November 11, 1996





Ms. Mary R. Hennessy
1 Nostrand Road
Cranbury, New Jersey  08512



                            Re: Tax Reimbursement

Dear Mary:

         In  connection  with your  becoming an employee of TIG  Holdings,  Inc.
("TIG"),  we have discussed  TIG's  willingness to indemnify you against certain
potential tax liability  that you may incur arising out of your  termination  of
employment  with American Re  Corporation  ("American  Re"). The purpose of this
letter is to confirm  those  arrangements.  In agreeing to provide the indemnity
described herein, we have relied upon the information that you have furnished us
concerning  the  payments  and  benefits  that  have  or will  accrue  to you in
connection with your termination of employment with American Re.

         If you owe any excise tax  pursuant  to  Section  4999 of the  Internal
Revenue Code of 1986, as amended, as a result of any severance payments,  or the
acceleration  of any stock options,  paid or provided to you in connection  with
the  acquisition  of  American  Re  by  Munchener  Ruckversicherung-Gesellschaft
Aktiengesellschaft  (the "Excise Tax"), TIG will promptly pay you an amount (the
"Reimbursement  Payment")  such that,  after the payment by you of any  federal,
state and local  income  taxes,  and any  Medicare  tax  portion of the  Federal
Insurance  Contributions Act tax, attributable to the Reimbursement Payment, you
will retain an amount of the Reimbursement Payment equal to the Excise Tax.

         You agree that (i) if you file any tax return reporting any Excise Tax,
and/or (ii) promptly after any determination,  claim or assertion is made by the
Internal Revenue Service ("IRS") that the Excise Tax is due, you will notify TIG
of such filing, or of such determination, claim or assertion.







You further agree that TIG will be allowed a reasonable period of time to review
with you  whether  the Excise Tax is owed or is  required  to be reported to the
IRS. If TIG obtains (at TIG's sole  expense) an opinion of legal counsel that it
is more  likely  than not that (a) the  Excise  Tax is not owed by you or is not
required to be reported to the IRS, or (b) that you would  succeed in  disputing
such determination, claim or assertion of the IRS, you will (upon request and at
the sole  expense of TIG) make a good faith  effort to file a claim for a refund
and/or to contest such IRS determination,  claim or assertion, or refund denial,
in all  administrative  proceedings  with  the IRS and in any  related  judicial
proceedings.  In conducting any such contest,  you will make a good faith effort
to keep TIG advised on all relevant matters and correspondence  with the IRS and
will permit TIG to control any administrative or judicial proceedings.  TIG will
bear all  expenses  of any such  proceedings  and  will  pay any  penalties  and
interest imposed on you (and not subsequently  waived) by the IRS as a result of
any such proceeding.

         If you are in agreement with the  foregoing,  please so indicate in the
space provided below.

                                                Very truly yours,

                                                TIG HOLDINGS, INC.


                                           By:        /s/ Peter M. Acton
                                                      -------------------
                                           Name:     Peter M. Acton
                                           Title:    Senior Vice President and
                                                     General Counsel


Acknowledged and agreed to:


/s/ Mary R. Hennessy
- --------------------
Mary R. Hennessy