Document:

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                                                                    Exhibit 10.5

                                 PROMISSORY NOTE

$18,000,000.00                                                    March 31, 2003

     FOR VALUE RECEIVED, the undersigned, ARGONAUT GROUP, INC., a Delaware
corporation having its principal office at Suite 800, 10101 Reunion Place, San
Antonio, Texas 78216 ("Borrower"), hereby promises to pay to the order of HCC
INSURANCE HOLDINGS, INC., a Delaware corporation having its principal office at
13403 Northwest Freeway, Houston, Texas 77040 ("Lender"), the principal amount
of EIGHTEEN MILLION DOLLARS ($18,000,000.00), together with interest on the
unpaid balance hereof, commencing from the date hereof.

     The further terms and conditions of this Promissory Note are as follows:

     SECTION 1. Defined Terms. The following terms (whether or not underscored)
when used in this Promissory Note and not otherwise defined herein shall, except
where the context otherwise requires, have the following meanings (such meanings
to be equally applicable to the singular and plural forms thereof):

     "Borrower" is defined in the first paragraph.

     "Business Day" means any day which is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed in Texas.

     "Change of Control" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 50% or more of the outstanding shares of voting stock of the
Borrower.

     "herein", "hereof", "hereto", "hereunder" and similar terms contained in
this Promissory Note refer to this Promissory Note as a whole and not to any
particular Section, paragraph or provision of this Promissory Note.

     "Interest Payment Date" is defined in Section 4.

     "Lender" is defined in the first paragraph.

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     "Maturity Date" means March 31, 2006.

     "Person" means any natural person, corporation, firm, association,
government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.

     "Subsidiary" means, with respect to any Person, any corporation of which
more than 50% of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, by such
Person and one or more other Subsidiaries of such Person, or by one or more
other Subsidiaries of such Person.

     SECTION 2. Interest. Interest shall accrue and be payable at the rate of
12% per annum. Following the maturity (whether by demand, acceleration or
otherwise) of this Promissory Note, interest shall accrue and be payable at the
rate of 15% per annum. Interest shall be calculated on the basis of a 360-day
year. Notwithstanding the foregoing, the interest rate shall not exceed the
maximum rate of interest permitted by law.

     SECTION 3. Principal. The entire unpaid principal balance hereof, together
with all accrued and unpaid interest, shall be due and payable in full on the
Maturity Date. The indebtedness evidenced hereby is senior to all other
indebtedness of the Borrower other than indebtedness to banks or financial
institutions for borrowed money that is not designated as subordinated to senior
indebtedness.

     SECTION 4. Interest Payments. Accrued interest shall be payable on (i) the
last Business Day of each March, June, September and December after the date
hereof and preceding the Maturity Date (such day herein called a "Interest
Payment Date"),(ii) at maturity (whether by demand or otherwise), and (iii) on
demand after maturity. Payments of both principal and interest are to be made to
an account designated by Lender (and as to which Lender has notified Borrower)
in lawful money of the United States of America in same day or immediately
available funds.

     SECTION 5. Optional Prepayments. Borrower may, at any time and from time to
time on any Business Day upon at least

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three but no more than five Business Days' prior written notice (which shall be
irrevocable) to Lender, without penalty or premium, make voluntary prepayments
of the outstanding principal amount of this Promissory Note in a minimum
aggregate amount of $1,000,000 (together with all accrued and unpaid interest on
the amount prepaid).

     SECTION 6. Mandatory Prepayment. The Borrower shall immediately, without
notice or demand and without penalty or premium, prepay the outstanding
principal amount of this Promissory Note in an amount equal to the amount of any
proceeds resulting from (i) indebtedness for borrowed money with a maturity
(including resulting from trust preferred securities) exceeding one year
incurred by the Borrower or any of its subsidiaries after the date hereof to the
extent exceeding $1,000,000 in the aggregate (it being understood that any such
mandatory prepayment required by any transaction involving a subsidiary of
Borrower shall be subject to any necessary regulatory approvals); and (ii) the
issuance of any Series A Mandatory Convertible Preferred Stock to any person
other than Lender or any of its affiliates.

     SECTION 7. Representations and Warranties. Borrower hereby makes to Lender
all representations and warranties made by Borrower in the Subscription
Agreement, dated as of March 12, 2003 and amended as of the date hereof (the
"Subscription Agreement"), between Borrower and Lender.

     SECTION 8. Covenants.

          (a) Borrower hereby covenants and agrees that (i) $5,000,000 of the
     proceeds shall be held pursuant to the Escrow Agreement, of even date
     herewith, between Borrower, Lender and Wachovia Bank, National Association;
     (ii) $12,000,000 of the proceeds shall be used to capitalize the Borrower's
     insurance company subsidiaries and (iii) $1,000,000 of the proceeds shall
     be used for general corporate purposes of the Borrower.

          (b) Borrower shall preserve its existence as a Delaware corporation in
     good standing and shall be and Borrower and its subsidiaries shall remain
     qualified to do business in good standing in all states and countries in
     which it is required to be so qualified.

          (c) Borrower shall make all filings required to be made by it under
     the Securities Exchange Act of 1934 on a timely basis.

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          (d) Borrower shall use its reasonable best efforts to maintain the
     quotation of the Common Shares on the Nasdaq National Market or to list the
     Common Shares on the New York Stock Exchange or another national securities
     exchange.

     SECTION 9. Events of Default. In case any one or more of the following
events of default (each an "Event of Default") shall occur and shall not have
been remedied:

          (a) failure to pay when due any payment of interest or principal due
     under this Promissory Note, if and only if such payment shall not have been
     made within five (5) days of the due date;

          (b) breach by Borrower of any covenant of Borrower contained in this
     Promissory Note or in the Subscription Agreement, if and only if such
     breach shall not have been cured by Borrower within thirty (30) days after
     written notice thereof has been delivered to Borrower;

          (c) the failure to pay when due any payment of interest or principal
     due under any agreement of Borrower or any of its subsidiaries relating to
     any indebtedness for borrowed money in excess of $1,000,000, if and only if
     such failure to pay shall not have been cured by Borrower within thirty
     (30) days after the due date;

          (d) the occurrence of a Change of Control;

          (e) there shall occur a material adverse change in the business or
     results of operations of the Borrower and its subsidiaries, taken as a
     whole;

          (f) if a final judgment for the payment of money in excess of the sum
     of $500,000 (or with respect to property with a value in excess of such
     amount) shall be rendered against the Borrower and such judgment shall
     remain unsatisfied for a period of 30 consecutive days after the entry
     thereof and within such 30-day period, such judgment has not been (a)
     stayed pending appeal or (b) discharged;

          (g) if the Borrower takes any action that is intended to result in its
     termination, dissolution or liquidation; or

          (h) if the Borrower shall (i) have an order of relief entered in any
     proceeding filed by it under the

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     federal bankruptcy laws; (ii) admit its inability to pay its debts
     generally as they become due; (iii) make a general assignment for the
     benefit of creditors; (iv) file a petition, or admit the material
     allegations of any petition filed against it, in bankruptcy under the
     federal bankruptcy laws, or under any other law for the relief of debtors,
     or for the discharge, arrangement or compromise of their debts; or (v)
     consent to the appointment of a receiver, conservator, trustee or
     liquidator of all or part of its assets.

Upon the occurrence of any Event of Default hereunder or default under any other
agreement or instrument securing or assuring the payment of this Note, then in
any such event the holder hereof may, at its option, (i) declare the entire
unpaid balance of the Note to be immediately due and payable without presentment
or notice of any kind which Borrower waives pursuant to Section 11 herein, (ii)
reduce any claim to judgment, and/or (iii) pursue and enforce any of Lender's
rights and remedies available pursuant to any applicable law or agreement;
provided, however, in the case of any default of this Note without any notice to
Borrower or any other act by Lender, this Note shall become immediately due and
payable without presentment, demand, protest, or other notice of any kind, all
of which are hereby waived by Borrower.

     SECTION 10. Costs and Expenses. Borrower shall reimburse Lender or any
other holder hereof for all costs incurred by it (including reasonable
attorneys' fees) in the enforcement or collection of any amounts due under this
Promissory Note. Borrower shall indemnify and hold Lender (and each of its
officers, directors, employees and agents) harmless from and against all losses,
claims, damages, costs and expenses arising from the loans evidenced by this
Promissory Note.

     SECTION 11. No Waiver. No waiver by Lender of any of its rights or remedies
hereunder or under any other document evidencing or securing this Note or
otherwise, shall be considered a waiver of any other subsequent right or remedy
of Lender; no delay or omission in the exercise or enforcement by Lender of any
rights or remedies shall ever be construed as a waiver of any right or remedy of
Lender; and no single or partial exercise or enforcement of any such rights or
remedies shall ever be held to exhaust any right or remedy of Lender. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Lender at law, in equity or otherwise.
Borrower and each surety, endorser, guarantor, and other party ever liable for
payment of any sums of

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money payable upon this Note, jointly and severally waive presentment, demand,
protest, notice of protest and non-payment or other notice of default, notice of
acceleration, and intention to accelerate, or other notice of any kind, and
agree that their liability under this Note shall not be affected by any renewal
or extension in the time of payment hereof, or in any indulgences, or by any
release or change in any security for the payment of this Note, and hereby
consent to any and all renewals, extensions, indulgences, releases, or changes,
regardless of the number of such renewals, extensions, indulgences, releases, or
changes.

     SECTION 12. Notices. All notices or other communications which are required
or permitted hereunder shall be sufficiently given if in writing and personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, addressed to Borrower, Lender or other holder hereof, as the
case may be, at the respective addresses set forth in the first paragraph of the
Promissory Note, or to such other address as Borrower, Lender or such other
holder shall have given notice of pursuant hereto.

     SECTION 13. Governing Law. THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS.

     SECTION 14. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS PROMISSORY
NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF LENDER OR BORROWER SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF TEXAS OR IN THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF TEXAS. BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND
OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS FOR THE
PURPOSE OF SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF TEXAS.
BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR

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NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, BORROWER HEREBY IRREVOCABLY
WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS PROMISSORY NOTE.

     SECTION 15. Waiver of Jury Trial. LENDER AND BORROWER HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS PROMISSORY NOTE, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF LENDER OR BORROWER.
BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR LENDER MAKING THE LOANS EVIDENCED BY THIS PROMISSORY NOTE.

                              ARGONAUT GROUP, INC.

                              By: /s/ Mark E. Watson III
                                ------------------------------------------------
                                Name: Mark E. Watson III
                                     -------------------------------------------
                                Title: President & CEO
                                      ------------------------------------------<PAGE>
                             [ARGONAUT LETTERHEAD]

                                                                    Exhibit 10.6

May 7, 2003

Via Fax (713) 744-9648
----------------------

Christopher L. Martin
HCC Insurance Holdings, Inc.
13403 Northwest Freeway
Houston, Texas 77040

Dear Mr. Martin:

     We refer you to the Promissory Note (the "Note") of Argonaut Group, Inc.
("Argonaut") dated March 31, 2003, in the initial principal amount of
$18,000,000, of which HCC Insurance Holdings, Inc. ("HCC") is the holder.
Capitalized terms not otherwise defined and used in this letter have the
meanings given to them in the Note.

1.   HCC acknowledges receipt of $6,032,000 from Argonaut on April 16, 2003,
which amount was paid as a mandatory prepayment pursuant to Section 6 of the
Note. The outstanding principal balance and accrued interest on the Note shall
be reduced by such amount as of such date.

2.   Argonaut intends to issue $15,464,000 principal amount of Floating Rate
Junior Subordinated Deferrable Interest Debentures due 2033 (the "Subordinated
Debentures") on or prior to May 15, 2003 in connection with a trust preferred
financing transaction. Pursuant to Section 6 of the Note, Argonaut is required
to prepay the outstanding principal balance of the Note in an amount equal to
the amount of any proceeds resulting from certain indebtedness, which would
include proceeds from the issuance of the Subordinated Debentures (such
requirement being the "Prepayment Covenant").

In connection with the issuance of the Subordinated Debentures, HCC hereby
waives the Prepayment Covenant in connection with the issuance of the
Subordinated Debentures. Such waiver shall act as a waiver only in connection
with the issuance of the Subordinated Debentures and shall not operate as a
waiver for any other purpose or any other transaction which would require a
mandatory prepayment. This waiver shall not extend to any other breach of any
other provision of the Note, nor prejudice any rights or remedies of HCC with
respect to any such other breach and HCC retains all of its rights and remedies
in connection with any such other breach.

Argonaut hereby agrees to contribute approximately 80% of the net proceeds from
the issuance of the Subordinated Debentures to Argonaut Insurance Company.
Argonaut intends to use the remaining net proceeds for general corporate
purposes.

3.   Subject to the foregoing, the Note shall remain in full force and effect
in accordance with its terms.

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4. This letter agreement may be executed in any number of counterparts and by
the different parties on separate counterparts and each such counterpart shall
be deemed to be an original, but all such counterparts shall together constitute
but one and the same letter agreement.

If the terms and conditions of this letter agreement are acceptable, please so
indicate by executing a counterpart of this letter agreement

                                        Very truly yours,

                                        ARGONAUT GROUP, INC.

                                        By: /s/ Byron L. LeFlore, Jr.
                                            ------------------------------------
                                        Name: Byron L. LeFlore, Jr.
                                              ----------------------------------
                                        Title: V.P., Secretary & General Counsel
                                               ---------------------------------

                                        Acknowledged and Agreed:

                                        HCC INSURANCE HOLDINGS, INC.

                                        By: /s/ Christopher L. Martin
                                            ------------------------------------
                                        Name: Christopher L. Martin
                                              ----------------------------------
                                        Title: EVP General Counsel
                                               ---------------------------------

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