Document:

<PAGE>
                                                                    EXHIBIT 10.2

                              COMMUTATION AGREEMENT

This Agreement is made effective as of March 31, 2004 (the "Commutation Date")
by and between PXRE Reinsurance Company and PXRE Reinsurance Ltd. (hereinafter,
separately and collectively, referred to as the "Reinsured") and Select
Reinsurance Ltd. (hereinafter referred to as the "Reinsurer").

Whereas, the parties hereto desire to effect a commutation and release of each
other for all or a portion of the coverage provided under following treaties
(hereinafter referred to as the "Commuted Contract Coverages") upon the terms
and conditions set forth below:

<TABLE>
<CAPTION>

------------------------------ --------------------------- --------------------------- ----------------------------
                                                                                       Full and complete
                                                           Commuted Contract           commutation of all
Treaty Name                    Underwriting Period(s)      Coverages                   Coverages
------------------------------ --------------------------- --------------------------- ----------------------------
<S>                            <C>                         <C>                         <C>
------------------------------ --------------------------- --------------------------- ----------------------------
Obligatory Quota Share         1996, 1997, 1998, 1999,     "Exited Lines" as defined   No, Exited Lines only
                               2000, 2001, 2002            herein
------------------------------ --------------------------- --------------------------- ----------------------------
Variable Quota Share           1996, 1997, 1998, 1999,     "Exited Lines" as defined   No, Exited Lines only
                               2000, 2001, 2002            herein
------------------------------ --------------------------- --------------------------- ----------------------------
Israel CLAL Stop Loss          2000                        All                         Yes
------------------------------ --------------------------- --------------------------- ----------------------------
Israel Phoenix Stop Loss       1998, 1999, 2000            All                         Yes
------------------------------ --------------------------- --------------------------- ----------------------------
Israel Menorah Stop Loss       1998, 1999, 2000            All                         Yes
------------------------------ --------------------------- --------------------------- ----------------------------
</TABLE>

"Exited Lines" as used herein shall be those contracts classified by the
Reinsured at the time of their writing, except in the instance of manifest
error, as one of the following lines of business, which the Reinsured warrants
includes all risks ceded by the Reinsured under the subject treaties that are
accounted for by Reinsured in its Exited Lines segment in the audited financial
statements filed by PXRE Group Ltd or its predecessor with the Securities and
Exchange Commission for each of the applicable periods:

                 Direct Casualty Pro Rata
                 Direct Auto Liability Risk XS
                 Direct General Liability -Traditional
                 Direct General Liability -Structured
                 Direct Property Cat & Risk
                 Direct Property Pro Rata
                 Direct Umbrella XS
                 Direct Worker's Comp XS
                 Contingency Credit Cat/Retro
                 Contingency Credit Pro Rata
                 Contingency Credit Risk
                 Facultative Reinsurance
                 International Casualty Pro Rata
                 International Property Pro Rata
                 North American Casualty
                 Lloyd's Syndicate Business
<PAGE>

The Reinsured further represents and warrants that it did not cede Exited Lines
risks to the Reinsurer in the 2003 underwriting period under the Obligatory
Quota Share and the Variable Quota Share treaties.

Now, therefore, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:

1. The Reinsurer shall pay to the Reinsured upon the Commutation Date an amount
of $10,183,278 (hereinafter referred to as the "Funds") under the Commuted
Contract Coverages. The payment of the Funds shall constitute the "Commutation
Payment", which amount represents the mutually agreed upon amount to completely
discharge all liabilities of the parties in respect of the Commuted Contract
Coverages.

2. The Reinsured and Reinsurer do hereby irrevocably and unconditionally release
and forever discharge each other, and their affiliates, parents, subsidiaries
and other related or associated companies, officers, directors and shareholders
and their heirs, executors, administrators, successors, predecessors and assigns
from all past, present and future obligations, losses, offsets, actions, causes
of action, suits, debts, sums of money, accounts, damages, judgments, claims,
demands or other liability whatsoever, known or unknown, at law or in equity, in
contract or in tort, arising under, or in connection with the Commuted Contract
Coverages , including, without limitation, any obligation for loss, loss
adjustment expenses, reinsurance premiums due, reinsurer's margin, commutation
amounts, termination amounts, profit sharing, adjustments, offsets, taxes and
any other obligation which might be claimed or demanded by reason of any matter
whatsoever arising out of, or in connection with, the Commuted Contract
Coverages; it being the intention of the parties that this release operate as a
full and final settlement of each party's current and future obligations and
liabilities to the other parties hereto with respect to the Commuted Contract
Coverages and discharge of any claim by one party against any other party
whatsoever arising out of, or in connection with, the Commuted Contract
Coverages.

3. Representations and Warranties. Each of the parties hereto expressly
severally warrants and represents to each of the other parties hereto that it is
a corporation in good standing in its respective place of domicile; that the
execution, giving effect to and performance of its obligations under this
Agreement is fully authorized by it; that the person executing this Agreement
has the necessary and appropriate authority to do so; that this Agreement
constitutes a valid and binding obligation of it; that it derives a benefit and
will not assert a lack of benefit by reason of its execution of this Agreement;
that there are no existing or pending agreements, transactions or negotiations
to which it is a party that would render this Agreement or any part thereof
void, avoidable or unenforceable; that there is no authorization, consent or
approval of any government or regulatory entity which is required to make this
Agreement valid and binding upon it; that no claim or account being paid or
settled hereunder has previously been assigned or transferred to another person
or entity; that no order has been made or petition presented or other step taken
for it to be wound up or for the appointment of a liquidator, provisional
liquidator, receiver, administrator or other like office holder under the laws
of any jurisdiction whatsoever; and that the execution, giving effect to and
performance of its obligations under, this Agreement does not contravene or fail
to comply with a direction given by any governmental authority having regulatory
authority over it.
<PAGE>

4. Governing Law. This Agreement shall be interpreted under and be governed by
the laws of New York, without regard to any choice of law principles which would
apply the law of any other jurisdiction.

5. Entire Agreement. This Agreement shall constitute the entire Agreement
between the Parties with respect to the commutation of the Commuted Contract
Coverages and may not be amended orally or in writing except by written addendum
signed by each of the Parties hereto.

6. No Third Party Beneficiaries. This Agreement shall be binding upon and shall
inure solely to the benefit of the Parties hereto and their respective assigns;
it being the intent of the Parties not to create any third party beneficiaries
hereunder.

7. No Reliance. The Parties acknowledge that they have entered into this
Agreement in reliance upon their own independent investigation and analysis and
not on the basis of any representation or warranty by the other Parties hereto
other than those representations and warranties set forth above.

8. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall for all purposes be deemed to be an original, but all of
which shall constitute one and the same Agreement.

IN WITNESS WHEREOF, the Reinsurer and the Reinsured have caused this Agreement
to be executed by their duly authorized representatives.

PXRE REINSURANCE LTD.

By:      /s/ Jeff Radke
        ----------------------------

Title:   CEO
        ----------------------------

Date:    April 21, 2004
        ----------------------------

PXRE REINSURANCE COMPANY

By:      /s/ Jeff Radke
        ----------------------------

Title:   CEO
        ----------------------------

Date:    April 21, 2004
        ----------------------------

SELECT REINSURANCE LTD.

By:      /s/ Brant L. Kizer
        ----------------------------

Title:   Vice President
        ----------------------------

Date:    April 21, 2004
        ----------------------------<PAGE>
                                                                    EXHIBIT 10.3

                                               Reinsurance Slip

REINSURED:                 PXRE Reinsurance Ltd., Hamilton, Bermuda

REINSURER:                 Select Reinsurance Ltd., Hamilton, Bermuda

PERIOD:                    April 1st 2004 (the "Effective Date") to March 31,
                           2006, both days inclusive or such shorter period as
                           provided for herein.

TYPE:                      Excess of Loss Reinsurance Treaty

CLASS:                     To indemnify the Reinsured for all losses emanating
                           from any and all perils from the following lines of
                           business of the Reinsured:
                           Property Catastrophe
                           Property Retrocessional
                           Property Risk Excess
                           Aviation

TERRITORIAL SCOPE:         Worldwide

LIMIT AND RETENTION:       USD 30 million Ultimate Net Loss in excess of the
                           Retention each and every event. The "Retention" for
                           2004 shall be USD 280 million. The Retention for 2004
                           and 2005 shall be set at an amount so that the
                           probability of exceedance of such amount for the
                           applicable year is no greater than 6.25% for "all
                           perils" per occurrence USD Ultimate Net Loss under a
                           combination of (a) the Reinsured's in-force book of
                           business at January 2 of the applicable year and (b)
                           the Reinsured projected in force business for those
                           policies that are projected to commence after January
                           2 and within the same calendar year.

AGGREGATE LIMIT:           The maximum amount recoverable hereon for Ultimate
                           Net Loss during the Period shall not exceed USD 30
                           million.

REINSURANCE PREMIUM:       Reinsurance premium shall equal USD 20 million. USD
                           5.5 million (the "Margin") shall be payable at the
                           inception of this Contract. The remaining balance of
                           USD 14.5 million shall be paid to the Reinsurer on a
                           funds withheld basis at the inception of this
                           Contract.

OFFSET:                    The Reinsured and the Reinsurer shall have the right
                           to offset any balance or amounts due and not yet paid
                           from one party to the other under the terms of this
                           Contract or any other agreement heretofore or
                           hereafter entered into between the Reinsured and the
                           Reinsurer, whether acting as assuming reinsurer or
                           ceding company.

                                       1
<PAGE>

                           The party asserting the right of offset may exercise
                           such right any time whether the balances or amounts
                           due are on account of premiums, funds withheld
                           amounts, claims or losses, loss expenses, profit
                           commissions or otherwise. This provision shall not be
                           affected by the insolvency of either party to this
                           Contract. For this purpose insolvency includes any
                           Insolvency Event as provided for in the Insolvency
                           Section but expanded to cover both parties.

EXPERIENCE ACCOUNT,        The Reinsured and the Reinsurer will calculate an
PROFIT COMMISSION,         Experience Account within 45 business days of the end
COMMUTATION AND            of each calendar quarter end as follows:
TERMINATION:
                                (a)  72.5% of Reinsurance Premiums paid;
                                (b)  Less all payments for claims and adjustment
                                     expenses under this Contract;
                                (c)  Less the present value of any outstanding
                                     liabilities determined as follows:
                                      (1) The Reinsured and the Reinsurer shall
                                      agree an estimate for the Ultimate Net
                                      Loss(es) outstanding.
                                      (2) The Reinsured and the Reinsurer shall
                                      then agree on a payment pattern and an
                                      interest rate to discount such outstanding
                                      liabilities to their present value.

                                      In the event that the Reinsured and the
                                      Reinsurer cannot agree on (1) or (2)
                                      above, a mutually agreed independent
                                      actuary shall be appointed, by the parties
                                      or under the arbitration procedure if they
                                      cannot agree, to determine the value(s) to
                                      be used and their opinion shall be binding
                                      on all parties. Such actuary shall be an
                                      F.C.A.S. or F.I.A. with experience in
                                      Excess of Loss Reinsurance for the lines
                                      covered hereunder and the costs shall be
                                      paid 50% by the Reinsurer and 50% by the
                                      Reinsured including any arbitration costs.
                                      This procedure shall also be followed if
                                      the Reinsurer disagrees with the amount of
                                      the Retention calculated by Reinsured for
                                      2004 or 2005.

                                If the Experience Account balance is positive
                                according to such calculation, then the
                                Reinsured shall have the option to commute this
                                Contract and to receive 100% of the Experience
                                Account balance within 20 business days.

                                       2
<PAGE>

                                As of any calendar month end, if the Reinsured
                                and the Reinsurer agree that there has been no
                                prior loss event that would exceed the Retention
                                of this Contract, the Reinsurer shall have the
                                ability to commute this Contract by giving 30
                                days prior written notice to the Reinsured, such
                                commutation to be effective on the date stated
                                in the notice which shall not be less than 30
                                days from the date such notice is given. The
                                Reinsurer may unilaterally terminate this
                                Contract on or after a date 30 days after notice
                                to Reinsured of such termination ("Post Event
                                Termination"), provided that the Reinsurer shall
                                remain liable for any Ultimate Net Loss from a
                                covered event occurring prior to the effective
                                date of termination set forth in such notice
                                (the "Cut-Off Date"). Upon commutation or Post
                                Event Termination, the Reinsurer will be
                                required to return to the Reinsured the unearned
                                portion of the Margin (determined on a pro-rata
                                basis) for the period from the Cut-Off Date or
                                effective date of commutation, whichever is
                                applicable, to March 31, 2006.

                                Upon a commutation, the Reinsurer and Reinsured
                                shall be released from all past, present and
                                future liabilities of any nature arising out of
                                this Contract.

                                In the event of a Post Event Termination, the
                                Reinsurer shall remain obligated under the terms
                                hereof for Ultimate Net Loss resulting from an
                                event occurring before the Cut-Off Date. If such
                                Ultimate Net Loss has not been finally
                                determined by a date that is three years from
                                December 31 of the year in which such event
                                occurred, then Reinsurer may seek from Reinsured
                                its estimate of such Ultimate Net Loss and
                                unless accepted by Reinsurer, then the parties
                                shall appoint an independent actuary that is an
                                F.C.A.S or F.I.A. with Excess of Loss experience
                                for the lines covered hereunder who shall
                                determine such Ultimate Net Loss including
                                payment pattern and interest rate discount. If
                                the parties cannot agree on the actuary, such
                                actuary shall be appointed under this Contract's
                                arbitration procedure. The actuary costs and any
                                arbitration costs related to its choice shall be
                                paid 50% by each party. Upon payment by
                                Reinsurer to Reinsured of the amount determined
                                under this provision for all covered events
                                occurring prior to the Cut-Off Date, the
                                Reinsurer and Reinsured shall be released from
                                all past, present and future liabilities of any
                                nature arising out of this Contract.

ACCOUNTS, REMITTANCES AND       Within 45 days following the end of each
LOSS SETTLEMENTS:               calendar quarter, the Reinsured shall report to
                                the Reinsurer the amount of Ultimate Net Loss
                                paid, Ultimate Net Loss outstanding and the
                                balance of the Experience Account as of the
                                applicable calendar quarter end along with
                                activity in the Experience Account during the
                                quarter. Settlement of Ultimate Net Loss paid by
                                Reinsured in excess of the Retention shall be
                                made by the Reinsurer quarterly within 30 days
                                of receipt of this reporting by the Reinsurer or
                                75 days after the end of the quarter, whichever
                                is later. Ultimate Net Loss amounts above the
                                Retention shall be firstly deducted from the
                                funds withheld premium amount retained by the
                                Reinsured until such time as the funds withheld
                                balance is USD 0, after which amounts shall be
                                paid by the Reinsurer to the Reinsured.

                                       3
<PAGE>

COLLATERAL AND REINSURER'S      The Reinsurer shall provide to the Reinsured
SECURITY:                       collateral in the form of either a) cash,
                                b) investment grade bonds which have a minimum
                                rating of not less than AA by S&P or Aa by
                                Moody's, or c) hedge funds meeting the
                                applicable 2002 Patriot Trust investment
                                guidelines, the combined total of which shall
                                have an Adjusted Collateral Value of USD $10.0
                                million. The determination of the Adjusted
                                Collateral Value shall be the actual market
                                value of the cash, investment grade bonds or
                                hedge funds multiplied by the following factors:

                                   1) For cash, 100%;
                                   2) For investment grade bonds, 100%;
                                   3) For hedge funds, 80%

                                Such collateral (the "Pre-Loss Collateral")
                                shall be deposited by the Reinsurer in the 2002
                                Patriot Trust upon execution of this Contract or
                                completion of the revisions to the Patriot Trust
                                and the change of Trustee, whichever is later
                                but in no event later than June 30, 2004.
                                Reinsured acknowledges that is has reviewed the
                                revisions to the Patriot Trust contemplated by
                                Reinsurer, that they are acceptable in principle
                                and that Reinsured does not contemplate offering
                                any other revisions. Both parties acknowledge
                                that additional changes may be required by the
                                new Trustee. Should the Adjusted Collateral
                                Value fall below $10 million as of any calendar
                                month end, the Reinsurer shall be required to
                                deposit additional collateral with an Adjusted
                                Collateral Value equivalent to the amount of the
                                deficiency into the revised 2002 Patriot Trust
                                within 5 business days of the date the Reinsurer
                                becomes aware of such deficiency, but in no case
                                later than 20 days after the end of the calendar
                                month in which the deficiency exists.

                                In the event that Ultimate Net Loss exceeds the
                                Retention by an amount greater than the sum of
                                the funds withheld premium and the Adjusted
                                Collateral Value of the Trust Fund under the
                                Patriot Trust available to be allocated to the
                                obligations of the Reinsurer hereunder, then the
                                Reinsurer shall deliver to the Trustee of the
                                Patriot Trust within 15 business days of
                                learning of such deficiency, collateral
                                permissible hereunder so that such deficiency
                                shall be eliminated. In no event shall the
                                Adjusted Collateral Value required hereunder
                                exceed the Aggregate Limit. In the event that
                                any portion of the collateral is hedge funds,
                                then the Adjusted Collateral Value of such hedge
                                funds shall be subject to a 20% haircut when
                                calculating the amount of additional collateral
                                to be deposited.

                                       4
<PAGE>

                                The Patriot Trust Agreement shall contain other
                                provisions governing the collateral hereunder,
                                including the right of Reinsurer to substitute
                                collateral.

CHANGE IN UNDERWRITING          If at any time during the Period of this
PRACTICES & OTHER CHANGES       Contract the Reinsured a) materially changes its
                                underwriting policies that were in force at the
                                inception of this Contract with respect to the
                                lines of business that are covered by this
                                Contract, b) writes a line that would be covered
                                hereunder but was not written at the inception
                                of the Period, c) changes or adds a member to
                                the Underwriting Committee as reflected on
                                Schedule A or changes any department head for a
                                line of business covered hereunder, d) or its
                                direct or indirect parent is engaged in any form
                                of reorganization or has a change of control as
                                defined below, or, e) adds a team of
                                underwriters formally employed together at
                                another insurer or reinsurer for a line of
                                business covered hereunder (a team consisting of
                                at least two underwriters), then the Reinsured
                                shall notify the Reinsurer within 10 business
                                days of making such change or the occurrence of
                                such event.

                                In addition, within 30 days of the end of each
                                calendar quarter, the Reinsured shall provide
                                the Reinsurer with a calculation showing the
                                probability of the applicable Retention being
                                exceeded as well as the dollar amount of
                                Ultimate Net Loss that corresponds to a
                                probability of exceedence of 6.25%, for "all
                                perils" per occurrence USD Ultimate Net Loss,
                                taking into account (a) the Reinsured's in-force
                                book of business on the day after the end of the
                                quarter as to which the information relates and
                                (b) the Reinsured's projected in force business
                                for those policies that are projected to
                                commence within the same calendar year. The
                                Reinsured agrees to provide such information as
                                the Reinsurer may reasonably request within a
                                commercially reasonable time so that the
                                Reinsurer may evaluate the probability provided.

                                       5
<PAGE>

                                A "Change of Control" shall be deemed to have
                                occurred with respect to PXRE if:
                                      i.  any "person" (as such term is used in
                                          Sections 13(d) and 14(d) of the United
                                          States Securities and Exchange Act of
                                          1934) (other than any holder of Series
                                          A, Series B or Series C Convertible
                                          Voting Preferred Shares of PXRE Group
                                          Ltd. ("PXT") by reason of the receipt
                                          of share dividends), directly or
                                          indirectly, acquires securities of PXT
                                          representing 40% or more
                                          of the combined voting power of
                                          PXT's then outstanding securities with
                                          respect to matters presented at PXT's
                                          general meetings, whether or not
                                          having the right to vote for directors
                                          ("Voting Power"); provided, however,
                                          that the disposition by an original
                                          holder of either Series A, Series B or
                                          Series C Convertible Voting Preferred
                                          Shares (a "Preferred Shareholder") of
                                          such preferred shares (or any
                                          securities into which such shares have
                                          ultimately been converted) to a person
                                          will not constitute a Change of
                                          Control under this clause (i) unless
                                          (x) such person, immediately following
                                          such acquisition from such Preferred
                                          Shareholder, holds securities
                                          representing at least 50% Voting
                                          Power, or (y) such person has acquired
                                          securities from more than one
                                          Preferred Shareholder in the same or
                                          related transactions, and immediately
                                          following the last of such
                                          transactions, holds securities
                                          representing at least 40% Voting
                                          Power; provided further, however, if,
                                          by reason of the preceding proviso,
                                          the acquisition by a person of at
                                          least 40% but less than 50% Voting
                                          Power does not constitute a Change of
                                          Control under this clause (i), a
                                          Change of Control will be deemed to
                                          occur if such person thereafter
                                          becomes holder of at least 50% Voting
                                          Power, whether or not pursuant to a
                                          related transaction; or
                                      ii. the stockholders of PXT approve (A)
                                          any merger or consolidation of PXT
                                          with any other corporation, other than
                                          a merger or consolidation in which PXT
                                          is the surviving entity or a merger or
                                          consolidation which would result in
                                          the holders of the voting securities
                                          of PXT outstanding immediately prior
                                          thereto holding immediately thereafter
                                          securities representing more than 55%
                                          of the combined voting power of the
                                          voting securities of PXT or such
                                          surviving entity outstanding
                                          immediately after such merger or
                                          consolidation, or (B) any sale or
                                          other disposition (in one transaction
                                          or a series of related transactions)
                                          of all, or substantially all, of the
                                          assets of PXT.

BERMUDIAN LAW AND               Subject always to the prior application of the
JURISDICTION:                   Arbitration Clause, all disputes and differences
                                arising under or in connection with this
                                Reinsurance shall be subject to the exclusive
                                jurisdiction of the High Court of Justice in
                                Bermuda who shall apply the law of Bermuda as
                                the proper law of this Reinsurance.

                                       6
<PAGE>

ULTIMATE NET LOSS               "Ultimate Net Loss" shall mean the sum of losses
                                on the business covered hereunder incurred by
                                the Reinsured in settlement of losses (after
                                making proper deductions for all salvages and
                                all recoveries), including allocated loss
                                adjustment expenses, reserves for incurred but
                                not reported losses and the liabilities for
                                Extra Contractual Obligations and losses in
                                Excess of Policy Limits. All salvages,
                                recoveries or payments recovered or received
                                subsequent to any loss settlement hereunder
                                shall be applied as if recovered or received
                                prior to the aforesaid settlement, and all
                                necessary adjustments shall be made by the
                                parties hereto. Nothing in this clause shall be
                                construed to mean that a recovery from Reinsurer
                                for the Reinsured's payment of Ultimate Net Loss
                                above the Retention cannot be made hereunder
                                until the Reinsured's full Ultimate Net Loss has
                                been ascertained.

CURRENCY CONVERSION CLAUSE      Accounts hereunder shall be rendered and
                                settlements shall be made only in United States
                                Dollars.

                                For Ultimate Net Loss payments by Reinsured in
                                currencies other that United States Dollars,
                                conversion shall be made to United States
                                Dollars at the rate of exchange prevailing on
                                the day on which such payment is made by the
                                Reinsured.

EXTRA CONTRACTUAL OBLIGATIONS   This Contract shall protect the Reinsured for
                                100% (one hundred percent) of any extra
                                contractual obligations subject always to the
                                Limit and Retention and Aggregate Limit hereof.
                                The term "Extra Contractual Obligations" is
                                defined as those liabilities not covered under
                                any other provision of the Reinsured's original
                                policies of insurance or reinsurance contracts
                                on business covered hereunder and which arise
                                from the handling of any claim, such liabilities
                                arising because of, but not limited to, the
                                following: failure by the Reinsured to settle
                                within the policies of insurance or reinsurance
                                contract 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. The date on which any Extra Contractual
                                Obligation is incurred by the Reinsured shall be
                                deemed, in all circumstances, to be the date of
                                the original loss event.

                                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
                                Reinsured, its parent or affiliate, 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.

                                       7
<PAGE>

EXCESS OF POLICY LIMITS         This Contract shall protect the Reinsured,
                                subject always to the Limit and Retention and
                                Aggregate Limit hereof, for 100% (one hundred
                                percent) of loss in excess of the limit of its
                                original policies of insurance or reinsurance
                                contracts, on business covered hereunder, such
                                loss in excess of the limit having been incurred
                                because of failure by the Reinsured to settle
                                within the policies of insurance or reinsurance
                                contract 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 Reinsured, its parent or affiliate,
                                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 Reinsured
                                would have been contractually liable to pay had
                                it not been for the limit of the original
                                reinsurance contract.

AMENDMENTS AND ALTERATIONS      This Contract may not be modified or amended or
                                any term or provision hereof waived or
                                discharged except in writing signed by the party
                                against whom such amendment, modification,
                                waiver or discharge is sought to be enforced.

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, provided such omission or error is
                                rectified as soon as possible after discovery
                                and the innocent party shall not be liable for
                                any Ultimate Net Loss caused solely by such
                                delay, ommission or error.

INSPECTION OF RECORDS           The Reinsured shall place at the disposal of the
                                Reinsurer at all reasonable times, and the
                                Reinsurer shall have the right to inspect
                                through its designated representatives, during
                                the term of this Contract and thereafter, all
                                books, records and papers of the Reinsured in
                                connection with any reinsurance hereunder, or
                                the subject matter hereof.

                                       8
<PAGE>

ARBITRATION                     A.     As a condition precedent to any right of
                                       action hereunder, any dispute arising
                                       out of the interpretation, performance
                                       or breach of this Contract, including
                                       the formation or validity thereof, shall
                                       be submitted for decision to a panel of
                                       three arbitrators. Notice requesting
                                       arbitration will be in writing and sent
                                       certified or registered mail, return
                                       receipt requested or similar type mail
                                       or delivered personally.

                                B.     One arbitrator shall be chosen by each
                                       party and the two arbitrators shall,
                                       before instituting the hearing, choose an
                                       impartial third arbitrator who shall
                                       preside at the hearing. If either party
                                       fails to appoint its arbitrator within
                                       thirty (30) days after receipt of notice
                                       being requested it to do so by the other
                                       party, the latter, after ten (10) days
                                       notice given as aforesaid, may appoint
                                       the second arbitrator.

                                C.     If the two arbitrators are unable to
                                       agree upon the third arbitrator within
                                       thirty (30) days of their appointment,
                                       the third arbitrator shall be selected
                                       from a list of six individuals (three
                                       named by each arbitrator) by the
                                       nominating committee of the Chartered
                                       Institute of Arbitrators, Bermuda Branch.

                                D.     All arbitrators shall be disinterested
                                       active or former executive officers of
                                       insurance or reinsurance companies or
                                       Underwriters at Lloyd's, London.

                                E.     Within thirty (30) days after notice of
                                       appointment of all arbitrators, the panel
                                       shall meet and determine timely periods
                                       for briefs, discovery procedures and
                                       schedules for hearings.

                                F.     The panel shall be relieved of all
                                       judicial formality and shall not be bound
                                       by the strict rules of procedure and
                                       evidence. Unless the parties agree
                                       otherwise,  arbitration shall take place
                                       in  Hamilton, Bermuda, but the venue may
                                       be changed when deemed by the panel to be
                                       in the  best interest of the arbitration
                                       proceeding. Insofar as the arbitration
                                       panel looks to substantive law, it shall
                                       consider the law of Bermuda. The decision
                                       of any two arbitrators when rendered in
                                       writing shall be final and binding. The
                                       panel is empowered to grant interim
                                       relief, as it may deem appropriate.

                                G.     The panel shall make its decision
                                       considering the custom and practice of
                                       the applicable insurance and reinsurance
                                       business as promptly as possible
                                       following the termination of the
                                       hearings. Judgment upon the award may be
                                       entered in any court having jurisdiction
                                       thereof.

                                       9
<PAGE>

                                H.      Each party shall bear the expense of its
                                        own arbitrator and shall jointly and
                                        equally bear with the other party the
                                        cost of the third arbitrator. The
                                        remaining costs of the arbitration shall
                                        be allocated by the panel. The panel
                                        may, at its discretion, award such
                                        further costs and expenses as it
                                        considers appropriate, including but not
                                        limited to attorneys fees, to the extent
                                        permitted by law. However, the panel may
                                        not award any exemplary or punitive
                                        damages.

INSOLVENCY                       Where an Insolvency Event occurs in relation to
                                 the Reinsured the following terms shall apply
                                 (and, in the event of any inconsistency between
                                 these terms and any other terms of this
                                 Contract, these terms shall prevail):

                                 1.    Notwithstanding any requirement in this
                                       Contract that the Reinsured shall
                                       actually make payment in discharge of its
                                       liability to third parties resulting from
                                       business covered hereunder ("Liability"),
                                       before becoming entitled to payment from
                                       the Reinsurers:

                                       a.     the Reinsurer shall be liable to
                                              pay the Reinsured even though the
                                              Reinsured is unable actually to
                                              pay, or discharge its Liability;
                                              but

                                       b.     nothing in this Article shall
                                              operate to accelerate the date for
                                              payment by the Reinsurer of any
                                              sum which may be payable to the
                                              Reinsured, which sum shall only
                                              become payable as and when the
                                              Reinsured would have discharged,
                                              by actual payment, its Liability
                                              for items of Ultimate Net Loss but
                                              for it being the subject of any
                                              Insolvency Event.

                                2.  The existence, quantum, valuation and date
                                    for payment of any sum which the Reinsurer
                                    is liable to pay the Reinsured under this
                                    Contract shall be those and only those for
                                    which the Reinsurer would be liable to the
                                    Reinsured if the Liability had been
                                    determined without reference to any term in
                                    any composition or scheme of arrangement or
                                    any similar such arrangement, entered into
                                    between the Reinsured in relation to all or
                                    any part of its business covered hereunder
                                    ("Arrangement'), unless and until the
                                    Reinsurer serves written notice to the
                                    contrary on the Reinsured in relation to any
                                    Arrangement.

                                       10
<PAGE>

                                An Insolvency Event shall occur if

                                A.      i.    a winding up petition is
                                              presented in respect of the
                                              Reinsured or a provisional
                                              liquidator is appointed over it or
                                              if the Reinsured goes into
                                              administration, administrative
                                              receivership or receivership or if
                                              the Reinsured has a scheme of
                                              arrangement or voluntary
                                              arrangement proposed in relation
                                              to all or any part of its affairs;
                                              or

                                       ii.    if the Reinsured goes into
                                              compulsory or voluntary
                                              liquidation; or,

                                       iii.    if the Reinsured becomes subject
                                               to any other similar insolvency
                                               process in any jurisdiction and,

                                the Reinsured is unable to pay its debts as and
                                when they fall due within the meaning of section
                                123 of the Insolvency Act 1986 (or any statutory
                                amendment or re-enactment of that section).

SERVICE OF SUIT                 Subject to the provisions of the Arbitration
                                clause above, it is agreed that in the event of
                                a dispute with respect to this Contract, a
                                party, at the request of the other party, shall
                                submit to the jurisdiction of the court in
                                Bermuda 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 a party's rights to
                                commence an action in any other court of
                                competent jurisdiction.

                                Service of process in such suit may be made upon
                                the parties in Bermuda or failing service after
                                reasonable efforts, for service upon Reinsured,
                                by service upon Conyers Dill & Pearman,
                                Clarendon House, 2 Church Street, Hamilton HM 11
                                Bermuda and for service upon Reinsurer, by
                                service upon Appleby Spurling & Hunter, Canon's
                                Court, 22 Victoria Street, Hamilton HM 12
                                Bermuda, (hereinafter such lawyers, "agent for
                                service of process"), and in any suit instituted
                                hereunder, the parties shall abide by the final
                                decision of such court or of any appellate court
                                in the event of an appeal.

                                       11
<PAGE>

                                The agent for service of process is authorized
                                and directed to accept service of process on
                                behalf of the party named in any such suit in
                                Bermuda and/or upon the request of a party to
                                give a written undertaking to such party that
                                the agent for service of process shall enter a
                                general appearance on behalf of the party for
                                whom it acts as agent for service of process in
                                the event such a suit shall be instituted.

EXCLUSIONS                      This Contract does not cover:

                                1.  Loss or damage directly or indirectly
                                    occasioned by, happening through or in
                                    consequence of war, invasion, acts of
                                    foreign enemies, hostilities (whether war be
                                    declared or not), civil war, rebellion,
                                    revolution, insurrection, military or
                                    usurped power or confiscation or
                                    nationalisation or requisition or
                                    destruction of or damage to property by or
                                    under the order of any government or public
                                    or local authority; provided however, that
                                    losses arising from terrorist acts shall not
                                    be excluded to the extent covered under the
                                    underlying contracts subject to this
                                    Contract and not excluded by the Reinsured's
                                    contracts.

                                2.  Offshore Marine business

                                3.  Marine business when written as such.

                                4.  Nuclear Incidents for those applicable
                                    classes of business and territories as
                                    appropriate in accordance with the clauses
                                    set out below, copies of which shall be
                                    provided by Reinsured to Reinsurer prior to
                                    execution of this Contract;

                                    a.       "Nuclear Incident Exclusion Clause
                                             - Physical Damage - Reinsurance",
                                             USA and Canada - NMA 1119 and NMA
                                             1980a.

                                    b.       Nuclear Energy Risks Exclusion
                                             Clause (Reinsurance) (1994) NMA
                                             1975a (Japanese Amendment).

                                5.  Transmission and Distribution Lines
                                    business.

                                6.  Any loss, damage, claim, cost, expense,
                                    sum or other obligation of any kind or
                                    description directly or indirectly caused
                                    by, contributing to, or resulting from
                                    mould, fungus, mildew or spores. This
                                    exclusion will apply regardless of
                                    whether or not:

                                       1)     the mould, fungus, mildew or
                                              spores is/are caused by,
                                              contributed to, or results from an
                                              insured peril;

                                       12
<PAGE>

                                       2)     the Reinsured's original
                                              policy(ies) provide coverage;

                                       3)     the Reinsured's original
                                              obligations are contractual,
                                              extra-contractual, or otherwise;

                                       4)     the reinsurance presentation is
                                              for settlement(s), judgement(s) or
                                              any other form of resolution.

                                7.     Any loss, damage, cost, claim or expense,
                                       whether preventative, remedial or
                                       otherwise, directly or indirectly arising
                                       out of or relating to:

                                       (a)   the calculation, comparison,
                                             differentiation, sequencing or
                                             processing of data involving the
                                             date change to the year 2000, or
                                             any other date change, including
                                             leap year calculations, by any
                                             computer system, hardware,
                                             programme or software and/or any
                                             microchip, integrated circuit or
                                             similar device in computer
                                             equipment or non-computer
                                             equipment, whether the property of
                                             the insured reinsured or not; or

                                       (b)   any change, alteration or
                                             modification involving the date
                                             change to the year 2000 or any
                                             other date change, including leap
                                             year calculations, to any such
                                             computer system, hardware,
                                             programme or software or any
                                             microchip, integrated circuit or
                                             similar device in computer
                                             equipment or non-computer
                                             equipment, whether the property of
                                             the Reinsured's insured or
                                             reinsured or not.

                                       This clause applies regardless of any
                                       other cause or event that contributes
                                       concurrently or in any sequence to the
                                       loss, damage, cost, claim or expense.

                                       The date change to the year 2000, or any
                                       other date change, including leap year
                                       calculations, shall not in and of itself
                                       be regarded as an event for the purposes
                                       of this Contract.

GENERAL CONDITIONS:             Other Conditions to be agreed.

                                       13
<PAGE>

WORDING:                   To be mutually agreed by the Reinsured and Reinsurer.

PXRE Reinsurance Ltd.

   /s/ Robert P. Myron                             April 23, 2004
----------------------------               ----------------------------
Robert P. Myron                             Date
Chief Financial Officer

Select Reinsurance Ltd.
Hamilton, Bermuda

   /s/ Brant L. Kizer
----------------------------

    Vice President                                April 23, 2004
----------------------------               ----------------------------
                                            Date

                                       14

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