforesaid period.

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

      D.    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."

      Except for those "loss occurrences" referred to in B. above, 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 will apply with respect to

                                       7

<PAGE>

one event, except for those loss occurrences referred to in A. above, where
only one such period of 72 consecutive hours will apply with respect to one
event, regardless of the duration of the event.

      As respects those "loss occurrences" referred to in B. above, if the
disaster, accident, or loss occasioned by the event is of greater duration than
72 consecutive hours, then the Company may divide that disaster, accident, or
loss into two or more "loss occurrences" provided no two periods overlap and no
individual loss is included in more than one such period and provided that no
period commences 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.

      No individual losses occasioned by an event that would be covered by 72
hours provisions may be included in any "loss occurrence" claimed under the 168
hours provisions.

      Losses directly or indirectly occasioned by:

            (i)   loss of, alteration of, or damage to, or

            (ii)  a reduction in the functionality, availability or operation of

      a computer system, hardware, program, software, data, information
      repository, microchip, integrated circuit or similar device in computer
      equipment or non-computer equipment, whether the property of the
      policyholder of the Company or not, do not in and of themselves constitute
      an event unless arising out of one or more of the following perils: fire,
      lightning, explosion, aircraft or vehicle impact, falling objects,
      windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano,
      tsunami, flood, freeze or weight of snow.

      With respect to business classified by the Company as Inland Marine, if
two or more losses arise during the course of any one trip by land
transportation conveyance or any one voyage by a waterborne vessel, the Company
will have the option of adding them together and treating them as one loss
occurrence.

NET RETAINED LIABILITY

      This Agreement will apply only to that portion of any insurance or
reinsurance that the Company retains net for its own account, and such portion
will be used in calculating the amount of any loss hereunder as well as the
amount in excess of which this Agreement attaches; however, recovery from any
underlying reinsurance will inure to the sole benefit of the Company and will be
disregarded for the purposes of this Agreement. The amount of the Reinsurers'
liability hereunder with respect to any loss will not be increased by the
inability of the Company to collect from any other reinsurers

                                       8

<PAGE>

any amounts that may have become due from them, whether such inability arises
from the insolvency of such reinsurers or otherwise.

SELF-INSURED OBLIGATIONS

      As respects business covered hereunder, this Agreement will cover all
obligations of the Company assumed by it as a self-insurer (or self-insured
obligations in excess of any valid collectible insurance available to the
Company) to the same extent as if all types of insurance or reinsurance covered
by this Agreement were afforded under the broadest form of policies issued by
the Company.

      Insurance or reinsurance wherein the Company is named as the insured or
reinsured party, either alone or jointly with some other party, will be deemed
to be insurance or reinsurance coming within the scope of this Agreement,
notwithstanding that no legal liability may arise in respect thereof by reason
of the fact that the Company is named as the insured or reinsured party or one
of the insured or reinsured parties.

OTHER REINSURANCE

      The Company is permitted to have other treaty reinsurance. The premium for
any such reinsurance that inures to the benefit of this Agreement will not be
included within the subject premium hereunder. Additionally, the Company may
purchase facultative reinsurance on any subject risk it deems advisable, and the
premium for that portion of the Company's policy reinsured elsewhere will not be
included within the subject premium hereunder.

REPORTS AND REMITTANCES

      Within 60 days following the expiration of this Agreement, the Company
will furnish the Reinsurers with a report of reinsurance premium due them for
that period. Such report will show and properly segregate the Company's premium
to which the reinsurance rate applies as well as contain such other information
as may be required by the Reinsurers for completion of their NAIC interim and/or
annual statements. The premium due the Reinsurers will be balanced against the
minimum and deposit premiums set forth in the Rate and Premium Sections of the
attached Exhibits, and any balance shown to be due the Reinsurers will be
remitted with said report. Any balance shown to be due the Company will be paid
within 30 days following receipt of said report by the Reinsurers.

                                       9

<PAGE>

RESERVES AND FUNDING

      (Applicable only if Reinsurers cannot qualify for credit by each
      governmental authority having jurisdiction over the Company's United
      States reserves and/or Canadian reserves.)

      With respect to policies issued by the Company coming within the scope of
this Agreement, the Company agrees that, when it files with the Insurance
Department or sets up on its books reserves for known losses that have been
reported to the Reinsurers (including loss and loss expense paid by the Company
but not recovered from the Reinsurers, loss and loss expense reported and
outstanding and an allowance for IBNR as determined by the Company), which it is
required by law to set up, it will forward to the Reinsurers a statement showing
the proportion of such reserves applicable to them. The Reinsurers hereby agree
that they will fund their portion of the aforementioned reserves by one of the
following methods of funding:

      A.    As regards Reinsurers unauthorized in any state of the United States
            or the District of Columbia, such funding may be made by cash
            advances, trust agreements, escrow accounts for the benefit of the
            Company, letters of credit, or a combination thereof.

      B.    As regards Reinsurers unauthorized in any province or jurisdiction
            of Canada, such funding will be equal to 110% of their proportion of
            reserves by a letter of credit for no more than 10% of the total
            funding required and cash advances for the remaining balance.

      The Reinsurers will have the option of determining the method of funding
referred to above, provided it is acceptable to the Company and the applicable
regulatory authorities.

      If a Reinsurer's choice of funding is or includes a letter of credit, it
will apply for and secure delivery to the Company of a clean, irrevocable,
unconditional letter of credit, dated on or before December 31 of the year in
which the request is made, issued by a member of the Federal Reserve System or
any bank approved for use by the NAIC Securities Valuation Office, provided that
said bank is at all times acceptable to the Company, and containing provisions
acceptable to the insurance regulatory authorities having jurisdiction over the
Company's reserves in an amount equal to that Reinsurer's proportion of said
reserves. In the event that the issuing bank becomes unacceptable to the
Company, the Company may request, at any time, that the letter of credit be
reissued by a bank that is acceptable to the Company and the applicable
regulatory authorities. The letter of credit will be issued for a period of not
less than one year, and will be automatically extended for one year from its
date of expiration or any future expiration date unless 30 days prior to any
expiration date the issuing bank notifies the Company by registered mail that it
elects not to consider the letter of credit extended for any additional period.
An issuing bank, not a member of the Federal Reserve System or not chartered in

                                       10

<PAGE>

the state of domicile of the Company, will provide 60 days notice to the Company
prior to any expiration in the event of nonextension.

      Notwithstanding any other provisions of this Agreement, the Company or its
court-appointed successor in interest may draw upon the cash advances, trust
agreements, escrow accounts and/or letters of credit at any time without
diminution because of the insolvency of the Company or of any Reinsurer for one
or more of the following purposes only:

      A.    To reimburse the Company for the Reinsurer's share of unearned
            premium on policies reinsured hereunder on account of cancellations
            of such policies.

      B.    To pay the Reinsurer's share or to reimburse the Company for the
            Reinsurer's share of any loss reinsured by this Agreement, which has
            not been otherwise paid.

      C.    To make refund of any sum in excess of the actual amount required to
            pay the Reinsurer's share of any liability reinsured by this
            Agreement.

      D.    In the event of nonextension of letters of credit as provided for
            above, to establish deposits of the Reinsurer's share of reserves
            for losses and/or unearned premium under this Agreement.

      E.    To pay any other amounts the Company claims are due under this
            Agreement.

      The issuing bank will have no responsibility whatsoever in connection with
the propriety of withdrawals made by the Company or the disposition of funds
withdrawn, except to ensure that withdrawals are made only upon the order of
properly authorized representatives of the Company.

      At annual intervals, or more frequently as agreed but never more
frequently than semi-annually, the Company will prepare and forward to the
Reinsurers a statement to reflect the Reinsurers' share of reserves for losses
and/or unearned premium. If the statement shows that the Reinsurers' share of
such reserves exceeds the balance available through cash advances, trust
agreements, escrow accounts and/or letters of credit as of the statement date,
then the Reinsurers will, within 30 days after receipt of notice of such excess,
make an adjustment to increase the amount available. If, however, the statement
shows that the Reinsurers' share of such reserves is less than the balance
available through the chosen method of funding as of the statement date, then
the Company will, within 30 days after receipt of written request from the
Reinsurers, release such excess by making the appropriate adjustment.

                                       11

<PAGE>

SPECIAL FUNDING/TERMINATION

      The Company may elect to request special funding for any Reinsurer's
participation or may terminate any Reinsurer's participation hereon at any time
on a cut-off basis by giving 30 days prior written notice to said Reinsurer upon
the happening of any one of the following circumstances:

      A.    The Reinsurer ceases assuming new and renewal property and casualty
            treaty reinsurance;

      B.    A state insurance department or other legal authority orders the
            Reinsurer to cease writing business;

      C.    The Reinsurer has become insolvent or has been placed into
            liquidation or receivership (whether voluntary or involuntary), or
            there has been instituted against it proceedings for the appointment
            of a receiver, liquidator, rehabilitator, conservator, or trustee in
            bankruptcy, or other agent known by whatever name, to take
            possession of its assets or control of its operations;

      D.    The Reinsurer's surplus has been reduced by whichever is greater,
            either 20% of the amount of surplus at the inception of this
            Agreement or 20% of the amount at the latest anniversary, or has
            lost any part of, or has reduced its paid-up capital (this provision
            D. will not apply to Underwriting Members of Lloyd's, London);

      E.    The Reinsurer has undergone a material change in senior management
            or has merged with or has become acquired or controlled by any
            company, corporation, or individual(s) not controlling the
            Reinsurer's operations previously; or

      F.    The Reinsurer has reinsured its entire liability under this
            Agreement without the Company's prior written consent.

      G.    The Reinsurer has been assigned an A.M. Best's rating of less than
            "A-" (a Standard & Poor's Insurance Solvency International rating of
            less than "BBB" will apply as respects alien Reinsurers other than
            Underwriting Members of Lloyd's, London, and a Standard & Poor's
            Lloyd's Syndicate Stability rating of less than "2" will apply as
            respects Underwriting Members of Lloyd's, London).

      If the Company elects to exercise its special funding option, said
Reinsurer will, within 30 calendar days of the date of the Company's request to
do so, provide the Company with a cash advance, trust agreement (including
funding into the Underwriters at Lloyd's Central Reserve Trust Fund), escrow
account for the benefit of the Company, letter of credit, or a combination
thereof acceptable to the Company to fund the

                                       12

<PAGE>

Reinsurer's share of the reserves hereunder for losses (including loss and loss
expense paid by the Company but not recovered from the Reinsurer, loss and loss
expense reported and outstanding, and an allowance for IBNR as determined by the
Company) and unearned premium, as if it were an unauthorized Reinsurer and
subject to the Reserves and Funding Article.

      If the Company instead elects to terminate the Reinsurer's participation,
said Reinsurer will immediately return the unearned portion of any premium paid
hereunder and any applicable minimum premium provisions will be waived.

      For the purposes of this Article, unearned premium is defined as the
difference between the deposit premium and the premium earned as of the date of
termination.

      Additionally, if said Reinsurer's participation is terminated pursuant to
subparagraphs A. through G. of this Article, then the Company, at its sole
discretion, may elect to commute the Reinsurer's liability for losses, including
loss expense, whether known or unknown, on policies covered under this
Agreement. In the event the Company and the Reinsurer cannot agree upon the
capitalized value of the Reinsurer's liability on such policies, the two parties
will mutually appoint an actuary within 30 days to resolve the matter of
valuation and will share equally in any expense associated with such appointment
in a manner agreed upon at the time of appointment. The appointed actuary will
not be under the control of either party and will be a Fellow of the Casualty
Actuarial Society. The value determined by said actuary will be set forth in a
sworn statement expressing the actuary's professional opinion that said value is
fair for the complete release of all liabilities being commuted. Payment by the
Reinsurer of the amount of liability ascertained will constitute a complete and
final release of the Reinsurer with respect to its liability for all losses,
including loss expense, whether known or unknown, on policies covered under this
Agreement.

      Alternatively, if said Reinsurer's participation is terminated pursuant to
subparagraphs A. or B. of this Article, then the Company, at its sole
discretion, may require the Reinsurer to return all premium paid by the Company
to the Reinsurer under this Agreement, less paid losses. The Reinsurer then will
be released completely from any and all liability for all losses, including loss
expense, whether known or unknown, on policies covered under this Agreement.

LOSS NOTICES AND SETTLEMENTS

      The Company will advise the Reinsurers promptly of all losses that, in the
opinion of the Company, may involve the Reinsurers under this Agreement and of
all subsequent developments pertaining thereto that may materially affect the
Reinsurers as well. Inadvertent omission in dispatching the aforementioned
notices will in no way affect the obligation of the Reinsurers under this
Agreement, provided the Company informs the Reinsurers of such omission promptly
upon discovery.

                                       13

<PAGE>

      The Company will have the right to settle all claims under its policies.
The settlements, provided they are within the terms of this Agreement, will be
unconditionally binding on the Reinsurers in proportion to their participation
in this Agreement. When so requested, however, the Company will afford the
Reinsurers, at the Reinsurers' own expense, an opportunity to be associated with
the Company in the defense of any claim, suit, or proceeding involving this
Agreement, and the Company and the Reinsurers will cooperate in every respect in
such defense. Amounts due the Company hereunder in the settlement of loss and
loss expense will be payable by the Reinsurers within 10 days upon being
furnished by the Company with reasonable evidence of the amount paid or to be
paid in excess of the Company's ultimate net loss retention as set forth in the
Retention and Limit sections of the attached Exhibits, by reason of any one loss
occurrence. However, with respect to any loss which has been previously
individually advised and which is settled for $1,000,000 or more, the Company
may give the Reinsurers written notice of its intention to imminently pay any
such loss on a certain date and may require the Reinsurers to have their share
of such loss in the hands of the Company by such date. Such written notice will
allow the Reinsurers at least two working days after their receipt to prepare
and dispatch its payment by check or wire transfer.

LATE PAYMENT PENALTY

      Payments from the Reinsurers to the Company will have as a due date the
date on which the proof of loss or demand for payment is received by the
Reinsurers, and will be overdue 60 days thereafter. For the purpose of this
paragraph only, payments received by the local Intermediary within the 60 day
deadline will not be considered overdue. Payments due from any Reinsurer to the
Company will not be considered overdue if the Reinsurer requests, in writing,
that such payment be made by drawing on a letter of credit or other similar
method of funding that has been established for this Agreement, provided that
there is an adequate balance in place, and further provided that such advice to
draw is received by the local Intermediary within the 60 day deadline set forth
above. Payments from the Company to the Reinsurers will have as a due date the
date specified in this Agreement and will be overdue 60 days thereafter. Premium
adjustments will be overdue 60 days from the Agreement due date or 120 days
after the expiration or renewal date, whichever is greater.

      The Company will provide the Reinsurers a proof of loss and a copy of the
claim adjuster's report(s) or any other evidence of indemnification. If,
subsequent to receipt of this evidence, the information contained therein is
insufficient or not in accordance with the contractual conditions of this
Agreement, then the payment due date as specified above will be deemed to be the
date upon which the Reinsurers received the additional information necessary to
approve payment of the claim and the claim is presented in an acceptable manner.
This paragraph is only for the purpose of establishing when a claim payment is
overdue, and will not alter the provisions of the Loss Notices and Settlements
Article or other pertinent contractual stipulations.

                                       14

<PAGE>

      Overdue amounts will bear simple interest from the overdue date at a rate
determined by the one month London Interbank Offered Rate for the first business
day of the calendar month in which the amount becomes overdue, as published in
The Wall Street Journal, plus one percentage point, to be calculated weekly. If
the sum of the compensating additional amount computed in respect of any overdue
payment is less than 0.25% of the amount overdue or $1,000, whichever is
greater, and/or the overdue period is one week or less, then the interest amount
will be waived.

      For the purpose of this Article, reinsuring Underwriting Members of
Lloyd's, London, will be considered to be one entity.

OFFSET

      All amounts due or otherwise accrued to any of the parties hereto or any
of their parents, affiliates, or subsidiaries, whether by reasons of premiums,
losses, expenses, or otherwise, under this Agreement or any other agreement will
at all times be subject to the right of offset and the net balance will be due
and payable, unless expressly prohibited by law or regulation.

SALVAGE AND SUBROGATION

      The Reinsurers will be credited with their share of salvage and/or
subrogation in respect of claims and settlements under this Agreement, less
their share of recovery expense. Unless the Company and Reinsurers agree to the
contrary, the Company will enforce its right to salvage and/or subrogation and
will prosecute all claims arising out of such right. Should the Company refuse
or neglect to enforce this right, the Reinsurers are hereby empowered and
authorized to institute appropriate action in the name of the Company.

      Amounts recovered from salvage and/or subrogation will always be used to
reimburse the excess reinsurers (and the Company, should it carry a portion of
excess coverage net) in the reverse order of their participation in the loss
before being used in any way to reimburse the Company for its primary loss. If
the amount recovered exceeds the recovery expense, the recovery expense will be
borne by each party in proportion to its benefit from the recovery. If the
recovery expense exceeds the amount recovered, the amount recovered (if any)
will be applied to the reimbursement of recovery expense and the remaining
expense as well as any originally incurred loss expense will be added to the
ultimate net loss.

                                       15

<PAGE>

DELAYS, ERRORS, OR OMISSIONS

      Any inadvertent delay, error, or omission will not be held to relieve
either party hereto from any liability that would attach to it hereunder if such
delay, error, or omission had not been made, providing any error or omission
will be rectified upon discovery.

AMENDMENTS

      This Agreement may be altered or amended in any of its terms and
conditions by mutual consent of the Company and the Reinsurers either by addenda
hereto or by an exchange of letters; such addenda or letters will then
constitute a part of this Agreement.

ACCESS TO RECORDS

      Provided the Company receives prior notice, the Reinsurers, through their
designated representatives and at their own expense, will have the right to
inspect, at any reasonable time, all records of the Company that pertain in any
way to this Agreement.

INSOLVENCY

      (This Article will apply severally to each reinsured company referenced
      within the definition of "Company" in the Preamble to this Agreement.
      Further, this Article and the laws of the domiciliary state will apply in
      the event of the insolvency of any company intended to be covered
      hereunder. In the event of a conflict between any provision of this
      Article and the laws of the domiciliary state of any company intended to
      be covered hereunder, that domiciliary state's laws will prevail.)

      In the event of the Company's insolvency, the reinsurance afforded by this
Agreement will be payable by the Reinsurers on the basis of the Company's
liability under the policies reinsured without diminution because of the
Company's insolvency or because its liquidator, receiver, conservator, or
statutory successor has failed to pay all or a portion of any claims, subject
however to the right of the Reinsurers to offset against such funds due
hereunder, any sums that may be payable to them by said insolvent Company in
accordance with applicable law. The reinsurance will be payable by the
Reinsurers directly to the Company, or to its liquidator, receiver, conservator,
or statutory successor except (a) where this Agreement specifically provides
another payee of such reinsurance in the event of the Company's insolvency or
(b) where the Reinsurers, with the consent of the direct insured or insureds,
have assumed such policy obligations of the Company as direct obligations of
themselves to the payees under such policies in substitution for the Company's
obligation to such payees. Then, and in that event only, the Company, with the
prior approval by the Superintendent of Insurance of the state of

                                       16

<PAGE>

New York of the Certificate of Assumption on New York risks, is entirely
released from its obligation and the Reinsurers will pay any loss directly to
payees under such policies.

      The Company's liquidator, receiver, conservator, or statutory successor
will give written notice of the pendency of a claim against the Company under
the policies reinsured within a reasonable time after such claim is filed in the
insolvency proceeding. During the pendency of such claim, the Reinsurers may
investigate said claim and interpose in the proceeding where the claim is to be
adjudicated, at their own expense, any defense that they may deem available to
the Company, or to its liquidator, receiver, conservator, or statutory
successor. The expense thus incurred by the Reinsurers will be chargeable
against the Company, subject to court approval, as part of the expense of
conservation or liquidation to the extent that such proportionate share of the
benefit will accrue to the Company solely as a result of the defense undertaken
by the Reinsurers. 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
will be apportioned in accordance with the terms of this Agreement as though
such expense had been incurred by the Company.

ARBITRATION

      As a condition precedent to any right of action under this Agreement, any
dispute (whether during the currency of this Agreement or after expiration or
termination of this Agreement) between the Company and any Reinsurer arising out
of or in connection with this Agreement, including its formation or actual
validity, will be submitted to the decision of a board of arbitration
(hereinafter called the "board") composed of two arbitrators and an umpire
meeting at a site in New York, unless some other site is mutually agreed by the
parties. Each member of the board will be disinterested in the outcome of the
arbitration, and will be an active or former official or experienced individual
who has operated in the United States insurance or reinsurance industry.

      To the extent not otherwise mutually agreed or provided for in this
Article, the procedures and rules applicable to arbitration under the laws of
New York, as from time to time set forth, will govern the procedures of the
arbitration. All time limitations stated in this Article may be amended by
mutual consent of the parties, and will be amended automatically to the extent
made necessary by any circumstances beyond the control of the parties.

      All notices in connection with the arbitration will be in writing and sent
certified or registered mail, return receipt requested. The claimant's notice
demanding arbitration will reference this Article, will state in particulars all
issues to be resolved in its view, and will name the arbitrator appointed by it.
Within 30 days of receipt of the claimant's notice, the respondent will notify
the claimant of any additional issues to be resolved in the arbitration and of
the name of its appointed arbitrator.

                                       17

<PAGE>

      If the respondent fails to appoint its arbitrator within 30 days after
having received the claimant's notice demanding arbitration, the claimant is
authorized to and will appoint the second arbitrator and will notify the
respondent of the name of the arbitrator appointed for it. The two arbitrators
will appoint an umpire before instituting the hearing. If the two arbitrators
fail to agree upon the appointment of an umpire within 30 days after
notification of the appointment of the second arbitrator, within 10 days
thereafter the claimant will petition the United States District Court having
geographical jurisdiction over the site of arbitration to appoint the umpire (or
if the federal court declines to act, the state court having general
jurisdiction in such area); the selection of the umpire will be within the
exercise of sound discretion by the court. The board will notify the claimant
and the respondent of the umpire's identity within 10 days of the umpire's
appointment.

      The arbitration hearing will commence within 60 days of the appointment of
the umpire. Within 30 days of the date of notice of appointment of the umpire,
the claimant and respondent each will submit initial briefs to the board
outlining the issues in dispute and the basis and reasons for their respective
positions. Within 10 days after filing of the initial briefs the claimant and
the respondent may submit reply briefs. Initial and reply briefs may be amended
by the submitting party at any time, but not later than 10 days prior to the
date of commencement of the arbitration hearing. Reasonable responses will be
allowed at the hearing to new material contained in any amendments filed to the
briefs but not addressed previously.

      Subject to customary and recognized legal rules of privilege, each party
will have the obligation to produce as witnesses to the arbitration such of its
employees or those of its affiliates as the other party may request, and any
documents that the other party may request, providing always that those
witnesses and documents be relevant to the issues before the arbitration and
provided further that the parties may mutually agree as to further discovery
prior to the arbitration. The board may, at its discretion, request and consider
underwriting and placement information provided by the Company to the
Reinsurers, as well as any correspondence exchanged by the parties that is
related to this Agreement and any information obtained in accordance with the
Access to Records Article. The umpire will be the final judge of rules of
privilege and relevancy of any witnesses and documents, if there is any
disagreement by the parties.

      The board will conduct the hearing and make its award with regard to the
terms expressed in this Agreement, the original intentions of the parties to the
extent reasonably ascertainable, and the custom and usage of the
property-casualty insurance and reinsurance business. At the hearing, evidence
will be allowed but the formal rules of evidence will not apply; cross
examination and rebuttal will be allowed. Within 20 days of the close of the
hearing, at their own election or at the request of the board, the claimant and
the respondent may submit post-hearing briefs to be considered by the board
before making its decision.

      The board will make its award within 30 days following the close of the
hearing or the submission of post-hearing briefs, whichever is later. The
decision by the majority

                                       18

<PAGE>

of the members of the board will be in writing and will be final and binding
upon the parties. The board is empowered to grant interim relief as it may deem
appropriate. Either the claimant or the respondent may apply to any court having
jurisdiction for an order confirming the award; a judgment of such court will
thereupon be entered on the award.

      The claimant and the respondent will each bear the expense of the
arbitrator appointed by or for it and will jointly and equally bear the expense
of the umpire and any stenographer requested. The remaining costs of the
arbitration proceedings will be allocated by the board.

      To the extent requested by the Company, the Reinsurer, or other Reinsurers
hereon, where the issues in dispute between the Company and the Reinsurer are
related or largely identical or similar to issues in dispute between the Company
and other Reinsurers, all parties may join together in a consolidated
arbitration under the terms and conditions contained in this Article to resolve
all common issues; provided, however, that:

      A.    The two arbitrators and umpire will be appointed by the Company and
            the original arbitrating Reinsurer;

      B.    Each party to a consolidated arbitration will have the right to its
            own attorney, position, and related claims and defenses;

      C.    No party will be prevented from presenting its position by the
            position put forth by any other party;

      D.    The consolidated arbitration will not be construed as changing the
            liability of the Reinsurers under the terms of this Agreement from
            several to joint; and

      E.    The cost and expenses of the arbitration, including the fees of the
            arbitrators and the umpire (but exclusive of attorneys' fees, which
            will be borne exclusively by the respective retaining party), will
            be borne pro rata by each party participating in the consolidated
            arbitration.

CONFLICT WITH LAW

      In the event any provision of this Agreement is rendered illegal or
unenforceable in any jurisdiction, such provision will be considered void as
respects that jurisdiction only, and such a consideration will not affect the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.

                                       19

<PAGE>

TAXES

      The Company will pay all taxes (except Federal Excise Tax) on premiums
reported to the Reinsurers on this Agreement.

FEDERAL EXCISE TAX

      The Reinsurers will allow for the purpose of paying Federal Excise Tax the
applicable percentage of the premium payable hereon (as imposed under Section
4371 of the Internal Revenue Service Code) to the extent such premium is subject
to such tax. In the event of any return of premium, the Reinsurers will deduct
the aforesaid percentage from the return premium payable hereon and the Company
or its agent will recover such tax from the United States Government.

CURRENCY

      The sign "$" in this Agreement refers to United States of America dollars,
except in those cases where the policies are issued by the Company in Canadian
dollars, in which case it will refer to Canadian dollars.

      In the event the Company is involved in a loss requiring payments in
United States and Canadian currency, the Company's retention and the amount
recoverable hereunder will be apportioned between the two currencies in the same
proportion as the amount of loss in each currency bears to the total amount of
loss sustained by the Company.

      For the purposes of this Agreement, where the Company receives premiums or
pays losses in currencies other than United States or Canadian currency, such
premiums and losses will be converted into United States dollars at the actual
rates of exchange at which these premiums and losses are entered in the
Company's books.

SERVICE OF SUIT

      (This Article applies to Reinsurers domiciled outside the United States of
      America and/or unauthorized in any state, territory, or district of the
      United States of America that has jurisdiction over the Company and in
      which a subject suit has been instituted. This Article is not intended to
      conflict with or override the parties' obligation to arbitrate their
      disputes in accordance with the Arbitration Article.)

      In the event any Reinsurer hereon fails to pay any amount claimed due
hereunder, such Reinsurer, at the request of the Company, will submit to the
jurisdiction of a court of competent jurisdiction within the United States and
will comply with all requirements

                                       20
<PAGE>

necessary to give that court jurisdiction. Nothing in this Article constitutes
or should be understood to constitute a waiver of the Reinsurer's right 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. Service of process in such suit may be made upon
Mendes and Mount, 750 Seventh Avenue, New York, New York 10019-6829, or another
party specifically designated in the applicable Interests and Liabilities
Agreement attached hereto. In any suit instituted against it upon this
Agreement, the Reinsurer will abide by the final decision of such court or of
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 Reinsurer 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 upon the Reinsurer's behalf in the event such a suit is
instituted.

      Further, pursuant to any statute of any state, territory, or district of
the United States that makes provision therefor, the Reinsurer hereby designates
the Superintendent, Commissioner, or Director of Insurance or other officer
specified for that purpose in the statute, or the 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 Agreement, and hereby
designates the above named as the person to whom the said officer is authorized
to mail such process or a true copy thereof.

AGENCY

      For purposes of sending and receiving notices and payments required by
this Agreement, the reinsured company that is set forth first in the definition
of "Company" in the Preamble to this Agreement will be deemed the agent of all
other reinsured companies referenced in the Preamble. In no event, however, will
any reinsured company be deemed the agent of another with respect to the terms
of the Insolvency Article.

INTERMEDIARY

      Aon Re Inc., an Illinois corporation, or one of its affiliated
corporations duly licensed as a reinsurance intermediary, 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 expenses, salvages, and loss
settlements) relating to this Agreement will be transmitted to the Company or
the Reinsurers through the Intermediary. Payments by the Company to the
Intermediary will be deemed payment to the Reinsurers. Payments by the
Reinsurers to the Intermediary will be deemed payment to the Company only to the
extent that such payments are actually received by the Company.

                                       21
<PAGE>

                                    EXHIBIT A
                                   FIRST LAYER

RETENTION AND LIMIT

      No claim will be made hereunder unless the Company has first sustained, by
reason of any one loss occurrence, an ultimate net loss in excess of $5,000,000.
The Reinsurers will then be liable for the amount of ultimate net loss in excess
of $5,000,000 any one loss occurrence, but the limit of liability of the
Reinsurers will not exceed $5,000,000 with respect to any one loss occurrence.

      The Company will retain net for its own account 5% of the excess losses
hereunder.

REINSTATEMENT

      In the event that all or any portion of the reinsurance under this Exhibit
A is exhausted by loss, the amount so exhausted will be reinstated from the time
of occurrence of such loss. The Reinsurers' liability will not exceed $5,000,000
in respect of any one loss occurrence nor $10,000,000 during the 12-month term
of this Agreement.

      For each amount so reinstated, the Company will pay an additional premium
based upon the pro rata amount of the reinstatement only. The provisional
reinstatement premium, based on the deposit premium and finally adjusted as set
forth in the Rate and Premium section of this Exhibit A, will be paid by the
Company at the same time the Reinsurers pay the loss.

RATE AND PREMIUM

      For the term of this Agreement, there will be a deposit premium hereon of
$xxx,xxx payable in equal quarterly installments of $xxx,xxx on January 1st,
April 1st, July 1st, and October 1st. At Agreement expiration, the Company will
adjust the deposit premium against a rate of x.xxx% of its gross net earned
premium, subject to a minimum premium of $xxx,xxx.

                                       22
<PAGE>

                                    EXHIBIT B
                                  SECOND LAYER

RETENTION AND LIMIT

      No claim will be made hereunder unless the Company has first sustained, by
reason of any one loss occurrence, an ultimate net loss in excess of
$10,000,000, inclusive of underlying catastrophe reinsurance. The Reinsurers
will then be liable for the amount of ultimate net loss in excess of $10,000,000
any one loss occurrence, but the limit of liability of the Reinsurers will not
exceed $10,000,000 with respect to any one loss occurrence.

      The Company will retain net for its own account 5% of the excess losses
hereunder.

REINSTATEMENT

      In the event that all or any portion of the reinsurance under this Exhibit
B is exhausted by loss, the amount so exhausted will be reinstated from the time
of occurrence of such loss. The Reinsurers' liability will not exceed
$10,000,000 in respect of any one loss occurrence nor $20,000,000 during the
12-month term of this Agreement.

      For each amount so reinstated, the Company will pay an additional premium
based upon the pro rata amount of the reinstatement only. The provisional
reinstatement premium, based on the deposit premium and finally adjusted as set
forth in the Rate and Premium section of this Exhibit B, will be paid by the
Company at the same time the Reinsurers pay the loss.

RATE AND PREMIUM

      For the term of this Agreement, there will be a deposit premium hereon of
$xxx,xxx, payable in equal quarterly installments of $xxx,xxx on January 1st,
April 1st, July 1st, and October 1st. At Agreement expiration, the Company will
adjust the deposit premium against a rate of x.xxx% of its gross net earned
premium, subject to a minimum premium of $xxx,xxx.

                                       23
<PAGE>

                                    EXHIBIT C
                                   THIRD LAYER

RETENTION AND LIMIT

      No claim will be made hereunder unless the Company has first sustained, by
reason of any one loss occurrence, an ultimate net loss in excess of
$20,000,000, inclusive of underlying catastrophe reinsurance. The Reinsurers
will then be liable for the amount of ultimate net loss in excess of $20,000,000
any one loss occurrence, but the limit of liability of the Reinsurers will not
exceed $45,000,000 with respect to any one loss occurrence.

      The Company will retain net for its own account 5% of the excess losses
hereunder.

REINSTATEMENT

      In the event that all or any portion of the reinsurance under this Exhibit
C is exhausted by loss, the amount so exhausted will be reinstated from the time
of occurrence of such loss. The Reinsurers' liability will not exceed
$45,000,000 in respect of any one loss occurrence nor $90,000,000 during the
term of this Agreement.

      For each amount so reinstated, the Company will pay an additional premium
based upon the pro rata amount of the reinstatement only. The provisional
reinstatement premium, based on the deposit premium and finally adjusted as set
forth in the Rate and Premium section of this Exhibit C, will be paid by the
Company at the same time the Reinsurers pay the loss.

RATE AND PREMIUM

      For the term of this Agreement, there will be a deposit premium hereon of
$x,xxx,xxx, payable in equal quarterly installments of $xxx,xxx on January 1st,
April 1st, July 1st, and October 1st. At Agreement expiration, the Company will
adjust the deposit premium against a rate of x.xx% of its gross net earned
premium, subject to a minimum premium of $x,xxx,xxx.

                                       24
<PAGE>

                POOLS, ASSOCIATIONS & SYNDICATES EXCLUSION CLAUSE

SECTION A:

Excluding:

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

      (2)   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 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,
            FM Global,
            Any Pool, Association or Syndicate formed for the purpose of writing
                Oil, Gas or Petro-Chemical Plants and/or Oil or Gas Drilling
                Rigs,
            United States Aircraft Insurance Group,
            Canadian Aircraft Insurance Group,
            Global Aerospace.

Section B does not apply:

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

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

      (3)   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(1).

                                  Page 1 of 3
<PAGE>

      (4)   To risks as follows:

            Offices, Hotels, Apartments, Hospitals, Educational Establishments,
            Public Utilities (other than Railroad Schedules) and Builder's Risks
            on the classes of risks specified in this subsection (4) only.

Where this clause attaches to Catastrophe Excesses, the following Sections C and
D are added:

SECTION C:

      Nevertheless the Reinsurer specifically agrees 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
            Citizens Property Insurance Corporation (CPIC)
            Louisiana Citizens Coastal Plan
            Mississippi Windstorm Underwriting Association
            North Carolina Insurance Underwriting Association
            South Carolina Wind and Hail Underwriting Association
            Texas Windstorm Insurance Association

                                       AND

      (2)   All "Fair Plan" and "Rural Risk Plan" business,

                                       AND

      (3)   California Earthquake Authority (CEA),

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

            (a)   The inability of any other participant in such Residual Market
                  Mechanisms to meet its liability.

            (b)   Any claim against such Residual Market Mechanisms or any
                  participant therein, including the Company, whether by way of
                  subrogation or otherwise, brought by or on behalf of any
                  insolvency fund (as defined in the Insolvency Funds Exclusion
                  Clause incorporated in this Contract).

                                  Page 2 of 3
<PAGE>

SECTION D:

      (1)   Notwithstanding Section C above, in respect of the CEA, where an
            assessment is made against the Company by the CEA, the Company may
            include in its ultimate net loss only that assessment directly
            attributable to each separate loss occurrence covered hereunder. The
            Company's initial capital contribution to the CEA shall not be
            included in the ultimate net loss.

      (2)   Notwithstanding Section C above, in respect of CPIC, where an
            assessment is made against the Company by CPIC, the maximum loss
            that the Company may include in the ultimate net loss in respect of
            any loss occurrence hereunder shall not exceed the lesser of:

            (a)   The Company's assessment from CPIC for the accounting year in
                  which the loss occurrence commenced, or

            (b)   The product of the following:

                  (i)   The Company's percentage participation in CPIC for the
                        accounting year in which the loss occurrence commenced;
                        and

                  (ii)  CPIC'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 CPIC, the ultimate net loss hereunder shall not include
            any monies expended to purchase or retire bonds as a consequence of
            being a member of CPIC.

            For the purposes of this Contract, the Company may not include in
            the ultimate net loss any assessment or any percentage assessment
            levied by CPIC to meet the obligations of an insolvent insurer,
            member or other party, or to meet any obligations arising from the
            deferment by CPIC of the collection of monies.

                                   Page 3 of 3
<PAGE>

           NUCLEAR ENERGY RISKS EXCLUSION CLAUSE (REINSURANCE) (1994)
                      (WORLDWIDE EXCLUDING U.S.A. & CANADA)

This agreement shall exclude Nuclear Energy Risks whether such risks are written
directly and/or by way of reinsurance and/or via Pools and/or Associations.

For all purposes of this agreement Nuclear Energy Risks shall mean all first
party and/or third party insurances or reinsurances (other than Workers'
Compensation and Employers' Liability) in respect of:

      (I)   All Property on the site of a nuclear power station. Nuclear
            Reactors, reactor buildings and plant and equipment therein on any
            site other than a nuclear power station.

      (II)  All Property, on any site (including but not limited to the sites
            referred to in (I) above) used or having been used for:

            (a)   the generation of nuclear energy; or

            (b)   the Production, Use or Storage of Nuclear Material.

      (III) Any other Property eligible for insurance by the relevant local
            Nuclear Insurance Pool and/or Association but only to the extent of
            the requirements of that local Pool and/or Association.

      (IV)  The supply of goods and services to any of the sites, described in
            (I) to (III) above, unless such insurances or reinsurances shall
            exclude the perils of irradiation and contamination by Nuclear
            Material.

Except as undernoted, Nuclear Energy Risks shall not include:

      (i)   Any insurance or reinsurance in respect of the construction or
            erection or installation or replacement or repair or maintenance or
            decommissioning of Property as described in (I) to (III) above
            (including contractors' plant and equipment);

      (ii)  Any Machinery Breakdown or other Engineering insurance or
            reinsurance not coming within the scope of (i) above;

Provided always that such insurance or reinsurance shall exclude the perils of
irradiation and contamination by Nuclear Material.

                                  Page 1 of 3
<PAGE>

However, the above exemption shall not extend to:

      (1)   The provision of any insurance or reinsurance whatsoever in respect
            of:

            (a)   Nuclear Material;

            (b)   Any Property in the High Radioactivity Zone or Area of any
                  Nuclear Installation as from the introduction of Nuclear
                  Material or - for reactor installations - as from fuel loading
                  or first criticality where so agreed with the relevant local
                  Nuclear Insurance Pool and/or Association.

      (2)   The provision of any insurance or reinsurance for the undernoted
            perils:

            -     Fire, lightning, explosion;

            -     Earthquake;

            -     Aircraft and other aerial devices or articles dropped
                  therefrom;

            -     Irradiation and radioactive contamination;

            -     Any other peril insured by the relevant local Nuclear
                  Insurance Pool and/or Association;

                  in respect of any other Property not specified in (1) above
                  which directly involves the Production, Use or Storage of
                  Nuclear Material as from the introduction of Nuclear Material
                  into such Property.

Definitions

"Nuclear Material" means:

      (i)   Nuclear fuel, other than natural uranium and depleted uranium,
            capable of producing energy by a self-sustaining chain process of
            nuclear fission outside a Nuclear Reactor, either alone or in
            combination with some other material; and

      (ii)  Radioactive Products or Waste.

"Radioactive Products or Waste" means any radioactive material produced in, or
any material made radioactive by exposure to the radiation incidental to the
production or utilisation of nuclear fuel, but does not include radioisotopes
which have reached the final stage of fabrication so as to be usable for any
scientific, medical, agricultural, commercial or industrial purpose.

                                  Page 2 of 3
<PAGE>

"Nuclear Installation" means:

      (i)   Any Nuclear Reactor;

      (ii)  Any factory using nuclear fuel for the production of Nuclear
            Material, or any factory for the processing of Nuclear Material,
            including any factory for the reprocessing of irradiated nuclear
            fuel; and

      (iii) Any facility where Nuclear Material is stored, other than storage
            incidental to the carriage of such material.

"Nuclear Reactor" means any structure containing nuclear fuel in such an
arrangement that a self-sustaining chain process of nuclear fission can occur
therein without an additional source of neutrons.

"Production, Use or Storage of Nuclear Material" means the production,
manufacture, enrichment, conditioning, processing, reprocessing, use, storage,
handling and disposal of Nuclear Material.

"Property" shall mean all land, buildings, structures, plant, equipment,
vehicles, contents (including but not limited to liquids and gases) and all
materials of whatever description whether fixed or not.

"High Radioactivity Zone or Area" means:

      (i)   For nuclear power stations and Nuclear Reactors, the vessel or
            structure which immediately contains the core (including its
            supports and shrouding) and all the contents thereof, the fuel
            elements, the control rods and the irradiated fuel store; and

      (ii)  For non-reactor Nuclear Installations, any area where the level of
            radioactivity requires the provision of a biological shield.

N.M.A. 1975a (10/3/94)
Form approved by Lloyd's Underwriters' Non-Marine Association Limited.

                                  Page 3 of 3
<PAGE>

U.S.A.

               NUCLEAR INCIDENT EXCLUSION CLAUSE--PHYSICAL DAMAGE-
                                  REINSURANCE

1.    This Reinsurance does not cover any loss or liability accruing to the
      Reassured, 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 Reinsurance does not cover any loss or liability accruing to
      the Reassured, 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 Reinsurance does not cover any loss or liability by
      radioactive contamination accruing to the Reassured, 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 Reassured 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.

                                  Page 1 of 2
<PAGE>

4.    Without in any way restricting the operations of paragraphs (1), (2) and
      (3) hereof, this Reinsurance does not cover any loss or liability by
      radioactive contamination accruing to the Reassured, 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 Reassured 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.    Reassured 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 Reassured 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
            Reassured 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.

N.M.A. 1119 (12/12/57)
                                   Page 2 of 2

<PAGE>

CANADA

               NUCLEAR INCIDENT EXCLUSION CLAUSE--PHYSICAL DAMAGE-
                                   REINSURANCE

1.    This Agreement does not cover any loss or liability accruing to the
      Reinsured 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 Reinsured, 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:

      (a)   nuclear reactor power plants including all auxiliary property on the
            site, or

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

      (c)   installations for fabricating complete fuel elements or for
            processing substantial quantities of radioactive materials, and for
            reprocessing, salvaging, chemically separating, storing or disposing
            of spent nuclear fuel or waste materials, or

      (d)   installations other than those listed in (c) 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 Reinsured, 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 Reinsured 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.

                                   Page 1 of 2
<PAGE>

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 Reinsured, 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 Reinsured to be
      the primary hazard.

6.    The term "radioactive material" means uranium, thorium, plutonium,
      neptunium, their respective derivatives and compounds, radioactive
      isotopes of other elements and any other substances which may be
      designated by or pursuant to any law, act or statute, or any law
      amendatory thereof as being prescribed substances capable of releasing
      atomic energy, or as being requisite for the production, use or
      application of atomic energy.

7.    Reinsured 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 Reinsured, directly or indirectly, and whether as Insurer
      or Reinsurer caused:

      (a)   by any nuclear incident as defined in or pursuant to 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 Reinsured whether new, renewal or replacement
      which become effective on or after December 31, 1992.

N.M.A. 1980a (01/04/96)
Form approved by Lloyd's Underwriters' Non-Marine Association Ltd.

                                  Page 2 of 2
<PAGE>

                        INSOLVENCY FUNDS EXCLUSION CLAUSE

This Agreement excludes 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, howsoever denominated, established, or governed, that 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.

<PAGE>

                               TERRORISM EXCLUSION

Notwithstanding any provision to the contrary within this reinsurance Agreement
or any endorsement thereto, it is agreed that this reinsurance Agreement
excludes loss, damage, cost, or expense directly or indirectly caused by,
contributed to by, resulting from, or arising out of or in connection with any
act of terrorism, as defined herein, regardless of any other cause or event
contributing concurrently or in any other sequence to the loss.

An act of terrorism includes any act, or preparation in respect of action, or
threat of action designed to influence the government de jure or de facto of any
nation or any political division thereof, or in pursuit of political, religious,
ideological, or similar purposes to intimidate the public or a section of the
public of any nation by any person or group(s) of persons whether acting alone
or on behalf of or in connection with any organization(s) or government(s) de
jure or de facto, and which:

(i)   involves violence against one or more persons; or

(ii)  involves damage to property; or

(iii) endangers life other than that of the person committing the action; or

(iv)  creates a risk to health or safety of the public or a section of the
      public; or

(v)   is designed to interfere with or to disrupt an electronic system.

This reinsurance Agreement also excludes loss, damage, cost, or expense directly
or indirectly caused by, contributed to by, resulting from, or arising out of or
in connection with any action in controlling, preventing, suppressing,
retaliating against, or responding to any act of terrorism.

Notwithstanding the above and subject otherwise to the terms, conditions, and
limitations of this reinsurance Agreement, in respect only of personal lines
this reinsurance Agreement will pay actual loss or damage (but not related cost
or expense) caused by any act of terrorism provided such act is not directly or
indirectly caused by, contributed to by, resulting from, or arising out of or in
connection with biological, chemical, radioactive, or nuclear pollution or
contamination or explosion.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}]]