Document:

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                                                                   EXHIBIT 10.16

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as of
the 10th day of January, 2002 (the "Effective Date"), between HCC INSURANCE
HOLDINGS, INC. ("HCC" or the "Company"), and CRAIG J. KELBEL ("Executive"),
sometimes collectively referred to herein as the "Parties."

                                R E C I T A L S:

         WHEREAS, Executive is to be employed as an Executive Vice President;

         WHEREAS, it is the desire of the Board of Directors of HCC (the
"Board") to directly engage Executive as an officer of HCC and its Subsidiaries;

         WHEREAS, Executive is desirous of committing himself to serve HCC on
the terms herein provided; and

         WHEREAS, Executive has previously entered into an Employment Agreement
dated as of the 4th day of June, 1999 (the "1999 Agreement"), which such
agreement, having been made with HCC Benefits Corporation is to be terminated
hereby;

         NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the Parties agree as follows:

         1. TERM. Effective as of the Effective Date, the 1999 Agreement is
terminated in its entirety and the Company hereby agrees to employ Executive as
an Executive Vice President, and Executive hereby agrees to accept such
employment, on the terms and conditions set forth herein, for the period
commencing on the Effective Date and expiring as of 11:59 p.m. on December 31,
2005 (the "Basic Term") (unless sooner terminated as hereinafter set forth).

         2. DUTIES.

         (a) DUTIES AS EMPLOYEE OF THE COMPANY. Executive shall, subject to the
supervision of the President of the Company, act as an Executive Vice President
of HCC in the ordinary course of its business with all such powers with respect
to such management and control as may be reasonably incident to such
responsibilities. During normal business hours, Executive shall devote his full
time and attention to diligently attending to the business of the Company during
the Basic Term. During the Basic Term, Executive shall not directly or
indirectly render any services of a business, commercial, or professional nature
to any other person, firm, corporation, or organization, whether for
compensation or otherwise, without the prior written consent of the President of
HCC. However, Executive shall have the right to engage in such activities as may
be appropriate in order to manage his personal investments so long as such
activities do not materially interfere or conflict with the performance of his
duties to the Company hereunder. The conduct of such activity shall not be
deemed to materially interfere or conflict with Executive's performance of

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his duties until Executive has been notified in writing thereof and given a
reasonable period in which to cure the same.

            (b) OTHER DUTIES. If elected, Executive agrees to serve as a member
of such managerial Committees of HCC and of any of its Subsidiaries and in one
or more executive offices of any of HCC's Subsidiaries, provided Executive is
indemnified for serving in any and all such capacities in a manner acceptable to
the Company and Executive. If elected, Executive agrees that he shall not be
entitled to receive any compensation for serving as a director of HCC, or in any
capacities of HCC's Subsidiaries other than the compensation to be paid to
Executive by the Company pursuant to this Agreement.

         3. COMPENSATION AND RELATED MATTERS.

            (a) BASE SALARY. Executive shall receive a base salary paid by the
Company as follows: $425,000 for 2002; $450,000 for 2003; $475,000 for 2004; and
$500,000 for 2005 to be paid in substantially equal monthly installments. For
purposes of this Agreement, "Base Salary" shall mean the Executive's initial
base salary and, as increased, the increased base salary.

            (b) BONUS PAYMENTS. Pursuant to the 1999 Agreement, Executive was to
receive payments of $100,000 in each of 2002 and 2003. Executive will be paid
$200,000 on January 2, 2002 in full settlement of such payments. In addition,
Executive shall be entitled to receive a bonus in the amount of $10,000 for each
Subsidiary (defined below) which achieves on an annual basis pre-tax net
earnings equal to the approved budget for such Subsidiary. In addition,
Executive shall be entitled to an additional bonus of $50,000 if the total on an
annual basis for all of such Subsidiaries' pre-tax net earnings exceeds, in the
aggregate, the budget for such Subsidiaries. For purposes of this Agreement,
Subsidiary shall mean HCC Employee Benefits; Rattner McKenzie Ltd.; HCC
Benefits; PIA, ASU and LDG Re (run off only).

            (c) OPTIONS. Executive shall receive options to acquire 100,000
shares of HCC Common Stock. Such options shall become vested in four equal
installments of 25,000 shares commencing January 1, 2003, and on each January 1
thereafter. The option shall terminate on December 31, 2007. The option grant
price shall be determined in accordance with the Company's Stock Option Plan on
the date of grant which shall be no later than January 30, 2002.

            (d) EXPENSES. During the Basic Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by him (in
accordance with the policies and procedures established by the Board for the
Company's senior executive officers) in performing services hereunder, provided
that Executive properly accounts therefor in accordance with Company policy.

            (e) OTHER BENEFITS. Executive shall be entitled to participate in or
receive benefits under any compensation, employee benefit plan, or other
arrangement made generally available by the Company now or in the future to its
senior executive officers, subject to and on a basis consistent with the terms,
conditions, and overall administration of such plan or arrangement. Nothing paid
to Executive under any plan or arrangement presently in effect or made available
in the future shall be deemed to be in lieu of the Base Salary payable to
Executive pursuant to Paragraph (a) of this

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Section. The Company shall not make any changes in any employee benefit plans or
other arrangements in effect on the date hereof or subsequently in effect in
which Executive currently or in the future participates (including, without
limitation, each pension and retirement plan, supplemental pension and
retirement plan, savings and profit sharing plan, stock or unit ownership plan,
stock or unit purchase plan, stock or unit option plan, life insurance plan,
medical insurance plan, disability plan, dental plan, health and accident plan,
or any other similar plan or arrangement) that would adversely affect
Executive's rights or benefits thereunder, unless such change occurs pursuant to
a program applicable generally to executives of the Company and does not result
in a proportionately greater reduction in the rights of or benefits to Executive
as compared with any other executive of the Company. Executive shall be entitled
to be reimbursed for temporary housing through February 15, 2002, in connection
with Executive's relocation to Houston, Texas.

            (f) VACATIONS. Executive shall be entitled to twenty (20) paid
vacation days per year during the Basic Term. There shall be no carryover of
unused vacation from year to year. For purposes of this Paragraph, weekends
shall not count as vacation days, and Executive shall also be entitled to all
paid holidays given by the Company to its senior executive officers.

            (g) PERQUISITES. Executive shall be entitled to receive the
perquisites and fringe benefits provided generally to an executive officer of
HCC in accordance with any practice established by the Board. Notwithstanding,
and in addition to any perquisites to which Executive is entitled pursuant to
the preceding sentence, Executive shall: (1) have a $1,000 per month automobile
allowance to be utilized by Executive to pay expenses related to Executive's use
of his automobile, including gasoline, insurance, and maintenance; (2) be
reimbursed for all dues at the Lochinvar Country Club; and (3) be entitled to
travel on first-class if traveling domestically and business class if traveling
internationally, and shall be required to use upgraded tickets if available.

            (h) PRORATION. Any payments or benefits payable to Executive
hereunder in respect of any calendar year during which Executive is employed by
the Company for less than the entire year, unless otherwise provided in the
applicable plan or arrangement, shall be prorated in accordance with the number
of days in such calendar year during which he is so employed. Notwithstanding
the foregoing, any payments pursuant to Paragraph 4(c) or 4(d) this Agreement
shall not be subject to proration.

            (i) CONSULTING. Effective January 1, 2006, unless this Agreement has
been renewed, Executive shall become a consultant to the Company for the period
(the "Consulting Period") beginning on such date and ending on December 31, of
such year equal to the number of full years Executive was a full-time employee
of the Company commencing January 1, 2002. So, as an example, if Executive
worked until December 31, 2005 (or four full years), the Consulting Period would
be four years. Executive shall receive an annual consulting fee of $50,000 and
be required to perform 250 hours of consulting services (the "Consulting
Services"). The Consulting Services to be provided shall be commensurate with
Executive's training, background, experience and prior duties with the Company.
Executive agrees to make himself reasonably available to provide such Consulting
Services during the Consulting Period; provided, however, the Company agrees
that it shall provide reasonable advance notice to Executive of its expected
consulting needs and any request for Consulting Services hereunder shall not
unreasonably interfere with Executive's other business activities and personal
affairs, as determined in good faith by Executive. In addition,

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Executive shall not be required to perform any requested Consulting Services
which, in Executive's good faith opinion, would cause Executive to breach any
fiduciary duty or contractual obligation Executive may have to another employer.
Executive's travel time shall constitute hours of Consulting Services for
purposes of this Paragraph. The Parties contemplate that, when appropriate, the
Consulting Services shall be performed at Executive's office, residence or at
the Company's executive offices in Houston, Texas and may be performed at such
other locations only as they may mutually agree upon. Executive shall be
promptly reimbursed for all travel and other expenses reasonably incurred by
Executive in rendering the Consulting Services. Other than the consulting fee,
Executive shall be entitled to no further benefits from the Company. Executive
shall not be entitled to consult if he is no longer employed by the Company at
the time the Consulting Period is to begin, unless Executive has been terminated
without Cause. In the event Executive dies or becomes disabled during the
Consulting Period, Executive or his legal representative shall continue to
receive the annual consulting fee for the remainder of the Consulting Period.
The Company's obligation to retain Executive as a Consultant shall immediately
terminate if Executive violates the non-competition, non-solicitation or
confidentiality provisions of this Agreement, or if after such non-competition
period, Executive competes during the Consulting Period

         4. TERMINATION.

            (a) DEFINITIONS.

                  (1) "CAUSE" shall mean:

                           (i) Material dishonesty which is not the result of an
         inadvertent or innocent mistake of Executive with respect to the
         Company or any of its Subsidiaries;

                           (ii) Willful misfeasance or nonfeasance of duty by
         Executive intended to injure or having the effect of injuring in some
         material fashion the reputation, business, or business relationships of
         the Company or any of its Subsidiaries or any of their respective
         officers, directors, or employees;

                           (iii) Material violation by Executive of any material
         term of this Agreement;

                           (iv) Conviction of Executive of any felony, any crime
         involving moral turpitude or any crime other than a vehicular offense
         which could reflect in some material fashion unfavorably upon the
         Company or any of its Subsidiaries.

         Executive may not be terminated for Cause unless and until there has
         been delivered to Executive written notice from the Board supplying the
         particulars of his acts or omissions that the Board believes constitute
         Cause, a reasonable period of time (not less than 30 days) has been
         given to Executive after such notice to either cure the same or to meet
         with the Board with his attorney if so desired by Executive, and
         following which the Board furnishes to Executive a written resolution
         specifying in detail its findings that Executive has been terminated
         for Cause as of the date set forth in the notice to Executive.

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                  (2) A "CHANGE OF CONTROL" shall be deemed to have occurred if:

                           (i) Any "person" or "group" (within the meaning of
         Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
         other than a trustee or other fiduciary holding securities under an
         employee benefit plan of the Company becomes the "beneficial owner" (as
         defined in Rule 13d-3 under the Securities Exchange Act of 1934),
         directly or indirectly, of 50% or more of the Company's then
         outstanding voting common stock; or

                           (ii) The shareholders of the Company approve a merger
         or consolidation of the Company with any other corporation, other than
         a merger or consolidation (a) in which a majority of the directors of
         the surviving entity were directors of the Company prior to such
         consolidation or merger, or (b) which would result in the voting
         securities of the Company outstanding immediately prior thereto
         continuing to represent (either by remaining outstanding or by being
         changed into voting securities of the surviving entity) more than 50%
         of the combined voting power of the voting securities of the surviving
         entity outstanding immediately after such merger or consolidation; or

                           (iii) The shareholders approve a plan of complete
         liquidation of the Company or an agreement for the sale or disposition
         by the Company of all or substantially all of the Company's assets.

                  (3) A "DISABILITY" shall mean the absence of Executive from
         Executive's duties with the Company on a full-time basis for 180
         consecutive days, or 180 days in a 365-day period, as a result of
         incapacity due to mental or physical illness which results in the
         Executive being unable to perform the essential functions of his
         position, with or without reasonable accommodation.

                  (4) A "GOOD REASON" shall mean any of the following (without
         Executive's express written consent):

                           (i) Within six (6) months following a Change of
         Control, there is a material alteration in the nature or status of
         Executive's duties or responsibilities, or the assignment of duties or
         responsibilities inconsistent with, Executive's status, duties or
         responsibilities (a "Material Alteration");

                           (ii) A failure by the Company to continue in effect
         any employee benefit plan in which Executive was participating, or the
         taking of any action by the Company that would adversely affect
         Executive's participation in, or materially reduce Executive's benefits
         under, any such employee benefit plan, unless such failure or such
         taking of any action adversely affects the management of the Company
         generally;

                           (iii) Executive's relocation to any place, other than
         the executive offices as a result of the Company relocating its
         executive offices, exceeding a distance of fifty (50) miles from the
         Company's current executive office located in Houston, Texas, except
         for reasonably required travel by Executive on the Company's business;

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                           (iv) Any material breach by the Company of any
         material provision of this Agreement; or

                           (v) Any failure by the Company to obtain the
         assumption and performance of this Agreement by any successor (by
         merger, consolidation, or otherwise) or assign of the Company.

However, Good Reason shall exist with respect to an above specified matter only
if (i) such matter relates to subparagraphs (ii), (iii), (iv) or (v) hereof, and
it is not corrected by the Company within thirty (30) days after the Company's
receipt of written notice of such matter from Executive or (ii) if there is a
Material Alteration and it relates to subparagraph (i) hereof, such matter is
not corrected after receipt of written notice by the later of thirty (30)days
following receipt of the written notice, or six months following the Change of
Control; and in no event shall a termination by Executive occurring more than
the later of ninety (90) days following the date of the event described above or
sixty (60) days after the end of the six months following a Change of Control be
a termination for Good Reason due to such event.

                  (5) "TERMINATION DATE" shall mean the date Executive
terminates or is terminated for any reason pursuant to this Agreement.

            (b) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON: BENEFITS. In the
event there is a termination by the Company without Cause, or if Executive
terminates for Good Reason (a "Termination Event"), this Agreement shall
terminate and Executive shall be entitled to the following severance benefits:

                  (1) For the remainder of the Basic Term after the Termination
         Date, Base Salary (as defined in Paragraph 3(a)), at the rate in effect
         immediately prior to the Termination Event, payable in a lump sum,
         appropriately discounted to take into consideration the lump sum early
         payment;

                  (2) If there is a Termination Event, any stock options ("Stock
         Awards") which Executive has received under this Agreement or otherwise
         shall vest immediately and all such Stock Awards shall be exercisable
         for thirty (30) days from the date of such Termination Event or the
         remainder of their term, whichever is less;

                  (3) To the extent not theretofore paid or provided, the
         Company shall timely pay or provide to Executive any other amounts or
         benefits required to be paid or provided or which Executive is eligible
         to receive under any plan, program, policy or practice, or contract or
         agreement of the Company and its affiliated companies for the period of
         time equal to the lesser of six months following Executive's
         Termination or the date Executive begins new employment. The Company,
         at its sole expense, shall continue to provide (through its own plan
         and/or individual policies) Executive (and Executive's dependents) with
         health benefits no less favorable than the group health plan benefits
         provided generally during such period to the senior executive officers
         of the Company or any

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         affiliated company (to the extent any such coverage or benefits are
         taxable to Executive by reason of being provided under a self-insured
         health plan of the Company or an affiliate, the Company shall make
         Executive "whole" for the same on an after-tax basis), provided,
         however, such coverage shall be secondary to any group health plan
         coverage Executive (or his dependents) receive from another employer,
         (such other amounts and benefits shall be hereinafter referred to as
         the "Other Benefits");

                  (4) All accrued compensation and unreimbursed expenses through
         the Termination Date. Such amounts shall be paid to Executive in a lump
         sum in cash within thirty (30) days after the Termination Date; and

                  (5) Executive shall be free to accept other employment during
         such period, and there shall be no offset of any employment
         compensation earned by Executive in such other employment during such
         period against payments due Executive under this Paragraph (4), and
         there shall be no offset in any compensation received from such other
         employment against the Base Salary set forth above.

            (c) TERMINATION IN EVENT OF DEATH: BENEFITS. If Executive's
employment is terminated by reason of Executive's death during the Basic Term,
this Agreement shall terminate without further obligation to Executive's legal
representatives under this Agreement, other than for payment of all accrued
compensation, unreimbursed expenses, the timely payment or provision of Other
Benefits through the date of death. Such amounts shall be paid to Executive's
estate or beneficiary, as applicable, in a lump sum in cash within ninety (90)
days after the date of death. In addition, Executive's legal representatives
shall receive, at the same time as if Executive were still an employee,
Executive's Base Salary for the lesser of one (1) year or the date this
Agreement would otherwise have terminated. With respect to the provision of
Other Benefits, the term Other Benefits as used in this Paragraph 4(c) shall
include, without limitation, and Executive's estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the most favorable benefits
provided by the Company to the estates and beneficiaries of other executive
level employees of the Company under such plans, programs, practices, and
policies relating to death benefits, if any, as in effect with respect to other
executives and their beneficiaries at any time during the 120-day period
immediately preceding the date of death. Additionally, all Stock Awards shall be
vested immediately and shall be exercisable for the later of one year after the
date of such vesting or the remaining term of such option.

            (d) TERMINATION IN EVENT OF DISABILITY: BENEFITS. If Executive's
employment is terminated by reason of Executive's Disability during the Basic
Term, this Agreement shall terminate but the Company shall continue to pay the
Base Salary for a period of three (3) months and thereafter shall make such
additional payment for the Term so that the after tax effect of Executive's
compensation is the same as before the Disability. Executive shall, not be
entitled to any subsequent cash or stock bonuses. In addition, all outstanding
Stock Awards shall vest immediately upon such termination due to Disability and
shall be exercisable for one year after the date of such vesting. Executive's
Benefits shall continue to the end of the Basic Term.

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            (e) VOLUNTARY TERMINATION BY EMPLOYEE AND TERMINATION FOR CAUSE:
BENEFITS. Executive may terminate his employment with the Company without Good
Reason by giving written notice of his intent and stating an effective
Termination Date at least ninety (90) days after the date of such notice;
provided, however, that the Company may accelerate such effective date by paying
Executive through the proposed Termination Date and also vesting awards that
would have vested but for this acceleration of the proposed Termination Date.
Upon such a termination by Executive or upon termination for Cause by the
Company, this Agreement shall terminate and the Company shall pay to Executive
all accrued compensation, unreimbursed expenses and the Other Benefits through
the Termination Date. Such amounts shall be paid to Executive in a lump sum in
cash within thirty (30) days after the date of termination. In addition, all
unvested stock options shall terminate and all vested options will terminate
fifteen (15) days after the Termination Date.

            (f) DIRECTOR POSITIONS. Executive agrees that upon termination of
employment, for any reason, at the request of the Chairman of the Board,
Executive will immediately tender his resignation from any and all Board
positions held with the Company and/or any of its Subsidiaries and affiliates.

         5. NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY. Executive
recognizes and agrees that the benefit of not being employed at-will, is
provided in consideration for, among other things, the agreements contained in
this Section, as well as the Stock Awards granted to Executive pursuant to this
Agreement. The Company agrees that while employed pursuant to this Agreement,
Executive will be provided with confidential information of Company; specialized
training on how to perform his duties; and contact with the Company's customers
and potential customers.

            (a) NON-COMPETITION DURING EMPLOYMENT. Executive agrees that during
the Basic Term, he will not compete with the Company by engaging in the
conception, design, development, production, marketing, or servicing of any
product or service that is substantially similar to the products or services
which the Company provides, and that he will not work for, in any capacity,
assist, or become affiliated with as an owner, partner, etc., either directly or
indirectly, any individual or business which offers or performs services, or
offers or provides products substantially similar to the services and products
provided by Company, provided, Executive shall not be prevented from owning no
more than 2% of any Company whose stock is publicly traded.

            (b) CONFLICTS OF INTEREST. Executive agrees that during the Basic
Term, he will not engage, either directly or indirectly, in any activity (a
"Conflict of Interest") which might adversely affect the Company or its
affiliates, including ownership of a material interest in any supplier,
contractor, distributor, subcontractor, customer or other entity with which the
Company does business or accepting any material payment, service, loan, gift,
trip, entertainment, or other favor from a supplier, contractor, distributor,
subcontractor, customer or other entity with which the Company does business,
and that Executive will promptly inform the President of the Company as to each
offer received by Executive to engage in any such activity. Executive further
agrees to disclose to the Company any other facts of which Executive becomes
aware which in Executive's good faith judgment could reasonably be expected to
involve or give rise to a Conflict of Interest or potential Conflict of
Interest.

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            (c) NON-COMPETITION AFTER TERMINATION. Executive agrees that
Executive shall not, at any time during the period of two (2) years after the
later of termination of the Basic Term for any reason, within any of the markets
in which the Company has sold products or services or formulated a plan to sell
products or services into a market during the last twelve (12) months of
Executive's employ or which the Company enters into within three (3) months
thereafter, engage in or contribute Executive's knowledge to any work which is
competitive with or similar to a product, process, apparatus, service, or
development on which Executive worked or with respect to which Executive had
access to Confidential Information while employed by the Company. Following the
expiration of said two (2) year period, Executive shall continue to be obligated
under the Confidential Information Paragraph of this Agreement not to use or to
disclose Confidential Information of the Company so long as it shall not be
publicly available. It is understood that the geographical area set forth in
this covenant is divisible so that if this clause is invalid or unenforceable in
an included geographic area, that area is severable and the clause remains in
effect for the remaining included geographic areas in which the clause is valid.

            (d) CONFIDENTIAL INFORMATION. Executive further agrees that he will
not, except as the Company may otherwise consent or direct in writing, reveal or
disclose, sell, use, lecture upon, publish or otherwise disclose to any third
party any Confidential Information or proprietary information of the Company, or
authorize anyone else to do these things at any time either during or subsequent
to his employment with the Company. This Section shall continue in full force
and effect after termination of Executive's employment and after the termination
of this Agreement. Executive's obligations under this Paragraph with respect to
any specific Confidential Information and proprietary information shall cease
when that specific portion of the Confidential Information and proprietary
information becomes publicly known, in its entirety and without combining
portions of such information obtained separately. It is understood that such
Confidential Information and proprietary information of the Company include
matters that Executive conceives or develops, as well as matters Executive
learns from other employees of Company. Confidential Information is defined to
include information: (1) disclosed to or known by the Executive as a consequence
of or through his employment with the Company; (2) not generally known outside
the Company; and (3) which relates to any aspect of the Company or its business,
finances, operation plans, budgets, research, or strategic development.
"Confidential Information" includes, but is not limited to the Company's trade
secrets, proprietary information, financial documents, long range plans,
customer lists, employer compensation, marketing strategy, data bases, costing
data, computer software developed by the Company, investments made by the
Company, and any information provided to the Company by a third party under
restrictions against disclosure or use by the Company or others.

            (e) RETURN OF DOCUMENTS, EQUIPMENT, ETC. All writings, records, and
other documents and things comprising, containing, describing, discussing,
explaining, or evidencing any Confidential Information, and all equipment,
components, parts, tools, and the like in Executive's custody or possession that
have been obtained or prepared in the course of Executive's employment with the
Company shall be the exclusive property of the Company, shall not be copied
and/or removed from the premises of the Company, except in pursuit of the
business of the Company, and shall be delivered to the Company, without
Executive retaining any copies, upon notification of the termination of
Executive's employment or at any other time requested by the Company. The

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Company shall have the right to retain, access, and inspect all property of
Executive of any kind in the office, work area, and on the premises of the
Company upon termination of Executive's employment and at any time during
employment by the Company to ensure compliance with the terms of this Agreement.

            (f) REAFFIRM OBLIGATIONS. Upon termination of his employment with
the Company, Executive, if requested by Company, shall reaffirm in writing
Executive's recognition of the importance of maintaining the confidentiality of
the Company's Confidential Information and proprietary information, and reaffirm
any other obligations set forth in this Agreement.

            (g) PRIOR DISCLOSURE. Executive represents and warrants that he has
not used or disclosed any Confidential Information he may have obtained from
Company prior to signing this Agreement, in any way inconsistent with the
provisions of this Agreement.

            (h) CONFIDENTIAL INFORMATION OF PRIOR COMPANIES. Executive will not
disclose or use during the period of his employment with the Company any
proprietary or Confidential Information or Copyright Works which Executive may
have acquired because of employment with an employer other than the Company or
acquired from any other third party, whether such information is in Executive's
memory or embodied in a writing or other physical form.

            (i) BREACH. Executive agrees that any breach of Paragraphs 5(a) or
(c) above cannot be remedied solely by money damages, and that in addition to
any other remedies Company may have, Company is entitled to obtain injunctive
relief against Executive. Nothing herein, however, shall be construed as
limiting Company's right to pursue any other available remedy at law or in
equity, including recovery of damages and termination of this Agreement and/or
any payments that may be due pursuant to this Agreement.

            (j) RIGHT TO ENTER AGREEMENT. Executive represents and covenants to
Company that he has full power and authority to enter into this Agreement and
that the execution of this Agreement will not breach or constitute a default of
any other agreement or contract to which he is a party or by which he is bound.

            (k) ENFORCEABILITY. The agreements contained in this Section 5 are
independent of the other agreements contained herein. Accordingly, failure of
the Company to comply with any of its obligations outside of this Paragraph do
not excuse Executive from complying with the agreements contained herein.

            (l) SURVIVABILITY. The agreements contained in Paragraphs 5(c)-(d)
shall survive the termination of this Agreement for any reason.

         6. ASSIGNMENT. This Agreement cannot be assigned by Executive. The
Company may assign this Agreement only to a successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and assets of the Company provided such
successor expressly agrees in writing reasonably satisfactory to Executive to
assume and perform this Agreement in the same manner and to the same extent that
the Company would be

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required to perform it if no such succession and assignment had taken place.
Failure of the Company to obtain such written agreement prior to the
effectiveness of any such succession shall be a material breach of this
Agreement.

         7. BINDING AGREEMENT. Executive understands that his obligations under
this Agreement are binding upon Executive's heirs, successors, personal
representatives, and legal representatives.

         8. NOTICES. All notices pursuant to this Agreement shall be in writing
and sent certified mail, return receipt requested, addressed as set forth below,
or by delivering the same in person to such party, or by transmission by
facsimile to the number set forth below (which shall not constitute notice).
Notice deposited in the United States Mail, mailed in the manner described
hereinabove, shall be effective upon deposit. Notice given in any other manner
shall be effective only if and when received:

            If to Executive:             Craig J. Kelbel

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

                                         -----------------------------
                                         Fax:
                                             -------------------------

            If to Company:               HCC Insurance Holdings, Inc.
                                         13403 Northwest Freeway
                                         Houston, Texas  77040
                                         Attn: General Counsel
                                         Fax: (713) 744-9648

            with a copy (which shall     Arthur S. Berner, Esq.
            not constitute notice) to:   Haynes and Boone, LLP
                                         1000 Louisiana Street,
                                         Suite 4300
                                         Houston, Texas 77002-5012
                                         Fax: (713) 236-5652

         9. WAIVER. No waiver by either party to this Agreement of any right to
enforce any term or condition of this Agreement, or of any breach hereof, shall
be deemed a waiver of such right in the future or of any other right or remedy
available under this Agreement.

         10. SEVERABILITY. If any provision of this Agreement is determined to
be void, invalid, unenforceable, or against public policy, such provisions shall
be deemed severable from the Agreement, and the remaining provisions of the
Agreement will remain unaffected and in full force and effect.

         11. ENTIRE AGREEMENT. The terms and provisions contained herein shall
constitute the entire agreement between the parties with respect to Executive's
employment with Company during the time period covered by this Agreement. This
Agreement replaces and supersedes any and all

                                       11
<PAGE>

existing Agreements entered into between Executive and the Company relating
generally to the same subject matter, if any, and shall be binding upon
Executive's heirs, executors, administrators, or other legal representatives or
assigns.

         12. MODIFICATION OF AGREEMENT. This Agreement may not be changed or
modified or released or discharged or abandoned or otherwise terminated, in
whole or in part, except by an instrument in writing signed by the Executive and
an officer or other authorized executive of Company.

         13. UNDERSTAND AGREEMENT. Executive represents and warrants that he has
read and understood each and every provision of this Agreement, and Executive
understands that he has the right to obtain advice from legal counsel of choice,
if necessary and desired, in order to interpret any and all provisions of this
Agreement, and that Executive has freely and voluntarily entered into this
Agreement.

         14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.

         15. JURISDICTION AND VENUE. With respect to any litigation regarding
this Agreement, Executive agrees to venue in the state or federal courts in
Harris County, Texas, and agrees to waive and does hereby waive any defenses
and/or arguments based upon improper venue and/or lack of personal jurisdiction.
By entering into this Agreement, Executive agrees to personal jurisdiction in
the state and federal courts in Harris County, Texas.

                [REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]

                                       12
<PAGE>

         IN WITNESS WHEREOF, the Parties have executed this Agreement in
multiple copies, effective as of the date first written above.

EXECUTIVE                                     COMPANY

                                              HCC INSURANCE HOLDINGS, INC.

     /s/ Craig J. Kelbel                      By:   /s/ John N. Molbeck, Jr.
--------------------------------------           -------------------------------
CRAIG J. KELBEL                                  JOHN N. MOLBECK, JR.,
                                                 President

Dated:   January 28, 2002                     Dated:    January 21, 2002
      --------------------------------              ----------------------------

                    [SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]

                                       13<PAGE>

                                                                   EXHIBIT 10.17

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT ("Agreement") is entered into effective as of
the 3rd day of June, 2002 (the "Effective Date"), between HCC INSURANCE
HOLDINGS, INC. ("HCC" or the "Company"), and MIKE SCHELL ("Executive"),
sometimes collectively referred to herein as the "Parties."

                                R E C I T A L S:

         WHEREAS, Executive is to be employed as Executive Vice President of HCC
and President, Chief Executive Officer and a Director of Houston Casualty
Company ("HC"); and, as an integral part of its management who participates in
the decision-making process relative to short and long-term planning and policy
for HCC and HC, Executive will serve on the Company's Executive Management Group
and Senior Management Group; and

         WHEREAS, it is the desire of the Boards of Directors of HCC and HC (the
"Boards") to directly engage Executive as an officer of HCC and HC; and

         WHEREAS, Executive is desirous of committing himself to serve HCC and
the Subsidiaries on the terms herein provided.

         NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements set forth below, the Parties agree as follows:

         1. TERM. Effective as of the Effective Date, the Company hereby agrees
to employ Executive as Executive Vice President of HCC and President and Chief
Executive Officer of HC, and Executive hereby agrees to accept such employment,
on the terms and conditions set forth herein, for the period commencing on the
Effective Date and expiring as of 11:59 p.m. on June 3rd, 2007 (the "Basic
Term") (unless sooner terminated as hereinafter set forth).

         2. DUTIES.

            (a) DUTIES AS EMPLOYEE OF THE COMPANY. Executive shall, subject to
the supervision of the President of the Company, or such other person as the
Board may direct, act as Executive Vice President of HCC and as President and
Chief Executive Officer of HC in the ordinary course of their business with all
such powers with respect to such management and control as may be reasonably
incident to such responsibilities. During normal business hours, Executive shall
devote his full time and attention to diligently attending to the business of
the Company and HC during the Basic Term. During the Basic Term, Executive shall
not directly or indirectly render any services of a business, commercial, or
professional nature to any other person, firm, corporation, or organization,
whether for compensation or otherwise, without the prior written consent of the
President of HCC. However, Executive shall have the right to engage in such
activities as may be appropriate in order to manage his personal investments so
long as such activities do not materially interfere or conflict with the
performance of his duties to the Company hereunder. The conduct of

<PAGE>

such activity shall not be deemed to materially interfere or conflict with
Executive's performance of his duties until Executive has been notified in
writing thereof and given a reasonable period in which to cure the same.

            (b) OTHER DUTIES. If requested, Executive agrees to serve as
President or other senior executive officer of U.S. Specialty Insurance Company
("USSIC"), HCC Life Insurance Company ("HCCL") and Avemco Insurance Company
("AIC") (collectively, HC, USSIC, HCCL and AIC are referred to herein as the
"Subsidiaries") and as a member of such management or operating committees of
HCC and any of the Subsidiaries, provided Executive is indemnified for serving
in any and all such capacities in a manner acceptable to the Company and
Executive. If elected, Executive agrees that he shall not be entitled to receive
any compensation for serving as a director of HCC or any of the Subsidiaries
other than the compensation to be paid to Executive by the Company pursuant to
this Agreement.

         3. COMPENSATION AND RELATED MATTERS.

            (a) BASE SALARY. Executive shall receive a base salary paid by the
Company as follows: $450,000 for the Basic Term in substantially equal monthly
installments. The base salary shall be increased by $25,000 on each anniversary
of the Effective Date during the Basic Term. For purposes of this Agreement,
"Base Salary" shall mean the Executive's initial base salary or, if increased,
then the increased base salary.

            (b) BONUS PAYMENTS AND OPTIONS.

                  (i) Each calendar year, Executive shall receive a bonus of
         $12,500 for each of the four Subsidiaries that has pre-tax net income
         exceeding the approved budget, plus an additional $50,000 if all of the
         Subsidiaries exceed their approved budgets. Any deficits caused by a
         Subsidiary failing to meet the pre-tax net income budget are carried
         forward for the next year, for that specific Subsidiary.

                  (ii) Executive shall receive options to acquire 200,000 shares
         of HCC Common Stock pursuant to a standard option agreement issued
         under HCC's stock option plans. Such options shall vest in five (5)
         equal installments beginning on the first anniversary of the date of
         grant and will expire on the sixth (6th) anniversary of the date of
         grant.

            (c) EXPENSES. During the Basic Term, Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by him (in
accordance with the policies and procedures established by the Board for the
Company's senior executive officers) in performing services hereunder, provided
that Executive properly accounts therefor in accordance with Company policy.

            (d) OTHER BENEFITS. Executive shall be entitled to participate in or
receive benefits under any compensation, employee benefit plan, or other
arrangement made generally available by the Company now or in the future to its
senior executive officers, subject to and on a basis consistent with the terms,
conditions, and overall administration of such plan or arrangement;

                                        2
<PAGE>

provided, however, Executive shall receive a term life insurance policy in the
amount of $1,000,000 and an AD&D insurance policy under the Company's standard
terms, also in the amount of $1,000,000. Nothing paid to Executive under any
plan or arrangement presently in effect or made available in the future shall be
deemed to be in lieu of the Base Salary payable to Executive pursuant to
Paragraph (a) of this Section. The Company shall not make any changes in any
employee benefit plans or other arrangements in effect on the date hereof or
subsequently in effect in which Executive currently or in the future
participates (including, without limitation, each pension and retirement plan,
supplemental pension and retirement plan, savings and profit sharing plan, stock
or unit ownership plan, stock or unit purchase plan, stock or unit option plan,
life insurance plan, medical insurance plan, disability plan, dental plan,
health and accident plan, or any other similar plan or arrangement) that would
adversely affect Executive's rights or benefits thereunder, unless such change
occurs pursuant to a program applicable to executives of the Company and does
not result in a proportionately greater reduction in the rights of or benefits
to Executive as compared with other executives of the Company.

            (e) VACATIONS. Executive shall be entitled to twenty (20) paid
vacation days per year during the Basic Term. There shall be no carryover of
unused vacation from year to year. For purposes of this Paragraph, weekends
shall not count as vacation days, and Executive shall also be entitled to all
paid holidays given by the Company to its senior executive officers.

            (f) PERQUISITES. Executive shall be entitled to receive the
perquisites and fringe benefits provided generally to an executive officer of
HCC in accordance with any practice established by the Board. Notwithstanding,
and in addition to, any perquisites to which Executive is entitled pursuant to
the preceding sentence, Executive shall: (i) have a car allowance of $1,000 per
month; (ii) be allowed to travel on business utilizing first class domestic
passage and business class international passage using Company mileage upgrades
(and, upon approval of the Chief Executive Officer, shall be entitled to utilize
the corporate aircraft); and (iii) receive the right to use one corporate club
membership with annual dues to be paid by HCC.

            (g) PRORATION. Any payments or benefits payable to Executive
hereunder in respect of any calendar year during which Executive is employed by
the Company for less than the entire year, unless otherwise provided in the
applicable plan or arrangement, shall be prorated in accordance with the number
of days in such calendar year during which he is so employed. Notwithstanding
the foregoing, any payments pursuant to Paragraph 4(c) or 4(d) this Agreement
shall not be subject to proration.

         4. TERMINATION.

            (a) DEFINITIONS.

                  (1) "CAUSE" shall mean:

                           (i) Material dishonesty which is not the result of an
         inadvertent or innocent mistake of Executive with respect to the
         Company or any of its subsidiaries;

                                        3
<PAGE>

                           (ii) Willful misfeasance or nonfeasance of duty by
         Executive intended to injure or having the effect of injuring in some
         material fashion the reputation, business, or business relationships of
         the Company or any of its subsidiaries or any of their respective
         officers, directors, or employees;

                           (iii) Material violation by Executive of any material
         term of this Agreement;

                           (iv) Conviction of Executive of any felony, any crime
         involving moral turpitude or any crime other than a vehicular offense
         which could reflect in some material fashion unfavorably upon the
         Company or any of its subsidiaries.

         Executive may not be terminated for Cause unless and until there has
         been delivered to Executive written notice from the Board supplying the
         particulars of his acts or omissions that the Board believes constitute
         Cause, a reasonable period of time (not less than 30 days) has been
         given to Executive after such notice to either cure the same or to meet
         with the Board with his attorney if so desired by Executive, and
         following which the Board furnishes to Executive a written resolution
         specifying in detail its findings that Executive has been terminated
         for Cause as of the date set forth in the notice to Executive.

                  (2) A "CHANGE OF CONTROL" shall be deemed to have occurred if:

                           (i) Any "person" or "group" (within the meaning of
         Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
         other than a trustee or other fiduciary holding securities under an
         employee benefit plan of the Company becomes the "beneficial owner" (as
         defined in Rule 13d-3 under the Securities Exchange Act of 1934),
         directly or indirectly, of 50% or more of the Company's then
         outstanding voting common stock; or

                           (ii) The shareholders of the Company approve a merger
         or consolidation of the Company with any other corporation, other than
         a merger or consolidation (a) in which a majority of the directors of
         the surviving entity were directors of the Company prior to such
         consolidation or merger, or (b) which would result in the voting
         securities of the Company outstanding immediately prior thereto
         continuing to represent (either by remaining outstanding or by being
         changed into voting securities of the surviving entity) more than 50%
         of the combined voting power of the voting securities of the surviving
         entity outstanding immediately after such merger or consolidation; or

                           (iii) The shareholders approve a plan of complete
         liquidation of the Company or an agreement for the sale or disposition
         by the Company of all or substantially all of the Company's assets.

                  (3) A "DISABILITY" shall mean the absence of Executive from
Executive's duties with the Company on a full-time basis for 180 consecutive
days, or 180 days in a 365-day period, as a result of incapacity due to mental
or physical illness which results in the Executive being unable to perform the
essential functions of his position, with or without reasonable accommodation.

                                        4

<PAGE>

                  (4) A "GOOD REASON" shall mean any of the following (without
Executive's express written consent):

                           (i) Within six (6) months following a Change of
         Control, there is a material adverse alteration in the Executive's
         compensation and, in addition, a material alteration in the nature or
         status of Executive's duties or responsibilities, or the assignment of
         duties or responsibilities inconsistent with, Executive's status,
         duties or responsibilities (a "Material Alteration");

                           (ii) The taking of any action by the Company that
         would adversely affect Executive's participation in, or materially
         reduce Executive's benefits under, any such employee benefit plan,
         unless such failure or such taking of any action adversely affects the
         management of the Company generally;

                           (iii) Executive's involuntary relocation to any
         place, other than the executive offices as a result of the Company
         relocating its executive offices, exceeding a distance of fifty (50)
         miles from the Company's current executive office located in Houston,
         Texas, except for reasonably required travel by Executive on the
         Company's business;

                           (iv) Any material breach by the Company of any
         material provision of this Agreement; or

                           (v) Any failure by the Company to obtain the
         assumption and performance of this Agreement by any successor (by
         merger, consolidation, or otherwise) or assign of the Company.

However, Good Reason shall exist with respect to an above specified matter only
if (i) such matter relates to subparagraphs (ii), (iii), (iv) or (v) hereof, and
it is not corrected by the Company within thirty (30) days after the Company's
receipt of written notice of such matter from Executive or (ii) if there is a
Material Alteration and it relates to subparagraph (i) hereof, such matter is
not corrected after receipt of written notice by the later of thirty (30) days
following receipt of the written notice, or six months following the Change of
Control; and in no event shall a termination by Executive occurring more than
the later of ninety (90) days following the date of the event described above or
sixty (60) days after the end of the six months following a Change of Control be
a termination for Good Reason due to such event.

                  (5) "TERMINATION DATE" shall mean the date Executive
terminates or is terminated for any reason pursuant to this Agreement.

            (b) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON: BENEFITS. In the
event there is a termination by the Company without Cause, or if Executive
terminates for Good Reason (a "Termination Event"), this Agreement shall
terminate and Executive shall be entitled to the following severance benefits:

                  (1) For the remainder of the Basic Term after the Termination
Date, Base Salary (as defined in Paragraph 3(a)), at the rate in effect
immediately prior to the Termination

                                        5

<PAGE>

Event, payable in a lump sum, appropriately discounted to take into
consideration the lump sum early payment;

                  (2) If there is a Termination Event, any stock options ("Stock
Awards") which Executive has received under this Agreement or otherwise shall
vest immediately, provided, however, all such Stock Awards shall be exercisable
for ninety (90) days from the date of such Termination Event or the remainder of
their term, whichever is less;

                  (3) To the extent not theretofore paid or provided, the
Company shall timely pay or provide to Executive any other amounts or benefits
required to be paid or provided or which Executive is eligible to receive under
any plan, program, policy or practice, or contract or agreement of the Company
and its affiliated companies for the period of time equal to the lesser of six
months following Executive's Termination or the date Executive begins new
employment. The Company, at its sole expense, shall continue to provide (through
its own plan and/or individual policies) Executive (and Executive's dependents)
with health benefits no less favorable than the group health plan benefits
provided generally during such period to the senior executive officers of the
Company or any affiliated company (to the extent any such coverage or benefits
are taxable to Executive by reason of being provided under a self-insured health
plan of the Company or an affiliate, the Company shall make Executive "whole"
for the same on an after-tax basis) (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits");

                  (4) All accrued compensation and unreimbursed expenses through
the Termination Date. Such amounts shall be paid to Executive in a lump sum in
cash within thirty (30) days after the Termination Date; and

                  (5) Executive shall be free to accept other employment during
such period, and, except as set forth above, there shall be no offset of any
employment compensation earned by Executive in such other employment during such
period against payments due Executive under this Paragraph (4), and there shall
be no offset in any compensation received from such other employment against the
Base Salary set forth above.

            (c) TERMINATION IN EVENT OF DEATH: BENEFITS. If Executive's
employment is terminated by reason of Executive's death during the Basic Term,
this Agreement shall terminate without further obligation to Executive's legal
representatives under this Agreement, other than for payment of all accrued
compensation, unreimbursed expenses, the timely payment or provision of Other
Benefits through the date of death. Such amounts shall be paid to Executive's
estate or beneficiary, as applicable, in a lump sum in cash within ninety (90)
days after the date of death. In addition, Executive's legal representatives
shall receive, at the same time as if Executive were still an employee,
Executive's Base Salary remaining for the Basic Term, less the face amount of
any life insurance proceeds from insurance policies provided by the Company.
With respect to the provision of Other Benefits, the term Other Benefits as used
in this Paragraph 4(c) shall include, without limitation, and Executive's estate
and/or beneficiaries shall be entitled to receive, benefits at least equal to
the most favorable benefits provided by the Company to the estates and
beneficiaries of other executive level employees of the Company under such
plans, programs, practices, and policies relating to death benefits, if any, as
in effect with respect to other executives and their beneficiaries at any time
during the 120-day period immediately preceding the date of death. Additionally,
all Stock

                                        6

<PAGE>

Awards shall be vested immediately and shall be exercisable for the earlier of
one year after the date of such vesting or the remaining term of such option.

            (d) TERMINATION IN EVENT OF DISABILITY: BENEFITS. If Executive's
employment is terminated by reason of Executive's Disability during the Basic
Term, this Agreement shall terminate but the Company shall continue to pay the
Base Salary for a period of three (3) months and thereafter shall make such
additional payment for the Basic Term so that the after tax effect of
Executive's compensation is the same as before the Disability. Executive shall
not be entitled to any subsequent cash or stock bonuses. In addition, all
outstanding Stock Awards shall vest immediately upon such termination due to
Disability and shall be exercisable for the earlier of one year after the date
of such vesting or the remaining term of such option. Executive's Benefits shall
continue to the end of the Basic Term.

            (e) VOLUNTARY TERMINATION BY EMPLOYEE AND TERMINATION FOR CAUSE:
BENEFITS. Executive may terminate his employment with the Company without Good
Reason by giving written notice of his intent and stating an effective
Termination Date at least ninety (90) days after the date of such notice;
provided, however, that the Company may accelerate such effective date by paying
Executive through the proposed Termination Date and also vesting awards that
would have vested but for this acceleration of the proposed Termination Date.
Upon such a termination by Executive or upon termination for Cause by the
Company, this Agreement shall terminate and the Company shall pay to Executive
all accrued compensation, unreimbursed expenses and the Other Benefits through
the Termination Date. Such amounts shall be paid to Executive in a lump sum in
cash within thirty (30) days after the date of termination. In addition, all
unvested Stock Awards shall terminate and all vested Stock Awards will terminate
thirty (30) days after the Termination Date.

            (f) DIRECTOR POSITIONS. Executive agrees that upon termination of
employment, for any reason, at the request of the Chairman of the Board,
Executive will immediately tender his resignation from any and all Board
positions held with the Company and/or any of its subsidiaries and affiliates.

         5. NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY. Executive
recognizes and agrees that the benefit of not being employed at-will, is
provided in consideration for, among other things, the agreements contained in
this Section, as well as the Stock Awards granted to Executive pursuant to this
Agreement. The Company agrees that while employed pursuant to this Agreement,
Executive will be provided with confidential information of Company; specialized
training on how to perform his duties; and contact with the Company's customers
and potential customers.

            (a) NON-COMPETITION DURING EMPLOYMENT. Executive agrees that during
the Basic Term, he will not compete with the Company by engaging in the
conception, design, development, production, marketing, or servicing of any
product or service that is substantially similar to the products or services
which the Company provides, and that he will not work for, in any capacity,
assist, or become affiliated with as an owner, partner, etc., either directly or
indirectly, any individual or business which offers or performs services, or
offers or provides products substantially similar to the services and products
provided by Company, provided, Executive shall not be prevented from owning no
more than 2% of any Company whose stock is publicly traded.

                                        7
<PAGE>

            (b) CONFLICTS OF INTEREST. Executive agrees that during the Basic
Term, he will not engage, either directly or indirectly, in any activity (a
"Conflict of Interest") which might adversely affect the Company or its
affiliates, including ownership of a material interest in any supplier,
contractor, distributor, subcontractor, customer or other entity with which the
Company does business or accepting any material payment, service, loan, gift,
trip, entertainment, or other favor from a supplier, contractor, distributor,
subcontractor, customer or other entity with which the Company does business,
and that Executive will promptly inform the President of the Company as to each
offer received by Executive to engage in any such activity. Executive further
agrees to disclose to the Company any other facts of which Executive becomes
aware which in Executive's good faith judgment could reasonably be expected to
involve or give rise to a Conflict of Interest or potential Conflict of
Interest.

            (c) NON-COMPETITION AFTER TERMINATION. Executive agrees that
Executive shall not, at any time during the period of one (1) year after
termination for any reason, within any of the markets in which the Company has
sold products or services or formulated a plan to sell products or services into
a market during the last twelve (12) months of Executive's employ or which the
Company enters into within three (3) months thereafter, engage in or contribute
Executive's knowledge to any work which is competitive with or similar to a
product, process, apparatus, service, or development on which Executive worked
or with respect to which Executive had access to Confidential Information while
employed by the Company. Following the expiration of said one (1) year period,
Executive shall continue to be obligated under the Confidential Information
Paragraph of this Agreement not to use or to disclose Confidential Information
of the Company so long as it shall not be publicly available. It is understood
that the geographical area set forth in this covenant is divisible so that if
this clause is invalid or unenforceable in an included geographic area, that
area is severable and the clause remains in effect for the remaining included
geographic areas in which the clause is valid.

            (d) CONFIDENTIAL INFORMATION. Executive further agrees that he will
not, except as the Company may otherwise consent or direct in writing, reveal or
disclose, sell, use, lecture upon, publish or otherwise disclose to any third
party any Confidential Information or proprietary information of the Company, or
authorize anyone else to do these things at any time either during or subsequent
to his employment with the Company. This Section shall continue in full force
and effect after termination of Executive's employment and after the termination
of this Agreement. Executive's obligations under this Paragraph with respect to
any specific Confidential Information and proprietary information shall cease
when that specific portion of the Confidential Information and proprietary
information becomes publicly known, in its entirety and without combining
portions of such information obtained separately. It is understood that such
Confidential Information and proprietary information of the Company include
matters that Executive conceives or develops, as well as matters Executive
learns from other employees of Company. Confidential Information is defined to
include information: (1) disclosed to or known by the Executive as a consequence
of or through his employment with the Company; (2) not generally known outside
the Company; and (3) which relates to any aspect of the Company or its business,
finances, operation plans, budgets, research, or strategic development.
"Confidential Information" includes, but is not limited to the Company's trade
secrets, proprietary information, financial documents, long range plans,
customer lists, employer compensation, marketing strategy, data bases, costing
data, computer software

                                        8

<PAGE>

developed by the Company, investments made by the Company, and any information
provided to the Company by a third party under restrictions against disclosure
or use by the Company or others.

            (e) NON-SOLICITATION. The Executive agrees that during his period of
employment with the Company and for a period of two (2) years after termination
of employment (for any reason), the Executive will not, directly or indirectly,
solicit, divert, or hire away or attempt to solicit, divert, or hire away any
person employed by the Company, its subsidiaries or affiliates, whether or not
such person is a full-time or temporary employee of the Company, its
subsidiaries or affiliates and will not make known to any person, firm, entity,
or corporation the names and addresses of any of the employees of the Company,
its subsidiaries or affiliates or any information pertaining to the employees of
the Company, its subsidiaries or affiliates.

            (f) RETURN OF DOCUMENTS, EQUIPMENT, ETC. All writings, records, and
other documents and things comprising, containing, describing, discussing,
explaining, or evidencing any Confidential Information, and all equipment,
components, parts, tools, and the like in Executive's custody or possession that
have been obtained or prepared in the course of Executive's employment with the
Company shall be the exclusive property of the Company, shall not be copied
and/or removed from the premises of the Company, except in pursuit of the
business of the Company, and shall be delivered to the Company, without
Executive retaining any copies, upon notification of the termination of
Executive's employment or at any other time requested by the Company. The
Company shall have the right to retain, access, and inspect all property of
Executive of any kind in the office, work area, and on the premises of the
Company upon termination of Executive's employment and at any time during
employment by the Company to ensure compliance with the terms of this Agreement.

            (g) REAFFIRM OBLIGATIONS. Upon termination of his employment with
the Company, Executive, if requested by Company, shall reaffirm in writing
Executive's recognition of the importance of maintaining the confidentiality of
the Company's Confidential Information and proprietary information, and reaffirm
any other obligations set forth in this Agreement.

            (h) PRIOR DISCLOSURE. Executive represents and warrants that he has
not used or disclosed any Confidential Information he may have obtained from
Company prior to signing this Agreement, in any way inconsistent with the
provisions of this Agreement.

            (i) CONFIDENTIAL INFORMATION OF PRIOR COMPANIES. Executive will not
disclose or use during the period of his employment with the Company any
proprietary or Confidential Information or Copyright Works which Executive may
have acquired because of employment with an employer other than the Company or
acquired from any other third party, whether such information is in Executive's
memory or embodied in a writing or other physical form.

            (j) BREACH. Executive agrees that any breach of Paragraphs 5(a) or
(c) above cannot be remedied solely by money damages, and that in addition to
any other remedies Company may have, Company is entitled to obtain injunctive
relief against Executive. Nothing herein, however, shall be construed as
limiting Company's right to pursue any other available remedy at law or in
equity, including recovery of damages and termination of this Agreement and/or
any payments that may be due pursuant to this Agreement.

                                        9

<PAGE>

            (k) RIGHT TO ENTER AGREEMENT. Executive represents and covenants to
Company that he has full power and authority to enter into this Agreement and
that the execution of this Agreement will not breach or constitute a default of
any other agreement or contract to which he is a party or by which he is bound.

            (l) ENFORCEABILITY. The agreements contained in this Section 5 are
independent of the other agreements contained herein. Accordingly, failure of
the Company to comply with any of its obligations outside of this Paragraph do
not excuse Executive from complying with the agreements contained herein.

            (m) SURVIVABILITY. The agreements contained in Paragraphs 5(c)-(e)
shall survive the termination of this Agreement for any reason.

         6. ASSIGNMENT. This Agreement cannot be assigned by Executive. The
Company may assign this Agreement only to a successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and assets of the Company provided such
successor expressly agrees in writing reasonably satisfactory to Executive to
assume and perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession and assignment
had taken place. Failure of the Company to obtain such written agreement prior
to the effectiveness of any such succession shall be a material breach of this
Agreement.

         7. BINDING AGREEMENT. Executive understands that his obligations under
this Agreement are binding upon Executive's heirs, successors, personal
representatives, and legal representatives.

         8. NOTICES. All notices pursuant to this Agreement shall be in writing
and sent certified mail, return receipt requested, addressed as set forth below,
or by delivering the same in person to such party, or by transmission by
facsimile to the number set forth below (which shall not constitute notice).
Notice deposited in the United States Mail, mailed in the manner described
hereinabove, shall be effective upon deposit. Notice given in any other manner
shall be effective only if and when received:

            If to Executive:             Mike Schell
                                         3 Hampton Court
                                         Houston, Texas 77024
                                         Fax: 713-827-0642

            If to Company:               HCC Insurance Holdings, Inc.
                                         13403 Northwest Freeway
                                         Houston, Texas 77040
                                         Attn: General Counsel
                                         Fax: (713) 744-9648

                                       10
<PAGE>

            with a copy (which shall     Arthur S. Berner, Esq.
            not constitute notice) to:   Haynes and Boone, LLP
                                         1000 Louisiana Street,
                                         Suite 4300
                                         Houston, Texas 77002-5012
                                         Fax: (713) 236-5652

         9. WAIVER. No waiver by either party to this Agreement of any right to
enforce any term or condition of this Agreement, or of any breach hereof, shall
be deemed a waiver of such right in the future or of any other right or remedy
available under this Agreement.

         10. SEVERABILITY. If any provision of this Agreement is determined to
be void, invalid, unenforceable, or against public policy, such provisions shall
be deemed severable from the Agreement, and the remaining provisions of the
Agreement will remain unaffected and in full force and effect.

         11. ENTIRE AGREEMENT. The terms and provisions contained herein shall
constitute the entire agreement between the parties with respect to Executive's
employment with Company during the time period covered by this Agreement. This
Agreement replaces and supersedes any and all existing Agreements entered into
between Executive and the Company relating generally to the same subject matter,
if any, and shall be binding upon Executive's heirs, executors, administrators,
or other legal representatives or assigns.

         12. MODIFICATION OF AGREEMENT. This Agreement may not be changed or
modified or released or discharged or abandoned or otherwise terminated, in
whole or in part, except by an instrument in writing signed by the Executive and
an officer or other authorized executive of Company.

         13. UNDERSTAND AGREEMENT. Executive represents and warrants that he has
read and understood each and every provision of this Agreement, and Executive
understands that he has the right to obtain advice from legal counsel of choice,
if necessary and desired, in order to interpret any and all provisions of this
Agreement, and that Executive has freely and voluntarily entered into this
Agreement.

         14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.

         15. JURISDICTION AND VENUE. With respect to any litigation regarding
this Agreement, Executive agrees to venue in the state or federal courts in
Harris County, Texas, and agrees to waive and does hereby waive any defenses
and/or arguments based upon improper venue and/or lack of personal jurisdiction.
By entering into this Agreement, Executive agrees to personal jurisdiction in
the state and federal courts in Harris County, Texas.

                                       11
<PAGE>

                  IN WITNESS WHEREOF, the Parties have executed this Agreement
in multiple copies, effective as of the date first written above.

EXECUTIVE                                    COMPANY

                                             HCC INSURANCE HOLDINGS, INC.

   /s/ Mike Schell                           By:   /s/ Stephen L. Way
------------------------------------            --------------------------------
Mike Schell                                     STEPHEN L. WAY,
                                                Chief Executive Officer and
                                                Chairman of the Board

Dated:     December 25, 2002                 Dated:    November 18, 2002
      ------------------------------               -----------------------------

                     SIGNATURE PAGE TO EMPLOYMENT AGREEMENT

                                       12

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