Document:

<PAGE>

                                                                   EXHIBIT 10.31

                           AMENDMENT AND RESTATEMENT
                                   TO AND OF
                          REVOLVING CREDIT AGREEMENT

                                 by and among

                         MERCURY GENERAL CORPORATION,
                           THE LENDERS PARTY HERETO,

                                      and

                        THE BANK OF NEW YORK, AS AGENT
                    UNION BANK OF CALIFORNIA, AS CO-AGENT
                                     and
                          BANK ONE, NA, AS CO-AGENT
                                     with
                          BNY CAPITAL MARKETS, INC.,
                               AS LEAD ARRANGER

                               ________________
                                 $100,000,000
                               ________________

                         Dated as of October 29, 1999
<PAGE>

                           AMENDMENT AND RESTATEMENT
                                   TO AND OF
                          REVOLVING CREDIT AGREEMENT
                          --------------------------

     AMENDMENT AND RESTATEMENT (this "Restatement") dated as of October 29,
1999, to and of the Revolving Credit Agreement, dated as of October 30, 1998, by
and among MERCURY GENERAL CORPORATION, a California corporation (the
"Borrower"), the lenders from time to time party thereto (collectively, together
with their respective assigns, the "Lenders", and each a "Lender"), and THE BANK
OF NEW YORK, as Agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Agent").

                                   RECITALS
                                   --------

     A.  Simultaneously with the execution and delivery hereof:  (i) each of The
Chase Manhattan Bank and Credit Lyonnais New York Branch (each, a "Withdrawing
Lender" and together, the "Withdrawing Lenders") is terminating its Commitment
under the Credit Agreement and shall no longer be deemed a party thereto; (ii)
Bank of America, N.A. (the "New Lender") has agreed to become a "Lender" under
the Credit Agreement and to make loans to the Borrower in the amount set forth
opposite its name on Exhibit A hereto and the Borrower desires to accept the
Commitment of the New Lender and to cause the New Lender to be added as a
"Lender" to the Loan Agreement as amended hereby, and the Agent and the Lenders
that are not terminating their Commitments under the Credit Agreement
(collectively, the "Existing Lenders"; the New Lender and the Existing Lenders
are hereinafter referred to collectively as the "Lenders") are agreeable to the
addition of the New Lender; and (iii) the Existing Lenders desire to change
their respective Commitments to the amount set forth opposite their respective
names on Exhibit A hereto and the Borrower desires to accept such changed
Commitments.

     B.  In addition, the Borrower has requested that the Maturity Date be
extended for an additional 364-day period from the current Maturity Date and the
Lenders agree to such extension subject to the terms and conditions set forth
below, including an increase in the Applicable Margin with respect to Eurodollar
Advances and the Commitment Fee.

     C.  Capitalized terms used herein that are defined in the Credit Agreement
and are not otherwise defined herein shall have the respective meanings ascribed
thereto in the Credit Agreement.

     Accordingly, in consideration of the Recitals and the covenants, conditions
and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
<PAGE>

     Article 1.    Change in Commitments.
                   ---------------------

          Section 1.1    From and after the date hereof, the Commitment of each
Lender shall be the amount set forth opposite such Lender's name on Exhibit A
hereto as the same may be reduced pursuant to the terms of the Credit Agreement,
and, with respect to each Existing Lender, such amount shall supersede and be
deemed to amend the amount of its respective Commitment as set forth opposite
its name on Exhibit A to the Credit Agreement.

          Section 1.2    The parties hereto acknowledge that the Commitment of
each of the Withdrawing Lenders under the Credit Agreement has been terminated
and the Withdrawing Lenders shall have no further duties or obligations under
the Credit Agreement after the date hereof.

          Section 1.3    The New Lender agrees with the Borrower, the Existing
Lenders and the Agent that (i) the New Lender will abide by the terms of the
Credit Agreement as amended hereby, (ii) the Credit Agreement shall be binding
upon, inure to the benefit of, and be enforceable by and against the New Lender,
and (ii) the New Lender shall be deemed to be a "Lender" under, and as such term
is defined in, the Credit Agreement.

          Section 1.4    If any Loans are outstanding under the Credit Agreement
on the date hereof, the Lenders shall on the date hereof, at the direction of
the Agent, make appropriate adjustments among themselves in order to insure that
the amount (and type) of the Loans outstanding from each Lender under the Credit
Agreement (as of the date hereof) are proportionate to each Lender's Commitment
Percentage, after giving effect to the reallocation of the Commitments of the
Lenders.

     Article 2.    Extension of Maturity Date.
                   --------------------------

          Notwithstanding the procedures set forth in Section 2.17 of the Credit
Agreement, the Agent and each of the Lenders hereby consents to the extension of
the Maturity Date for a period of 364 days from the current Maturity Date.
Accordingly, the new Maturity Date shall be October 27, 2000.

     Article 3.    Amendments to the Credit Agreement.
                   ----------------------------------

          Section 3.1    The Credit Agreement is hereby amended by restating in
its entirety the definition of "Applicable Margin" contained in Section 1.1 of
the Credit Agreement to read as follows:

               "Applicable Margin": (i) with respect to the unpaid principal
          balance of ABR Advances, the applicable percentage set forth below in
          the column entitled "ABR Advances", (ii) with respect to the unpaid
          principal balance of Eurodollar Advances, the applicable percentage
          set forth below in the column entitled "Eurodollar Advances", and
          (iii) with respect to the Commitment Fee, the applicable percentage
          set forth below in the column entitled "Commitment Fee"; in each case
          opposite the applicable Pricing Level:

                                       2
<PAGE>

<TABLE>
<CAPTION>
                                            ABR               Eurodollar              Commitment
          Pricing Level                     Advances          Advances                Fee
          -------------                     --------          ----------              ----------
          <S>                               <C>               <C>                     <C>
          Pricing Level I                      0%                0.6000%                  .1250%
          Pricing Level II                     0%                0.6500%                  .1250%
          Pricing Level III                    0%                0.7750%                  .1250%
          Pricing Level IV                     0%                0.9000%                  .1250%
</TABLE>

          Section 3.2.   The Credit Agreement is hereby amended by restating in
its entirety the definition of "Maturity Date" contained in Section 1.1 of the
Credit Agreement to read as follows:

               "Maturity Date": October 27, 2000 (or any date subsequent thereto
          resulting from an extension of the Maturity Date pursuant to Section
          2.17), or such earlier date on which the Notes shall become due and
          payable, whether by acceleration or otherwise.

          Section 3.3.   Exhibit A to the Credit Agreement is deleted in its
entirety and Exhibit A hereto is substituted therefor.

          Section 3.4.   In order to evidence the Loans, as amended hereby, the
Borrower shall execute and deliver to each Lender, simultaneously with the
execution and delivery hereof, a promissory note payable to the order of such
Lender in substantially the form of Exhibit B hereto (hereinafter referred to
individually as a "SUBSTITUTED NOTE" and collectively as the "SUBSTITUTED
NOTES").  Each of the Existing Lenders shall, promptly after the execution and
delivery by the Borrower of its applicable Substituted Note as herein provided,
mark the Notes delivered to it in connection with the Credit Agreement "Replaced
by Substituted Note" and return such Notes to the Borrower.  Exhibit B to the
Credit Agreement is deleted in its entirety and Exhibit B hereto is substituted
therefor.

          Section 3.5.   Schedule 1.1 to the Credit Agreement is deleted in its
entirety and Schedule 1.1 hereto is substituted therefor.

          Section 3.6.   All references in the Credit Agreement and the other
Loan Documents to: (i) the "Credit Agreement", and also in the case of the
Credit Agreement to "this Agreement", shall be deemed to refer to the Credit
Agreement, as amended and restated hereby, (ii) the "Note(s)" shall be deemed to
refer to the Substituted Note(s), and (iii) the "Loan Documents" shall be deemed
to include this Restatement and the Substituted Notes.

          Section 3.7    The Credit Agreement and the other Loan Documents shall
each be deemed amended, supplemented and restated hereby to the extent
necessary, if any, to give effect to the provisions of this Restatement.

     Article 4.    Conditions to Effectiveness of this Restatement.

          This Restatement shall become effective on the date of the fulfillment
(to the satisfaction of the Agent) of the following conditions precedent:

                                       3
<PAGE>

          (a) The Agent shall have received this Restatement, duly executed by a
duly authorized officer or officers of the Borrower, the Agent and each Lender.

          (b) The Borrower shall have executed and delivered to each Lender its
Substituted Note.

          (c) The Agent shall have received a certificate of the Secretary or
Assistant Secretary of the Borrower (i) attaching a true and complete copy of
the resolutions of its Board of Directors and of all documents evidencing all
other necessary corporate action (in form and substance satisfactory to the
Agent) taken by it to authorize this Restatement and the Substituted Notes, (ii)
certifying that its certificate of incorporation and by-laws have not been
amended since October 30, 1998, or, if so, setting forth the same, and (iii)
setting forth the incumbency of its officer or officers who may sign this
Restatement, including therein a signature specimen of such officer or officers.

          (d) The Agent shall have received such other documents as it shall
reasonably request.

     Article 5.    Representations and Warranties.
                   ------------------------------

          The Borrower hereby (i) reaffirms and admits the validity and
enforceability of the Credit Agreement and the other Loan Documents and all of
its obligations thereunder, and agrees and admits that it has no defense or
offset against any of its obligations under the Loan Documents, (ii) represents
and warrants that there exists no Default or Event of Default immediately after
giving effect to this Restatement, and (iii) represents and warrants that the
representations and warranties contained in the Loan Documents, including the
Credit Agreement as amended by this Restatement, are true and correct in all
material respects on and as of the date hereof.

     Article 6.    Miscellaneous.
                   -------------

          Section 6.1    Except as amended and restated hereby, the Credit
Agreement and the other Loan Documents are hereby ratified and confirmed in all
respects and shall remain in full force and effect in accordance with their
respective terms.

          Section 6.2    This Restatement may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one agreement.  It shall not be necessary in making proof of this
Restatement to produce or account for more than one counterpart signed by the
party against which enforcement is sought.

          Section 6.3    THIS RESTATEMENT IS BEING DELIVERED IN AND IS INTENDED
TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCEABLE
AND BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.

                                       4
<PAGE>

     AS EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Restatement to be
executed on its behalf as of the date first written above.

                                    MERCURY GENERAL CORPORATION

                                    By:_________________________________________
                                    Name:_______________________________________
                                    Title:______________________________________

                                    THE BANK OF NEW YORK, in its capacity
                                    as a Lender and in its capacity as the Agent

                                    By:_________________________________________
                                    Name:_______________________________________
                                    Title:______________________________________

CONSENTED TO:

UNION BANK OF CALIFORNIA, N.A.

By:_________________________________________
Name:_______________________________________
Title:______________________________________

BANK ONE, NA, (F/K/A THE FIRST
NATIONAL BANK OF CHICAGO)

By:_________________________________________
Name:_______________________________________
Title:______________________________________

FLEET NATIONAL BANK

By:_________________________________________
Name:_______________________________________
Title:______________________________________

BANK OF AMERICA, N.A.

By:_________________________________________
Name:_______________________________________
Title:______________________________________

                 Signature Page to Mercury General Corporation
        Amendment and Restatement to and of Revolving Credit Agreement
<PAGE>

                           MERCURY GENERAL EXHIBIT A
                           -------------------------

                              List of Commitments
                              -------------------
<TABLE>
<CAPTION>
Bank                              Commitment                 Commitment Percentage
----                              ----------                 ---------------------
<S>                               <C>                         <C>
The Bank of New York              $ 20,500,000                       20.50%
Union Bank of California, N.A     $ 20,250,000                       20.25%
Bank One, NA                      $ 20,250,000                       20.25%
Fleet National Bank               $ 19,500,000                       19.50%
Bank of America, N.A.             $ 19,500,000                       19.50%

TOTAL                             $100,000,000                         100%
</TABLE>
<PAGE>

                           MERCURY GENERAL EXHIBIT B

                                 FORM OF NOTE

                                                             __________ __, ____
                                                              New York, New York

     FOR VALUE RECEIVED, on the Maturity Date, MERCURY GENERAL CORPORATION, a
California corporation (the "Borrower"), hereby promises to pay to the order of
________________ (the "Lender"), at the office of The Bank of New York, as Agent
(the "Agent"), located at One Wall Street, New York, New York or at such other
place as the Agent may specify from time to time, in lawful money of the United
States of America, the outstanding principal balance of the Lender's Loans to
the Borrower, together with interest from the date hereof, on the unpaid
principal balance hereof, payable at the rate or rates and at the time or times
provided for in the Revolving Credit Agreement, dated as of October 30, 1998,
among the Borrower, the Lenders from time to time party thereto and the Agent
(as the same may be amended, modified or supplemented from time to time, the
"Agreement").  Capitalized terms used herein that are defined in the Agreement
shall have the meanings therein defined.  In no event shall interest payable
hereon exceed the Highest Lawful Rate.

     This Note is one of the Notes referred to in the Agreement and is entitled
to the benefits of, and is subject to the terms set forth in, the Agreement.
The principal of this Note is payable in the amounts and under the
circumstances, and its maturity is subject to acceleration upon the terms, set
forth in the Agreement.  Except as otherwise provided in the Agreement, if any
payment on this Note becomes due and payable on a day which is not a Business
Day, the maturity thereof shall be extended to the next Business Day and
interest shall be payable at the applicable rate or rates specified in the
Agreement during such extension period.

     The (i) date and amount of each Loan made by the Lender, (ii) its character
as an ABR Advance, a Eurodollar Advance, or a combination thereof, (iii) the
interest rate and Interest Period applicable to Eurodollar Advances, and (iv)
each payment and prepayment of the principal thereof, shall be recorded by the
Lender on its books and, prior to any transfer of this Note, indorsed by the
Lender on the schedule attached hereto or any continuation thereof, provided
that the failure of the Lender to make any such recordation or indorsement shall
not affect the obligations of the Borrower to make payment when due of any
amount owing hereunder.

     Presentment for payment, demand, protest, notice of protest and notice of
dishonor and all other demands and notices in connection with the delivery,
performance and enforcement of this Note are hereby waived, except as
specifically otherwise provided in the Agreement.

     This Note is being delivered in, is intended to be performed in, shall be
construed and interpreted in accordance with, and be governed by the internal
laws of, the State of New York, without regard to principles of conflicts of
law.
<PAGE>

     This Note may only be amended by an instrument in writing executed pursuant
to the provisions of Section 11.1 of the Agreement.

                                               MERCURY GENERAL CORPORATION

                                               By:______________________________
                                               Name:____________________________
                                               Title:___________________________

                                       2
<PAGE>

                               SCHEDULE TO NOTE

<TABLE>
<CAPTION>
                                                Interest
                                                Rate on
                                                Eurodollar
                                                Advances
                 Type of       Amount of        (without        Interest
                 Advance       principal        regard to       Period (if
                 (ABR or       Amount of        paid or         Applicable      Eurodollar       Notation
 Date            Eurodollar    Advance          prepaid         Margin)         Advance)         Made By
 ----            ----------    ---------        ----------      ----------      ----------       --------
<S>              <C>           <C>              <C>             <C>             <C>              <C>
</TABLE>
<PAGE>

                         MERCURY GENERAL SCHEDULE 1.1

                            LIST OF LENDING OFFICES
                            -----------------------

DOMESTIC LENDING OFFICES                   EURODOLLAR LENDING OFFICES
------------------------                   --------------------------

1.  The Bank of New York                   The Bank of New York
    One Wall Street                        One Wall Street
    Agency Function Administration         Agency Function Administration
    18th New York                          18th Floor
    New York, New York 10286               New York, New York 10286
    Att: Patricia A. Hylton                Att: Patricia A. Hylton
    Telephone: (212) 635-4693 (212)        Telephone: (212) 635-4693
    Telecopy: (212) 635-6365(60r7)         Telecopy: (212) 635-6365(60r7)

2.  Union Bank of California, N.A.         Union Bank of California, N.A.
    Insurance Industries Group             Insurance Industries Group
    350 California Street - 6/th/ Floor    350 California Street - 6/th/ Floor
    Att: James R. Fothergill,              Att: James R. Fothergill,
         Vice President                         Vice President
    Telephone: (415) 705-7035              Telephone: (415) 705-7035
    Telecopy: (415) 705-7037               Telecopy: (415) 705-7037

3.  Bank One, NA                           Bank One, NA
    1 Bank One Plaza                       1 Bank One Plaza
    16/th/ Floor IL 1-0085                 16/th/ Floor IL 1-0085
    Chicago, Il 60670                      Chicago, Il 60670
    Att: Thomas W. Doddridge               Att: Thomas W. Doddridge
         First Vice President                   First Vice President
    Telephone:  (312) 732-3881             Telephone:  (312) 732-3881
    Telecopy:  (312) 732-4033              Telecopy:  (312) 732-4033

4.  Financial Institutions                 Financial Institutions
    Fleet National Bank                    Fleet National Bank
    25th Floor CTMOO250                    25th Floor CTMOO250
    777 Main Street                        777 Main Street
    Hartford, CT 06115                     Hartford, CT 06115
    Att: David Albanesi                    Att: David Albanesi
         Vice President                         Vice President
    Telephone: 860-986-7932                Telephone: 860-986-7932
    Facsimile: 860-986-1264                Facsimile: 860-986-1264

5.  Bank of America, N.A.                  Bank of America, N.A.
    901 Main Street                        901 Main Street
    66th Floor                             66th Floor
    Dallas, Texas 75202                    Dallas, Texas 75202
    Att: Joan D'Amico                      Att: Joan D'Amico
    Telephone: 214-209-3307                Telephone: 214-209-3307
    Facsimile: 214-209-3742                Facsimile: 214-209-3742

                                       2<PAGE>

                                                                   Exhibit 10.32

                         MULTIPLE LINE EXCESS OF LOSS
                             REINSURANCE AGREEMENT
                                 NO. TM670A,B

                           EFFECTIVE JANUARY 1, 1999

                                    between

                           MERCURY CASUALTY COMPANY
                               Brea, California

                                      and

                     SWISS REINSURANCE AMERICA CORPORATION
                              New York, New York
<PAGE>

        MULTIPLE LINE EXCESS OF LOSS REINSURANCE AGREEMENT NO. TM670A,B

<TABLE>
<CAPTION>
ARTICLE         CONTENTS                                              PAGE
-------         --------                                              ----
<S>             <C>                                                   <C>
                PREAMBLE                                                 1
I               INTENT                                                   1
II              COVER                                                    1
III             EFFECTIVE DATE AND TERMINATION                           2
IV              TERRITORY                                                2
V               ULTIMATE NET LOSS                                        2
VI              LOSS IN EXCESS OF POLICY LIMITS                          3
VII             EXTRA CONTRACTUAL OBLIGATIONS                            3
VIII            DEFINITION OF RISK                                       4
IX              EXCLUSIONS                                               5
X               SPECIAL ACCEPTANCE                                      11
XI              LOSS OCCURRENCE                                         12
XII             REPORTS AND REMITTANCES                                 14
XIII            CLAIMS                                                  14
XIV             SALVAGE AND SUBROGATION                                 15
XV              ACCESS TO RECORDS                                       16
XVI             TAXES                                                   16
XVII            CURRENCY                                                16
XVIII           OFFSET                                                  16
XIX             ERRORS OR OMISSIONS                                     17
XX              DISPUTE RESOLUTION                                      17
XXI             INSOLVENCY                                              19
XXII            SPECIAL TERMINATION                                     20
XXIII           AMENDMENTS                                              21
                SIGNATURES                                              21
</TABLE>

ATTACHMENTS:    EXHIBIT A - FIRST MULTIPLE LINE EXCESS OF LOSS COVER
                EXHIBIT B - SECOND MULTIPLE LINE EXCESS OF LOSS COVER

                INSOLVENCY FUNDS EXCLUSION CLAUSE
                POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE
                POLLUTION AND SEEPAGE EXCLUSION CLAUSE
                NUCLEAR INCIDENT EXCLUSION CLAUSE  - PHYSICAL DAMAGE -
                 REINSURANCE - U.S.A.
                NUCLEAR INCIDENT EXCLUSION CLAUSE  - PHYSICAL DAMAGE -
                 REINSURANCE - CANADA
                NUCLEAR INCIDENT EXCLUSION CLAUSE - REINSURANCE - NO. 4
                POLLUTION LIABILITY EXCLUSION CLAUSE - REINSURANCE
                NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY -
                 REINSURANCE  - U.S.A.
                NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY -
                 REINSURANCE - CANADA
<PAGE>

                         MULTIPLE LINE EXCESS OF LOSS
                             REINSURANCE AGREEMENT
                                 NO. TM670A,B
                 (hereinafter referred to as the "Agreement")

                                    between

                           MERCURY CASUALTY COMPANY
                               Brea, California
                  (hereinafter referred to as the "Company")

                                      and

                     SWISS REINSURANCE AMERICA CORPORATION
                              New York, New York
                 (hereinafter referred to as the "Reinsurer")

ARTICLE I - INTENT
------------------

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

      EXHIBIT A - FIRST MULTIPLE LINE EXCESS OF LOSS COVER
      EXHIBIT B - SECOND MULTIPLE LINE EXCESS OF LOSS COVER

B. This Agreement is solely between the Company and the Reinsurer, and nothing
   contained in this Agreement shall create any obligations or establish any
   rights against the Reinsurer in favor of any person or entity not a party
   hereto.

C. The performance of obligations by both parties under this Agreement shall be
   in accordance with a fiduciary standard of good faith and fair dealing.

ARTICLE II - COVER
------------------

A. The Reinsurer shall indemnify the Company on an excess of loss basis in
   respect of the Company's Ultimate Net Loss paid or to be paid by the Company
   as a result of losses occurring during the term of this Agreement, for
   Policies in force as of January 1, 1999, and new and renewal Policies
   becoming effective on or after said date, subject to the terms and conditions
   contained herein.

B. The term "Policies" shall mean each of the Company's binders, policies and
   contracts of insurance or reinsurance on the business covered hereunder.

                                       1.
<PAGE>

ARTICLE III - EFFECTIVE DATE AND TERMINATION
--------------------------------------------

A. This Agreement shall become effective with respect to losses occurring on and
   after 12:01 a.m., Pacific Standard Time, January 1, 1999, and shall remain in
   full force until terminated.  This Agreement may be terminated at any time by
   either party giving to the other 90 days prior written notice by certified
   mail of its intention to do so.

B. Upon termination of this Agreement, the Reinsurer shall be liable for losses
   occurring prior to the date of termination; however, the Reinsurer shall have
   no liability for losses occurring subsequent to the termination of this
   Agreement.

C. If this Agreement shall terminate while a Property loss covered hereunder is
   in progress, it is agreed that, subject to the other conditions of this
   Agreement, the Reinsurer shall indemnify the Company as if the entire loss
   had occurred during the time this Agreement is in force provided the loss
   covered hereunder started before the date of termination.

ARTICLE IV - TERRITORY
----------------------

A. As respects Property Business, this Agreement applies to risks located in the
   United States of America, its territories and possessions, and Canada, except
   that with respect to Multiple Peril Policies covered hereunder, the
   territorial limits of this Agreement shall be those of the original Policies
   when such Policies are written to cover risks primarily located in the United
   States of America, its territories and possessions, and Canada.

B. As respects Casualty Business, this Agreement applies to Policies issued by
   the Company within the United States of America, its territories and
   possessions, and Canada and shall apply to losses covered hereunder wherever
   occurring.

ARTICLE V - ULTIMATE NET LOSS
-----------------------------

A. The term "Ultimate Net Loss" shall mean the actual sum paid or to be paid by
   the Company in settlement of losses or liability after making deductions for
   all recoveries, including subrogation, salvages, and claims upon other
   reinsurances, whether collectible or not, which inure to the benefit of the
   Reinsurer under this Agreement, and shall include Loss Adjustment Expenses
   incurred by the Company.

B. The term "Ultimate Net Loss" shall include 90% of Extra Contractual
   Obligations, as defined herein.

                                       2.
<PAGE>

C. The term "Loss Adjustment Expenses" shall mean all expenses incurred by the
   Company in connection with the investigation, settlement, defense or
   litigation of any claim or loss covered by the Policies reinsured under this
   Agreement, and shall include Declaratory Judgment Expenses.  However, the
   term "Loss Adjustment Expenses" shall not include the salaries and expenses
   of Company employees, office expenses and other overhead expenses.

D. The term "Declaratory Judgment Expenses" shall mean all legal expenses,
   incurred in the representation of the Company in litigation brought to
   determine the Company's defense and/or indemnification obligations, that are
   allocable to any specific claim or loss applicable to Policies subject to
   this Agreement. In addition, the Company shall promptly notify the Reinsurer
   of any Declaratory Judgment Expenses subject to this Agreement.

E. All recoveries, salvages or payments recovered or received subsequent to a
   loss settlement under this Agreement shall be applied as if recovered or
   received prior to the aforesaid settlement and all necessary adjustments to
   the loss settlement shall be made by the parties hereto.

F. Nothing in this Article shall be construed to mean that losses are not
   recoverable hereunder until the Ultimate Net Loss of the Company has been
   ascertained.

ARTICLE VI - LOSS IN EXCESS OF POLICY LIMITS
--------------------------------------------

A. In the event the Company is liable to a policyholder as the result of a
   settlement or judgment rendered against the policyholder which is in excess
   of the Policy limit, 90% of that portion of the award made to the third party
   claimant which is in excess of the Company's Policy limit shall be added to
   the amount of the Company's Policy limit and the sum thereof shall be
   considered one loss, subject to the provision in Paragraph B. below and all
   other provisions set forth in this Agreement.

B. With respect to coverage provided under this Article, recoveries from any
   insurance or reinsurance other than this Agreement, shall inure to the
   benefit of the Reinsurer and shall be deducted to arrive at the amount of the
   Company's Ultimate Net Loss.

ARTICLE VII - EXTRA CONTRACTUAL OBLIGATIONS
-------------------------------------------

A. "Extra Contractual Obligations" are defined as those liabilities not covered
   under any other provision of this Agreement and which arise from the handling
   of any claim on business covered hereunder, such liabilities arising because
   of, but not limited to, the following: failure by the Company to settle
   within the Policy limit, or by reason of alleged or actual negligence, fraud
   or bad faith in

                                       3.
<PAGE>

   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.

B. The date on which an Extra Contractual Obligation is incurred by the Company
   shall be deemed, in all circumstances, to be the date of the original
   accident, casualty, disaster or loss occurrence.

C. However, coverage hereunder as respects Extra Contractual Obligations shall
   not apply where the loss has been incurred due to the fraud of a member of
   the Board of Directors or a corporate officer of the Company 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.

D. Extra Contractual Obligations shall not include loss arising out of
   engineering or other services or any other non-claims related activity
   provided to the insured by the Company.

E. Recoveries, collectibles or retention from any other form of insurance or
   reinsurance including deductibles or self-insured retention which protect the
   Company against Extra Contractual Obligations shall inure to the benefit of
   the Reinsurer and shall be deducted from the total amount of Extra
   Contractual Obligations for purposes of determining the loss hereunder.

ARTICLE VIII - DEFINITION OF RISK
---------------------------------

The Company shall be the sole judge of what constitutes one risk provided,
however, that:

A. A risk shall never be less than all insurable values within exterior walls
   and under one roof regardless of fire divisions, the number of Policies
   involved, and whether there is a single, multiple or unrelated named insureds
   involved in such risk.

B. When two or more buildings are situated at the same general location, the
   Company shall identify on its records at the time of acceptance by the
   Company, those individual buildings and all insurable values contained
   therein that are considered to constitute each risk.  If such identification
   is not made, each building and all insurable values contained therein shall
   be considered to be a separate risk.

C. A risk shall be determined from the standpoint of the predominant  peril and
   such peril shall be noted in the Company's records.

                                       4.
<PAGE>

ARTICLE IX - EXCLUSIONS
-----------------------

I. AS RESPECTS PROPERTY BUSINESS COVERED UNDER THIS AGREEMENT,
   THIS AGREEMENT DOES NOT COVER:

   A. THE FOLLOWING GENERAL CATEGORIES

      1.  All Lines of Business not specifically listed in Section I - Business
          Covered of Exhibits A and B.

      2.  Policies issued with a deductible or self-insured retention of $25,000
          or more except Policies covering the Company's own building coverage
          that are written with a self-insured retention less than or equal to
          $1,000,000; provided this exclusion shall not apply to Policies which
          customarily provide a percentage deductible on the perils of
          earthquake or windstorm.

      3.  Reinsurance assumed, except inter-company reinsurance.

      4.  Ex-gratia Payments.

      5.  Loss or damage occasioned by war, invasion, revolution, bombardment,
          hostilities, acts of foreign enemies, civil war, rebellion,
          insurrection, military or usurped power, martial law, or confiscation
          by order of any government or public authority, but not excluding loss
          or damage which would be covered under a standard form of Policy
          containing a standard war exclusion clause.

      6.  Insolvency Funds as per the attached Insolvency Funds Exclusion
          Clause, which is made part of this Agreement.

      7.  Pool, Syndicate and Association business as per the attached Pools,
          Associations and Syndicates Exclusion Clause, which is made part of
          this Agreement.

      8.  Risks where the total insured value exceeds $20,000,000.

      9.  System performance.

   B. THE FOLLOWING CLASSES OF BUSINESS AND TYPES OF RISKS

      1.  Mortgage Impairment.

      2.  Growing and/or standing crops.

      3.  Mortality and Health covering birds, animals or fish.

      4.  All onshore and offshore gas and oil drilling rigs.

                                       5.
<PAGE>

      5.  Petrochemical operations engaged in the production, refining or
          upgrading of petroleum or petroleum derivatives or natural gas.

      6.  Satellites.

      7.  All railroad business.

      8.  As respects Inland Marine business:
          a. Registered Mail and Armored Car Policies.
          b. Jeweler's Block Policies.
          c. Furrier's Customers Policies.
          d. Rolling Stock.
          e. Parcel Post when  written  to  cover  banks  and  financial
             institutions.
          f. Commercial Negative Film Insurance and Cast and/or Non-Appearance
             Insurance.
          g. Garment Contractors Policies.
          h. Mining Equipment while underground.
          i. Radio and Television Broadcasting Towers except for existing
             exposures present at the inception of this Agreement.
          j. Motor Truck Cargo Insurance written for common carriers operating
             beyond a radius of 200 miles.
          k. Cargo Insurance written to cover ocean, lake or inland waterway
             vessels.
          l. Watercraft.

      9.  Any collection of fine arts where the insurable value is equal to or
          exceeds $1,000,000.

      10. Bridges, tunnels and dams.

      11. Personal Multiple Peril (Section II only).

   C. THE FOLLOWING PERILS

      1.  Flood and/or Earthquake when written as such.

      2.  Difference in Conditions, however styled.

      3.  Pollution and Seepage as per the attached Pollution and Seepage
          Exclusion Clause which is made part of this Agreement.

      4.  Nuclear Incident Exclusion Clauses which are attached and made part of
          this Agreement:
          a. Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance -
             U.S.A.
          b. Nuclear Incident Exclusion Clause - Physical Damage -Reinsurance -
             Canada.
          c. Nuclear Incident Exclusion Clause - Reinsurance - No. 4.

                                       6.
<PAGE>

   D. In the event the Company is inadvertently bound on any risk which is
      excluded under this Agreement and identified below, the reinsurance
      provided under this Agreement shall apply to such risk until discovery by
      the Company within its Home Office of the existence of such risk and for
      30 days thereafter, and shall then cease unless within the 30 day period,
      the Company has received from the Reinsurer written notice of its approval
      of such risk.

      As respects Classes of Business and Types of Risks:

      Items 1. through 11. of Section B. of this Part I.

II.   AS RESPECTS CASUALTY BUSINESS COVERED UNDER THIS AGREEMENT,
      THIS AGREEMENT DOES NOT COVER:

   A. THE FOLLOWING GENERAL CATEGORIES

      1.  Ex-gratia payments.

      2.  Risks subject to a deductible or a self-insured retention excess of
          $25,000.

      3.  Loss or damage caused directly or indirectly by: (a) enemy attack by
          armed forces including action taken by military, naval or air forces
          in resisting an actual or an immediately impending enemy attack; (b)
          invasion; (c) insurrection; (d) rebellion; (e) revolution; (f)
          intervention; (g) civil war; and (h) usurped power.

      4.  Reinsurance assumed by the Company except inter-company reinsurance.

      5.  Business derived from any Pool, Association, including Joint
          Underwriting Association, Syndicate, Exchange, Plan, Fund or other
          facility directly as a member, subscriber or participant, or
          indirectly by way of reinsurance or assessments; provided this
          exclusion shall not apply to Automobile assigned risks which may be
          currently or subsequently covered hereunder.

      6.  Pollution Liability as per the attached Pollution Liability Exclusion
          Clause - Reinsurance.

      7.  Insolvency Funds as per the attached Insolvency Funds Exclusion
          Clause.

      8.  Nuclear Incident Exclusion Clauses which are attached and made part of
          this Agreement:
          a. Nuclear Incident Exclusion Clause - Liability - Reinsurance -
             U.S.A.

                                       7.
<PAGE>

          b. Nuclear Incident Exclusion Clause - Liability - Reinsurance -
             Canada.
          c. Nuclear Incident Exclusion  Clause - Reinsurance - No. 4.

   B. THE FOLLOWING INSURANCE COVERAGES

      1.  Fiduciary Liability.

      2.  Fidelity and Surety.

      3.  Credit and Financial Guarantee.

      4.  Securities and Exchange Liability.

      5.  Retroactive coverage.

      6.  Personal and Commercial Excess or Umbrella  Liability.

      7.  Malpractice or Professional Liability except incidental Malpractice
          Liability.

      8.  Errors and Omissions Liability except as provided under the Printers
          Program.

      9.  Directors' and Officers' Liability.

      10. Advertisers', Broadcasters' and Telecasters' Liability as respects
          Personal Injury Liability except as provided under Commercial Package
          Policies.

      11. Liquor Law Liability except Host Liquor Law Liability and Liquor Law
          Liability under Businessowners Policies written for the American
          Legion.

      12. Kidnap, Extortion and Ransom Liability.

      13. Boiler and Machinery Insurance.

      14. Protection and Indemnity (Ocean Marine).

      15. Personal Automobile Liability.

      16. Automobile Collision.

      17. Workers Compensation and Employers Liability.

   C. THE FOLLOWING RISKS AS RESPECTS HIRED AND NON-OWNED AUTOMOBILE LIABILITY

      1.  Vehicles used in or while in practice or preparation for, a
          prearranged racing, speed, exhibition or demolition contest.

                                       8.
<PAGE>

      2.  All vehicles classified as "Public Automobiles" except church buses,
          social service agency automobiles, van pools and vehicles used for the
          transportation of employees.

      3.  Fire, police, emergency  or municipal vehicles.

      4.  Motorcycles.

      5.  The rental or leasing of vehicles to others.

      6.  Logging trucks.

      7.  Vehicles regularly used to haul property of others and operating
          beyond a 200 mile radius.

      8.  Newspaper delivery trucks.

      9.  Vehicles engaged in the transportation or distribution of fireworks,
          fuses, explosives, ammunitions, natural or artificial fuel, gas, or
          liquefied petroleum gases or gasoline.

   D. THE FOLLOWING AS RESPECTS LIABILITY OTHER THAN AUTOMOBILE

      1.  The manufacturing, mining, refining, processing, distribution,
          installation, removal or encapsulment of asbestos.

      2.  Risks involving known exposure to the following substances:
          a. dioxin.
          b. polychlorinated biphenols.
          c. asbestos.

      3.  Liability as respects Products and Completed Operations:
          a. The manufacture, labeling or re-labeling, importation or wholesale
             distribution of:
             (i)    Drugs or pharmaceuticals.
             (ii)   Cosmetics.
             (iii)  Herbicides, insecticides or pesticides.
             (iv)   Petrochemical or electrical equipment used for heating,
                    lighting or cooking.
             (v)    Industrial or toxic chemicals.
             (vi)   Valves, gaskets or seals of a hydraulic, petrochemical or
                    high pressure nature.
             (vii)  Medical supplies.
             (viii) Heavy machinery and equipment.
             (ix)   Power tools.
             (x)    Medical equipment used for diagnostic or life sustaining
                    purposes.
          b. The manufacture or importing of motorized or self-propelled
             vehicles and equipment.

                                       9.
<PAGE>

          c. The manufacturing, importing, packing, canning, bottling or
             processing of foodstuffs except Retail Businessowners Policies on
             premises where sales are made.
          d. The blending, mixing, processing or importing of animal feed.
          e. The manufacture, sale, distribution, handling, servicing or
             maintenance of aircraft, aerospacecraft, missiles, satellites or
             any component or components thereof.

      4.  Ownership, operation or use of vessels exceeding 50 feet in length.

      5.  All railway operations except sidetrack agreements.

      6.  Amusement parks, carnivals or circuses.

      7.  Public assembly exposure in excess of 5,000.

      8.  Gas, electric and water utility companies.

      9.  Subaqueous operations.

      10. Mining.

      11. Blasting operations.

      12. Demolition of buildings or structures in excess of two stories.

      13. Shoring, underpinning or moving of buildings or structures.

      14. Manufacture, sale, rental, lease, erection or repair of scaffolds.

      15. Construction of bridges, tunnels or dams.

      16. a. Manufacturers or importers of fireworks, fuses, or any substance,
             as defined and noted below, intended for use as an explosive.
          b. Loading of fireworks, fuses, or any explosive substance defined
             below into containers for use as explosive objects, propellant
             charges or detonation devices and the storage thereof.
          c. Manufacturers or importers of any product in which fireworks,
             fuses, or any explosive substance defined below is an ingredient.
          d. Handling, storage, transportation or use of fireworks, fuses, or
             any explosive substance defined below.

          NOTE: An explosive substance is defined as any substance manufactured
          for the express purpose of exploding as

                                      10.
<PAGE>

          differentiated from commodities used industrially and which are only
          incidentally explosive.

      17. Manufacture, production, refining, storage, wholesale distribution or
          transportation of natural or artificial fuel, gas, butane, propane or
          liquefied petroleum gases or gasoline.

      18. Onshore and offshore gas and oil drilling operations.

      19. Ownership, maintenance or use of any airport or aircraft, including
          fueling, or any device or machine intended for and/or aiding in the
          achievement of atmospheric flight, projection or orbit.

      20. Municipalities.

   E. Those exclusions set forth under Items 6. and 17. of Section D. shall not
      apply if the exposure is incidental to the regular operations of the
      insured covered hereunder.

   F. In the event the Company is inadvertently bound on any risk which is
      excluded under this Agreement and identified below, the reinsurance
      provided under this Agreement shall apply to such risk until discovery by
      the Company within its Home Office of the existence of such risk and for
      30 days thereafter, and shall then cease unless within the 30 day period,
      the Company has received from the Reinsurer written notice of its approval
      of such risk:

      1.  As respects Hired and Non-Owned Automobile Liability:

          Items 2. through 9. of Section C. of this Part II.

      2.  As respects Liability Other Than Automobile:

          Items 3. through 20. of Section D. of this Part II.

ARTICLE X - SPECIAL ACCEPTANCE
------------------------------

Risks which are beyond the terms, conditions or limitations of this Agreement
may be submitted to the Reinsurer for special acceptance hereunder; and such
risks, if accepted in writing by the Reinsurer, shall be subject to all of the
terms, conditions and limitations of this Agreement, except as modified by the
special acceptance. Premiums and losses derived from any special acceptance
shall be included with other data for rating purposes under this Agreement.

                                      11.
<PAGE>

ARTICLE XI - LOSS OCCURRENCE
----------------------------

As respects Property Business covered under this Agreement:

A. The term "Loss Occurrence" shall mean the sum of all individual losses
   directly occasioned by any one disaster, accident or loss or series of
   disasters, accidents or losses arising out of one event which occurs within
   the area of one state of the United States or province of Canada and states
   or provinces contiguous thereto and to one another.  However, the duration
   and extent of any one Loss Occurrence shall be limited to all individual
   losses sustained by the Company occurring during any period of 168
   consecutive hours arising out of and directly occasioned by the same event
   except that the term "Loss Occurrence" shall be further defined as follows:

   1. As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing
      collapse and water damage, all individual losses sustained by the Company
      occurring during any period of 72 consecutive hours arising out of and
      directly occasioned by the same event. However, the event need not be
      limited to one state or province or states or provinces contiguous
      thereto.

   2. As regards riot, riot attending a strike, civil commotion, vandalism and
      malicious mischief, all individual losses sustained by the Company,
      occurring during any period of 72 consecutive hours within the area of one
      municipality or county and the municipalities or counties contiguous
      thereto arising out of and directly occasioned by the same event. The
      maximum duration of 72 consecutive hours may be extended in respect of
      individual losses which occur beyond such 72 consecutive hours during the
      continued occupation of an assured's premises by strikers, provided such
      occupation commenced during the aforesaid period.

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

   4. As regards Freeze, only individual losses directly occasioned by collapse,
      breakage of glass and water damage (caused by bursting of frozen pipes and
      tanks) may be included in the Company's Loss Occurrence.

B. For all Loss Occurrences the Company may choose the date and time when any
   such period of consecutive hours commences provided that it is not earlier
   than the date and time of the occurrence of the first recorded individual
   loss sustained by the Company arising out of that disaster, accident or loss
   and provided that only one such period of 168 consecutive hours shall apply
   with respect to one

                                      12.
<PAGE>

   event except for those Loss Occurrences referred to in 1. and 2. above, where
   only one such period of 72 consecutive hours shall apply with respect to one
   event, regardless of the duration of the event.

C. No individual losses occasioned by an event that would be covered by 72 hours
   clauses may be included in any Loss Occurrence claimed under the 168 hours
   provision.

As respects Casualty Business covered under this Agreement:

The term "Loss Occurrence" shall mean any accident or occurrence or series of
accidents or occurrences arising out of any one event and happening within the
term and scope of this Agreement. Without limiting the generality of the
foregoing, the term "Loss Occurrence" shall be held to include:

A. As respects Products Bodily Injury and Products Property Damage Liability,
   injuries to all persons and all damage to property of others occurring during
   a Policy Period and proceeding from or traceable to the same causative agency
   shall be deemed to arise out of one Loss Occurrence, and the date of such
   Loss Occurrence shall be deemed to be the commencing date of the Policy
   Period.  For the purpose of this provision, each annual period of a Policy
   which continues in force for more than one year shall be deemed to be a
   separate Policy Period.

B. As respects Bodily Injury Liability (other than Automobile and Products),
   said term shall also be understood to mean, as regards each original assured,
   injuries to one or more than one person resulting from infection, contagion,
   poisoning, or contamination proceeding from or traceable to the same
   causative agency.

C. As respects Property Damage Liability (other than Automobile and Products),
   said term shall also, subject to Provisions 1. and 2. below, be understood to
   mean loss or losses caused by a series of operations, events, or occurrences
   arising out of operations at one specific site and which cannot be attributed
   to any single one of such operations, events or occurrences, but rather to
   the cumulative effect of the same.  In assessing each and every Loss
   Occurrence within the foregoing definition, it is understood and agreed that:

   1. the series of operations, events or occurrences shall not extend over a
      period longer than 12 consecutive months; and

   2. the Company may elect the date on which the period of not exceeding 12
      consecutive months shall be deemed to have commenced.

   In the event that the series of operations, events or occurrences extend over
   a period longer than 12 consecutive months, then each consecutive period of
   12 months, the first of which commences on the

                                      13.
<PAGE>

   date elected under 2. above, shall form the basis of claim under this
   Agreement.

D. As respects those Policies of the Company which provide aggregate limits of
   liability, the total of all individual losses occurring during any one Policy
   year which proceed from or are traceable to the same causative agency.

ARTICLE XII - REPORTS AND REMITTANCES
-------------------------------------

A. The Company shall furnish the Reinsurer with all necessary data respecting
   premiums and losses for as long as one of the parties hereto has a claim
   against the other arising from this Agreement.

B. Within 45 days after the close of each calendar month, the Company shall
   submit an account to the Reinsurer summarizing Subject Earned Premium
   underwritten and produced through the Commercial Property and Personal Lines
   Departments, and the reinsurance premium due as respects Property Business
   under Exhibits A and B and Casualty Business under Exhibit A.  Such
   reinsurance premium shall be remitted within 45 days after the close of each
   calendar month.  The reinsurance premium for Casualty Business under Exhibit
   B shall be paid in advance at January 1 of each year.

C. Payment by the Reinsurer of its portion of loss and Loss Adjustment Expenses
   paid by the Company shall be made by the Reinsurer to the Company within 15
   days after proof of payment is received by the Reinsurer.

D. As respects Property Business covered under this Agreement, the Company shall
   furnish the following to the Reinsurer with respect to occurrences designated
   as catastrophes by the Property Claim Services:

   1. Prompt preliminary estimate of amount recoverable from the Reinsurer;

   2. Within 30 days after the close of each quarter the amount of losses and
      Loss Adjustment Expenses paid, less all recoveries, including salvage and
      subrogation, at the end of each quarter segregated by Line of Business;

   3. Within 30 days after the close of each quarter the amount of losses and
      Loss Adjustment Expenses outstanding at the end of each quarter segregated
      by Line of Business.

ARTICLE XIII - CLAIMS
---------------------

A. The Company shall promptly notify the Reinsurer of each claim which may
   involve the reinsurance provided hereunder and of all subsequent

                                      14.
<PAGE>

   developments relating thereto, stating the amount claimed and estimate of the
   Company's Ultimate Net Loss and Loss Adjustment Expenses. Notwithstanding the
   provisions set forth in any other Article herein, prompt notification of loss
   shall be considered a condition precedent to liability under this Agreement.

B. As respects Casualty Business covered under this Agreement, the Company shall
   advise the Reinsurer of all claims which:

   1. Are reserved by the Company for an amount in excess of 50% of its
      retention;

   2. Originate from fatal injuries;

   3. Originate from the following kinds of bodily injury:

      a.  Brain injuries resulting in impairment of physical function;

      b.  Spinal injuries resulting in a partial or total paralysis of upper or
          lower extremities;

      c.  Amputation or permanent loss of use of upper or lower extremities;

      d.  Severe burn injuries;

      e.  Loss of sight in one or both eyes;

      f.  All other injuries likely to result in a permanent disability rate of
          50% or more.

C. The Company shall have the responsibility to investigate, defend or negotiate
   settlements of all claims and lawsuits related to Policies written by the
   Company and reinsured under this Agreement.  The Reinsurer, at its own
   expense, may associate with the Company in the defense or control of any
   claim, suit or other proceeding which involves or is likely to involve the
   reinsurance provided under this Agreement, and the Company shall cooperate in
   every respect in the defense of any such claim, suit or proceeding.

ARTICLE XIV - SALVAGE AND SUBROGATION
-------------------------------------

A. In the event of the payment of any indemnity by the Reinsurer under this
   Agreement, the Reinsurer shall be subrogated, to the extent of such payment,
   to all of the rights of the Company against any person or entity legally
   responsible for damages of the loss.  The Company agrees to enforce such
   rights; but, in case the Company refuses or neglects to do so, the Reinsurer
   is hereby authorized and empowered to bring any appropriate action in the
   name of the Company or their policyholders or otherwise to enforce such
   rights.

                                      15.
<PAGE>

B. From any amount recovered by subrogation, salvage or other means, there shall
   first be deducted the expenses incurred in effecting the recovery.  The
   balance shall then be used to reimburse the excess carriers in the inverse
   order to that in which their respective liabilities attached, before being
   used to reimburse the Company for its primary loss.

ARTICLE XV - ACCESS TO RECORDS
------------------------------

The Reinsurer or its duly authorized representatives shall have the right to
examine, at the offices of the Company at a reasonable time, during the currency
of this Agreement or anytime thereafter, all books and records of the Company
relating to business which is the subject of this Agreement.

ARTICLE XVI - TAXES
-------------------

The Company shall be liable for all taxes on premiums paid to the Reinsurer
under this Agreement, except income or profit taxes of the Reinsurer, and shall
indemnify and hold the Reinsurer harmless for any such taxes which the Reinsurer
may become obligated to pay to any local, state or federal taxing authority.

ARTICLE XVII - CURRENCY
-----------------------

Wherever the word "dollars" or the "$" symbol is used in this Agreement, it
shall mean dollars of the United States of America, excepting in those cases
where the Policy is issued by the Company in Canadian dollars, in which case it
shall mean dollars of Canada.  In the event the Company is involved in a loss
requiring payment in United States and Canadian currency, the Company's
retention and the limit of liability of the Reinsurer shall be apportioned
between the two currencies in the same proportion as the amount of net loss in
each currency bears to the total amount of net loss paid by the Company.  For
the purposes of this Agreement, where the Company receives premiums or pays
losses in currencies other than United States or Canadian currency, such
premiums and losses shall be converted into United States dollars at the actual
rates of exchange at which the premiums and losses are entered in the Company's
books.

ARTICLE XVIII - OFFSET
----------------------

Each party to this Agreement together with their successors or assigns shall
have and may exercise, at any time, the right to offset any balance or balances
due the other (or, if more than one, any other).  Such offset may include
balances due under this Agreement and any other agreements heretofore or
hereafter entered into between the parties regardless of whether such balances
arise from premiums, losses or

                                      16.
<PAGE>

otherwise, and regardless of capacity of any party, whether as assuming insurer
and/or ceding insurer, under the various agreements involved, provided however,
that in the event of insolvency of a party hereto, offsets shall only be allowed
in accordance with the provisions of Section 7427 of the Insurance Law of the
State of New York to the extent such statute or any other applicable law,
statute or regulation governing such offset shall apply.

ARTICLE XIX - ERRORS OR OMISSIONS
---------------------------------

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

ARTICLE XX - DISPUTE RESOLUTION
-------------------------------

Part I - Choice Of Law And Forum

Any dispute arising under this Agreement shall be resolved in the State of New
York or at another mutually agreed location, and the laws of the State of New
York shall govern the interpretation and application of this Agreement.

Part II - Mediation

If a dispute between the Company and the Reinsurer, arising out of the
provisions of this Agreement or concerning its interpretation or validity and
whether arising before or after termination of this Agreement has not been
settled through negotiation, both parties agree to try in good faith to settle
such dispute by nonbinding mediation, before resorting to arbitration.

Part III - Arbitration

A. Resolution of Disputes - As a condition precedent to any right arising
   hereunder, any dispute not resolved by mediation between the Company and the
   Reinsurer arising out of the provisions of this Agreement or concerning its
   interpretation or validity, whether arising before or after termination of
   this Agreement, shall be submitted to arbitration in the manner hereinafter
   set forth.

B. Composition of Panel - Unless the parties agree upon a single arbitrator
   within 15 days after the receipt of a notice of intention to arbitrate, all
   disputes shall be submitted to an arbitration

                                      17.
<PAGE>

   panel composed of two arbitrators and an umpire chosen in accordance with
   Paragraph C. hereof.

C. Appointment of Arbitrators - The members of the arbitration panel shall be
   chosen from persons knowledgeable in the insurance and reinsurance business.
   Unless a single arbitrator is agreed upon, the party requesting arbitration
   (hereinafter referred to as the "claimant") shall appoint an arbitrator and
   give written notice thereof by certified mail, to the other party
   (hereinafter referred to as the "respondent") together with its notice of
   intention to arbitrate.  Within 30 days after receiving such notice, the
   respondent shall also appoint an arbitrator and notify the claimant thereof
   by certified mail.  Before instituting a hearing, the two arbitrators so
   appointed shall choose an umpire.  If, within 20 days after the appointment
   of the arbitrator chosen by the respondent, the two arbitrators fail to agree
   upon the appointment of an umpire, each of them shall nominate three
   individuals to serve as umpire, of whom the other shall decline two and the
   umpire shall be chosen from the remaining two by drawing lots.  The name of
   the individual first drawn shall be the umpire.

D. Failure of Party to Appoint an Arbitrator - If the respondent fails to
   appoint an arbitrator within 30 days after receiving a notice of intention to
   arbitrate, the claimant's arbitrator shall appoint an arbitrator on behalf of
   the respondent, such arbitrator shall then, together with the claimant's
   arbitrator, choose an umpire as provided in Paragraph C. of Part III of this
   Article.

E. Involvement of Other Reinsurers - If more than one reinsurer is involved in
   the same dispute, all such reinsurers shall constitute and act as one party
   for purposes of this Article and communications shall be made by the Company
   to each of the reinsurers constituting the one party; provided, however,
   nothing herein shall impair the right of such reinsurers to assert several,
   rather than joint, defenses or claims, nor be construed as changing the
   liability of the reinsurers under the terms of this Agreement from several to
   joint.

F. If the Company is involved in a dispute under the terms of this Agreement and
   in one or more separate disputes with one or more other reinsurers in which
   common questions of law or fact are in issue, the Company or the Reinsurer,
   at its option, may join with such other reinsurers in a common arbitration
   proceeding under the terms of this Article.  If the Company and such other
   reinsurers have commenced arbitration, the Reinsurer may at its option join
   such proceeding for the determination of the dispute between the Company and
   the Reinsurer.

G. Submission of Dispute to Panel - Unless otherwise extended by the arbitration
   panel or agreed to by the parties, each party shall submit its case to the
   panel within 30 days after the selection of the umpire.

                                      18.
<PAGE>

H. Procedure Governing Arbitration - All proceedings before the panel shall be
   informal and the panel shall not be bound by the formal rules of evidence.
   The panel shall have the power to fix all procedural rules relating to the
   arbitration proceeding.  In reaching any decision, the panel shall give due
   consideration to the customs and usages of the insurance and reinsurance
   business.

I. Arbitration Award - The arbitration panel shall render its decision within 60
   days after termination of the proceeding, which decision shall be in writing,
   stating the reasons therefor.  The decision of the majority of the panel
   shall be final and binding on the parties to the proceeding.

J. Cost of Arbitration - Unless otherwise allocated by the panel, each party
   shall bear the expense of its own arbitrator and shall jointly and equally
   bear with the other parties the expense of the umpire and the arbitration.

ARTICLE XXI - INSOLVENCY
------------------------

A. In the event of insolvency of the Company, the reinsurance provided by this
   Agreement shall be payable by the Reinsurer on the basis of the liability of
   the Company as respects Policies covered hereunder, without diminution
   because of such insolvency, directly to the Company or its liquidator,
   receiver, conservator or statutory successor except as provided in Sections
   4118(a)(1)(A) and 1114(c) of the New York Insurance Law.

B. The Reinsurer shall be given written notice of the pendency of each claim or
   loss which may involve the reinsurance provided by this Agreement within a
   reasonable time after such claim or loss is filed in the insolvency
   proceedings.  The Reinsurer shall have the right to investigate each such
   claim or loss and interpose, at its own expense, in the proceedings where the
   claim or loss is to be adjudicated, any defense which it may deem available
   to the Company, its liquidator, receiver, conservator or statutory successor.
   The expense thus incurred by the Reinsurer shall be chargeable, subject to
   court approval, against the insolvent Company as part of the expense of
   liquidation to the extent of a proportionate share of the benefit which may
   accrue to the Company solely as a result of the defense undertaken by the
   Reinsurer.

C. In addition to the offset provisions set forth in Article XVIII - Offset, any
   debts or credits, liquidated or unliquidated, in favor of or against either
   party on the date of the receivership or liquidation order (except where the
   obligation was purchased by or transferred to be used as an offset) are
   deemed mutual debts or credits and shall be set off with the balance only to
   be allowed or paid.  Although such claim on the part of either party against
   the other may be unliquidated or undetermined in amount on the date of the
   entry of the receivership or liquidation order, such claim will

                                      19.
<PAGE>

   be regarded as being in existence as of such date and any claims then in
   existence and held by the other party may be offset against it.

D. Nothing contained in this Article is intended to change the relationship or
   status of the parties to this Agreement or to enlarge upon the rights or
   obligations of either party hereunder except as provided herein.

ARTICLE XXII - SPECIAL TERMINATION
----------------------------------

A. Notwithstanding the termination provisions set forth in Article III -
   Effective Date and Termination, this Agreement shall be:

   1. Terminated automatically and simultaneously upon the happening of any of
      the following events:

      a.  Entry of an order of liquidation, rehabilitation, receivership or
          conservatorship with respect to the Company or the Reinsurer by any
          court or regulatory authority;

      b.  Assignment of this Agreement by either party;

      c.  Any transfer of control of either party by change in ownership or
          otherwise;

      d.  General reinsurance of any portion of the Company's business it
          retains net for its own account, as determined under the provisions of
          this Agreement without prior consent of the Reinsurer.

   2. Terminated in accordance with the provisions set forth in this Paragraph,
      upon the discovery of the following event:

          A reduction of 50% or more of the Company's or the Reinsurer's
          policyholders surplus during any calendar year. Such reduction shall
          be determined by calculating the difference between the Company's or
          the Reinsurer's prior year annual statement and each subsequent
          quarterly statutory statement within such current calendar year.

      As respects the event set forth in this Paragraph A.2., the Company or the
      Reinsurer shall be obligated to notify the other party in writing within
      30 days after the filing of its quarterly statement.  Upon receipt of such
      notification the other party shall have the right to terminate this
      Agreement, by giving not less than 30 days notice of its intention to do
      so.

B. Any notice of termination pursuant to provisions set forth in Paragraph A.2.
   above shall be sent by certified mail, return receipt

                                      20.
<PAGE>

   requested. Such notice period shall commence upon the other party's receipt
   of the notice of termination.

C. In the event of termination, the Reinsurer shall not be liable for losses
   occurring subsequent to the date of termination.

ARTICLE XXIII - AMENDMENTS
--------------------------

This Agreement may be amended by mutual consent of the parties expressed in an
addendum; and such addendum, when executed by both parties, shall be deemed to
be an integral part of this Agreement and binding on the parties hereto.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the following dates:

In Brea, California, this            day of                      , 1999.

ATTEST:                            MERCURY CASUALTY COMPANY

_______________________            ________________________________________

And in New York, New York, this         day of                   , 1999.

ATTEST:                            SWISS REINSURANCE AMERICA CORPORATION

_______________________            ________________________________________
Member of Management                      Member of Senior Management

                                      21.
<PAGE>

                                   EXHIBIT A

                   FIRST MULTIPLE LINE EXCESS OF LOSS COVER

                           IS ATTACHED TO AND FORMS

                                    PART OF

                      REINSURANCE AGREEMENT NO. TM670A,B
<PAGE>

             EXHIBIT A - FIRST MULTIPLE LINE EXCESS OF LOSS COVER

SECTION          SUBJECT                                PAGE
-------          -------                                ----

  1              BUSINESS COVERED                       A-1

  2              LIMIT AND RETENTION                    A-1

  3              REINSURANCE PREMIUM                    A-2

<PAGE>

             EXHIBIT A - FIRST MULTIPLE LINE EXCESS OF LOSS COVER

SECTION 1 - BUSINESS COVERED
----------------------------

Under this Exhibit, the indemnity for reinsured loss applies to those Policies
issued by the Company with respect to the following Property and Casualty
Business except as excluded under Article IX - Exclusions of this Agreement.

PROPERTY BUSINESS
-----------------

NAIC
CODE:   LINES OF BUSINESS:

01      Fire
02      Allied Lines
04      Homeowners (Section I only)
05      Commercial Multiple Peril (Section I only)

CASUALTY BUSINESS
-----------------

CLASSES OF INSURANCE

1. Hired and Non-Owned Automobile Liability:

   Bodily Injury Liability, Property Damage Liability, Medical Payments,
   Uninsured Motorists, Underinsured Motorists and No-Fault Coverage.

2. Liability Other Than Automobile:

   Bodily Injury Liability, Property Damage Liability, Personal and Advertising
   Injury Liability, and Medical Payments Coverage when written as part of a
   Commercial Package Policy.

SECTION 2 - LIMIT AND RETENTION
-------------------------------

A. As respects Property Business covered under this Exhibit involving one or
   more than one Line of Business, the Company shall retain the first $250,000
   of Ultimate Net Loss as respects each risk in any one Loss Occurrence.  The
   Reinsurer shall then be liable for the amount by which the Company's Ultimate
   Net Loss exceeds the Company's retention of $250,000, but the liability of
   the Reinsurer shall never exceed $750,000 each risk any one Loss Occurrence,
   nor shall

                                      A-1
<PAGE>

   the Reinsurer's liability from all risks in each Loss Occurrence exceed
   $2,250,000.

B. As respects Casualty Business covered under this Exhibit involving one or
   more than one Class of Insurance, the Company shall retain the first $250,000
   of Ultimate Net Loss as respects any one Loss Occurrence. The Reinsurer shall
   then be liable for the amount by which the Company's Ultimate Net Loss
   exceeds the Company's retention of $250,000, but the liability of the
   Reinsurer shall never exceed $750,000 with respect to any one Loss
   Occurrence.

C. In the event both a Property and Casualty loss are involved in the same Loss
   Occurrence, it is understood that the Company shall retain for its own
   account only the first $250,000 of the combined Property and Casualty
   Ultimate Net Loss, provided only one Property risk may be combined in the
   same Loss Occurrence. Such loss and the Company's retention thereon shall be
   apportioned to each Property and Casualty loss in the same proportion that
   the Company's Ultimate Net Loss for each such Property and Casualty loss
   bears to the Company's combined Ultimate Net Loss from both losses. The
   Reinsurer shall reimburse the Company for the difference between the
   Company's first $250,000 of Ultimate Net Loss under each Property and
   Casualty loss and the Company's pro rated retention on each Property and
   Casualty loss.

D. As respects Casualty Business covered under this Exhibit the Company warrants
   that the maximum limit of liability, per occurrence set forth under each
   Policy subject to this Exhibit shall not exceed $1,000,000.

SECTION 3 - REINSURANCE PREMIUM
-------------------------------

A. The Company shall pay to the Reinsurer a premium for the reinsurance provided
   under 1) the Property and Casualty business underwritten and produced through
   the Company's Commercial Property Department and 2) the Property business
   underwritten and produced through the Company's Personal Lines Department,
   all of which are covered under this Exhibit, at the rates set forth below.
   Each rate shall be applied to the combined total of the Company's Subject
   Earned Premium which shall be defined as the Subject Earned Premium as
   respects Property and Casualty business, underwritten and produced through
   the Company's Commercial Property Department plus the Subject Earned Premium
   as respects Property business only, underwritten and produced through the
   Company's Personal Lines Department, for the monthly period being reported.

   Department                Business Covered                  Rate
   ----------                ----------------                  ----

   Commercial Property       Property and Casualty             2.76%

   Personal Lines            Property                          0.92%
                                                               ----
                                                    Total      3.68%

                                      A-2
<PAGE>

B. The term "Subject Earned Premium" as used herein is equal to the sum of the
   Net Premiums Written on the business covered hereunder during the period
   under consideration, plus the unearned premium reserve as respects premiums
   in force at the beginning of such period, less the unearned premium reserve
   as respects premiums in force at the end of the period, said unearned premium
   is to be calculated on a monthly pro rata basis.

C. The term "Net Premiums Written" shall mean gross premiums written less
   returns, allowances and reinsurances which inure to the benefit of the
   Reinsurer.

D. The following percentages of the Company's premium shall be allocated to the
   business covered under this Exhibit:

   Homeowners                  Section I - 90%          Section II -  0%

   Businessowners              Section I - 65%          Section II - 35%

   Commercial
     Multiple Peril            Section I:               Section II:
    Actual Issued Premium,                              Actual Issued Premium,
    subject to a minimum                                subject to a minimum
    of 75%                                              of 25%

This Exhibit A is attached to and forms part of Reinsurance Agreement No.
TM670A,B issued to MERCURY CASUALTY COMPANY.

                                      A-3
<PAGE>

                                   EXHIBIT B

                   SECOND MULTIPLE LINE EXCESS OF LOSS COVER

                           IS ATTACHED TO AND FORMS

                                    PART OF

                      REINSURANCE AGREEMENT NO. TM670A,B
<PAGE>

             EXHIBIT B - SECOND MULTIPLE LINE EXCESS OF LOSS COVER

SECTION                 SUBJECT                     PAGE
-------                 -------                     ----

  1                     BUSINESS COVERED            B-1

  2                     LIMIT AND RETENTION         B-1

  3                     REINSURANCE PREMIUM         B-2

<PAGE>

             EXHIBIT B - SECOND MULTIPLE LINE EXCESS OF LOSS COVER

SECTION 1 - BUSINESS COVERED
----------------------------

Under this Exhibit, the indemnity for reinsured loss applies to those Policies
issued by the Company with respect to the following Property and Casualty
Business except as excluded under Article IX - Exclusions of this Agreement.

PROPERTY BUSINESS
-----------------

NAIC
CODE:   LINES OF BUSINESS:

01      Fire
02      Allied Lines
04      Homeowners (Section I only)
05      Commercial Multiple Peril (Section I only)

CASUALTY BUSINESS
-----------------

CLASSES OF INSURANCE

1. Hired and Non-Owned Automobile Liability:

   Bodily Injury Liability, Property Damage Liability, Medical Payments,
   Uninsured Motorists, Underinsured Motorists and No-Fault Coverage.

2. Liability Other Than Automobile:

   Bodily Injury Liability, Property Damage Liability, Personal and Advertising
   Injury Liability, and Medical Payments Coverage when written as part of a
   Commercial Package Policy.

SECTION 2 - LIMIT AND RETENTION
-------------------------------

A. As respects Property Business covered under this Exhibit involving one or
   more than one Line of Business, the Company shall retain the first $1,000,000
   of Ultimate Net Loss as respects each risk in any one Loss Occurrence.  The
   Reinsurer shall then be liable for the amount by which the Company's Ultimate
   Net Loss exceeds the Company's retention of $1,000,000, but the liability of
   the

                                      B-1
<PAGE>

   Reinsurer shall never exceed $1,000,000 each risk any one Loss Occurrence,
   nor shall the Reinsurer's liability from all risks in each Loss Occurrence
   exceed $1,000,000.

B. As respects Casualty Business covered under this Exhibit involving one or
   more than one Class of Insurance, the Company shall retain the first
   $1,000,000 of Ultimate Net Loss as respects any one Loss Occurrence.  The
   Reinsurer shall then be liable for the amount by which the Company's Ultimate
   Net Loss exceeds the Company's retention of $1,000,000, but the liability of
   the Reinsurer shall never exceed $1,000,000 with respect to any one Loss
   Occurrence.

C. Reinsurance of the Company's retention, set forth in Paragraphs A. and B.
   above, shall not be deducted in arriving at the Company's Ultimate Net Loss
   herein.

D. As respects Casualty Business covered under this Exhibit the Company warrants
   that the maximum limit of liability, per occurrence set forth under each
   Policy subject to this Exhibit shall not exceed $1,000,000.

SECTION 3 - REINSURANCE PREMIUM
-------------------------------

A. As respects Property Business underwritten and produced through the Company's
   Commercial Property and Personal Lines Departments, the Company shall pay to
   the Reinsurer a premium for the reinsurance provided under this Exhibit, at
   the rates set forth below.  Notwithstanding the provisions of Paragraph B.
   below, each rate shall be applied to the combined total of the Company's
   Subject Earned Premium for both the Property and Casualty Business covered
   under this Exhibit which shall be defined as the Subject Earned Premium as
   respects Property and Casualty business, underwritten and produced through
   the Company's Commercial Property Department plus the Subject Earned Premium
   as respects Property business only, underwritten and produced through the
   Company's Personal Lines Department, for the monthly period being reported.

              Department                   Rate
              ----------                   ----

              Commercial Property          0.42%

              Personal Lines               0.13%
                                           ----

                                  Total    0.55%

B. As respects Casualty Business underwritten and produced through the Company's
   Commercial Property Department, the Company shall pay to the Reinsurer an
   annual flat premium of $25,000 for the reinsurance provided.

                                      B-2
<PAGE>

C. The term "Subject Earned Premium" as used herein is equal to the sum of the
   Net Premiums Written on the business covered hereunder during the period
   under consideration, plus the unearned premium reserve as respects premiums
   in force at the beginning of such period, less the unearned premium reserve
   as respects premiums in force at the end of the period, said unearned premium
   is to be calculated on a monthly pro rata basis.

D. The term "Net Premiums Written" shall mean gross premiums written less
   returns, allowances and reinsurances which inure to the benefit of the
   Reinsurer.

E. The following percentages of the Company's premium shall be allocated to the
   business covered under this Exhibit:

   Homeowners                     Section I - 90%         Section II -  0%

   Businessowners                 Section I - 65%         Section II - 35%

   Commercial
     Multiple Peril               Section I:              Section II:
    Actual Issued Premium,                                Actual Issued Premium,
    subject to a minimum                                  subject to a minimum
    of 75%                                                of 25%

This Exhibit B is attached to and forms part of Reinsurance Agreement No.
TM670A,B issued to MERCURY CASUALTY COMPANY.

                                      B-3
<PAGE>

                         SUPPLEMENT TO THE ATTACHMENTS

        DEFINITION OF IDENTIFICATION TERMS USED WITHIN THE ATTACHMENTS
        --------------------------------------------------------------

A. Wherever the term "Company" or "Reinsured" or "Reassured" or whatever other
   term is used to designate the reinsured company or companies within the
   various attachments to the reinsurance agreement, the term shall be
   understood to mean Company or Reinsured or Reassured or whatever other term
   is used in the attached reinsurance agreement to designate the reinsured
   company or companies.

B. Wherever the term "Agreement" or "Contract" or "Policy" or whatever other
   term is used to designate the attached reinsurance agreement within the
   various attachments to the reinsurance agreement, the term shall be
   understood to mean Agreement or Contract or Policy or whatever other term is
   used to designate the attached reinsurance agreement.

C. Wherever the term "Reinsurer" or "Reinsurers" or "Underwriters" or whatever
   other term is used to designate the reinsurer or reinsurers in the various
   attachments to the reinsurance agreement, the term shall be understood to
   mean Reinsurer or Reinsurers or Underwriters or whatever other term is used
   to designate the reinsuring company or companies.

________________________________________________________________________________
________________________________________________________________________________

                       INSOLVENCY FUNDS EXCLUSION CLAUSE
                       ---------------------------------

This Agreement excludes all liability of the Company arising by contract,
operation of law, or otherwise from its participation or membership, whether
voluntary or involuntary, in any insolvency fund or from reimbursement of any
person for any such liability.  "Insolvency fund" includes any guaranty fund,
insolvency fund, plan, pool, association, fund or other arrangement, howsoever
denominated, established or governed, which provides for any assessment of or
payment or assumption by any person of part or all of any claim, debt, charge,
fee, or other obligation of an insurer, or its successors or assigns, which has
been declared by any competent authority to be insolvent or which is otherwise
deemed unable to meet any claim, debt, charge, fee or other obligation in whole
or in part.
<PAGE>

              POOLS, ASSOCIATIONS AND SYNDICATES EXCLUSION CLAUSE
              ---------------------------------------------------

SECTION A

Excluding:

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

(b) Any Pool or Scheme (whether voluntary or mandatory) formed after March 1,
    1968, for the purpose of insuring Property whether on a country-wide basis
    or in respect of designated areas.  This Exclusion shall not apply to so-
    called Automobile Insurance Plans or other Pools formed to provide coverage
    for Automobile Physical Damage.

SECTION B

It is agreed that business, written by the Company for the same perils, which is
known at the time to be insured by or in excess of underlying amounts placed in
the following Pools, Associations or Syndicates, whether by way of insurance or
reinsurance is excluded hereunder:

     Industrial Risk Insurers (successor to Factory Insurance Association and
     Oil Insurance Association); Associated Factory Mutuals; Improved Risk
     Mutuals.

     Any Pool, Association or Syndicate formed for the purpose of writing Oil,
     Gas or Petro-Chemical Plants and/or Oil or Gas Drilling Rigs.

     United States Aircraft Insurance Group, Canadian Aircraft Insurance Group,
     Associated Aviation Underwriters, American Aviation Underwriters.

SECTION B does not apply:

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

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

(c)  To Contingent Business Interruption, except when the Company is aware that
     the key location is known at the time to be insured in any Pool,
     Association or Syndicate named above.

(d)  To risks as follows: Offices, Hotels, Apartments, Hospitals, Educational
     Establishments, Public Utilities (other than Railroad Schedules) and
     Builders Risks on the classes of risks specified in this subsection (d)
     only.
<PAGE>

                    POLLUTION AND SEEPAGE EXCLUSION CLAUSE
                    --------------------------------------

This Reinsurance does not apply to:

   1. Pollution, seepage, contamination or environmental impairment insurances
      (hereinafter collectively referred to as "pollution"), however styled;

   2. Loss or damage caused directly or indirectly by pollution, unless said
      loss or damage follows as a result of a loss caused directly by a peril
      covered hereunder;

   3. Expenses resulting from any governmental direction or request that
      material present in or part of or utilized on an insured's property be
      removed or modified, except as provided in 5. below;

   4. Expenses incurred in testing for and/or monitoring pollutants;

   5. Expenses incurred in removing debris, unless (A) the debris results from a
      loss caused directly by a peril covered hereunder, and (B) the debris to
      be removed is itself covered hereunder, and (C) the debris is on the
      insured's premises, subject, however, to a limit of $5,000 plus 25% of (i)
      the property damage loss, any risk, any one location, any one original
      insured, and (ii) any deductible applicable to the loss;

   6. Expenses incurred to extract pollutants from land or water at the
      insured's premises unless (A) the release, discharge, or dispersal of
      pollutants results from a loss caused directly by a peril covered
      hereunder, and (B) such expenses shall not exceed $10,000;

   7. Loss of income due to any increased period of time required to resume
      operations resulting from enforcement of any law regulating the
      prevention, control, repair, clean-up or restoration of environmental
      damage;

   8. Claims under 5. and/or 6. above, unless notice thereof is given to the
      Company within 180 days after the date of the loss occurrence to which
      such claims relate.

"Pollutants" means any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and
waste.  Waste includes materials to be recycled, reconditioned or reclaimed.

                                      -1-
<PAGE>

Where no pollution exclusion has been accepted or approved by an insurance
regulatory authority for use in a policy that is subject to this Agreement or
where a pollution exclusion that has been used in a policy is overturned, either
in whole or in part, by a court having jurisdiction, there shall be no recovery
for pollution under this Agreement unless said pollution loss or damage follows
as a result of a loss caused directly by a peril covered hereunder.

Nothing herein shall be deemed to extend the coverage afforded by this
reinsurance to property or perils specifically excluded or not covered under the
terms and conditions of the original policy involved.

                                      -2-
<PAGE>

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - U.S.A.
--------------------------------------------------------------------------

N.M.A. 1119

1. This Reinsurance does not cover any loss or liability accruing to the
   Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from
   any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic
   or Nuclear Energy risks.

2. Without in any way restricting the operation of paragraph 1. of this Clause,
   this Reinsurance does not cover any loss or liability accruing to the
   Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from
   any insurance against Physical Damage (including business interruption or
   consequential loss arising out of such Physical Damage) to:

   I.   Nuclear reactor power plants including all auxiliary property on the
        site, or

   II.  Any other nuclear reactor installation, including laboratories handling
        radioactive materials in connection with reactor installations, and
        critical facilities as such, or

   III. Installations for fabricating complete fuel elements or for processing
        substantial quantities of "special nuclear material," and for
        reprocessing, salvaging, chemically separating, storing or disposing of
        spent nuclear fuel or waste materials, or

   IV.  Installations other than those listed in paragraph 2. III. above using
        substantial quantities of radioactive isotopes or other products of
        nuclear fission.

3. Without in any way restricting the operation of paragraphs 1. and 2. of this
   Clause, this Reinsurance does not cover any loss or liability by radioactive
   contamination accruing to the Reassured, directly or indirectly, and whether
   as Insurer or Reinsurer, from any insurance on property which is on the same
   site as a nuclear reactor power plant or other nuclear installation and which
   normally would be insured therewith, except that this paragraph 3. shall not
   operate:

      (a) where the Reassured does not have knowledge of such nuclear reactor
          power plant or nuclear installation, or

      (b) where the said insurance contains a provision excluding coverage for
          damage to property caused by or resulting from radioactive
          contamination, however caused.  However, on and after 1st January,
          1960, this sub-paragraph (b) shall only apply provided the said
          radioactive contamination exclusion provision has been approved by the
          Governmental Authority having jurisdiction thereof.

                                      -1-
<PAGE>

4. Without in any way restricting the operation of paragraphs 1., 2. and 3. of
   this Clause, this Reinsurance does not cover any loss or liability by
   radioactive contamination accruing to the Reassured, directly or indirectly,
   and whether as Insurer or Reinsurer, when such radioactive contamination is a
   named hazard specifically insured against.

5. It is understood and agreed this Clause shall not extend to risks using
   radioactive isotopes in any form where the nuclear exposure is not considered
   by the Reassured to be the primary hazard.

6. The term "special nuclear material" shall have the meaning given to it by the
   Atomic Energy Act of 1954 or by any law amendatory thereof.

7. Reassured to be sole judge of what constitutes:

   (a) substantial quantities, and

   (b) the extent of installation, plant or site.

NOTE: - Without in any way restricting the operation of paragraph 1. hereof, it
is understood and agreed that

   (a) all policies issued by the Reassured on or before 31st December, 1957
       shall be free from the application of the other provisions of this Clause
       until expiry date or 31st December, 1960 whichever first occurs whereupon
       all the provisions of this Clause shall apply,

   (b) with respect to any risk located in Canada policies issued by the
       Reassured on or before 31st December, 1958 shall be free from the
       application of the other provisions of this Clause until expiry date or
       31st December, 1960 whichever first occurs whereupon all the provisions
       of this Clause shall apply.

                                      -2-
<PAGE>

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - CANADA
--------------------------------------------------------------------------

N.M.A. 1980

1. This Agreement does not cover any loss or liability accruing to the Company
   directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of
   Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear
   Energy risks.

2. Without in any way restricting the operation of paragraph 1. of this clause,
   this Agreement does not cover any loss or liability accruing to the Company,
   directly or indirectly, and whether as Insurer or Reinsurer, from any
   insurance against Physical Damage (including business interruption or
   consequential loss arising out of such Physical Damage) to:

   a. Nuclear reactor power plants including all auxiliary property on the site,
      or

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

   c. Installations for fabricating complete fuel elements or for processing
      substantial quantities of prescribed substances, and for reprocessing,
      salvaging, chemically separating, storing or disposing of spent nuclear
      fuel or waste materials, or

   d. Installations other than those listed in c. above using substantial
      quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operation of paragraphs 1. and 2. of this
   clause, this Agreement does not cover any loss or liability by radioactive
   contamination accruing to the Company, directly or indirectly, and whether as
   Insurer or Reinsurer, from any insurance on property which is on the same
   site as a nuclear reactor power plant or other nuclear installation and which
   normally would be insured therewith, except that this paragraph 3. shall not
   operate:

   a. where the Company does not have knowledge of such nuclear reactor power
      plant or nuclear installation, or

   b. where the said insurance contains a provision excluding coverage for
      damage to property caused by or resulting from radioactive contamination,
      however caused.

                                      -1-
<PAGE>

4. Without in any way restricting the operation of paragraphs 1., 2. and 3. of
   this clause, this Agreement does not cover any loss or liability by
   radioactive contamination accruing to the Company, directly or indirectly,
   and whether as Insurer or Reinsurer, when such radioactive contamination is a
   named hazard specifically insured against.

5. This clause shall not extend to risks using radioactive isotopes in any form
   where the nuclear exposure is not considered by the Company to be the primary
   hazard.

6. The term "prescribed substances" shall have the meaning given to it by the
   Atomic Energy Control Act R.S.C. 1974 or by any law amendatory thereof.

7. Company to be sole judge of what constitutes:

   a. substantial quantities, and

   b. the extent of installation, plant or site.

8. Without in any way restricting the operation of paragraphs 1., 2., 3. and 4.
   of this clause, this Agreement does not cover any loss or liability accruing
   to the Company, directly or indirectly, and whether as Insurer or Reinsurer,
   caused by any nuclear incident as defined in The Nuclear Liability Act,
   nuclear explosion or contamination by radioactive material.

NOTE: Without in any way restricting the operation of paragraphs 1., 2., 3. and
      4. of this clause, paragraph 8. of this clause shall apply to all original
      contracts of the Company whether new, renewal or replacement which become
      effective on or after December 31, 1984.

                                      -2-
<PAGE>

            NUCLEAR INCIDENT EXCLUSION CLAUSE - REINSURANCE - NO. 4
            -------------------------------------------------------

1. This Reinsurance does not cover any loss or liability accruing to the
   Reassured as a member of, or subscriber to, any association of insurers or
   reinsurers formed for the purpose of covering nuclear energy risks or as a
   direct or indirect reinsurer of any such member, subscriber or association.

2. Without in any way restricting the operations of Nuclear Incident Exclusion
   Clauses, - Liability, - Physical Damage, - Boiler and Machinery and paragraph
   1. of this Clause, it is understood and agreed that for all purposes of the
   reinsurance assumed by the Reinsurer from the Reinsured, all original
   insurance policies or contracts of the Reinsured (new, renewal and
   replacement) shall be deemed to include the applicable existing Nuclear
   Clause and/or Nuclear Exclusion Clause(s) in effect at the time and any
   subsequent revisions thereto as agreed upon and approved by the Insurance
   Industry and/or a qualified Advisory or Rating Bureau.
<PAGE>

              POLLUTION LIABILITY EXCLUSION CLAUSE - REINSURANCE
              --------------------------------------------------

   This Reinsurance excludes:

   (1) Any loss occurrence arising out of the actual, alleged or threatened
       discharge, dispersal, release or escape of pollutants:

      a)  At or from premises owned, rented or occupied by an original assured;
          or

      b)  At or from any site or location used for the handling, storage,
          disposal, processing or treatment of waste; or

      c)  Which are at any time transported, handled, stored, treated, disposed
          of, or processed as waste; or

      d)  At or from any site or location on which any original assured is
          performing operations:

          (i)  If the pollutants are brought on or to the site or location in
               connection  with such operations; or

          (ii) If the operations are to test for, monitor, clean up, remove,
               contain, treat, detoxify or neutralize the pollutants.

   (2) Any liability, loss, cost or expense arising out of any governmental
       direction or request to test for, monitor, clean up, remove, contain,
       treat, detoxify or neutralize pollutants.

"Pollutants" means any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and
waste.  Waste includes materials to be recycled, reconditioned or reclaimed.

Subparagraphs a) and d)(i) of paragraph (1) of this exclusion do not apply to
loss occurrences caused by heat, smoke or fumes from a hostile fire. As used
herein, "hostile fire" means one which becomes uncontrollable or breaks out from
where it was intended to be.

"Original assured" as used herein means all insureds as defined in the policy
issued by the Company.
<PAGE>

   NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A.
   --------------------------------------------------------------------

   N.M.A. 1590

1. This reinsurance does not cover any loss or liability accruing to the
   Reassured as a member of, or subscriber to, any association of insurers or
   reinsurers formed for the purpose of covering nuclear energy risks or as a
   direct or indirect reinsurer of any such member, subscriber or association.

2. Without in any way restricting the operation of paragraph 1. of this Clause
   it is understood and agreed that for all purposes of this reinsurance all the
   original policies of the Reassured (new, renewal and replacement) of the
   classes specified in Clause II. in this paragraph 2. from the time specified
   in Clause III. in this paragraph 2. shall be deemed to include the following
   provision (specified as the Limited Exclusion Provision):

   LIMITED EXCLUSION PROVISION*

     I.   It is agreed that the policy does not apply under any liability
          coverage, to injury, sickness, disease, death or destruction, bodily
          injury or property damage with respect to which an insured under the
          policy is also an insured under a nuclear energy liability policy
          issued by Nuclear Energy Liability Insurance Association, Mutual
          Atomic Energy Liability Underwriters or Nuclear Insurance Association
          of Canada, or would be an insured under any such policy but for its
          termination upon exhaustion of its limit of liability.

    II.   Family Automobile Policies (liability only), Special Automobile
          Policies (private passenger automobiles, liability only), Farmers
          Comprehensive Personal Liabilities Policies (liability only),
          Comprehensive Personal Liability Policies (liability only) or policies
          of a similar nature; and the liability portion of combination forms
          related to the four  classes of policies stated above, such as the
          Comprehensive Dwelling Policy and the applicable types of Homeowners
          Policies.

   III.   The inception dates and thereafter of all original policies as
          described in II. above, whether new, renewal or replacement, being
          policies which either

                                      -1-
<PAGE>

        (a)   become effective on or after 1st May, 1960, or

        (b)   become effective before that date and contain the Limited
              Exclusion Provision set out above; provided this paragraph 2.
              shall not be applicable to Family Automobile Policies, Special
              Automobile Policies, or policies or combination policies of a
              similar nature, issued by the Reassured on New York risks, until
              90 days following approval of the Limited Exclusion Provision by
              the Governmental Authority having jurisdiction thereof.

3. Except for those classes of policies specified in Clause II. of paragraph 2.
   and without in any way restricting the operation of paragraph 1. of this
   Clause, it is understood and agreed that for all purposes of this reinsurance
   the original liability policies of the Reassured (new, renewal and
   replacement) affording the following coverages:

   Owners, Landlords and Tenants Liability, Contractual Liability, Elevator
   Liability, Owners or Contractors (including railroad) Protective Liability,
   Manufacturers and Contractors Liability, Product Liability, Professional and
   Malpractice Liability, Storekeepers Liability, Garage Liability, Automobile
   Liability (including Massachusetts Motor Vehicle or Garage Liability)

   shall be deemed to include with respect to such coverages, from the time
   specified in Clause V. of this paragraph 3., the following provision
   (specified as the Broad Exclusion Provision):

   BROAD EXCLUSION PROVISION*

   It is agreed that the policy does not apply:

    I.    Under any Liability Coverage to injury, sickness, disease, death or
          destruction, bodily injury or property damage

          (a)  with respect to which an insured under the policy is also an
               insured under nuclear energy liability policy issued by Nuclear
               Energy Liability Insurance Association, Mutual Atomic Energy
               Liability Underwriters or Nuclear Insurance Association of
               Canada, or would be an insured under any such policy but for its
               termination upon exhaustion of its limit of liability; or

                                      -2-
<PAGE>

          (b)  resulting from the hazardous properties of nuclear material and
               with respect to which (1) any person or organization is required
               to maintain financial protection pursuant to the Atomic Energy
               Act of 1954, or any law amendatory thereof, or (2) the insured
               is, or had this policy not been issued would be, entitled to
               indemnity from the United States of America, or any agency
               thereof, under any agreement entered into by the United States of
               America, or any agency thereof, with any person or organization.

    II.   Under any Medical Payments Coverage, or under any Supplementary
          Payments Provision relating to immediate medical or surgical relief,
          first aid, to expenses incurred with respect to bodily injury,
          sickness, disease or death, bodily injury resulting from the hazardous
          properties of nuclear material and arising out of the operation of a
          nuclear facility by any person or organization.

   III.   Under any Liability Coverage, to injury, sickness, disease, death or
          destruction, bodily injury or property damage resulting from the
          hazardous properties of nuclear material, if

          (a)  the nuclear material (1) is at any nuclear facility owned by, or
               operated by or on behalf of, an insured or (2) has been
               discharged or dispersed therefrom;

          (b)  the nuclear material is contained in spent fuel or waste at any
               time possessed, handled, used, processed, stored, transported or
               disposed of by or on behalf of an insured; or

          (c)  the injury, sickness, disease, death or destruction, bodily
               injury or property damage arises out of the furnishing by an
               insured of services, materials, parts or equipment in connection
               with the planning, construction, maintenance, operation or use of
               any nuclear facility, but if such facility is located within the
               United States of America, its territories, or possessions or
               Canada, this exclusion (c) applies only to injury to or
               destruction of property at such nuclear facility, property damage
               to such nuclear facility and any property thereat.

                                      -3-
<PAGE>

     IV.  As used in this endorsement:

          "hazardous properties" include radioactive, toxic or explosive
          properties; "nuclear material" means source material, special nuclear
          material or byproduct material; "source material," "special nuclear
          material," and "byproduct material" have the meanings given them in
          the Atomic Energy Act of 1954 or in any law amendatory thereof; "spent
          fuel" means any fuel element or fuel component, solid or liquid, which
          has been used or exposed to radiation in a nuclear reactor; "waste"
          means any waste material (1) containing byproduct material other than
          the tailings or wastes produced by the extraction or concentration of
          uranium or thorium from any ore processed for its source material
          content and (2) resulting from the operation by any person or
          organization of any nuclear facility included within the definition of
          nuclear facility under paragraph (a) or (b) thereof; "nuclear
          facility" means

          (a)  any nuclear reactor,

          (b)  any equipment or device designed or used for (1) separating the
               isotopes of uranium or plutonium, (2) processing or utilizing
               spent fuel, or (3) handling, processing or packaging waste,

          (c)  any equipment or device used for the processing, fabricating or
               alloying of special nuclear material if at any time the total
               amount of such material in the custody of the insured at the
               premises where such equipment or device is located consists of or
               contains more than 25 grams of plutonium or uranium 233 or any
               combination thereof, or more than 250 grams of uranium 235,

          (d)  any structure, basin, excavation, premises or place prepared or
               used for the storage or disposal of waste

          and includes the site on which any of the foregoing is located, all
          operations conducted on such site and all premises used for such
          operations; "nuclear reactor" means any apparatus designed or used to
          sustain nuclear fission in a self-supporting chain reaction or to
          contain a critical mass of fissionable material; with respect to
          injury to or destruction of property, the word "injury" or
          "destruction" includes all forms of radioactive contamination of
          property; "property damage" includes all forms of radioactive
          contamination of property.

      V.  The inception dates and thereafter of all original policies affording
          coverages specified in this paragraph 3., whether new, renewal or
          replacement, being policies which become effective on or after 1st
          May, 1960, provided this paragraph 3. shall not be applicable to

                                      -4-
<PAGE>

          (i)  Garage and Automobile Policies issued by the Reassured
               on New York risks, or

          (ii) Statutory liability insurance required under Chapter 90, General
               Laws of Massachusetts,

          until 90 days following approval of the Broad Exclusion Provision by
          the Governmental Authority having jurisdiction thereof.

4. Without in any way restricting the operations of paragraph 1. of this Clause,
   it is understood and agreed that paragraphs 2. and 3. above are not
   applicable to original liability policies of the Reassured in Canada, and
   that with respect to such policies, this Clause shall be deemed to include
   the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian
   Underwriters' Association or the Independent Insurance Conference of Canada.

*NOTE:  The words printed in BOLD TYPE in the Limited Exclusion Provision and in
        the Broad Exclusion Provision shall apply only in relation to original
        liability policies which include a Limited Exclusion Provision or a
        Broad Exclusion Provision containing those words.

                                      -5-
<PAGE>

   NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - CANADA
   --------------------------------------------------------------------

   N.M.A. 1979

1. This Agreement does not cover any loss or liability accruing to the Company
   as a member of, or subscriber to, any association of insurers or reinsurers
   formed for the purpose of covering nuclear energy risks or as a direct or
   indirect reinsurer of any such member, subscriber or association.

2. Without in any way restricting the operation of Paragraph 1. of this Clause,
   it is agreed that for all purposes of this Agreement all the original
   liability contracts of the Company, whether new, renewal or replacement, of
   the following classes, namely,

          Personal Liability
          Farmers' Liability
          Storekeepers' Liability

   which become effective on or after 31st December 1984, shall be deemed to
   include, from their inception dates and thereafter, the following provision:

   Limited Exclusion Provision -

   This Policy does not apply to bodily injury or property damage with respect
   to which the Insured is also insured under a contract of nuclear energy
   liability insurance (whether the Insured is unnamed in such contract and
   whether or not it is legally enforceable by the Insured) issued by the
   Nuclear Insurance Association of Canada or any other group or pool of
   insurers or would be an Insured under any such policy but for its termination
   upon exhaustion of its limits of liability.

   With respect to property, loss of use of such property shall be deemed to be
   property damage.

3. Without in any way restricting the operation of Paragraph 1. of this Clause,
   it is agreed that for all purposes of this Agreement all the original
   liability contracts of the Company, whether new, renewal or replacement, of
   any class whatsoever (other than Personal Liability, Farmers' Liability,
   Storekeepers' Liability or Automobile Liability contracts), which become
   effective on or after 31st December 1984, shall be deemed to include, from
   their inception dates and thereafter, the following provision:

                                      -1-
<PAGE>

   Broad Exclusion Provision -

   It is agreed that this Policy does not apply:

   (a) to liability imposed by or arising under the Nuclear Liability Act; nor

   (b) to bodily injury or property damage with respect to which an Insured
       under this Policy is also insured under a contract of nuclear energy
       liability insurance (whether the Insured is unnamed in such contract and
       whether or not it is legally enforceable by the Insured) issued by the
       Nuclear Association of Canada or any other insurer or group or pool of
       insurers or would be an Insured under any such policy but for its
       termination upon exhaustion of its limit of liability; nor

   (c) to bodily injury or property damage resulting directly or indirectly from
       the nuclear energy hazard arising from:

       (i)    the ownership, maintenance, operation or use of a nuclear facility
              by or on behalf of an Insured;

       (ii)   the furnishing of an Insured of services, materials, parts or
              equipment in connection with the planning, construction,
              maintenance, operation or use of any nuclear facility; and

       (iii)  the possession, consumption, use, handling, disposal or
              transportation of fissionable substances, or of other radioactive
              material (except radioactive isotopes, away from a nuclear
              facility, which have reached the final stage of fabrication so as
              to be usable for any scientific, medical, agricultural, commercial
              or industrial purpose) used, distributed, handled or sold by an
              Insured.

   As used in this Policy:

   (1) The term "nuclear energy hazard" means the radioactive, toxic, explosive,
       or other hazardous properties of radioactive material;

   (2) The term "radioactive material" means uranium, thorium, plutonium,
       neptunium, their respective derivatives and compounds, radioactive
       isotopes of other elements and any other substances that the Atomic
       Energy Control Board may, by regulation, designate as being prescribed
       substances capable of releasing atomic energy, or as being requisite for
       the production, use or application of atomic energy;

                                      -2-
<PAGE>

   (3) The term "nuclear facility" means:

       (a) any apparatus designed or used to sustain nuclear fission in a self-
           supporting chain reaction or to contain a critical mass of plutonium,
           thorium and uranium or any one or more of them;

       (b) any equipment or device designed or used for (i) separating the
           isotopes of plutonium, thorium and uranium or any one or more of
           them, (ii) processing or utilizing spent fuel, or (iii) handling,
           processing or packaging waste;

       (c) any equipment or device used for the processing, fabricating or
           alloying of plutonium, thorium or uranium enriched in the isotope
           uranium 233 or in the isotope uranium 235, or any one or more of them
           if at any time the total amount of such material in the custody of
           the Insured at the premises where such equipment or device is located
           consists of or contains more than 25 grams of plutonium or uranium
           233 or any combination thereof, or more than 250 grams of uranium
           235;

       (d) any structure, basin, excavation, premises or place prepared or used
           for the storage or disposal of waste radioactive material;

       and includes the site on which any of the foregoing is located, together
       with all operations conducted thereon and all premises used for such
       operations.

   (4) The term "fissionable substance" means any prescribed substance that is,
       or from which can be obtained, a substance capable of releasing atomic
       energy by nuclear fission.

   (5) With respect to property, loss of use of such property shall be deemed to
       be property damage.

                                      -3-

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