Document:

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                            PXRE REINSURANCE COMPANY
                            AGGREGATE EXCESS OF LOSS
                                   REINSURANCE

                             Effective July 1, 2001
Article  Summary                                                            Page

    1     Business Covered                                                   2
    2     Term, Territory and Inuring Reinsurances                           2
    3     Basis of Coverage                                                  3
    4     Exclusions                                                         3
    5     Coverage, Retention, Aggregate Limit and Franchise Deductible      4
    6     Definitions                                                        6
    7     Net Retained Lines                                                 9
    8     Initial Premium, Additional Premium, Return Premium               10
            and Reinsurer's Expense
    9     Ceding Commission                                                 11
   10     Funds Held Account                                                11
   11     Interest Credit                                                   12
   12     Accounts, Remittances and Loss Settlements                        13
   13     Commutation                                                       14
   14     Profit Sharing                                                    14
   15     Currency                                                          15
   16     Taxes                                                             15
   17     Reinsurer's Security                                              15
   18     Excess of Policy Limits                                           17
   19     Extra Contractual Obligations                                     17
   20     Offset                                                            18
   21     Indemnification and Errors and Omissions                          18
   22     Access to Records                                                 18
   23     Assignment and Assumption                                         19
   24     Insolvency                                                        19
   25     Confidentiality                                                   20
   26     Arbitration                                                       20
   27     Service of Suit                                                   21
   28     Governing Law                                                     21
   29     Severability                                                      22
   30     Contingent Trust Fund                                             22
   31     Changes in Administrative Practices                               23
   32     Intermediary                                                      23
   33     Counterparts                                                      23
   34     Other Clauses                                                     23

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                     ACCIDENT YEAR AGGREGATE EXCESS OF LOSS
                                   REINSURANCE

                  (hereinafter referred to as the "Agreement")

                                     between

                            PXRE REINSURANCE COMPANY
                              Hartford, Connecticut

                   (hereinafter referred to as the "Company")

                                       and

                             SELECT REINSURANCE LTD.
                                Hamilton, Bermuda

                  (hereinafter referred to as the "Reinsurers")

                                    ARTICLE 1

BUSINESS COVERED

This Agreement is to indemnify the Company with respect to the Ultimate Net
Losses which may accrue to the Company as a result of losses occurring, and
claims made during the Term, all as per underlying policies and binders of
insurance, facultative certificates and programs of Reinsurance Agreements
(hereinafter referred to as "Subject Business") as respects all classes of
business underwritten by the Company except for business excluded in Article 4,
Exclusions, all subject to the terms and conditions of this Agreement.

                                    ARTICLE 2

TERM, TERRITORY AND INURING REINSURANCES

A.    This Agreement shall be effective from 12:01 a.m. Eastern Standard Time,
      July 1, 2001, until 11:59 p.m. Eastern Standard Time, June 30, 2002 (the
      "Term"), both days inclusive unless this Agreement is terminated early.

B.    This Agreement applies to losses worldwide on all Subject Business.

C.    All other reinsurance treaties, other than those set forth on Schedule A
      (such treaties, "Non-Inuring Reinsurance"), that inure to the benefit of
      this Agreement shall be deemed in place until all liability of the
      Reinsurers under this Agreement is finalized by payment of all covered
      Ultimate Net Losses or Commutation as outlined in Article 13.

                                       2
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                                   ARTICLE 3

BASIS OF COVERAGE

The Reinsurers shall indemnify the Company for all losses on Subject Business
during the Term. Coverage for Loss Occurrences or claims made or losses
discovered shall in all cases follow the underlying coverage form of the
Company's policies, binders and certificates of insurance or Reinsurance
Agreements.

                                    ARTICLE 4

EXCLUSIONS

This Agreement shall not apply to and specifically excludes:

A.    Nuclear incident, in accordance with the following clauses attached
      hereto:

      1.    Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance -
            U.S.A. - NMA 1119;

      2.    Nuclear Incident Exclusion Clause - Physical Damage and Liability
            (Boiler and Machinery Policies) - Reinsurance - U.S.A. - NMA 1166;

      3.    Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance -
            Canada - NMA 1980;

      4.    Nuclear Incident Exclusion Clause - Physical Damage and Liability
            (Boiler and Machinery Policies) Reinsurance - Canada - NMA 1251;

      5.    Nuclear Incident Exclusion Clause - Liability - Reinsurance - U.S.A.
            - NMA 1590;

      6.    Nuclear Incident Exclusion Clause - Liability - Reinsurance - Canada
            - NMA 1979; and

      7.    Nuclear Energy Risks Exclusion Clause (Reinsurance) (1984) -
            Worldwide Excluding U.S.A. and Canada - NMA 1975;

B.    War risks, in accordance with the war risks exclusion clause attached
      hereto;

C.    Insolvency Funds Exclusion Clause attached hereto;

D.    With respect to property business liability assumed by the Company as a
      member of any Pool, Association or Syndicate as per the property
      catastrophe clause attached hereto;

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E.    With respect to workers' compensation, any loss or liability accruing to
      the Company directly or indirectly as insurer arising out of membership in
      any Pool, Association or Syndicate; however, this exclusion shall not
      apply to the Company's involuntary participation in workers' compensation
      assigned risk plans or to business assumed through the National Workers'
      Compensation Reinsurance Pool; and

F.    All reinsurance business classified by the Company as finite reinsurance
      business, other than those finite reinsurance agreements and treaties set
      forth on Schedule B.

G.    All credit default swaps, credit derivatives, collateralized debt
      obligations, collateralized bond obligations and collateralized loan
      obligations.

H.    Any and all exposure associated with the Company's run-off of its Lloyd's
      operations.

                                    ARTICLE 5

COVERAGE, RETENTION, AGGREGATE LIMIT AND FRANCHISE DEDUCTIBLE

A.    Coverage - The Reinsurers shall indemnify the Company for 100% (one
      hundred percent) of the paid Ultimate Net Loss during the Term for the
      layers as defined herein, in excess of the respective Retention, as
      defined in Section B. below, and the Franchise Deductible, as defined in
      Section D. below, subject to a maximum liability equal to the Aggregate
      Limit, as defined in Section C. below, in respect of Ultimate Net Loss of
      the Company. The layers of coverage as provided hereon are defined as the
      following:

      Layer A - Layer A Coverage shall equal 333.33% (three hundred thirty three
      point three three percent) of the net Premium (including Additional
      Premiums) paid by the Company, either on a funds transferred or funds held
      basis or by offset, in respect of Layer A only, not to exceed total Layer
      A Coverage equal to the greater of, but not to exceed, $62,000,000 (sixty
      two million dollars) or 27.94% (twenty seven point nine four percent) of
      SNEPI (such amount, the "Layer A Coverage Limit").

      Layer B - Layer B Coverage shall equal the greater of, but not to exceed,
      $63,000,000 (sixty three million dollars) or 28.39% (twenty eight point
      three nine percent) of SNEPI (such amount, the "Layer B Coverage Limit").

      Layer C - Layer C Coverage shall equal $52,000,000 (fifty two million
      dollars) (the "Layer C Coverage Limit") per occurrence and in the
      aggregate. Layer C Coverage shall be available only to the extent losses
      are not ceded to Layer A.

B.    Retention - The Retention for the Term shall equal the following:

      Layer A - The Reinsurers shall indemnify the Company for 100% (one hundred
      percent) of the Ultimate Net Loss incurred during the Term and paid in
      respect of Ultimate Net Loss within the Net Retained Liability of the
      Company in excess of an amount equal to the sum of 72.14% (seventy two
      point one four percent) of SNEPI and the Franchise Deductible below (i.e.,
      effective retention), not to exceed the respective Layer A Coverage Limit
      hereon. Layer A is subject to a minimum Retention of $152,000,000 (one
      hundred fifty two million dollars).

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      Layer B - The Reinsurers shall indemnify the Company for 100% (one hundred
      percent) of the Ultimate Net Loss incurred during the Term and paid in
      respect of Ultimate Net Loss within the Net Retained Liability of the
      Company in excess of an amount equal to the sum of 100.08% (one hundred
      point zero eight percent) of SNEPI, not to exceed the respective Layer B
      Coverage Limit hereon. Layer B is subject to a minimum Retention of
      $152,000,000 (one hundred fifty two million dollars) plus the greater of
      $62,000,000 (sixty two million dollars) or 27.94% (twenty seven point nine
      four percent) of SNEPI. In addition, Coverage provided under Layer B shall
      be reduced to $40,874,000 (forty million eight hundred seventy four
      dollars) if the additional Reinsurers' Expense as set forth in Article 8,
      item C., Reinsurers' Expense is not paid by the Company to the Reinsurers
      on or before the payment dates established in Article 8.

      Except for Non-Inuring Reinsurance, the Company shall retain and be liable
      for the paid portion of Ultimate Net Loss equal to the Retention, as
      defined above, inclusive of the Franchise Deductible, as defined below,
      for the coverage afforded hereunder.

      Layer C- The Reinsurers shall indemnify the Company for 100% (one hundred
      percent) of the Ultimate Net Loss incurred during the Term and paid in
      respect of Ultimate Net Loss in excess of $10,000,000 (ten million
      dollars) on a per event basis only.

C.    Aggregate Limit - The Reinsurers' liability shall be subject to a maximum
      Aggregate Limit for the Term of an amount equal to the greater of
      $125,000,000 (one hundred twenty five million dollars) or 56.32% (fifty
      six point three two percent) of SNEPI, subject to a maximum of
      $135,000,000 (one hundred thirty five million dollars. Should the result
      of multiplying the actual SNEPI by 61.73% (sixty one point seven three
      percent) exceed $135,000,000 (one hundred thirty five million dollars),
      then Ultimate Net Loss and SNEPI shall be prorated based upon applying the
      factor equal to the result of $135,000,000 (one hundred thirty five
      million dollars) divided by the result of multiplying SNEPI by 61.73%
      (sixty one point seven three percent) to the respective Ultimate Net Loss
      and SNEPI hereon.

D.    Franchise Deductible - Coverage hereunder is subject to a Franchise
      Deductible. Except for Non-Inuring Reinsurance, the Company shall retain
      net and unreinsured the following percentage of SNEPI corresponding to the
      respective Ultimate Net Loss Ratio:

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                           (A)             (B)       (C)=(A)+(B)
        Ultimate Net                   Franchise        Effective
         Loss Ratio        Retention   Deductible      Retention
       --------------      ---------   ----------    -------------

         81.45% or below    72.14%       9.31%           81.45%
         83.45%             72.14%       8.31%           80.45%
         85.45%             72.14%       7.31%           79.45%
         87.45%             72.14%       6.31%           78.45%
         89.45%             72.14%       5.31%           77.45%
         91.45%             72.14%       4.31%           76.45%
         93.45%             72.14%       3.31%           75.45%
         95.45%             72.14%       2.31%           74.45%
         97.45%             72.14%       1.31%           73.45%
         99.45%             72.14%       0.31%           72.45%
        100.08% or greater               0.00%           72.14%

                                    ARTICLE 6

DEFINITIONS

A.    "Allocated Loss Adjustment Expenses", as used in this Agreement, shall
      mean the Company's share of costs and expenses allocable to specific
      claims attaching to the Reinsurance Agreements and that are incurred in
      the investigation, appraisal, adjustment, settlement, litigation, defense
      or appeal of such specific claims, including statutory penalties, court
      costs and costs of supersedeas and appeal bonds, and including:

      1)    pre-judgment interest, unless included as part of the award or
            judgment;

      2)    post-judgement interest; and

      3)    legal expenses and costs incurred in connection with coverage
            questions and legal actions connected thereto, including declaratory
            judgement expense.

      Allocated Loss Adjustment Expenses shall not include the Company's office
      expenses and salaries of employees of the Company, except: 1) payments to
      attorneys on the Company's staff who are engaged in the investigation,
      litigation or settlement of claims, suits, legal proceedings or losses
      reinsured under this Agreement; 2) when the Company uses its own employees
      or officials, including claims personnel and engineers to settle losses,
      the Company shall be permitted to include a pro rata share of expenses
      incurred by and salaries related to such employees and officials,
      including claim personnel and engineers. The Company warrants that the
      allocation of Loss Adjustment Expenses will remain consistent while this
      Agreement is in force and /or the Reinsurer is at risk.

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B.    "Loss Occurrence(s)", "Claim(s) Made", and "Loss(es) Discovered" shall
      follow the definition each such term may have under the policies, binders
      and certificates of insurance covered by this Agreement. The Reinsurers
      shall accept such definitions and any subsequent loss allocations as
      determined by the Company.

C.    "Net Written Premium Income" shall mean gross premium of the Company's
      Business Covered less cancellations and returns and less premium paid for
      all other specific or aggregate excess reinsurance inuring to this
      Agreement.

D.    "Other Lines" shall mean lines of business other than Short-Tail Lines of
      business including, but not limited to, workers' compensation finite
      specific excess of loss contracts.

E.    "Prejudgment Interest or Delayed Damages" shall mean interest or damages
      added to a settlement, verdict, award, or judgment based on the amount of
      time prior to the settlement, verdict, award or judgment whether or not
      made part of the settlement, verdict, award or judgment.

F.    "Property Catastrophe Loss" shall mean any loss event worldwide which is
      assigned a catastrophe designation by the organization responsible for
      assigning such designation for the geographic area in which the loss event
      occurred and for which the Company receives a specific identification via
      report(s) from their underlying clients of such Property Catastrophe
      Losses.

G.    "Short-Tail Lines" shall mean property lines of business, including
      property catastrophe and assumed finite business that is not more than 50%
      (fifty percent) casualty oriented in terms of underlying Subject Business.

H.    "Statutory Penalties" shall mean fines imposed by statutes or laws.

I.    "Subject Net Earned Premium Income (SNEPI)" for any period applicable to
      this Agreement shall mean the Net Written Premium Income of the Company's
      Business Covered for the Term plus the respective Net Written Premium
      Income Unearned as of the inception of this Agreement Year less the
      respective Net Written Premium Income Unearned as of the end of the
      calculation period less ceded premium in respect of all inuring
      reinsurance/retrocessional protection. SNEPI shall be gross of all
      premiums including Initial Premium and Minimum Premium for Subject
      Business in respect of this reinsurance coverage. For purposes of the
      agreements set forth on Schedule B, Premium, Earned Premium, Gross Premium
      and Written Premium shall be as defined in such agreements.

      (i)   "Net Written Premium Income Unearned" shall be determined by the
            Company following its standard practices and calculations as
            respects the subject Reinsurance Agreements.

                                       7
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J.    "Ultimate Net Loss" shall mean the sum of losses incurred by the Company
      on its net retained liability in settlement of losses, including Allocated
      Loss Adjustment Expenses, on Subject Business plus reserves for
      outstanding losses and Allocated Loss Adjustment Expenses, including
      reserves for incurred but not reported claims, ex gratia payments, the
      liability for Loss in Excess of Original Policy Limits, in accordance with
      Article 18, Excess of Policy Limits, and the liability for Extra
      Contractual Obligations emanating from underlying contracts of the
      Company's clients, in accordance with Article 19, Extra Contractual
      Obligations, from the Company's assumed reinsurance contracts. Ultimate
      Net Loss shall be net of inuring reinsurances (but gross of Non-Inuring
      Reinsurance), whether collectible or not, and all salvages and recoveries
      deducted from the Ultimate Net Loss, provided, however, that in the event
      of the insolvency of the Company, payments by the Reinsurers shall be made
      in accordance with the provisions of Article 24, Insolvency. Nothing
      herein shall be construed to mean that losses under this Agreement are not
      recoverable until the Company's Ultimate Net Loss has been ascertained.

      Ultimate Net Loss that may be ceded under this Agreement shall be subject
      to a Property Catastrophe Loss per event aggregate sublimit equal to
      $62,000,000 (sixty two million dollars). Ultimate Net Loss in respect of
      Short-Tail Lines that may be ceded under this Agreement shall be limited
      in the aggregate to $90,000,000 (ninety million dollars) above plan (as
      detailed in Schedule C). In addition, Short-Tail Ultimate Net Loss ceded
      with respect to Short-Tail Lines shall decrease dollar for dollar the
      amount that the subject Ultimate Net Loss is greater than the Retention
      plus the Limit for Layers A and B.

      The Ultimate Net Loss in respect of the agreement set forth on Schedule B,
      item 4., shall be limited to plan (as detailed in Schedule C) plus 10%
      (ten percent) of Ultimate Net Loss above plan only, in respect of this
      Agreement.

      With respect to the agreements set forth on Schedule B, (i) Ultimate Net
      Loss, Ceding Commission and Return Premium shall be as defined in such
      agreements, and (ii) Ultimate Net Loss shall only include Return Premium
      and Ceding Commissions earned during the Term.

      Ultimate Net Loss shall exclude both unallocated Loss Adjustment Expenses
      and all other general operating expenses (overhead) of the Company, but
      shall include any unallocated Loss Adjustment Expenses where the
      underlying treaties and facultative business with the Company's clients
      provide for such coverage.

      Ultimate Net Loss amounts shall include Business Covered paid losses,
      outstanding losses, and losses incurred, as referenced in this Agreement.
      As referred to in this Agreement, outstanding losses shall include in
      respect of Business Covered the Company's loss reserves for losses
      incurred, losses incurred but not reported and reserves for loss
      adjustment expense as of the calculation date; losses incurred shall
      comprise the sum of Ultimate Net Losses paid and Ultimate Net Losses
      outstanding as of the calculation date.

                                       8
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      Notwithstanding the Coverage, Aggregate Limit and Premium terms hereon,
      the Reinsurers shall not be obligated to pay any further Ultimate Net
      Losses otherwise due to the Company upon the Reinsurers sustaining a
      present value economic loss on a paid basis greater than 15.1% (fifteen
      point one percent) of present value ceded Premiums hereon (i.e., excluding
      the Franchise Deductible).

      Present value economic loss shall be based upon Ultimate Net Loss and
      Return Premiums, if applicable, paid by the Reinsurers, being discounted
      at an 8.0% (eight point zero percent) effective annual rate for those
      payments made by debiting the Funds Held Account and a 4.66% (four point
      six six percent) effective annual rate for said payments made from the
      Reinsurers' Expenses, and other funds of the Reinsurers, including
      Premiums paid to the Reinsurers, all back to inception of this Agreement.

      The Company must cede Ultimate Net Loss as reported in the Company's
      audited financial statements unless otherwise agreed by the Company and
      the Reinsurers provided, however, that with respect to Layer B only, the
      Company shall have the option to not report Ultimate Net Loss as long as
      the election to not report and cede such loss does not have a material
      detrimental economic effect on the Reinsurers.

K.    "Ultimate Net Loss Ratio" shall mean the ratio of Ultimate Net Losses
      incurred divided by Subject Net Earned Premium Income as of the date of
      calculation.

                                    ARTICLE 7

NET RETAINED LINES

This Agreement applies only to that portion of any Reinsurance Agreement which
the Company retains net for its own account, and in calculating the amount of
any Ultimate Net Loss hereunder and also in computing the amounts in Article 5,
Coverage, Retention, Aggregate Limit and Franchise Deductible to which this
Agreement applies, only Ultimate Net Loss in respect of that portion of any
Reinsurance Agreement which the Company retains net for its own account shall be
included, provided, however, that Non-Inuring Reinsurance shall be disregarded
for purposes of calculating Ultimate Net Loss hereunder.

The amount of the Reinsurers' liability hereunder in respect of any Ultimate Net
Loss shall not be increased by reason of the inability of the Company to collect
from any other reinsurer, whether specific or general, any amounts which may
have become due from such reinsurer, whether such inability arises from the
insolvency of such other reinsurer or otherwise.

                                       9
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                                    ARTICLE 8

INITIAL PREMIUM, ADDITIONAL PREMIUM, RETURN PREMIUM AND REINSURERS' EXPENSE

A.    Initial Premium - The Company shall pay an Initial Premium to the
      Reinsurers as follows:

      Layer A - There shall be no Initial Premium in respect of Layer A
      Coverage.

      Layer B - An Initial Premium, in respect of Layer B Coverage, equal to the
      greater of $40,874,000 (forty million eight hundred seventy four thousand
      dollars) or 18.42% (eighteen point four two percent) of SNEPI shall be
      credited to the Funds Held Account as of July 1, 2001.

      Layer C - There shall be no Initial Premium in respect of Layer C
      Coverage.

B.    Additional Premium - The Company shall pay Additional Premium to the
      Reinsurers as follows:

      Layer A - Additional Premium, in respect of Layer A Coverage only, equal
      to 30% (thirty percent) of the ceded amount of Ultimate Net Loss in
      respect of Layer A Coverage shall be credited to the Funds Held Account as
      of July 1, 2001.

      Layer B - There shall be no Additional Premium in respect of Layer B
      Coverage.

      Layer C - Additional Premium, in respect of Layer C Coverage only, equal
      to 30% (thirty percent) of the ceded amount of Ultimate Net Loss plus 10%
      (ten percent) of ceded Ultimate Net Loss in excess of $26,000,000 (twenty
      six million dollars) in respect of Layer C Coverage shall be credited to
      the Funds Held Account as of July 1, 2001.

C.    Return Premium - The Company shall be entitled to 100% (one hundred
      percent) of the difference between Layer B Initial Premium less Ceding
      Commission if subject Ultimate Net Loss does not exceed the Retention of
      Layer B Coverage, provided that if any portion of the Layer B Initial
      Premium is paid on a funds held basis, such portion shall be credited with
      interest, as provided in Article 11, Interest Credit, paragraph 2. Subject
      Ultimate Net Loss excess the Retention of Layer B Coverage will reduce the
      Return Premium dollar for dollar. The Reinsurers shall pay Return Premium
      at the earlier of the final settlement of Ultimate Net Loss or Commutation
      by debit to the Funds Held Account.

D.    Reinsurers' Expense - The Company shall pay an up-front Reinsurers'
      Expense equal to the greater of .83% (point eight three percent) of SNEPI
      or $1,850,000 (one million eight hundred fifty thousand dollars), net of
      Ceding Commission. Reinsurers' Expense shall be paid by the Company to the
      Reinsurers as soon as practicable on or after the inception of this
      Agreement. Furthermore, the Company shall pay the Reinsurers 3.50% (three
      point five zero percent) of the gross Additional Premium payable
      hereunder, except in respect of the 10% (ten percent) Additional Premium
      in Layer C, including interest back to inception. The Reinsurers shall pay
      the Company any return Reinsurers' Expense, including interest back to
      inception, based upon downward adjustment of ceded Ultimate Net Loss.

                                       10
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      The Company shall also pay the Reinsurers an additional Reinsurers'
      Expense of $1,000,000 (one million dollars) on July 1, 2003 and another
      $1,000,000 on July 1, 2005 if Coverage afforded under this Agreement is in
      force and not commuted at such respective dates.

      Reinsurers' Expense shall be debited from the Funds Held Account at July
      1, 2001.

                                    ARTICLE 9

CEDING COMMISSION

A.    The Reinsurers shall allow the Company a Ceding Commission equal to 40.0%
      (forty percent) of all Initial Premium, Additional Premium and Reinsurers'
      Expense hereon after grossing up all such Premiums and Reinsurers' Expense
      by 0.60 (100% - 40%). All Ceding Commissions shall be credited to the
      Funds Held Account as of July 1, 2001. Accordingly, all such grossed up
      Premiums and Reinsurers' Expense shall be credited to the Funds Held
      Account at July 1, 2001.

B.    Ceding Commission due hereunder shall be paid by the Reinsurers to the
      Company at the earlier of final settlement of Business Covered Ultimate
      Net Losses or Commutation, as defined in Article 13, Commutation.

                                   ARTICLE 10

FUNDS HELD ACCOUNT

For purposes of this Agreement, the Reinsurers shall allow the Company to
establish and maintain a cumulative Funds Held Account, comprised of the
following:

      A.    The Funds Held Account balance at June 30, 2001 shall be equal to
            zero.

      B.    The Funds Held Account at each subsequent calendar quarter end shall
            be comprised of the following cumulative amounts:

            1)    The Funds Held Account at the end of the prior calendar
                  quarter; plus

            2)    100% (one hundred percent) of incremental Initial Premiums,
                  Additional Premiums and Reinsurers' Expense, inclusive of
                  Ceding Commission due, if any; plus

                                       11
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            3)    Ceding Commission actually paid by the Reinsurers, if any;
                  less

            4)    Return Premium paid by the Reinsurers, if any; less

            5)    Reinsurers' Expense; plus

            6)    Interest Credit, per Article 11, Interest Credit; less

            7)    Ceded Ultimate Net Losses paid by the Reinsurers for the
                  respective calendar quarter; less

            8)    Any Commutation Amounts paid by the Reinsurer per Article 13,
                  Commutation.

      The Company shall determine and report the balance and activity of the
      Funds Held Account quarterly within 60 (sixty) days to the Reinsurer.

      It is hereby understood that, in order for the Reinsurer to receive the
      balance of the Funds Held Account, for any other reason except as provided
      by the terms and conditions of this Agreement, this Agreement must be
      surrendered and reissued to transfer the right to maintain the Funds Held
      Account.

      The Reinsurer shall remain liable under the terms and conditions hereon
      until all Ultimate Net Losses are finalized or until this Agreement is
      commuted.

      In the event the Company is required to transfer the balance of the Funds
      Held Account to a Contingent Trust Fund pursuant to Article 30 of this
      Agreement, then the Contingent Trust Fund shall be deemed to be the Funds
      Held Account for all purposes under this Agreement, including without
      limitation, determining Commutation payments under Article 13, Profit
      Sharing under Article 14 and the security required under Article 17.

                                   ARTICLE 11

INTEREST CREDIT

The Funds Held Account shall be credited quarterly by the Company with 1). an
Interest Credit rate of 1.9427% (one point nine four two seven percent) as of
the first day of each calendar quarter resulting in an effective annual rate of
8.0% (eight point zero percent) on the Funds Held Account balance as of the end
of the preceding calendar quarter.

Interest Credit on the Funds Held Account will continue even in the event of the
Company's insolvency, liquidation or rehabilitation.

                                       12
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In the event that the Funds Held Account is transferred to a trust account, as
provided in Article 30, Contingent Trust Account, the Company is obligated to
contribute additional assets to the trust so that the 1.9427% (one point nine
four two seven percent) quarterly yield on the trust assets are equivalent to
the Funds Held Account Interest Credit rate stipulated herein.

                                   ARTICLE 12

ACCOUNTS, REMITTANCES AND LOSS SETTLEMENTS

A.    Within 60 (sixty) days following the end of each calendar quarter, the
      Company shall report to the Reinsurers the amount of:

      1)    Subject Net Earned Premium Income segregated by Short-Tail and Other
            Lines of Business and Retention;

      2)    Ultimate Net Losses paid segregated by Short-Tail and Other Lines of
            Business;

      3)    Ultimate Net Losses outstanding segregated by Short-Tail and Other
            Lines of Business;

      4)    Ultimate Net Losses paid and outstanding under this
            Agreement segregated by Short-Tail and Other Lines of Business, in
            accordance with Article 5, Coverage, Retention, Aggregate Limit and
            Franchise Deductible;

      5)    Premium amounts calculated in accordance with Article 8, Initial
            Premium, Additional Premium, Return Premium and Reinsurers' Expense,
            including applicable Ceding Commission; and

      6)    The balance of the Funds Held Account as of that calendar quarter
            end and activity in the Funds Held Account during the calendar
            quarter.

      The report outlined in this section shall continue until final settlement
      of all losses hereunder or Commutation in accordance with Article 13,
      Commutation.

B.    Remittance of Reinsurers' Expense amounts due shall be paid by the Company
      to the Reinsurers as premiums are due in the manner outlined under Article
      8, Initial Premium, Additional Premium, Return Premium and Reinsurers'
      Expense.

      All loss settlements made by the Company on Subject Business, whether
      under policy terms and conditions or by way of compromise, shall be in the
      sole discretion of the Company and shall be unconditionally binding on the
      Reinsurers. Upon satisfactory proof of loss, the Reinsurers shall pay or
      allow, as applicable, its share of each such settlement in accordance with
      this Agreement.

                                       13
<PAGE>

C.    Settlement of Ultimate Net Losses paid in excess of the Retention shall be
      made by the Reinsurers to the Company quarterly within 15 (fifteen) days
      of receipt of the report by the Reinsurers or 75 (seventy five) days after
      the end of the quarter, whichever is later. Ultimate Net Loss amounts
      shall be firstly deducted from the Funds Held Account until such time as
      the Funds Held Account is zero, after which amounts shall be paid by the
      Reinsurers to the Company. The Reinsurers' liability for Ultimate Net
      Losses (including ceded Ultimate Net Losses paid from the Funds Held
      Account) shall be subject to the Aggregate Limits hereunder as detailed in
      Article 5, Coverage, Retention, Aggregate Limit and Franchise Deductible,
      Sections C, D and E.

                                   ARTICLE 13

COMMUTATION

The Company may unilaterally elect to commute Ultimate Net Loss liability
outstanding if the Funds Held Account balance equals or exceeds total ceded
reinsurance recoverables (ceded outstanding Ultimate Net Loss, Ceding
Commissions payable and Return Premiums payable). Otherwise, Commutation is also
available upon the mutual consent of the Company and the Reinsurers effective at
any calendar quarter end on or after the termination date, to commute Ultimate
Net Loss liability outstanding hereunder. At Commutation, the Reinsurers shall
pay to the Company, the lesser of:

      1)    the present value of any Ultimate Net Loss liability, as determined
            by the Company; or

      2)    the existing value of the Funds Held Account at the Commutation
            date.

Commutation payments in accordance with this Article shall be treated as
Ultimate Net Loss paid under this Agreement for determination of the Funds Held
Account.

Said payment shall constitute, together with the Profit Sharing payment, Ceding
Commission and Return Premium settlements, a full and final settlement of all
terms of this Agreement. The Company will execute a hold harmless agreement in a
form acceptable to the Company and the Reinsurers so stating and the Reinsurers
will be thereby released from all current and future liability hereunder.

                                   ARTICLE 14

PROFIT SHARING

Upon finalization of the payment of all Ultimate Net Loss recoverable hereunder
and/or Commutation, the Reinsurers will relinquish to the Company 100% (one
hundred percent) of the remaining Funds Held Account balance, if any, after
payment of the Return Premium and Ceding Commission. Payment of Profit Sharing
by the Reinsurers to the Company shall release the Reinsurers from all current
and future liability hereunder.

                                       14
<PAGE>

                                   ARTICLE 15

CURRENCY

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

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

                                   ARTICLE 16

TAXES

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

The Company shall pay any United States Federal Excise Tax and/or Withholding
Tax which are applicable to remittances under this Agreement to the appropriate
authorities. Federal Excise Tax shall not be deducted from the Funds Held
Account.

Any foreign Reinsurer must file U.S. Federal Tax Form W-8, "Certificate of
Foreign Status", with the Company certifying that it is a foreign person.

                                   ARTICLE 17

REINSURERS' SECURITY

(This Article applies only to a Reinsurer who does not qualify for full credit
with any insurance regulatory authority having jurisdiction over the Company's
reserves.)

It is agreed that when the Company files with the Insurance Department or
establishes reserves for claims covered and unearned premium hereunder, as
required by law, the Company shall forward to the Reinsurers a statement showing
the proportion of such loss and unearned premium reserves which is applicable to
the Reinsurers. The Reinsurers hereby agree, if it is necessary for the Company
to obtain statutory credit for such, to fund such reserves in respect of
unearned premium, known outstanding losses that have been reported to the
Reinsurers and allocated loss adjustment expense relating thereto, losses and
allocated loss adjustment expense paid by the Company but not recovered from the
Reinsurers, plus reserves for losses incurred but not reported, as shown in the
statement prepared by the Company to the extent such reserves exceed the Funds
Held Account Balance. Upon the Company's request, the Reinsurers hereby agree to
apply for and secure delivery to the Company of a clean, irrevocable,
unconditional and evergreen Letter of Credit or Trust, with a minimum term of
one year, that is issued or confirmed, and presentable and payable in the United
States by any bank or trust company meeting the requirements under the insurance
laws of the State of Connecticut, and is in a format acceptable to the
governmental authority having jurisdiction over the Company's reserves, in an
amount equal to the Reinsurer's proportion of such loss and unearned premium and
commission reserves which exceed the Funds Held Account balance.

                                       15
<PAGE>

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

      1)    to reimburse the Company for the Reinsurer's share of Ultimate Net
            Losses paid by the Company under the Reinsurance Agreements
            reinsured under this Agreement and which has not otherwise been
            paid;

      2)    to reimburse the Company for the Reinsurer's share of premium
            returned under the Reinsurance Agreements reinsured under this
            Agreement on account of cancellation of such Reinsurance Agreements;

      3)    to fund an account with the Company in an amount at least equal to
            the deduction, for reinsurance ceded, from the Company's liabilities
            for amounts ceded under this Agreement. Such cash deposits shall be
            held in an interest bearing account separate from the Company's
            other assets, and interest thereon shall accrue to the benefit of
            the Reinsurers. Such amount shall include, but not be limited to,
            amounts for reserves for claims and losses incurred, including
            losses incurred but not reported, loss adjustment expenses, and
            unearned premiums;

      4)    to pay any other amounts the Company claims are due under this
            Agreement;

      5)    to return any amounts drawn down on Letters of Credit in excess of
            the actual amounts required for (1), (2) and (3) above, or in case
            of (4) above, any amounts which are subsequently determined not to
            be due.

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

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

                                       16
<PAGE>

The Company agrees to pay the actual costs of obtaining any such Letter of
Credit for amounts up to, but not exceeding, 60 (sixty) basis points times the
time weighted annual average face amount of such Letter of Credit.

                                   ARTICLE 18

EXCESS OF POLICY LIMITS

A.    This Agreement shall protect the Company, within the limits hereof, for
      100% (one hundred percent) of loss in excess of the limit of its original
      policies of insurance or Reinsurance Agreements, such loss in excess of
      the limit having been incurred because of failure by the Company to settle
      within the policies of insurance or Reinsurance Agreement limit or by
      reason of alleged or actual negligence or bad faith in rejecting an offer
      of settlement or in the preparation of the defense or in the trial of any
      action against its insured or reinsured or in the preparation or
      prosecution of an appeal consequent upon such action.

      However, this Article shall not apply where the loss has been incurred due
      to fraud by a member of the board of directors or a corporate officer of
      the company 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.

      For the purpose of this Article, the word "loss" shall mean any amounts
      for which the Company would have been contractually liable to pay had it
      not been for the limit of the original Reinsurance Agreement.

B.    In addition, Ultimate Net Loss, as defined above, shall include 100% (one
      hundred percent) of the Company's share of losses paid under excess of
      policy limits coverage provided by the Company in its Subject Business.

                                   ARTICLE 19

EXTRA CONTRACTUAL OBLIGATIONS

A.    This Agreement shall protect the Company for 100% (one hundred percent) of
      any extra contractual obligations within the limits hereof. The term
      "Extra Contractual Obligations" is defined as those liabilities not
      covered under any other provision of the Company's original policies of
      insurance or Reinsurance Agreements and which arise from the handling of
      any claim on business covered hereunder, such liabilities arising because
      of, but not limited to, the following: failure by the Company to settle
      within the policies of insurance or Reinsurance Agreement limit, or by
      reason of alleged or actual negligence or bad faith in rejecting an offer
      of settlement or in the preparation of the defense or in the trial of any
      action against its insured or reinsured or in the preparation or
      prosecution of an appeal consequent upon such action.

                                       17
<PAGE>

      The date on which any Extra Contractual Obligation is incurred by the
      Company shall be deemed, in all circumstances, to be the date of the
      original loss event. However, this Article shall not apply where the loss
      has been incurred due to fraud by a member of the board of directors or a
      corporate officer of the Company 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.

B.    In addition, Ultimate Net Loss, as defined above, shall include 100% (one
      hundred percent) of the Company's share of losses paid under extra
      contractual obligations coverage provided by the Company in its Subject
      Business.

                                   ARTICLE 20

OFFSET

The Company or the Reinsurers shall have and may exercise, at any time and from
time to time, the right to offset any balance or balances whether on account of
Initial Premiums, Return Premiums, Interest Credit, Ceding Commissions, or on
account of ceded Ultimate Net Losses paid, or otherwise any amounts due from one
party to the other party hereto under the terms of this Agreement.

                                   ARTICLE 21

INDEMNIFICATION AND ERRORS AND OMISSIONS

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

                                   ARTICLE 22

ACCESS TO RECORDS

The Company shall place at the disposal of the Reinsurers at all reasonable
times, and the Reinsurers shall have the right to inspect, through their
authorized representatives, all books, records and papers of the Company in
connection with any reinsurance hereunder or claims in connection herewith.

                                       18
<PAGE>

                                   ARTICLE 23

ASSIGNMENT AND ASSUMPTION

All the terms of this Agreement will be binding upon the successors and assigns
of the parties hereto and will inure to the benefit of and be enforceable by the
parties, their successors and assigns, provided however, that this Agreement may
not be assigned by either party hereto without the prior written consent to the
other; and provided further that nothing in this Agreement will prevent either
the Reinsurers or the Company from merging or consolidating with a corporation
or having the assets of either the Reinsurers or the Company sold or otherwise
transferred.

                                   ARTICLE 24

INSOLVENCY

A.    In the event of the insolvency of the Company, reinsurance under this
      Agreement shall be payable by the Reinsurers (on the basis of the
      liability of the Company under the policy or policies reinsured without
      diminution because of the insolvency of the Company) to the Company or to
      its liquidator, receiver or statutory successor, except as provided by
      Connecticut insurance law or except:

      1)    Where the Agreement specifically provides another payee of such
            reinsurance in the event of the insolvency of the Company; and

      2)    Where the Reinsurers, with the consent of the direct insured or
            insureds, has assumed such policy obligations of the Company as
            direct obligations of the Reinsurers to the payees under such
            policies and in substitution for the obligations of the Company to
            such payees.

B.    It is agreed, however, that the liquidator or receiver or statutory
      successor of the insolvent Company shall give written notice to the
      Reinsurers of the pendency of a claim against the insolvent Company on the
      policy or policies reinsured within a reasonable time after such claim is
      filed in the insolvency proceeding and that, during the pendency of such
      claim, the Reinsurers may investigate such claim and interpose, at their
      own expense, in the proceeding where such claim is to be adjudicated, any
      defense or defenses which they may deem available to the Company or its
      liquidator or receiver or statutory successor. The expense thus incurred
      by the Reinsurers shall be chargeable, subject to court approval, against
      the insolvent Company as part of the expense of liquidation to the extent
      of a proportionate share of the benefit which may accrue to the Company
      solely as a result of the defense undertaken by the Reinsurers.

C.    Should the Company go into liquidation or should a receiver be appointed,
      the Reinsurers shall be entitled to deduct from any sums which may be or
      may become due to the Company under this Agreement any sums which are due
      to the Reinsurers by the Company under this Agreement and which are
      payable at a fixed or stated date, as well as any other sums due the
      Reinsurers which are permitted to be offset under applicable law.

                                       19
<PAGE>

                                   ARTICLE 25

CONFIDENTIALITY

The parties acknowledge there may be portions of this Agreement, the treaty
prospectus or the marketing package that may contain confidential, proprietary
information of the Company. The Reinsurers shall maintain the confidentiality of
such information concerning the Company or its business and shall not disclose
it to any third person without prior approval; provided, however, that the
Reinsurers may be required and are permitted under this Agreement to disclose
such information in answers to interrogatories, subpoenas or other
legal/arbitration processes as well as to the Company's Intermediaries, to the
Reinsurers' retrocessionaires, and applicable intermediaries, or in response to
request by governmental and regulatory agencies. In addition, the Reinsurers may
disclose such information to their accountants and to their outside legal
counsel as may be necessary.

                                   ARTICLE 26

ARBITRATION

A.    As a condition precedent to any right of action hereunder, if any dispute
      shall arise between the Company and the Reinsurers with reference to the
      formation or validity of this Agreement, the interpretation of this
      Agreement or their rights with respect to any transaction involved,
      whether such dispute arises before or after termination of this Agreement,
      such dispute, upon the written request of either party, shall be submitted
      to three arbitrators, one to be chosen by each party, and the third by the
      two so chosen. If either party refuses or neglects to appoint an
      arbitrator within 30 (thirty) days after the receipt of written notice
      from the other party requesting it to do so, the requesting party may
      appoint two arbitrators. If the two arbitrators fail to agree on the
      selection of a third arbitrator within 30 (thirty) days of their
      appointment, each of them shall name two, of whom each shall decline one
      and the decision shall be made by the American Arbitration Association.
      All arbitrators shall be active or retired disinterested executive
      officers of insurance or reinsurance companies not under the management or
      control of either party to this Agreement.

B.    Each party shall submit its case to its arbitrator within 30 (thirty) days
      of the appointment of the third arbitrator. The arbitrators shall render a
      decision within 30 (thirty) days of the close of the arbitration hearing.

C.    The decision in writing of any two arbitrators, when filed with the
      parties hereto, shall be final and binding on both parties. Judgment may
      be entered upon the final decision of the arbitrators in any court having
      jurisdiction. Each party shall bear the expense of its own arbitrator and
      shall jointly and equally bear with the other party the expense of the
      third arbitrator and of the arbitration. Said arbitration shall take place
      in Edison, New Jersey, unless some other place is mutually agreed upon by
      the Company and the Reinsurers.

                                       20
<PAGE>

                                   ARTICLE 27

SERVICE OF SUIT

Subject to the provisions of Article 26, Arbitration ,it is agreed that in the
event of the failure of the Reinsurers to pay any amount claimed to be due under
this Agreement, the Reinsurers, at the request of the Company, shall submit to
the jurisdiction of any court of competent jurisdiction within the United States
of America and shall comply with all requirements necessary to give such court
jurisdiction; and all matters arising hereunder shall be determined in
accordance with the law and practice of such court. Nothing in this Article
constitutes or should be understood to constitute a waiver of the Reinsurers'
rights to commence an action in any court of competent jurisdiction in the
United States of America, 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 of America or of any state in the United States of America.

Service of process in such suit may be made upon Messrs. Mendes and Mount, 750
Seventh Avenue, New York, New York 10019-6829 (hereinafter "agent for service of
process"), and in any suit instituted against the Reinsurers upon this
Agreement, the Reinsurers shall 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 Reinsurers in any such suit and/or upon the request of the Company
to give a written undertaking to the Company that the agent for service of
process shall enter a general appearance on behalf of the Reinsurers in the
event such a suit shall be instituted.

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

                                   ARTICLE 28
GOVERNING LAW

This Agreement shall be governed as to performance, administration and
interpretation by the laws of New York, exclusive of the rules with respect to
conflicts of law, and except as to rules with respect to credit for reinsurance
in which case the rules of all applicable states shall apply.

                                       21
<PAGE>

                                   ARTICLE 29

SEVERABILITY

If any provision of this Agreement shall be rendered illegal or unenforceable by
the laws, regulation or public policy of any jurisdiction, the parties hereto
agree to renegotiate in good faith the terms and conditions of such provision as
it applies to such jurisdiction, but only to the extent required to conform to
the applicable statute or regulation, and to renegotiate in good faith such
other terms and provisions of this Agreement (if any) which are affected by the
illegality or unenforceability of such provision as it applies to such
jurisdiction.

                                   ARTICLE 30

CONTINGENT TRUST FUND

The Company will immediately transfer the balance of the Funds Held Account in
no less than 30 (thirty) days from the date of a Triggering Event, into a New
York Regulation No. 114 compliant trust account. Notwithstanding the above, the
Company is required to deposit additional assets into the trust account as to
guarantee an investment return equivalent to the Interest Credit, as provided in
Article 11, Interest Credit. A Triggering Event shall include the following:

      1)    Change of Control - a change in the ultimate controlling shareholder
            of the Company that requires a filing to be made with any insurance
            regulatory authority or with the Securities and Exchange Commission
            of the United States, excluding any internal consolidation or
            reorganization which does not change such ultimate controlling
            shareholder;

      2)    Change in Management - any change, without the prior written consent
            of the Reinsurers, in the offices of Chairman, President or Chief
            Executive Officer or a change to the office of the majority of
            Executive Vice Presidents of the Company; or

      3)    Downgrade - a downgrade in the Company's rating by A.M. Bests below
            "B++" (Very Good); or

      4)    Regulatory Scrutiny or Oversight - the Company becomes (a) subject
            to the administrative supervision of any applicable insurance
            regulatory authority, (b) becomes subject to any rehabilitation or
            insolvency proceeding, or (c), the Company's risk based capital
            falls below the Company Action Level, as defined in the NAIC Risk
            Based Capital Model Act; or

                                       22
<PAGE>

                                   ARTICLE 31

CHANGES IN ADMINISTRATIVE PRACTICES

The Company may not commute any of the reinsurance agreements set forth on
Schedule B without the prior approval of the Reinsurer, provided, however, that
if the Company is required to commute under the terms of the underlying
reinsurance agreements, then such agreement shall be deemed to be in place as if
there had been no commutation until all liability of the Reinsurer under this
Agreement is commuted.

                                   ARTICLE 32

INTERMEDIARY

Pegasus Advisors - Towers Perrin Reinsurance is hereby recognized as the
Intermediary negotiating this Agreement for all business hereunder. All
communications (including but not limited to notices, statements, premium,
return premium, commissions, taxes, losses, loss adjustment expenses, salvages
and loss settlements) related hereto shall be transmitted to the Company or the
Reinsurer through Pegasus Advisors - Towers Perrin Reinsurance, Forestal Centre,
175 Powder Forest Drive, Weatogue, Connecticut 06089. It is understood, as
regards remittances due either party hereunder, that payment by the Company to
the Intermediary shall constitute payment to the Reinsurer but payment by the
Reinsurer to the Intermediary shall only constitute payment to the Company to
the extent that such payments are actually received by the Company.
Notwithstanding the foregoing, it is agreed that all payments will be direct
from the Reinsurer to the Company, or from the Company to the Reinsurer, as
appropriate.

                                   ARTICLE 33

COUNTERPARTS

This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

                                   ARTICLE 34

OTHER CLAUSES

1)       Change in Control
2)       Others to be agreed.

                                       23
<PAGE>

In Witness Whereof, the parties hereto express their agreement by their duly
authorized signatures below:

For and on behalf of PXRE Reinsurance Company in confirmation of the terms,
conditions and Reinsurers hereon:

By:    /s/ J. Radke
       -------------------------

Title:  EVP
       -------------------------

For and on behalf of Select Reinsurance Ltd., for a 40% (forty percent)
participation, in confirmation of the terms and conditions hereon, however
signed subject to no other reinsurer or rcinsurers to this transaction receiving
more favorable terms and conditions than Select Reinsurance Ltd., additionally
noting however that Select Re is not requiring PXRE Reinsurance Company to post
a letter of credit at the inception of the agreement as required by other
reinsurers to this Agreement and also that Select Reinsurance Ltd. shall have
Change of Control as a Triggering Event per Article 30 of this Agreement while
other reinsurer or reinsurers may not have such a provision included within the
terms of their own Agreements.

 By:   /s/ Robert P. Myron
       ---------------------------

Title: Vice President
       Select Reinsurance Ltd.
       ---------------------------

                                       24<PAGE>

REINSURER:              Select Reinsurance Ltd.

REINSURED:              PXRE Reinsurance Ltd.

TERM:                   Agreement commencing January 1, 2001
                        covering Subject Business attaching from inception to
                        December 31, 2001. It is agreed by the parties to this
                        Agreement that this slip replaces any previously
                        executed placing slip covering this exposure for PXRE
                        Reinsurance Company.

BUSINESS COVERED:       The Covered Contracts are:

                        1.    the Quota Share Reinsurance of Tower Insurance
                              Company of New York

                        2.    the Quota Share Reinsurance of Legion Insurance
                              Company

                        The terms set out herein shall apply to both covered
                        contracts individually. The execution of one contract is
                        for the convenience of the parties, all terms shall
                        apply if there were separate contracts for each of the
                        contracts.

LIMITS & RETENTIONS:    The Reinsurer shall indemnify the Reinsured for all
                        ultimate net loss incurred by the Reinsured in excess
                        of 0% of the Subject Premium Income on the Covered
                        Contract subject to a maximum of 100% of the Subject
                        Premium Income on the Covered Contract.

CEDED PREMIUM &
CEDING COMMISSION:      The Reinsurance Premium shall be equal to 100% of the
                        Subject Premium Income on the Covered Contract, subject
                        to a maximum of $13,956,000 for Covered Contract 1 and
                        $4,544,000 for Covered Contract 2. There shall be a
                        ceding commission of 30% of any Reinsurance Premium. The
                        Reinsurer shall pay such Ceding Commission to the
                        Company at the time of final settlement of the
                        losses hereunder or commutation.

COMMUTATION
PROVISIONS:             This Agreement may be commuted at any time if both
                        parties agree. If commuted or at the settlement of all
                        losses, the Reinsurer shall pay to the Reinsured the
                        balance of a notional experience account. The balance of
                        the experience account at the end of each calendar
                        quarter shall be:

                        90% of Reinsurance Premium paid, Less Reinsurer's margin
                        of 8.065% of Reinsurance Premium if commuted by December
                        31, 2003, 8.355% if not commuted by December 31, 2003.
                        Less paid Ultimate Net Loss Less paid Ceding Commission
                        Plus an interest credited quarterly on the average daily
                        balance at a rate of USD LIBOR less 100 bp.

OTHER WORDING:          1. Ultimate Net Loss shall mean the amounts paid,
                        payable or deducted from funds withheld by third parties
                        on behalf of the Reinsured under the Covered Business.

                        2. Right of offset to the fullest extent allowed by
                        applicable law and regulation.

                        3. Other conditions to be agreed.

<PAGE>

ACCEPTED HEREON:        100% by the Reinsurer

                        /s/ Robert Myron
                        -------------------------------------------
                        Robert Myron
                        Vice President
                        Select Reinsurance Ltd.

AND FOR PXRE Reinsurance Ltd.

                        By:                              /s/ Gerald L. Radke
                            --------------------------   -----------------------
                            Jeffrey L. Radke             Gerald L. Radke
                            President                    Chairman
                            PXRE Reinsurance Ltd.        PXRE Reinsurance Ltd.

<PAGE>

The Reinsurer's and Reinsured's Right of Commutation

This Agreement may be commuted at any calendar quarter end while coverage under
this contract is in effect by:

      a)    The Reinsured at its sole option should the balance of the
            Experience Account be positive by providing 60 days written notice
            to the Reinsurer; or

      b)    The Reinsurer at its sole option by providing 60 days written notice
            to the Reinsured; or

      c)    By mutual agreement of the Reinsured and the Reinsurer with each
            party agreeing to do so in writing with 60 days notice

Such Commutation shall constitute a full and final settlement of all obligations
and rights under this Agreement for both the Reinsured and the Reinsurer. The
Commutation shall be effective on the date the Commutation payment is made to
the Reinsured by the Reinsurer.

The Commutation Payment shall be calculated as follows:

      a.    the Reinsured and the Reinsurer shall jointly retain and compensate
            an Actuary who shall determine the present value, calculated at the
            rate of 7.25% per annum, of all incurred but unpaid (by the
            Reinsurer to the Reinsured) Ceded Ultimate Net Losses as of the
            Commutation Date, unless the Reinsured and the Reinsurer mutually
            agree on this amount, and as such the services of the Actuary shall
            not be required.

      b.    There shall be a final calculation of the Experience Account as of
            the Commutation Date utilizing 100% of the amount calculated in (a)
            above if elected to be commuted by the Reinsured, and 110% of the
            amount calculated in (a) above if elected to be commuted by the
            Reinsurer. The amount of Ceded Ultimate Net Losses utilized for such
            Final Calculation as calculated in (a) above, shall be payable to
            the Reinsured to the Reinsurer, subject to the limit of this
            Agreement.

      c.    If the balance of the Experience Account is positive after this
            Final Calculation, the Communtation Payment shall be equal to the
            positive amount. If the balance of the Experience Account is
            negative after this Final Calculation, no amount shall be payable by
            the Reinsurer to the Reinsured.

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