Registration No. 33-60105



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
   
                         POST EFFECTIVE AMENDMENT NO. 3
     
                                   FORM S-2
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933



                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
               (Exact name of registrant as specified in charter)



         Barbados                               Not Applicable
(State or other jurisdiction             (I.R.S. employer identification
of incorporation or organization)                   number)



                            Financial Services Centre
                               Bishops Court Hill
                           St. Michael, Barbados, W.I.
   
                                 (246) 436-4895
    
                        (Address and telephone number of
                           principal executive office)



                    RONALD W. JONES, Vice-President, Finance
                 Motors Mechanical Reinsurance Company, Limited
                            Financial Services Centre
                               Bishops Court Hill
                           St. Michael, Barbados, W.I.
   
                                 (246) 436-4895
    
            (Name, address and telephone number of agent for service)



                                    Copy to:
                             David R. Woodward, Esq.
                     LeBoeuf, Lamb, Greene & MacRae, L.L.P.
                          1875 Connecticut Avenue, N.W.
                             Washington, D.C. 20009



If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. (X)

If the  registrant  elects to deliver  its  latest  annual  report to  security-
holders, or a complete and legible facsimile thereof,  pursuant to Item 11(a)(i)
of this form, check the following box.( )




                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                          Cross reference sheet between
                        Items of Form S-2 and Prospectus
                             Pursuant to Item 501(b)
                                of Regulation S-K

     FORM S-2 ITEM NO.                        CAPTION OR
       AND CAPTION                            LOCATION IN PROSPECTUS

 1. Forepart of Registration Statement
    and Outside Front Cover Page of
    Prospectus .......................        Front Cover

 2. Inside Front Page and Outside Back
    Cover Pages of Prospectus ........        Inside Front Cover; Outside
                                              Back Cover

 3. Summary Information, Risk Factors
    and Ratio of Earnings to Fixed
    Charges ..........................        Summary; Risk Factors

 4. Use of Proceeds ..................        Use of Proceeds

 5. Determination of Offering Price ..        Determination of Offering Price

 6. Dilution .........................        Not Applicable

 7. Selling Security Holdings ........        Not Applicable

 8. Plan of Distribution .............        Plan of Distribution

 9. Description of Securities to be
    Registered .......................        Description of Capital Stock

10. Interests of Named Experts and
    Counsel ..........................        Not Applicable

11. Information With Respect to the
    Registrant .......................        Summary; Use of
                                              Proceeds; Business of the Company;
                                              Capitalization; Management

12. Incorporation of Certain Information      Incorporation of Certain
    by Reference                              Information by Reference

13. Disclosure of Commission Position
     on Indemnification for Securities
     Act Liabilities ..................       Not Applicable




                               P R O S P E C T U S

                 Motors Mechanical Reinsurance Company, Limited
                      12,000 Shares of Participating Stock

THE  SECURITIES  OFFERED HEREBY  INVOLVE  SIGNIFICANT  RISK, ARE SUBJECT TO
SUBSTANTIAL  RESTRICTIONS  ON  TRANSFER,  AND  WILL NOT BE  READILY  MARKETABLE.
OFFEREES SHOULD REFER TO THE SECTION CAPTIONED "RISK FACTORS".

Motors Mechanical  Reinsurance  Company,  Limited,  a Barbados company,  is
engaged in the  business  of  assuming  risks in  respect  of certain  insurance
policies  covering  motor  vehicle  mechanical  repairs.  (See  "Business of the
Company.")

The shares of Participating Stock of the Company offered by this Prospectus (the
"Shares") are divided into 120 series,  and the  authorized  number of Shares of
each  series is 100  Shares.  The  offering  price is  $75.00  per  Share.  (See
"Description  of Capital  Stock.") ALL AMOUNTS OF MONEY SHOWN IN THIS PROSPECTUS
ARE STATED IN U.S. DOLLARS.

The Company is  offering  Shares of a series  only to persons  certified  by the
owners of motor vehicle franchises to be identified with that series and only if
it  receives  Stock  Purchase  Agreements  executed  by such  persons  which are
acceptable to the Company in its sole discretion.

The Shares are being sold, on a continuous basis, by certain employees of Motors
Insurance  Corporation ("MIC"),  who are not compensated  specifically for their
services in this regard.
(See "Plan of Distribution.")

THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED  BY THE SECURITIES AND
EXCHANGE  COMMISSION OR ANY STATE  SECURITIES  COMMISSION NOR HAS THE SECURITIES
AND  EXCHANGE  COMMISSION  OR ANY STATE  SECURITIES  COMMISSION  PASSED UPON THE
ACCURACY OR ADEQUACY OF THE PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                                            Underwriting
                                Price to    discounts and     Proceeds
                                 public      commissions      to issuer

Per Share                        $75.00         None            $75.00

Total 12,000 shares            $900,000         None          $900,000

   
            The date of this Prospectus is           , 1997.
    

The Company,  certain of its  directors,  and certain  experts  named herein are
residents of  Barbados,  and all or a  substantial  portion of the assets of the
Company and of such persons are or may be located outside the United States.  As
a result,  it may not be possible  for  investors  to effect  service of process
within the United States upon the Company or such persons, or to enforce against
them  judgments  obtained  in United  States  courts  predicated  upon the civil
liability provisions of the Securities Act of 1933, as amended (the "1933 Act").
The Company has been advised by its Barbados counsel,  Evelyn, Gittens & Farmer,
that there is doubt as to whether Barbados courts would (1) enforce judgments of
United States  courts  obtained  against the Company or such persons  predicated
upon the civil liability  provisions of the 1933 Act, or (2) impose, in original
actions in Barbados,  liabilities against the Company or such persons predicated
upon the 1933 Act.

The  Company is  subject to the  informational  requirements  of the  Securities
Exchange Act of 1934 (the "Exchange  Act"),  and in accordance  therewith  files
reports and other  information with the Securities and Exchange  Commission (the
"Commission"). Such reports and other information can be inspected and copied at
the offices of the Commission, at Room 1024, 450 Fifth Street, N.W., Washington,
D.C.;  Room  1204,  Kluczynski  Federal  Building,  230 South  Dearborn  Street,
Chicago,  Illinois;  and Room 1102, Jacob K. Javits Building,  26 Federal Plaza,
New York,  New York.  Copies of such  material  can be obtained  from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,  D.C.
20549 at prescribed rates.

The Company furnishes to its stockholders  annual reports  containing  financial
statements  that reflect the  Company's  overall  results and condition and that
have been audited and  reported  upon by  independent  public  accountants,  and
quarterly  reports  for each of the first  three  quarters  of each  fiscal year
containing unaudited financial  information.  In addition, the Company furnishes
to each holder of Shares of a series a quarterly statement  containing unaudited
financial  information  relating to such  series.  The reports  furnished by the
Company contain  information  prepared in accordance with accounting  principles
generally accepted in the United States.


                     FOR ARIZONA AND MASSACHUSETTS INVESTORS

NO  SHARES  MAY  BE  OFFERED  TO  OR   PURCHASED  BY  RESIDENTS  OF  ARIZONA  OR
MASSACHUSETTS  UNLESS THE PURCHASER IS (I) A FRANCHISE  OWNER,  (II) A MEMBER OF
THE FRANCHISE OWNER'S FAMILY, (III) A TRUST FOR THE BENEFIT OF PERSONS OTHERWISE
ELIGIBLE TO PURCHASE SHARES, (IV) A CORPORATION OR PARTNERSHIP CONTROLLED BY THE
FRANCHISE OWNER, OR (V) A KEY EMPLOYEE WITH RESPECT TO THE FRANCHISE.

                              FOR FLORIDA INVESTORS

THE  SECURITIES  BEING  OFFERED  HEREBY HAVE NOT BEEN  REGISTERED  WITH THE
FLORIDA DIVISION OF SECURITIES. ANY SALE MADE PURSUANT TO THIS PROSPECTUS MAY BE
VOIDED  BY  THE  PURCHASER   WITHIN  THREE  DAYS  OF  THE  FIRST   TENDERING  OF
CONSIDERATION.

                            FOR MISSISSIPPI INVESTORS

THE  COMMISSIONER  OF INSURANCE OF THE STATE OF  MISSISSIPPI  (THE  "MISSISSIPPI
INSURANCE  COMMISSIONER") HAS NOT APPROVED OR DISAPPROVED THIS OFFERING, NOR HAS
THE MISSISSIPPI  INSURANCE  COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS.

                             FOR NEBRASKA INVESTORS
   
ALL  NEBRASKA  INVESTORS  DESIRING  TO PURCHASE  PARTICIPATING  STOCK SHALL
FORWARD THEIR EXECUTED STOCK PURCHASE  AGREEMENTS,  CERTIFIED OR CASHIER'S CHECK
PAYABLE TO THE COMPANY, AND CERTIFICATION OF ELIGIBILITY TO:
    

                  MOTORS INSURANCE CORPORATION
                  3044 W. GRAND BOULEVARD
                  RM GM 2-202
                  DETROIT, MI  48202
                  ATTENTION:  ROBERT E. CAPSTACK



                          FOR NORTH CAROLINA INVESTORS

THESE  SECURITIES  HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE  COMMISSIONER OF
INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER OF INSURANCE
RULED UPON THE  ACCURACY OR THE  ADEQUACY OF THIS  DOCUMENT.  THE BUYER IN NORTH
CAROLINA UNDERSTANDS THAT THE OFFERER IS NOT LICENSED AS AN INSURANCE COMPANY IN
NORTH CAROLINA, NOR DOES IT MEET THE BASIC ADMISSIONS REQUIREMENTS FOR LICENSING
AS AN INSURANCE COMPANY IN NORTH CAROLINA.


                            TABLE OF CONTENTS

                                                                          Page

DEFINITIONS .......................................................
SUMMARY ...........................................................
RISK FACTORS ......................................................
 Relationship with MIC ............................................
 Restrictions Applicable to Certain Retrocessions .................
 Extension of New Vehicle Warranties ..............................
 Risk of Underwriting Losses ......................................
 Investment Related Risks .........................................
 United States Tax Considerations .................................
 Risks Related to Foreign Business Operations .....................
 Competition and Loss of Business .................................
 Barbados Regulatory Limitations ..................................
 Reliance on Outside Consultants ..................................
 Dividends ........................................................
 No Public Market; Restrictions on Transfers ......................
 Share Redemption..................................................
ELIGIBILITY TO PURCHASE THE SHARES ................................
USE OF PROCEEDS ...................................................
DETERMINATION OF OFFERING PRICE ...................................
DIVIDENDS .........................................................
BUSINESS OF THE COMPANY ...........................................
SELECTED FINANCIAL DATA............................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS .............................
MANAGEMENT ........................................................
 Certain Transactions ..............................................
DESCRIPTION OF CAPITAL STOCK ......................................
 Allocations to Subsidiary Capital Accounts .......................
 Voting Rights ....................................................
  Election of Directors ...........................................
  Proxies .........................................................
  Liquidation .....................................................
  Changes in Articles and By-Laws .................................
  Other Matters ...................................................
 Redemption .......................................................
 Liquidation ......................................................
 Restrictions on Transfer .........................................
  Transfers of Less Than All Shares of a Series ...................
  Right of First Refusal ..........................................
  Exceptions for Certain Transfers ................................
  Provisions Applicable to All Transfers ..........................
 Common Stock .....................................................
 Barbados Corporate Law Provisions ................................
  Dividends and Distributions .....................................
  Repurchase ......................................................
  Shareholders' Remedies ..........................................
  Enforcement of United States Judgments ..........................
  Indemnification .................................................
  Inspection of Corporate Records .................................
PLAN OF DISTRIBUTION ..............................................
 Purchase Procedures ..............................................
 Terms of Sale ....................................................
 Conditions of Sale ...............................................
 Approval of Purchase ............................................
 Termination of Offering ..........................................
UNITED STATES FEDERAL TAX CONSIDERATIONS ..........................
 United States - Barbados Income Tax Treaty .......................
 United States Premium Excise Tax .................................
 United States Federal Income Tax Risks and
  Consequences -- The Company .....................................
 United States Federal Income Tax Consequences -- The Shareholders.
LEGAL MATTERS .....................................................
EXPERTS ...........................................................
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE .................
ADDITIONAL INFORMATION ............................................
INDEPENDENT AUDITORS' REPORT ......................................
FINANCIAL STATEMENTS...............................................
APPENDIX   A (Restated Articles of Incorporation of the Company)...
APPENDIX   B (Stock Purchase Agreement)............................
APPENDIX   C (Certification Form)..................................



THIS  PROSPECTUS  DOES NOT CONSTITUTE AN OFFERING IN ANY  JURISDICTION  IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER,  SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY  REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,  AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.

DEFINITIONS

As used in this Prospectus, the following terms have the particular meanings set
forth below.

Common Stock -- The class of shares held by MIC.

Company -- Motors Mechanical Reinsurance Company, Limited.
   
Eligible Purchaser -- An individual or entity certified,  by the owner(s) of the
Franchise(s) for which an MIC Mechanical  Account is maintained,  as a purchaser
of all or part of a series of Shares in respect of such MIC Mechanical Account.
    
Franchise -- A right  conferred by a motor  vehicle  manufacturer  pursuant to a
written agreement which permits the grantee to sell the manufacturer's new motor
vehicles.

MIC -- Motors Insurance Corporation.
   
MIC Mechanical  Account -- The separate business record maintained by MIC or any
of its subsidiaries to track volume, experience, and commissions with respect to
mechanical service agreements sold by one or more particular Franchises.

Policies -- Insurance policies issued by any MIC subsidiary and reinsured by MIC
that cover motor vehicle mechanical service agreements, to the extent that risks
under such policies are attributable to an MIC Mechanical  Account in respect of
which a series of  Shares  is  issued  and  outstanding,  provided,  that  fleet
coverages, medium duty truck business and maintenance plans are not reinsured.

Retrocession  Agreement -- The agreement or agreements  entered into between the
Company  and MIC  pursuant  to  which  risks  arising  under  the  Policies  are
transferred to the Company.

Shares -- The shares of the Participating Stock of the Company.
    
Stock Purchase Agreement -- The agreement entered into between the Company and a
purchaser of Shares, in the form approved by the Company's Board of Directors.
   
Subsidiary  Capital Account -- The bookkeeping record established by the Company
for a  particular  series of shares  or class of stock  and  maintained  for the
purpose of accounting for items of income and expense, gains and losses, capital
contributions,   and  shareholder  distributions  which  are  allocated  to  the
particular series of shares or class of stock.
    
                                     SUMMARY

The following  summary is qualified in its entirety by the detailed  information
and financial  statements,  including the notes thereto,  appearing elsewhere in
this Prospectus.

THE COMPANY

The  Company was  incorporated  under the laws of Barbados on June 12, 1986
and is registered as a licensee under the Barbados Exempt Insurance Act, 1983 to
carry on the business of an Exempt Insurance  Company from within Barbados.  Its
registered  and  principal  offices are located in St.  Michael,  Barbados.  The
Company is engaged in the business of assuming  insurance  risks with respect to
motor vehicle mechanical breakdowns insured under policies that are reinsured by
MIC. The Company conducts its operations within or from Barbados. (See "Business
of the Company.")

THE OFFERING

Securities Being
Offered ...........      Participating Stock, not to exceed 12,000 shares, in 
                         series of 100 shares each, without nominal or par 
                         value.  (See "Description of Capital Stock.")

Offering Price ....      $75.00 per Share, or $7,500 per series.
   
Terms of Offering .      Shares  of a  series  of  Participating  Stock  will be
                         issued with  respect to a specific MIC  Mechanical
                         Account.  Only one  series of Shares  will be issued
                         with  respect to each  MIC  Mechanical  Account.  
                         An  entire  series  must be purchased  by  one  or
                         more Eligible Purchasers.  See "Eligibility to
                         Purchase the Shares.")
    
Offering Period ...      This offering commenced as of July 12, 1995 and,
                         subject to termination by the Board of Directors of the
                         Company (the "Board"), will be continuous in accordance
                         with Rule 415 under the 1933 Act.  All funds paid by an
                         Eligible Purchaser will be held for the benefit of the 
                         Company in an escrow account at Barclays Bank PLC in 
                         Bridgetown, Barbados until such time as the related 
                         Stock Purchase Agreement has been accepted by the
                         Company.  Upon acceptance by the Company of a Stock
                         Purchase Agreement, funds will be paid to the Company 
                         and Shares will be issued.


Purchase Procedure..     Eligible Purchasers who wish to purchase Shares will be
                         required to submit to the Company in Barbados the
                         following: (1) two executed Stock Purchase Agreements; 
                         (2) a certified or cashier's check in the amount of the
                         purchase price of the Shares payable to "Motors 
                         Mechanical Reinsurance Company, Limited -- Escrow 
                         Account"; and (3) certification of eligibility.  (See
                        "Eligibility to Purchase the Shares.")

Restrictions on
Transfer ..........      Subject to certain exceptions, the transfer of Shares
                         is subject to the Company's right of first refusal.  In
                         addition, the transfer of less than all of the Shares 
                         of a series requires prior written consent of the 
                         Company.  (See "Description of Capital Stock -- 
                         Restrictions on Transfer.")

Voting Rights .....      Holders of shares of Participating Stock as a class are
                         entitled to elect one out of six members of the Board. 
                         Their right to vote on other matters is limited.  
                         (See "Description of Capital Stock -- Voting Rights.")

Risk Factors ......      This investment is subject to significant risks.  
                         (See "Risk Factors.")
   
Capital                  Structure..  As of  April  1,  1997,  26,200 shares of 
                         Participating Stock representing 262 series were 
                         issued and outstanding and were held by 454 
                         shareholders.  In addition to the Shares, the Company 
                         has authorized 2,000 shares of Common Stock without 
                         nominal or par value,  all of which have been issued
                         to MIC and are outstanding.
    
Use of Proceeds ...      The proceeds of this offering are added to general
                         funds of the Company and utilized in its insurance
                         business.  (See "Use of Proceeds.")

Plan of
Distribution ......      The Shares are being sold by employees of MIC, on a
                         continuous basis.  Neither MIC nor its employees are 
                         compensated specifically for their services in that 
                         regard, and no commissions are charged or paid in 
                         connection with sales of the Shares.  (See "Plan of 
                         Distribution.")

                               RISK FACTORS

Investment in the Company is subject to significant risk.  Prospective investors
should carefully consider,  together with the information contained elsewhere in
this Prospectus, the following:
   
Relationship  with MIC. MIC owns all of the Common  Stock of the Company,  which
permits it to control the Board and determine, among other things, the selection
of the Company's  officers,  outside  insurance  management  company and outside
investment  adviser.  (See  "Description  of Capital  Stock.")  The  Company has
entered into a Retrocession  Agreement with MIC pursuant to which risks that MIC
reinsures under Policies are "retroceded" to the Company.  (See "Business of the
Company.") The Company relies  exclusively  on the  Retrocession  Agreement and,
thus, on MIC for its business.  Therefore,  any matters adversely  affecting MIC
may  have an  adverse  impact  on the  insurance  business  of the  Company.  In
addition,  it  should be noted  that,  under the  Retrocession  Agreement,  only
business identified with certain MIC Mechanical Accounts is retroceded.  MIC and
its subsidiaries have the power to limit the Company's  insurance  business with
respect to MIC Mechanical Accounts.
    
Pursuant to the Retrocession Agreement,  the Company must pay to MIC the amounts
of any and all  claims  paid by MIC in  respect of the  Policies.  Although  the
Company may, at its own expense,  be  associated  with MIC in the defense of any
claim, MIC or its subsidiaries  generally have full authority to investigate and
settle, or defend, all claims.

The Retrocession  Agreement  extends for an indefinite term. It generally may be
terminated at any time by MIC or the Company upon 30 days written notice. In the
event that the Retrocession Agreement is terminated,  there is no assurance that
the Company could make arrangements  which would allow it to continue to operate
in the manner described in this Prospectus.
   
Restrictions  Applicable  to Certain  Retrocessions.  At the present  time,  MIC
believes  that there is no federal or state law or  regulation  that impairs its
ability to retrocede its risks to the Company.  However, certain state insurance
laws and regulations are imprecise and subject to varied interpretations, and it
is  possible  that some state  administrators  could seek to limit  retrocession
arrangements  with a non-United  States  insurance  company or with an insurance
company that is affiliated  with the ceding company or its producers.  Moreover,
from time to time, there are legislative and regulatory proposals that could, if
adopted, affect the MIC retrocession.

Extension of New Vehicle Warranties. Sales of mechanical service agreements, and
thus the  business  of the  Company,  may be  adversely  affected  by changes in
warranties provided by manufacturers for new motor vehicles.  If such warranties
are  expanded,  there  could be an  adverse  affect on the  sales of  mechanical
service agreements, and thus on the retrocession business of the Company.

Risk  of   Underwriting   Losses.   Mechanical   service   agreement  risks  are
unpredictable  and highly  volatile.  If losses  and  expenses  incurred  by the
Company were to exceed its earned  premium and  investment  income,  the Company
would incur net losses.

Each series of Shares  bears 100% of the losses  incurred  (to the extent of its
respective   Subsidiary  Capital  Account  balance)  with  respect  to  business
attributable to the MIC Mechanical Account related to such series. To the extent
such losses are substantial, a holder of Shares might sustain a loss of all or a
portion  of his or her  investment  even if  other  holders  of  Shares  are not
similarly affected.  In addition,  underwriting losses allocable to a particular
series may, under certain circumstances,  be allocated to the other series. (See
"Description of Capital Stock -- Allocations to Subsidiary Capital Accounts.")

Investment  Related Risks.  The  profitability of the Company depends in part on
the amount of income that the Company earns on its investments.  There can be no
assurance that the Company will earn a net investment  return which,  when added
to its earned premium, will be sufficient to offset its liability for claims and
expenses.  In  addition,  the  Company  could  suffer  investment  losses due to
declines in the market  values of  securities  in which it invests  which may be
caused by, among other things,  volatile  interest  rates.  The Company  invests
primarily in U.S.  dollar-denominated  securities  issued  outside of the United
States by non-U.S.  private or governmental issuers and U.S.  dollar-denominated
bank  certificates  of deposit  issued by foreign banks and foreign  branches of
U.S. banks.  Investing in such securities  subjects the Company to certain risks
not generally associated with securities issued in the United States. Subject to
satisfaction of certain conditions,  the Company may make limited investments in
non-  U.S.  dollar  denominated  bonds on a fully  currency-hedged  basis.  Such
forward foreign currency transactions minimize the risk of loss resulting from a
decline in the value of the foreign  currency  relative  to the dollar,  but may
also limit the  potential  for gain in the event the  foreign  currency's  value
increases in relation to the value of the dollar.  The  instruments  that may be
used to hedge non-U.S.  dollar denominated investments could involve, to varying
degrees,  elements of credit risk in the event a counterparty  should default on
its obligation under the hedge  instrument.  Such credit risk is managed through
the selection of financially  sound  counterparties  and periodic  monitoring of
counterparty financial condition.

United States Tax Considerations. The Company conducts a reinsurance business in
Barbados and executes and administers its reinsurance agreements and manages its
business  affairs from  Barbados.  On this basis,  the Company  believes that it
should not be deemed to be engaged in business  within the United States through
a permanent establishment, and, therefore, the Company believes it should not be
subject to United States income tax.  However,  given the factual  nature of the
questions  involved  and certain  aspects of the  Company's  treaty  reinsurance
program  related to the United  States,  there can be no assurance  that for tax
purposes  the  Company  ultimately  will not be deemed to be engaged in business
within the United States through a permanent  establishment.  In such event, the
Company  would be  subject  to United  States  income  tax on  business  profits
attributable to such permanent establishment, as well as an additional 5% branch
profits tax.
    
Under captive  insurance  company  provisions  contained in the Internal Revenue
Code,  each holder of Shares  generally  will be subject to United States income
tax  currently  on his or her pro rata  share of the  earnings  of the  Company,
whether or not such  earnings  are  distributed.  To the extent that the Company
were subject to United States income tax on its business profits, the holders of
Shares would not be subject to current tax on such profits, but the holders of

Shares would be subject to tax on actual  distributions of the Company with
respect to such  profits.  (See "United  States  Federal Tax  Considerations  --
United States Federal Income Tax Consequences -- The Shareholders.")

No  representation is made as to the effect that any change in United States tax
laws or the interpretation thereof may have on the Company or holders of Shares.
   
Risks  Related  to  Foreign  Business  Operations.  The  Company's  business  is
conducted  outside of the United  States and may,  consequently,  be affected by
changes in foreign  governments and by other political and economic  conditions.
As a Barbados  corporation,  the  Company is  subject to the  provisions  of the
Barbados  Companies Act, 1982.  (See  "Description  of Capital Stock -- Barbados
Corporate Law  Provisions.")  In addition,  the Company has received a guarantee
from the Barbados  Minister of Finance  effectively  exempting it from  Barbados
taxes for a period ending December 31, 2016.

Competition  and Loss of Business.  The  business of insuring  risks under motor
vehicle mechanical service agreements is highly competitive, with many companies
seeking  the  business  produced  by motor  vehicle  dealers.  Since  all of the
Company's  business is currently  derived from the Retrocession  Agreement,  the
volume  of the  Company's  business  is  dependent,  to some  extent,  upon  the
marketability  of  agreements  and plans  developed by GM and its  subsidiaries,
including MIC, and offered through motor vehicle  dealers.  In addition,  GM may
choose not to insure its liability under mechanical repair plans with MIC or its
subsidiaries.

Barbados  Regulatory  Limitations.  Barbados  insurance  law  requires  that the
Company maintain certain levels of capital and surplus in relation to its earned
premium.  To the extent that the net asset  value of the  Company  does not meet
these minimum  requirements and to the extent that a Subsidiary  Capital Account
does not support the  business  attributable  to such  account,  the Company may
reduce the amount of its  business  attributable  to such  deficient  Subsidiary
Capital Account.
    
Reliance on Outside  Consultants.  The Company does not have any  full-time
officers or employees.  The Company relies on outside  consultants for insurance
management,  day-to-day  administrative  services,  and investment advice.  (See
"Business of the Company.")

Dividends.  Although the Company's  Restated Articles of Incorporation (the
"Articles") (see Appendix A) provide for a minimum annual dividend to holders of
Shares  under  certain  circumstances,  the  ability  of the  Company to pay any
dividend  is  subject  to   compliance   with  Barbados   insurance   regulatory
requirements,  the Barbados Companies Act and other limitations  provided in the
Company's Articles. (See "Dividends.")

No Public Market;  Restrictions on Transfers.  There is no public market for the
Participating  Stock or the  other  capital  stock of the  Company,  and none is
expected  to  develop.  In  addition,  the  Participating  Stock is  subject  to
substantial restrictions on transfer. Except for transfers to certain members of
a transferor's family, certain trusts, certain business affiliates,  or estates,
a transfer  of any series of shares is subject to the  Company's  right of first
refusal,  and a transfer  of less than all of the  shares of a series  cannot be
made without the express  written consent of the Company.  All transferees  must
agree to be bound by the  provisions of a Stock Purchase  Agreement,  including,
among  other  things,  restrictions  on  the  transfer  of  their  shares.  (See
"Description  of Capital Stock --  Restrictions  on Transfer,"  "Eligibility  to
Purchase the Shares," and "Plan of Distribution.")

Share  Redemption.  The Board of  Directors of the Company has the right to
cause a  redemption  of the shares of  Participating  Stock of any series at any
time  and for any  reason.  This  permits,  among  other  things,  the  Board of
Directors to redeem, at its discretion,  shareholders who produce unsatisfactory
business  on a  continuing  basis.  The  Board  also may  reject a  request  for
redemption by a shareholder. (See "Description of Capital Stock -- Redemption.")

                       ELIGIBILITY TO PURCHASE THE SHARES
   
Shares of a series may be purchased only by an individual or entity certified by
all the  owner(s) of the  Franchise(s)  for which an MIC  Mechanical  Account is
maintained,  as a  purchaser  of all or part of a series of Shares in respect of
such  MIC  Mechanical  Account  ("Eligible  Purchaser").  There  are  no  formal
eligibility  requirements for  certification.  Franchise  owner(s) have complete
discretion  with  respect to whom they choose to certify as Eligible  Purchasers
(including  themselves),  provided that all beneficial  owners of the dealership
operating  under the Franchise  consent to such  designation.  In addition,  the
Company  has  complete  discretion  to accept or  reject  any offer to  purchase
Shares.  No more than one  series of Shares is issued  with  respect to each MIC
Mechanical  Account.  No Shares of a series are  issued  unless  executed  Stock
Purchase  Agreements  (see  Appendix  B) for all Shares of that series have been
received and accepted by the Company.
    
A prospective  purchaser is  considered to be properly  certified if the Company
has received a certificate in the form furnished by the Company (see Appendix C)
from each owner of the  particular  Franchise(s)  stating  that the  prospective
purchaser  has been  designated  by such owner(s) to be eligible to purchase the
particular  Shares and representing that all beneficial owners of the dealership
operating under the Franchise have consented to such  designation.  In addition,
the  prospective  purchaser must execute a Stock Purchase  Agreement and forward
that agreement,  together with payment for the Shares purchased, to the Company.
Stock Purchase  Agreements are subject to acceptance by the Company.  (See "Plan
of Distribution.")

Transfer  of Shares is  subject to  certain  restrictions.  If less than all the
Shares of a series  are  transferred,  the  Company  must give its  consent.  In
addition,  the Company has a right of first refusal to purchase any Shares which
the holder attempts to transfer. However, a transfer is not subject to either of
the foregoing restrictions if the transferee falls into one of the categories of
designated  transferees set forth in the Articles.  (See "Description of Capital
Stock -- Restrictions on Transfer.")

                                 USE OF PROCEEDS

The  offering  of the  Shares  pursuant  to this  Prospectus  is being made on a
continuous  basis. This means that it is not possible to predict how many series
of Shares will ultimately be purchased or the maximum net proceeds to be derived
by the Company from this offering.
   
The proceeds  derived from this  offering are added to the general  funds of the
Company to provide a pool of funds for the payment of future claims in the event
premiums  prove  insufficient  to cover such  claims.  Under  Barbados  law, the
Company is required to have minimum net assets,  determined  by reference to the
annual earned premium.  All of the Company's  available  capital,  including the
proceeds of this offering,  is invested by its investment  advisor in accordance
with guidelines established by the Board. The Company believes that the proceeds
derived from this offering will be sufficient,  together with its other capital,
to support the Company's insurance operations for the foreseeable future.
    
The  consideration  received  by the Company  upon  issuance of a series of
Shares is allocated to the Subsidiary  Capital Account  established with respect
to that series of Shares.  (See  "Description  of Capital Stock - Allocations to
Subsidiary Capital Accounts.")

                         DETERMINATION OF OFFERING PRICE

There is no public trading market for the Shares nor is one expected to develop.
The price per Share  reflects  the  projected  capital  needs of the Company and
bears no relationship to any valuation criteria.

                                    DIVIDENDS

Dividends may be declared and paid at the discretion of the Board, provided that
each  holder  of  Shares  of a series  will be  entitled  to  receive  a minimum
dividend,  payable annually,  equal to 20% of the annual net income attributable
to the Subsidiary  Capital Account associated with that series of Shares. In all
events,  however,  dividends  are subject to the  restrictions  described in the
following paragraphs.
   
Pursuant to the general corporate laws of Barbados,  dividends on the Shares are
payable  only if after the  payment:  (a) the  Company  would be able to pay its
liabilities  as they come due;  and (b) the  realizable  value of the  Company's
assets exceeds its liabilities and stated capital of all classes.  Dividends may
not  be  paid  out of  unrealized  investment  gains.  Further,  under  Barbados
insurance law, the Company is required to maintain a minimum  capitalization  of
$125,000  and, in  addition,  the  recorded  value of its assets must exceed its
liabilities by: (a) $125,000 where the earned premium in the preceding financial
year did not exceed  $750,000;  (b) an amount equal to 20% of the earned premium
for the preceding  financial year,  where such income exceeded  $750,000 but did
not exceed  $5,000,000;  and (c) an amount equal to the  aggregate of $1,000,000
and 10% of the amount by which the earned  premium for the  preceding  financial
year  exceeded  $5,000,000.  (See  "Description  of  Capital  Stock --  Barbados
Corporate Law Provisions.")

In addition to the provisions of Barbados law, the Articles place limitations on
the payment of  dividends.  Dividends  may be declared  and paid only out of the
earned  surplus of the Company and only if the Company,  after giving  effect to
the  distribution,  meets the Barbados margin of solvency  requirements  without
regard to any letters of credit.  Further,  dividends with respect to any series
of Shares may be paid only out of earned surplus  attributable to the Subsidiary
Capital Account identified with those Shares, and only to the extent that, after
giving  effect to the  dividend,  the capital and surplus  identified  with that
Subsidiary Capital Account (without regard to any guarantee or letter of credit)
would meet its pro rata share, based on allocable earned premium, of the minimum
margin of solvency  required of the Company under  Barbados law, as described in
the  preceding  paragraph.  To the  extent  a  dividend,  other  than a  minimum
dividend, is declared on the Shares, it will be declared and paid subject to the
foregoing  limitations on all series of Shares as a percentage of the net income
and/or earned surplus attributable to each series, provided that such percentage
may vary with the level of net income and/or earned surplus.

In March of 1997 and April of 1996 and 1995, the Company  declared  dividends on
the Shares  aggregating  $4,196,730,  $4,007,483 and  $1,188,614,  respectively.
These dividends,  in each case, were declared as a varying  percentage of earned
surplus attributable to each series of Shares with the percentage  applicable to
each  series  depending  on the amount of earned  surplus  attributable  to such
series.  The applicable  percentages  were 20% to 45% for dividends  declared in
1997,  20% to 60% for the  dividend  declared  in  1996,  and 15% to 40% for the
dividend declared in 1995.
    
Dividends  on the  Common  Stock  are also  subject  to the  restrictions  under
Barbados law and the Articles described above. In addition, the Articles provide
that  dividends may not be declared or paid on the Common Stock unless and until
each holder of Shares of a series has received any minimum  dividend to which he
is  entitled  for the current  period and may be  declared  and paid only to the
extent  that  the  earned  surplus  attributable  to the  Common  Stock  exceeds
Restricted Earned Surplus.  (See "Description of Capital Stock -- Allocations to
Subsidiary Capital Accounts.")

                             BUSINESS OF THE COMPANY

The Company was incorporated in Barbados on June 12, 1986. It became  registered
in Barbados as an insurer on June 30, 1986 and commenced operations in December,
1987. The Company was organized by MIC. All of MIC's  outstanding stock is owned
by General  Motors  Acceptance  Corporation  which,  in turn,  is a wholly owned
subsidiary of General Motors Corporation ("GM").
   
The business of the Company is the assumption of risks arising under  mechanical
breakdown  protection  plans sold to  purchasers  of  automobiles.  These  plans
provide coverage against specific  automobile  mechanical  breakdowns during the
manufacturer's   new  vehicle   warranty  period  that  are  not  attributed  to
manufacturing  defects and coverage for certain specified mechanical  breakdowns
(whether or not caused by  manufacturing  defects)  beyond the period covered by
the  manufacturer's  warranty.  The risk of loss under these plans is covered by
insurance  policies  that are  issued  either  to GM or to  automobile  dealers,
reinsured by MIC, and retroceded to the Company to the extent that such policies
are  attributable  to an MIC Mechanical  Account in respect of which a series of
Shares is issued and outstanding.

Reinsurance is a means of transferring the risk of loss arising under a contract
of insurance from the company that initially  insured the risk to the reinsurer.
Retrocession   is  the  transfer  of  the  risk  borne  by  the  reinsurer  (the
"retroceding company") to another company which, in turn, assumes such risk (the
"retrocessionaire"). Retrocession agreements are of numerous different types and
may be individually  negotiated by the parties to meet particular needs. Under a
"quota  share"  indemnity  retrocession  agreement,  such  as  the  Retrocession
Agreement  between MIC and the Company,  the  retrocessionaire  (the Company) is
paid ("ceded") a certain percentage of the premiums collected by the retroceding
company (MIC) and, in return,  agrees to indemnify the retroceding company for a
certain percentage of the losses in respect of those risks.  Further, a "treaty"
arrangement,  such as is  involved  here,  covers all risks of a defined  class.
Under the terms of the Retrocession Agreement,  the Company assumes 100% of each
risk  retroceded  to it by MIC in return for which it receives  75% of the gross
premium  with  respect  to the risk,  reduced by  related  agents'  or  brokers'
commission  if any. The remaining 25% of the gross premium is retained by MIC as
a ceding commission.
    
A major source of income to the Company is income  earned on the  investment  of
amounts not currently  required to meet claims or expenses.  The principal funds
available for investment by the Company come from accumulated  capital,  and the
cumulative excess of premiums collected over losses and operating expenses paid.
Rothschild Asset Management  Limited  ("Rothschild")  manages the investment and
reinvestment of the Company's  funds in accordance with the investment  policies
and guidelines established by the Board.  Rothschild charges a management fee of
0.3% per annum on the first  $20,000,000 of assets under management based on the
market value of the Company's  investment  portfolio at the end of each calendar
quarter, and 0.15% per annum on the excess thereof.
   
The Company has entered into an Insurance  Management Agreement (the "Management
Agreement") with Alexander  Insurance Managers  (Barbados) Ltd. (the "Manager"),
pursuant  to which the Manager  collects  and  disburses  funds on behalf of the
Company, provides accounting, clerical, telephone, telex, facsimile, information
management and other services for the Company, and advises and consults with the
Company in regard to all aspects of the Company's retrocession activities. Under
the terms of the  Management  Agreement,  the  Company  pays the Manager a fixed
annual fee plus a monthly variable fee based on the number of outstanding Shares
at each calendar  month end. For the year ended  December 31, 1996,  the Company
paid fees to the Manager in the amount of $204,674.
    
                             SELECTED FINANCIAL DATA
   
The following  selected  financial  data for the years ended  December 31, 1996,
1995, 1994, 1993 and 1992 have been derived from financial statements audited by
Deloitte & Touche, independent chartered accountants,  whose report with respect
to their audits of the financial statements as of December 31, 1996 and 1995 and
for each of the three years in the period  ended  December  31, 1996 is included
elsewhere in this  Prospectus.  This  information  should be read in conjunction
with the information  under  "Management's  Discussion and Analysis of Financial
Condition and Results of  Operations"  and the financial  statements and related
notes included elsewhere in this Prospectus.




                                           December 31
                                                                         
                            1996          1995           1994          1993       1992
                            ----          ----           ----          ----       ----

Premiums Assumed       $ 47,410,037   $44,084,952    $38,371,896   $27,779,063  $19,386,455
                       ============   ===========    ===========   ===========  ===========
Premiums Earned        $ 36,077,699   $28,800,689    $21,316,685   $15,429,611  $13,005,184
Net Investment
  Income                  5,341,924     5,563,573      1,227,816     2,700,242    2,522,712
                       ------------   -----------    -----------   -----------  -----------
Total Income             41,419,623    34,364,262     22,544,501    18,129,853   15,527,896
Less Losses and
  Expenses               33,965,100    27,462,338     20,825,943    15,425,146   12,020,682
                       ------------   -----------    -----------   -----------  -----------
Net Income*            $  7,454,523   $ 6,901,924    $ 1,718,558   $ 2,704,707  $ 3,507,214
                       ============   ===========    ===========   ===========  ===========
Dividends Per
  Common Share                    0             0              0             0            0
Total Assets           $106,041,164   $91,526,976    $66,012,284   $50,359,633  $36,847,490
Total Policy
  Reserves and
  Other Liabilities      88,479,590    76,350,313     60,246,641    42,430,269   29,777,783
Stockholders' Equity     17,561,574    15,176,663      5,765,643     7,929,364    7,069,707
Dividends Paid on
  Participating Shares    4,007,483     1,188,614      2,156,304     2,021,504    1,021,705



*/ Information as to earnings per share is not provided  inasmuch as the results
for each series of stock will vary with the underwriting experience attributable
to each Subsidiary Capital Account  established with respect to that series. See
Note 2 to the financial statements.


MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Liquidity.  The Company expects to generate  sufficient funds from operations to
cover current liquidity needs. The Company's liquidity  requirements are related
to payment of insurance losses, administrative expenses, and dividends. Premiums
generated  by the  Company's  reinsurance  business,  combined  with  investment
earnings  plus  proceeds  from  the  sale of  Shares,  will  continue  to be the
principal  sources of funds for the  Company.  Although  losses are  expected to
increase due to the increased  level of premiums  assumed in each preceding year
and  the   anticipated   incidence  of  claims   following  the   expiration  of
manufacturers'  warranties,  available funds from the sources  identified  above
have also grown.  Net cash  provided by operating  activities  has  increased to
$17,588,199  in 1996 and  $16,418,640  in 1995  from  $14,960,494  in 1994.  The
Company  believes  that such  funds  will be  sufficient  to meet its  liquidity
requirements  in 1997 and in future years to which its  reinsurance  liabilities
extend. No capital expenditures are expected during the next few years.

The Company had  unearned  premium  reserves of  $84,084,870  as of December 31,
1996, and $72,752,532 as of December 31, 1995. These amounts are attributable to
the long-term  nature of the contracts sold. Such contracts may extend for up to
72 months from date of issue. In addition, the risk of loss to the Company under
the contract  arises  primarily  after the  underlying  manufacturer's  warranty
expires.  For new vehicles,  the warranty  generally  covers 36 months or 36,000
miles.  For  used  vehicles,  the  applicable  warranty  period  depends  on the
unexpired  portion  of the  original  manufacturer's  warranty  at the  time  of
purchase  of the  vehicle.  Because the Company has little risk of loss prior to
expiration  of the  underlying  manufacturer's  warranty,  most  premium  is not
recognized  as earned  until  such  expiration.  Since  very  little  premium is
recognized as earned until the  expiration of the underlying  warranty,  most of
the premium written in any year is recorded as unearned.

On March 27, 1997, the Board of Directors authorized the payment of dividends to
eligible holders of Participating Shares aggregating $4,196,730. See "Dividends"
for a discussion  of  dividends  paid and legal  restrictions  on the payment of
dividends.

Capital Resources.  Capitalization of the Company,  as of December 31, 1996, was
comprised  of paid-in  capital  with  respect to the Common  Stock of  $200,000,
paid-in  capital  with  respect  to the  Shares  of  $1,905,000  (compared  with
$1,807,500 and $1,665,000 as of December 31, 1995 and 1994,  respectively),  and
earnings retained for use in the business of $14,913,053.  Barbados law requires
that the Company's net assets equal at least the aggregate of $1,000,000 and 10%
of the amount by which the earned  premium  exceeded  $5,000,000 in the previous
year.  If the  Company's  net assets are less than mandated by Barbados law, the
Company has the right to reduce the  business  related to a  Subsidiary  Capital
Account by retrocession or any other means to the extent necessary to permit the
Subsidiary  Capital Account to meet its pro rata share of the Company's required
capital and surplus.  At January 1, 1997,  the  Company's  required  minimum net
assets  computed in accordance with Barbados law was  approximately  $4,107,770,
compared to total capital and retained earnings computed for purpose of Barbados
law of $ 17,018,053.

Results of Operations.  During the year ended December 31, 1996, the Company had
net income of $7,454,523  compared to $6,901,924  and  $1,718,558  for the years
ended December 31, 1995 and 1994, respectively. As described below, the increase
in net income during 1996 compared to the previous year was primarily due to the
improved underwriting results which were partially offset by a small decrease in
investment  income.  The  increase  in net income  during  1995  compared to the
previous  year was the  result  of  realized  gains on the sale of  investments,
increases in interest earned and improved underwriting results.

The  Company  had net  underwriting  income of  $2,112,599  in 1996  compared to
$1,338,351  and  $490,742  for the  years  ended  December  31,  1995 and  1994,
respectively.  The increase in underwriting income during 1996 was the result of
an increase in the amount of premiums  earned coupled with a modest  improvement
in the loss ratio (the ratio of losses  incurred  to  premiums  earned).  During
1996, the Company had earned premiums of $36,077,699 compared to $28,800,689 and
$21,316,685  during 1995 and 1994,  respectively.  Increased  premium income has
been  generated by the issuance of  additional  series of Shares during the year
ended December 31, 1996, and the  continuing  flow of reinsurance  premiums from
series issued in prior years.  During 1996,  the Company issued 16 new series of
Shares and  redeemed 3 series of Shares for a net  increase of 13 series.  There
were a total of 254 series  outstanding at December 31, 1996 compared to 241 and
222 series of Shares outstanding at December 31, 1995 and 1994, respectively.

The Company  incurred  losses and  administrative  expenses during the year
ended December 31, 1996 of $33,965,100 compared with $27,462,338 and $20,825,943
for the years ended December 31, 1995 and 1994,  respectively.  Expenses in 1996
were comprised of losses paid and provisions for losses incurred of $24,037,827,
ceding  commissions  and excise taxes of $9,378,748  and  operating  expenses of
$548,525.  Losses  incurred in 1995 and 1994 were  $19,431,032  and  $14,830,166
respectively.  The loss ratio for the year  ended  December  31,  1996 was 66.6%
compared  to 67.5% and 69.6% for the years  ended  December  31,  1995 and 1994,
respectively.

The Company incurred  operating expenses during the year ended December 31, 1996
of $548,525  compared to $544,837 and $455,238 for the years ended  December 31,
1995 and 1994,  respectively.  MIC has agreed to pay directly  certain  costs of
registering  and  issuing  shares  if such  costs  cannot  be  allocated  to the
subsidiary  Capital  Account for the Common Stock. In 1996 $64,848 of such costs
were paid  directly by MIC compared to $171,079 and $162,989 for the years ended
December 31, 1995 and 1994, respectively.

Investment  income in 1996 was $5,341,924  compared to $5,563,573 and $1,227,816
for the years ended  December 31, 1995 and 1994,  respectively.  The decrease in
investment  income during 1996 compared to 1995 was  attributable  to an overall
decline  in yields in U.S.  and  non-U.S.  dollar  positions.  The  increase  in
investment  income  during 1995  compared to 1994 was  attributable  to realized
gains on the sale of investment  securities and an increase in interest  earned.
The sale of investment  securities for the year ended December 31, 1996 resulted
in realized  gains of $64,244  compared to realized  gains of $1,404,232 for the
year ended  December 31, 1995,  and realized  losses of $1,543,358  for the year
ended  December 31, 1994.  The realized  gains during 1995 were due to increased
sales  of  investment  securities  to take  advantage  of  market  opportunities
presented by fluctuations in interest rates.  Interest earned for the year ended
December 31, 1996 was  $5,277,680  compared to $4,159,341 and $2,771,174 for the
years ended December 31, 1995 and 1994,  respectively.  The increase in interest
earnings during 1996 was largely a result of an increase in the amount of assets
under management.

Unrealized  appreciation on investment  securities held at December 31, 1996 was
$543,521 compared to unrealized appreciation at December 31, 1995 of $1,651,621.
The change in  unrealized  appreciation  as of  December  31,  1996  compared to
December 31, 1995 is in large part  attributable  to the fact that the Company's
portfolio at December 31, 1996 comprised  primarily U.S.  dollar  securities and
U.S. yields were approximating fair market value at that time.

At  December  31,  1996,  100%  of  the  Company's   investments  were  in  U.S.
dollar-denominated  fixed-income  securities  compared to 78.5% at December 1995
when  approximately  21.5%  of  the  Company's   investments  were  in  non-U.S.
dollar-denominated  bonds,  on a  fully  currency-hedged  basis.  The  Company's
investment  manager seeks to identify  non-U.S.  dollar-denominated  investments
that  offer a  higher  rate of  return  (net of  hedging  costs)  than  would be
available in the market for similarly rated U.S.  dollar-denominated  bonds. The
instruments used to hedge non-U.S.  dollar-denominated  investments  involve, to
varying  degrees,  elements  of credit risk in the event a  counterparty  should
default  on its  obligation  under the hedge  instrument.  Such  credit  risk is
managed through the selection of financially sound  counterparties  and periodic
monitoring  of  counterparty  financial  condition.   The  Company's  investment
guidelines do not permit the use of financial instrument derivatives in managing
interest rate risk.

Pursuant  to  the  retrocession  Agreement,  the  Company  must  furnish  to MIC
collateral in the form of an irrevocable  letter of credit of at least 12 months
duration equal in amount to the unearned  premium in respect of risks retroceded
and  unpaid  loss  reserves  (including  reserves  for losses  incurred  but not
reported) otherwise required to be maintained by MIC in respect of the Policies.
As of December 31, 1996,  the Company had  furnished  such a letter of credit in
the amount of $67,350,000.



                                   MANAGEMENT

DIRECTORS AND OFFICERS

Five of the current  directors  of the Company  were  elected by MIC through its
ownership of the Common Stock the Annual Shareholders  Meeting held on March 27,
1997 and one director was elected by the holders of the Shares at such  meeting.
The directors and officers of the Company are as follows:

                                   POSITION WITH THE COMPANY
                                   (AND OTHER EMPLOYMENT DURING PAST FIVE YEARS)
    NAME                     AGE


William B. Noll ............  54     Chairman and Chief Executive Officer, 
                                     President and Director (Executive Vice 
                                     President & Chief Financial Officer, Motors
                                     Insurance Corporation ("MIC") March 1993;
                                     Group  Vice-President, MIC, 1991-1993; 
                                     Vice President, MIC, 1989-1990).

                                     Mr. Noll became President and Director in
                                     April of 1995.

Louis S. Carrio, Jr. ......   53     Vice-President and Director 
                                     (Vice-President, MIC).

                                     Mr. Carrio became Vice President and 
                                     Director in June of 1991.

Bernard J. Buselmeier ......  41     Vice-President and Director (Vice-President
                                     and Treasurer, MIC, March 1993; Treasurer,
                                     MIC, 1989- 1993).

                                     Mr. Buselmeier became Vice-President and
                                     Director in April of 1995.

John J. Dunn, Jr...........   38     Vice-President and Director (Assistant 
                                     Treasurer, MIC, 1995; previously manager,
                                     Coopers & Lybrand, L.L.P.)

                                     Mr. Dunn became a Director in April of
                                     1996.

Peter R. P. Evelyn ........   55     Director (Attorney, Evelyn, Gittens &
                                     Farmer, a Barbados law firm).

                                     Mr. Evelyn has been a Director since 1986.

Gregory Greenwood .........   37     Director (Greenwood Chevrolet, Youngstown,
                                     Ohio)

                                     Mr. Greenwood became a director in March 
                                     of 1997

Ronald W. Jones ...........   44     Vice-President, Finance (Managing Director,
                                     Alexander Insurance Managers (Barbados)
                                     Ltd.).

                                     Mr. Jones has served as Vice-President,
                                     Finance since 1987.

Michael R. Boyce ...........  58     Secretary (Principal, Colybrand Company 
                                     Services, Limited, Barbados, since 1993;
                                     previously principal, Price Waterhouse, 
                                     Eastern Caribbean).

                                     Mr. Boyce was elected Secretary in 1994.  
                                     Mr. Boyce served previously as Assistant 
                                     Secretary to the Company.
    
The  directors  and  officers  named above serve in those  capacities  until the
annual meeting of shareholders next following their election.

                              CERTAIN TRANSACTIONS

It is the Company's policy not to make loans to any of its officers,  directors,
control persons or other affiliates.

All transactions between the Company and its officers, directors,  employees and
affiliates,  will be on  terms  no less  favorable  to the  Company  than can be
obtained from unaffiliated parties. Any such transactions will be subject to the
approval of a majority of the disinterested members of the Board of Directors.

                          DESCRIPTION OF CAPITAL STOCK
   
The  Company is  currently  authorized  to issue 2,000  shares of Common  Stock,
without nominal or par value per share, all of which have been issued to MIC and
are  outstanding.  In  addition,  the Company is currently  authorized  to issue
100,000 shares of  Participating  Stock (the "Shares"),  also without nominal or
par value per share (collectively,  the Shares and the Common Stock are referred
to as the "Capital Stock"). The Shares are issued in series of 100 shares. As of
March 1, 1997,  26,000 Shares  representing  260 series had been issued and were
outstanding  and were  held of record by 453  shareholders.  All of the  Capital
Stock is, when issued and outstanding,  fully paid and nonassessable.  No shares
of Capital Stock have conversion, preemptive or sinking-fund rights.
    

ALLOCATIONS TO SUBSIDIARY CAPITAL ACCOUNTS

The Company has  established  a Subsidiary  Capital  Account with respect to the
Common Stock as a class,  and  establishes  such an account with respect to each
series of Shares at the time a series is issued. Subsidiary Capital Accounts are
maintained solely for the purpose of the allocations described below, and do not
serve any other legal or accounting  function.  None of the Company's assets are
segregated or earmarked with respect to those accounts.

The  consideration  received by the Company  upon the  issuance of a  particular
series of Shares and the Common Stock as a class are allocated to the Subsidiary
Capital  Account  for that  series or class.  Items of income and  expense,  and
losses,  attributable  to insurance  underwriting  activities are determined and
allocated  to the  Subsidiary  Capital  Accounts as of the end of each  quarter.
Investment  experience,  and other items of income and expense, gains and losses
and  distributions  with  respect  to the  Capital  Stock,  are  determined  and
allocated to the Subsidiary Capital Accounts as of the end of each quarter.  All
such accounting  determinations  are made using United States generally accepted
accounting principles, unless otherwise required by the Articles.
   
For  purposes  of the  following  discussion,  items shall be  "related"  to the
Subsidiary  Capital  Account for the series  identified  with the MIC Mechanical
Account to which such items can be attributed.
    
(1)    Allocations with respect to underwriting activities are made as follows:

       (a)      With respect to premiums ceded by MIC to the Company,  100% to
                the related  Subsidiary  Capital Account;  provided,  however,
                that an  amount  equal to  1-1/3%  of those  premiums,  net of
                related  ceding   commissions,   are   subtracted   from  such
                Subsidiary  Capital  Account and  allocated to the  Subsidiary
                Capital Account for the Common Stock.

       (b)      With   respect  to  any  agents'  or   brokers'   commissions,
                commissions   recaptured,   unearned   premiums,   reinsurance
                premiums ceded,  and any United States excise tax, 100% to the
                related Subsidiary Capital Account.

       (c)      With  respect  to losses  incurred,  and any  amount of losses
                recovered  through  salvage,  subrogation,   reimbursement  or
                otherwise, 100% to the related Subsidiary Capital Account.

       (d)      With  respect  to  return  premiums,  98-2/3%  to the  related
                Subsidiary  Capital  Account  and  1-1/3%  to  the  Subsidiary
                Capital Account for the Common Stock.
   
(2)    Any  expenses  or  liabilities   attributable  to  day-to-day   Company
       operations,  excluding any United  States  Federal  income  taxes,  are
       allocated among all Subsidiary Capital Accounts for the Shares pro rata
       in accordance  with the number of series issued and  outstanding at the
       end of the  fiscal  quarter  in  which  the  expense  or  liability  is
       incurred,  provided  that for  purposes of such  allocation,  series of
       Shares issued during the current  calendar year and series with respect
       to which  unearned  premium is zero as of the date of such  allocation,
       shall be excluded.
    
(3)    Any United  States  Federal  income  tax  liability  (and any  interest
       thereon  or any  penalties  related  thereto)  is  allocated  among the
       Subsidiary  Capital  Accounts based upon the relative  contribution  of
       each of those  accounts to the taxable income of the Company upon which
       the tax (or any interest or penalties) is imposed.

(4)    Any expenses or  liabilities  attributable  to the sale and issuance of
       Shares,  including  but not  limited  to the costs of  compliance  with
       regulations and requirements of the Securities and Exchange  Commission
       and state securities laws (but not including ongoing periodic reporting
       costs),  are allocated to the Subsidiary Capital Account for the Common
       Stock; however, MIC may undertake to pay such expenses.

(5)    Any expenses or  liabilities of the Company not allocable in the manner
       described  in  paragraphs  2 through 4 above  are  allocated  among the
       Subsidiary  Capital  Accounts on the basis of the relative  balances of
       those accounts as of the end of the quarter preceding the date on which
       the expense or liability is incurred.

(6)    (a)     Investment  income,  net of any  direct  investment  expense,  is
               allocated  among the Subsidiary  Capital  Accounts pro rata based
               upon  the  relative  Investment  Asset  Balance  (as  defined  in
               subparagraph  (b) below) of each of those accounts as of the last
               day of the quarter preceding the quarter for which the investment
               income is being  allocated.  For these  purposes,  net investment
               income includes realized (but not unrealized) gains and losses.

       (b)     The Investment  Asset Balance of each Subsidiary  Capital Account
               is equal to the capital and  surplus of each  account,  increased
               by:

               (i)   the unearned  portions of the written  premiums  that
                     have been  collected by the Company  attributable  to
                     those  accounts  as of the  last  day of the  quarter
                     preceding  the  quarter for which the income is being
                     allocated,  net of  any  applicable  commissions  and
                     taxes;

               (ii)  the outstanding loss reserves  attributable to each of
                     those accounts  as of the last day of the quarter 
                     preceding the quarter for which the income is being 
                     allocated; and

              (iii)  any other  outstanding  liability that has been charged
                     to the account as of the last day of the quarter 
                     preceding the quarter or which the income is being 
                     allocated.

(7)      (a)   If, after the credits and charges  described  in  paragraphs
               1-6 above are made to the Subsidiary  Capital Accounts there
               exists a deficit in one or more of the  accounts,  then each
               such deficit is allocated to and charged against:

               (i)  first,  the Subsidiary  Capital  Account for the Common
                    Stock to the extent of Restricted Earned Surplus (the phrase
                    "Restricted  Earned  Surplus"  refers to the  portion of the
                    earned  surplus,  if any, in the Subsidiary  Capital Account
                    for the Common  Stock equal to that  1-1/3% of the  premiums
                    ceded  to  the  Company  during  the  immediately  preceding
                    five-year  period which was  subtracted  from the Subsidiary
                    Capital  Accounts for the Shares  pursuant to paragraph 1(a)
                    above,  net of losses  allocated to that account during such
                    period  pursuant to the  allocation  procedure  described in
                    this  paragraph 7 and net of return  premiums  allocated  to
                    that Account  during such period  pursuant to the allocation
                    procedure described in paragraph (1)(d) above);

             (ii)   then, the Subsidiary  Capital  Accounts for the Shares,
                    pro rata, based upon the relative earned premiums  allocated
                    to  each  such   account  for  the  quarter  for  which  the
                    allocation  is being  made,  provided,  however,  that  only
                    accounts which have positive balances are taken into account
                    for purposes of this allocation;

            (iii)   then, the remaining Subsidiary Capital Accounts for the
                    Shares  with  positive  balances  as of the  last day of the
                    quarter for which the  allocation  is being made,  pro rata,
                    based upon such balances; and

             (iv)   then, to the extent necessary,  the Subsidiary  Capital
                    Account for the Common Stock.

         (b)   If, as a result of an  allocation of a deficit as described in
               subparagraph  (ii) or (iii) of paragraph (a) above,  a deficit
               is created in one or more of the Subsidiary  Capital Accounts,
               then the  resulting  deficit(s)  are further  allocated in the
               manner  provided  in  that  subparagraph   before  applying  a
               subsequent subparagraph.

         (c)   Notwithstanding  the foregoing,  if any  Subsidiary  Capital
               Account for a series of Shares had a deficit  that was  allocated
               to and charged  against the  Restricted  Earned Surplus or, after
               January 1, 1995, to the Subsidiary Capital Account for any series
               of shares,  then at the end of any  succeeding  quarter for which
               that account otherwise would show an account balance greater than
               zero, the balance is reallocated to the Restricted Earned Surplus
               until  all  reductions  of  that  surplus  attributable  to  that
               Subsidiary Capital Account have been restored and thereafter,  to
               the Subsidiary Capital Accounts for the Shares, pro rata based on
               the relative amount of deficits allocated to such accounts, until
               all reductions of such Subsidiary  Capital Accounts after January
               1, 1995 have been restored.

               Thus, a loss in a Subsidiary  Capital  Account which exceeds
               the  balance in that  account  is  absorbed  by other  Subsidiary
               Capital  Accounts,  in general,  as  follows:  The amount of such
               excess losses is charged first to the  Restricted  Earned Surplus
               portion of the  Subsidiary  Capital  Account of the Common Stock.
               Any remaining  losses,  should the  Restricted  Earned Surplus be
               exhausted, are allocated among the Subsidiary Capital Accounts of
               other  participating  series.  Any  then  unabsorbed  losses  are
               charged to the  Subsidiary  Capital  Account of the Common Stock.
               Funds drawn from the Restricted  Earned Surplus or the Subsidiary
               Capital  Accounts  for the shares in the manner  described  above
               must be restored from the  Subsidiary  Capital  Account that drew
               the funds if at any time it returns to a positive balance.

(8)      (a)   Dividends,   payments   upon   redemption   or   liquidation
               (described  below),  and any other  distributions with respect to
               the Capital Stock are allocated to the Subsidiary Capital Account
               for the  class or series  with  respect  to which  the  dividend,
               payment or distribution was made.

          (b)  Where all Shares of a series are  repurchased by the Company
               pursuant to its right of first  refusal or redeemed in accordance
               with the Company's  procedures  for  redemption,  the  Subsidiary
               Capital  Account for that series is terminated.  Thereafter,  all
               income, expenses, gains and losses that would have been allocated
               to the terminated account, will be allocated among the Subsidiary
               Capital  Accounts of the existing series of Shares pro rata based
               upon relative earned  premiums  attributable to such accounts for
               the  calendar  quarter in which the item was earned or  incurred;
               provided,  however,  that a net  deficit  for any such  period is
               allocated to the Subsidiary  Capital Account for the Common Stock
               (to the extent of Restricted  Earned Surplus)  before  allocating
               any remaining deficits to the Subsidiary Capital Accounts for the
               participating series.
   
Using the procedures  described  above,  the Company has allocated items of gain
and loss to the  Subsidiary  Capital  Account for each  series.  Initially  each
Account had a balance of $7,500  representing  the amount paid for the Shares of
that  series.  During  the year  ended  December  31,  1996,  $2,661,124  of net
underwriting gains and $548,525 of administrative  expenses were allocated among
the 254 series of Shares  outstanding as of December 31, 1996, and $5,341,924 of
net investment  income was allocated  among such series of Shares and the Common
Stock.

As of December 31, 1996, 214 series of Shares  outstanding had balances  greater
than $7,500 (ranging from $7,788 to $534,098) and 40 of such series had balances
less than $7,500  (ranging from $7,339 to zero).  (The amounts in the Subsidiary
Capital Accounts can fluctuate substantially and therefore may not be indicative
of future  results.) At December 31, 1996, an aggregate of  $2,207,958  had been
advanced  from the  Restricted  Earned  Surplus  (which  forms a portion  of the
Account  established for the Common Stock owned by MIC) to 32 Subsidiary Capital
Accounts and remained  outstanding  at that date.  In addition,  at December 31,
1996, net deficits of $537,992 associated with 4 series of Shares that have been
redeemed  had been  charged  against  Restricted  Earned  Surplus  and  remained
outstanding  at that date.  As of  December  31,  1996,  $981,497  of  aggregate
deficits  has been  reallocated  among the  Subsidiary  Capital  Accounts of the
Shares and  remained  outstanding.  Of this amount  $284,048 is  available to be
recovered from deficit accounts should they return to  profitability  and to the
extent that the risk fund is repaid in full.
    
     The Subsidiary Capital Account for the Common Stock had, at the time it was
established, a balance of approximately $200,000,  representing the capital paid
in by MIC for the 2,000 shares of the Common Stock issued to it. That Subsidiary
Capital  Account  is not  affected  directly  by  underwriting  gains and losses
attributable to the various  Subsidiary  Capital  Accounts  related to series of
Shares,  but is affected by those gains and losses indirectly to the extent that
one of the Subsidiary  Capital Accounts for a series of Shares incurs a deficit,
in which case resort to the Subsidiary Capital Account for the Common Stock will
result, in the manner described above.

The  allocations  of income and  expense,  gains and losses,  and  distributions
described  above are  subject  to  approval  by the Board,  and when  finally so
approved are considered  final and conclusive and will be binding on all holders
of Shares for all purposes including without limitation any redemption of Shares
pursuant to the  Company's  procedures  for  redemption.  (See  "Description  of
Capital Stock -- Redemption.")

Barbados  insurance law requires that the Company maintain certain levels of net
assets,  which for this  purpose are  calculated  without  taking  into  account
unrealized  gains or losses.  The Company is currently in compliance  with these
requirements.  However,  in the event that the  Company is unable to comply with
such requirements in the future, it has the right to reduce the business related
to a Subsidiary Capital Account by retrocession or any other means to the extent
necessary to permit the Subsidiary Capital Account to meet its pro rata share of
the Company's required capital and surplus.

VOTING RIGHTS

Subject to the following,  holders of Capital Stock are entitled to one vote for
each share held on any  question on which the holder is  entitled  to vote.  The
matters on which holders of Capital Stock are entitled to vote, and the relative
voting rights of each class of stock, are set forth below.

Election of  Directors.  The holders of Shares as a class are  entitled to elect
one  director  of the  Company and one  alternate  director,  and the holders of
Common  Stock as a class are  entitled  to elect five  directors  and up to five
alternate directors. At least one of the directors must be resident in Barbados.
Cumulative voting is not permitted.

Proxies.  Any  shareholder of the Company may appoint another person as his
or her  proxy to act on  behalf  of the  appointing  shareholder  at any  annual
meeting of the Company.  The  appointment of a person as proxy for a shareholder
must be in writing.

Liquidation. The Company may be liquidated upon the vote of at least 75% of
the outstanding Shares. (See "Description of Capital Stock -- Liquidation.")

Changes  in  Articles  and  By-Laws.  No change may be made in the  Articles  or
By-Laws  unless a majority  of the Shares,  and a majority of the Common  Stock,
present  in person or by proxy and  voting at a meeting  at which a vote on that
issue is put forth for a vote, approve the change. In addition, no amendment may
vary the  rights  associated  with  any one  series  unless  either  the  rights
associated  with all other  series are  similarly  changed or a majority  of the
holders of the Shares of each series  present in person or by proxy at a meeting
vote in favor of the amendment.

Other  Matters.  Any matters other than those  described  above which call for a
shareholder  vote require only approval by a majority of the outstanding  shares
of Common Stock.

REDEMPTION

Pursuant  to the  Articles,  the Capital  Stock may be redeemed as follows:  The
Company may redeem  outstanding Shares of a series at any time for any reason if
the  redemption  of such  Shares  is  approved  by a  majority  of the  Board of
Directors, provided that the Director representing the Shares must vote in favor
of  the  action  being  taken.   The  Common  Stock  is   nonredeemable  in  all
circumstances.

A redemption  of Shares is  effective  as of the date  specified by the Board of
Directors but no later than the end of the calendar year in which the redemption
was  approved  by the  Board.  This  date  is  referred  to  hereinafter  as the
"Redemption  Date." The consideration  payable to the holders of redeemed Shares
will be the Subsidiary  Capital  Account  balance  ("Account  Balance") of those
Shares as of the Redemption Date, as adjusted by the Board to reflect unrealized
gains  and  losses  on  investments  held  by the  Company  and  any  contingent
liabilities  allocable  to such  account.  Each holder of  redeemed  Shares will
receive the pro rata  portion of the Account  Balance  that  corresponds  to the
proportionate  number of Shares of the series owned. The Account Balance will be
paid  within  five  months of the  Redemption  Date and bear  interest  from the
Redemption  Date  until  the date of  payment  at a rate  equal to the  yield on
26-week U.S. Treasury Bills for the issue  immediately  following the Redemption
Date.

Upon the redemption of Shares on the Redemption  Date, the redeemed  Shares will
be  cancelled  and the holders  thereof  will no longer have any interest in the
Shares  redeemed  or in the  Subsidiary  Capital  Account  with  respect  to the
redeemed Shares.

LIQUIDATION

Subject to  Barbados  regulatory  and  judicial  approvals,  the  Company may be
liquidated upon the vote of 75% of the outstanding  Shares.  In the event of the
liquidation  of the Company,  after payment of all  liabilities  of the Company,
each  holder of Shares of a series is  entitled to receive his pro rata share of
his  respective  Account  Balance before any  distribution  of the assets of the
Company is made to the  holder(s) of Common  Stock.  Thereafter,  the holders of
Shares are not entitled to participate further in the distribution of the assets
of the Company.  Each holder of Common Stock will be entitled to receive his pro
rata share of the remaining assets of the Company, if any.

RESTRICTIONS ON TRANSFER

There is no existing  public  market for the Shares,  and it is not  anticipated
that one will  develop in the future.  In  addition,  the  Articles  set forth a
number of  restrictions  on the manner in which the  Shares may be  transferred.
These restrictions and certain exceptions thereto are described below.

Transfers  of Less  Than All  Shares  of a  Series.  Subject  to the  exceptions
described  below,  transfers of less than all Shares of a series may not be made
unless the transfer is to the Company,  or the holder(s) of the Shares sought to
be transferred  has received the written  consent of the Company.  A request for
consent must be made in writing and set forth the name(s) and address(es) of the
intended  transferee(s),  the desired date of the transfer and the consideration
to be paid. No transfer may otherwise be made by a shareholder  of less than all
of the Shares of a particular  series that he owns. If the Company fails to give
its written consent, any subsequent transfer is void and of no effect.

Right  of  First  Refusal.  Subject  to  the  exceptions  described  below,
transfers  of  Shares  of a  series  may not in any  event  be made  unless  the
holder(s) has received a bona fide written offer to purchase such Shares, a copy
of that offer has been  furnished to the Company,  and the Company is thereafter
offered the  opportunity  to purchase the Shares.  The Company will have 60 days
during  which to  exercise  its  right  to  purchase  the  Shares  sought  to be
transferred. If the Company accepts the offer to purchase, the price will be the
lesser of the Account  Balance for the series of Shares sought to be transferred
as of the last day of the quarter  immediately  preceding  the date on which the
offer to purchase was accepted by the Company, or the bona fide offering price.
A purchase made by the Company pursuant to this "right of first refusal" will be
deemed  effective  upon  acceptance  by the  Company  of the offer to  purchase,
although  payment by the Company may be deferred until the end of the quarter in
which the offer to purchase is accepted by the Company.  Shares purchased by the
Company pursuant to its right of first refusal will be cancelled.

Exceptions for Certain  Transfers.  A transfer of either all or a portion of the
Shares  of a series  is not  subject  to either  the  consent  or right of first
refusal of the Company  where the Board  determines  that the  transferee of the
shares is: (1) a member of the transferring  shareholder's immediate family; (2)
a trust for the benefit of the  transferring  shareholder  or for the benefit of
other exempted transferees described in this paragraph; (3) if the transferor is
a corporation, any of its shareholders;  (4) if the transferor is a partnership,
any of its partners;  (5) a  corporation  which is controlled by or under common
control  with the  transferor;  (6) the  estate of a  deceased  shareholder  and
legatees  or  heirs  of a  deceased  shareholder;  (7)  a  charitable  or  other
qualifying  organization  described in section  170(c)(2)  of the United  States
Internal Revenue Code of 1986, or any successor  provision  thereto;  (8) in the
case of a  transfer  of less  than all the  Shares  of a  series,  a person  who
immediately  prior to such transfer is a holder of Shares of that series; or (9)
a key  employee of an owner of a Franchise  previously  designated  in the Stock
Purchase Agreement entered into by the transferor.

Provisions Applicable to All Transfers.  No Shares may be transferred unless and
until  the Board  has  received,  from the  holder  of the  Shares  sought to be
transferred,  assurances of compliance with all applicable laws and regulations.
Further, transferees of Shares must agree to abide by the requirements set forth
in the Stock Purchase Agreement entered into by the transferor.

Certificates  representing  the Shares will bear a legend noting the  applicable
limitations on transfers.

COMMON STOCK

The  Company is  currently  authorized  to issue 2,000  shares of Common  Stock,
without  nominal  or par  value,  all of which  have been  issued to MIC and are
outstanding.

A Subsidiary  Capital Account has been established for this class of stock,
and  allocations  of various  items to such account are  described  above.  (See
"Description of Capital Stock -- Allocations to Subsidiary Capital Accounts.")

Holders of Common  Stock as a class are  entitled  to elect five  directors,  at
least  one of whom  must  be  resident  in  Barbados,  and up to five  alternate
directors.  As a class,  these holders  generally have the sole right to vote on
matters not specifically  reserved to the Shares.  (See  "Description of Capital
Stock -- Voting Rights.")

BARBADOS CORPORATE LAW PROVISIONS

The  corporate  law of Barbados  was derived  historically  from that of England
prior to the coming into force in 1985 of the Companies Act Cap. 308 of the Laws
of Barbados,  which is similar to the Canada  Corporations Act. Barbados law may
differ in  certain  respects  from  comparable  law in the  United  States.  The
following  is a summary of  certain  provisions  of  Barbados  corporate  law as
prepared  by Evelyn,  Gittens & Farmer,  the  Company's  Barbados  counsel.  The
summary  does not  purport to contain  all  applicable  provisions  and does not
purport to be complete or cover all respects in which Barbados corporate law may
differ from laws generally  applicable to United States  corporations  and their
shareholders.

Dividends  and  Distributions.  Under  Barbados law, a company may pay dividends
only if there are reasonable grounds for believing that (a) the company would be
able, after the payment of the dividends,  to pay its liabilities as they become
due, and (b) the realizable  value of the company's assets would be greater than
the aggregate of its  liabilities  and stated capital of all classes.  Dividends
may not be paid out of unrealized gains.

Repurchase.  The Company is authorized by the Articles,  subject to certain
approvals,  to repurchase its own shares. Such purchases may only be effected if
the Company can satisfy a similar  solvency test as that  described  above under
"Dividends and Distributions."

Shareholders'  Remedies.  Barbados  corporate law contains wide  protection  for
minority  shareholders and investors  generally.  A statutory right of action is
conferred on subscribers to shares of a Barbados  company  against the directors
and officers  responsible  for the issue of a prospectus,  in respect of damages
suffered by reason of untrue statements  therein.  In addition,  the Company may
take action against directors and officers for breach of their statutory duty to
act honestly and in good faith with a view to the best interests of the Company.

Enforcement of United States Judgments. Except as mentioned below, a judgment of
a court in the United States, under which a sum of money is payable,  will under
most  circumstances  be  enforced  as a debt by the courts of  Barbados  without
reexamination  of the merits of the case. This will not apply where the judgment
is for payment of taxes, fines or penalties. There is also doubt as to whether a
Barbados court would enforce  judgments of United States courts obtained against
the Company,  or its directors and officers resident in Barbados,  predicated on
the civil liability  provisions of the 1933 Act or, in original actions,  impose
liabilities  against  the  Company  or such  persons  predicated  upon that Act.
(However, liability for violations of the 1933 Act by the Company may be imposed
directly  on MIC in a United  States  court as a result of MIC being a  "control
person" with respect to the Company under the 1933 Act.)

Indemnification.  The By-Laws of the Company provide for the  indemnification of
its directors and officers against  liabilities  incurred in their capacities as
such, but the indemnity does not extend to any liability  incurred in respect of
wilful  negligence,  wilful  default,  fraud or  dishonesty  in  relation to the
Company.

Inspection of Corporate Records. Shareholders have the right to inspect and copy
the Articles and By-Laws,  corporate  register,  security  register,  minutes of
shareholders meetings,  any unanimous shareholder agreement,  as well as audited
financial  statements  of the  Company,  which must be  presented  to the annual
meeting of shareholders.

                              PLAN OF DISTRIBUTION

The Shares are being  offered by full-time  employees of MIC, or its  affiliates
("Salespersons"),  who have other duties in connection  with the business of MIC
or its  affiliates.  Salespersons  receive no commissions or other  compensation
related  directly  to their sale of the Shares.  In  addition,  MIC  receives no
compensation in connection with its distribution of the Shares. Salespersons are
licensed  as agents of MIC in certain  states in which they offer the Shares for
sale and their activities in selling the Shares are subject to the regulation of
state securities regulators.  All sales of the Shares are subject to approval by
the Company. (See "Eligibility to Purchase the Shares.")

PURCHASE PROCEDURES

In order to purchase the Shares,  the  following  documents  must be sent to the
Company in Barbados:

(1)      two duly executed Stock Purchase Agreements (see Appendix B);
   
(2)      all  necessary   certifications   of  the  eligibility  of  prospective
         purchasers by all the owner(s) of the  Franchise(s)  related to the MIC
         Mechanical Account with respect to which the Shares will be issued (see
         "Description  of Capital Stock --  Allocations  to  Subsidiary  Capital
         Accounts," and Appendix C); and
    
(3)      a  certified  or  cashier's   check   payable  to  "Motors   Mechanical
         Reinsurance  Company,  Limited -- Escrow  Account" in the amount of the
         aggregate  cost of the Shares to be  purchased,  based on the  offering
         price of $75.00 per Share ("Purchase Payment").

NONE OF THE  FOREGOING  DOCUMENTS IS TO BE EXECUTED OR  DELIVERED  UNTIL AFTER A
FINAL PROSPECTUS HAS BEEN DELIVERED TO THE OFFEREE.

Once it is executed by a prospective  purchaser, a Stock Purchase Agreement
is, in effect,  an offer to purchase the Shares  described  therein.  That offer
will be deemed accepted only if the Company  approves the offer and executes the
agreement. (See "Plan of Distribution--Conditions of Sale.")

Following  execution  of  the  Stock  Purchase  Agreement  by the  Company,  the
prospective  purchaser  has no right to  withdraw  the  amount  of the  Purchase
Payment or any interest  earned  thereon.  Amounts  remain in the Escrow Account
pending  satisfaction  of the  conditions  set forth below under  "Conditions of
Sale."

TERMS OF SALE

Shares are sold only to eligible  purchasers  who have executed a Stock Purchase
Agreement  and returned it to the  Company.  Shares must be purchased by series,
although more than one person may buy the Shares of one series.  Pursuant to the
Stock Purchase Agreement, the purchaser must accept and agree to be bound by the
Articles and By-Laws of the Company,  including  the  restrictions  on transfer.
(See  "Description  of Capital Stock --  Restrictions  on Transfer.")  The Stock
Purchase  Agreement further provides that the Company may place on a certificate
issued  with  respect  to Shares a legend  stating  that the  transfer  or other
disposition  of the Shares  evidenced  thereby  is  restricted  pursuant  to the
Articles and By-Laws.

Once it is accepted by the Company, a Stock Purchase Agreement remains in effect
as long as the Shares  purchased  pursuant thereto remain  outstanding.  A Stock
Purchase  Agreement  terminates  only upon the  redemption  of the Shares or the
liquidation  of the  Company.  Upon a transfer  of  Shares,  the  transferor  is
relieved of all restrictions and obligations under the Stock Purchase  Agreement
which the  transferor had entered into upon the purchase of those Shares and the
transferee, as a condition of the transfer, is required to agree to abide by all
of the provisions of the Stock Purchase Agreement.

CONDITIONS OF SALE

The Company  maintains  an Escrow  Account at Barclays  Bank PLC in  Bridgetown,
Barbados (the "Escrow Account"),  into which checks from prospective  purchasers
are deposited  pending  satisfaction  of the conditions  described  below.  This
account  bears  interest at  prevailing  rates but is not subject to  investment
guidelines  discussed  above. If the conditions are not satisfied,  the Purchase
Payment is returned together with any interest earned.

Approval of  Purchase.  Each  purchase of Shares must be accepted by the Company
within 120 days from the date of  execution of the Stock  Purchase  Agreement by
the Purchaser.  If the Company  determines to accept an offer to purchase Shares
from an  Eligible  Purchaser,  it  executes  both  copies of the Stock  Purchase
Agreement  remitted by such person and  returns one copy to such  person.  If it
determines  not to approve an offer to purchase,  it returns the Stock  Purchase
Agreement without having executed it.

Pending  approval of offers,  each check for the purchase of Shares  (which
ordinarily is received together with a Stock Purchase Agreement) is deposited in
the Escrow Account. If a request to purchase is approved,  Shares are issued and
the  Eligible  Purchaser  receives a  certificate  evidencing  ownership  of the
Shares.  Where  the  Company  determines  not to  approve  a sale of Shares to a
prospective  purchaser,  the  Purchase  Payment is returned,  together  with any
interest  earned  thereon.  The Company has the right to reject any  prospective
purchaser for any reason whatsoever.

TERMINATION OF OFFERING

Unless  terminated sooner by the Board, this offering will terminate on the date
on which all of the Shares offered hereby have been sold.


                    UNITED STATES FEDERAL TAX CONSIDERATIONS


It is  impractical  to comment  here on all aspects of the Federal,  state,  and
local tax laws that may affect the United States taxation of the Company and its
shareholders. The following is a discussion, based on the facts set forth herein
and existing law, of the material Federal tax consequences which, in the opinion
of the Company's U.S. tax counsel,  LeBoeuf,  Lamb, Greene & MacRae, L.L.P., are
associated with an investment in the Company.
   
United States taxation of the Company and its shareholders  involves a number of
complex  questions  of fact and law with  respect  to some of which  there is no
statutory,  administrative,  or judicial  authority  directly on point.  Advance
rulings on these  questions  have not been  requested  by the  Company  from the
Internal  Revenue Service (the  "Service") and, at least as to certain  matters,
there is no assurance that favorable rulings could be obtained. There is also no
assurance that the laws in existence as of the date of this  Prospectus will not
be  modified  so as to  alter  the tax  consequences  described  below.  In this
connection,  for example, it is to be noted that President Clinton's 1997 Budget
Plan contains a proposal  concerning the Taxation of Certain  Captive  Insurance
Companies and their  shareholders  which might,  if enacted,  have a significant
effect on the tax  consequences  described below and possibly on the business of
the Company.  In general,  that proposal would  eliminate the tax benefit for an
insured's  insurance premium  deductions when the insured's risks ultimately are
assumed by a  "related-party"  reinsurer and would  materially  alter the way in
which the  reinsurer  accounts  for tax  purposes  for the  reinsurance  of such
"related-party" risks. It appears that for this purpose a substantial portion of
the Company's  business would be composed of the reinsurance of  "related-party"
risks. (See "Business of the Company.") Accordingly, although it is not entirely
clear at this time,  the enactment of the  President's  captive  proposal  could
materially alter the tax treatment with respect to "related-party" risks assumed
by  the  Company.  Such a  change  could  in  turn  result  in a  change  in the
reinsurance and/or stock ownership relationships between MIC and the Company.
    
This discussion does not address all aspects of federal income taxation that may
be relevant to a  particular  shareholder  in light of his or her  personal  tax
circumstances.  Nor does it address state,  local,  or foreign tax laws that may
affect taxation of shareholders. EACH PROSPECTIVE INVESTOR IN THE COMPANY SHOULD
CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE TAX IMPLICATIONS OF HIS OR HER
INVESTMENT IN THE COMPANY.

UNITED STATES -- BARBADOS INCOME TAX TREATY

The United  States and  Barbados  have  entered  into an income tax treaty  (the
"Treaty") that offers  certain tax benefits (some of which are discussed  below)
to those persons who qualify for its protection.  As a Barbados corporation that
ultimately  is owned more than 50% by U.S.  persons,  the Company is entitled to
the benefits of the Treaty provided that it is "resident" (that is, "managed and
controlled") in Barbados. The Company attempts to conduct its business in such a
manner that it will be considered to be "managed and  controlled" in Barbados in
order to qualify for the benefits of the Treaty.

UNITED STATES PREMIUM EXCISE TAX
   
The United States  imposes an excise tax at the rate of 1% of the gross premiums
paid to foreign  insurance  companies  for  reinsurance  covering  risks located
within the United States.  Reinsurance  premiums paid to the Company are subject
to this excise tax.
    
UNITED STATES FEDERAL INCOME TAX RISKS AND CONSEQUENCES -- THE COMPANY

Risks and  Consequences  of Carrying  on a United  States  Reinsurance  Business
Through a Permanent  Establishment.  As a "resident" of Barbados, if the Company
engages in business within the United States through a permanent  establishment,
it will be subject to United States Federal  income tax at normal  corporate tax
rates  on  its  business   profits  that  are  attributable  to  such  permanent
establishment.  Insofar as is relevant hereto, all of the Company's underwriting
income and investment income (such as dividends and interest) generally would be
treated as business profits attributable to such a permanent  establishment.  In
addition,  a Barbadian  resident  corporation  engaged in business in the United
States through a permanent  establishment would be subject to a branch-level tax
at the rate of 5% (reduced by the Treaty  from a 30%  statutory  rate that would
apply  generally  to  foreign  corporations  engaged in  business  in the United
States) on its after-tax  earnings  attributable to its United States  permanent
establishment   that  are  considered   remitted  to  the  head  office  of  the
corporation.

All  relevant  facts  and  circumstances  must  be  taken  into  account  in any
particular  case in determining  whether a person is engaged in business  within
the United  States  and,  if so,  whether  the  business is carried on through a
permanent  establishment within the meaning of the Treaty. Under the Treaty, the
activities of both dependent and independent agents in some circumstances may be
deemed to create a permanent establishment of the principal that they represent.
As discussed  elsewhere  herein,  the Company conducts  reinsurance  business in
Barbados and in that regard executes and administers its reinsurance  agreements
and manages its  business  affairs  from  Barbados.  On this basis,  the Company
believes  that it should  not be deemed to be  engaged  in  business  within the
United  States  through a permanent  establishment,  and  therefore  the Company
believes it should not be subject to United  States income tax.  However,  given
the  factual  nature  of the  questions  involved  and  certain  aspects  of the
Company's treaty reinsurance program related to the United States, and given the
absence of any clear legal  interpretation  of the application of the provisions
of the permanent establishment standard under the circumstances, there can be no
assurance that for tax purposes the Company  ultimately will not be deemed to be
engaged in business within the United States through a permanent establishment.

United  States  Withholding  Tax  Applicable  to Certain  Investment  Income Not
Attributable to a United States Permanent Establishment. If the Company does not
engage in business  within the United States through a permanent  establishment,
it generally  will be subject to a United  States  withholding  tax on interest,
dividends,  and certain other investment  income derived from sources within the
United  States.  (The 30% rate of United  States  withholding  tax  provided  by
statute is reduced  by the Treaty to 5% in the case of  interest  and 15% in the
case of dividends  derived from  portfolio  investments.)  An exemption from the
United  States  withholding  tax is provided for  interest  earned on amounts on
deposit in a bank,  savings and loan  association,  or  insurance  company,  and
interest  income,  termed  "portfolio  interest," on certain debt obligations of
United States issuers.

Although the Company could, in the  circumstances  described above,  invest
its funds in the United States without  incurring a withholding tax, the Company
currently invests its funds outside of the United States.  (See "Business of the
Company.")

Reallocations  By  Internal  Revenue  Service.  Under  section  482  of the
Internal  Revenue  Code (the  "Code"),  the Service may allocate  gross  income,
deductions,  and  credits  between  or among  two or more  businesses,  owned or
controlled  directly or  indirectly by the same  interests,  in order to prevent
evasion  of  taxes  or to  reflect  clearly  the  true  taxable  income  of such
businesses.  As described elsewhere herein, MIC elects five of the Company's six
directors  through its ownership of all of the Company's  issued and outstanding
Common Stock. Thus, if transactions  between MIC and the Company were determined
not to reflect the true taxable income of the parties,  a reallocation of income
or  deductions  between such  entities  could  result.  However,  as long as the
transactions  between  MIC and the Company are  conducted  on an  "arm's-length"
basis in a manner consistent with industry standards and practices,  section 482
should not provide a basis for  reallocations by the Service between MIC and the
Company.
   
In addition,  section 845 of the Code grants  broad  authority to the Service to
adjust  items   arising   under  certain   reinsurance   agreements   (including
retrocession agreements), whether or not they involve related parties. If two or
more "related" parties enter into a reinsurance contract, the Service in general
may make any  adjustment  necessary to reflect the "proper source and character"
of the taxable income of each such party.  The Service also has broad  authority
to make proper  adjustments  where any reinsurance  contract  between  unrelated
parties has a "significant tax avoidance effect" on any party to the contract.
    
Because MIC is entitled to elect five of the  Company's six  directors,  MIC and
the Company may be considered  "related"  parties  within the meaning of section
845 of the Code. To date, there are no regulations under section 845 of the Code
to aid in its  interpretation.  However,  the legislative history of section 845
suggests that certain types of reinsurance transactions -- such as a coinsurance
reinsurance  transaction that covers new business of the ceding company and that
allocates expenses and income items between the ceding company and the reinsurer
in the same  proportion  as the  allocation  of the risk  reinsured -- generally
should not be subject to reallocations  or adjustments.  The ongoing quota share
Retrocession Agreement between MIC and the Company, in general, would seem to be
similar to such transactions for which adjustments generally should not be made,
but there is substantial uncertainty at the present time concerning the scope of
section 845.

If the  Service  were  successful  in an effort to  reallocate  to MIC  business
retroceded  to the  Company by MIC,  MIC would  likely be subject to tax on such
business.  Since the Company has no  obligation  to  indemnify  MIC against such
adverse tax consequences,  a reallocation of business to MIC should not directly
affect the Company. However, any such reallocation might contribute to the early
termination of the Retrocession Agreement between MIC and the Company.

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES --- THE SHAREHOLDERS

Taxation of Income of the Company to  Shareholders  Under Subpart F of the Code.
Under the  so-called  "Subpart  F"  provisions  (sections  951-964) of the Code,
current  United  States  income tax is imposed on each United  States person who
owns stock in any 25% or more U.S.-owned  foreign insurance company with respect
to "related person  insurance  income,"  whatever the degree of ownership of the
United States shareholder.  For this purpose, the term "related person insurance
income"  means   underwriting  and  investment   income  of  a  foreign  insurer
attributable  to a policy of insurance or reinsurance  with respect to which the
insured  is a United  States  shareholder  of the  foreign  insurer  or a person
related to such a shareholder. Under this provision, all of the Company's income
(as determined for tax purposes)  will be treated as "related  person  insurance
income," and, as such,  will be passed through and taxed currently to all of the
shareholders of the Company ("Shareholders") under Subpart F of the Code.

The basis of the stock of a  Shareholder  will be  increased  by the amount
required to be included in the  Shareholder's  income with respect to such stock
under  Subpart F.  Further,  a  distribution  from  earnings  and profits of the
Company  attributable  to amounts that have been included in gross income of the
Shareholders  under Subpart F would not be included again in gross income of the
Shareholders  but would  reduce the adjusted tax basis of the stock with respect
to which the distribution is made. It should be noted that Subpart F income will
be computed for the Company as a single  entity.  The amount of Subpart F income
attributable to one series of Shares in these  circumstances  may be affected by
results with respect to other series. It also should be noted that the Subpart F
income of the  Company  generally  will be  computed  under the same  rules that
govern the  computation  of taxable  income of domestic  property  and  casualty
insurance companies.

As a result of differences between financial and tax accounting rules applicable
to the  computation  of income of the Company,  the amount of income  subject to
pass-through  to  Shareholders of the Company for United States tax purposes may
in any year differ from the amount of book income  allocable to a  Shareholder's
subsidiary capital account.  Since the consideration payable to the holders of a
series  of  Shares  upon  redemption  is  based  substantially  on  book  income
previously  allocated to the Shares being redeemed,  such  consideration may not
reflect the amount of income  previously passed through and taxed to the holders
of those Shares.

To the extent that the Company were subject to United  States  income tax on its
business profits, the Shareholders generally would not be subject to current tax
on such  profits  under  Subpart  F,  but  would  be  taxed  when  profits  were
distributed by the Company.  (See "United States Federal Tax  Considerations  --
United States Federal Income Tax Consequences -- The Company.")

Risk of  Recharacterization of Reinsurance Profits on Business Retroceded to the
Company. As described elsewhere herein, a portion of the underwriting experience
in respect of insurance  business  retroceded to the Company is allocated to the
series of Shares issued in respect of the  Franchise  that is the source of such
business. In this connection, the Service could question whether profits on such
business  should  be  treated  as being  related  to  equity  ownership  for tax
purposes,  or whether the Shares  should be treated,  in whole or in part,  as a
means by which the  direct  insurer  pays  additional  income to  certain of its
business producers or pays return premiums to certain  policyholders,  such that
the producers or policyholders  (rather than the Shareholders) should be subject
to ordinary income tax on all or some of such profits. Although the issue is not
free  from  doubt,   given,   among  other  things,   the  significance  of  the
Shareholders'  "at-risk"  investment  in the  Company  relative to the volume of
business  projected  for the  Company,  the degree of pooling of risks among all
series of  Shares,  the fact that  distributions  with  respect  to Shares  are,
subject to certain "minimum  dividends," within the discretion of the Board, and
the vote accompanying each Share, there should be substantial  arguments against
the recharacterization of profits with respect to the Shares.

Deductibility of Premiums Paid By Franchises for Certain Coverages  Reinsured by
the Company.  As discussed  elsewhere  herein,  risks arising  under  mechanical
service  agreements  entered  into  with  respect  to  a  particular   Franchise
ultimately may be retroceded to the Company and allocated in part to a series of
Shares owned by the owner(s) of such Franchise or by persons  closely related to
such owner(s).  The Service  conceivably could seek to deny any deductions taken
by the obligor under the mechanical  service  agreements for premiums paid by it
with respect to its obligations ultimately retroceded to the Company, relying on
the theory,  developed in cases dealing with transactions involving wholly owned
insurance companies,  that no insurance risk has been shifted in respect of such
premiums.  However, although the matter is not free from doubt, given the degree
of risk pooling  within the Company,  there should be  substantial  arguments in
support of the treatment of such premiums as deductible  insurance  premiums for
tax purposes.

                                  LEGAL MATTERS

The  legality  of the  securities  offered  hereby is  passed  upon for the
Company by its  Barbados  counsel,  Evelyn,  Gittens & Farmer,  Heritage  House,
Pinfold Street,  Bridgetown,  Barbados,  West Indies.  LeBoeuf,  Lamb,  Greene &
MacRae,  L.L.P., 1875 Connecticut  Avenue,  N.W.,  Washington,  D.C. 20009, will
advise the Company as to certain  matters  pertaining  to the laws of the United
States.

                                     EXPERTS
   
The  financial  statements  as of December 31, 1996 and 1995 and for each of the
three years in the period ended  December 31, 1996,  included  elsewhere in this
Prospectus,  have been  audited  by  Deloitte  & Touche,  independent  chartered
accountants,  Bridgetown, Barbados as set forth in their report included in this
Prospectus.  Such financial  statements have been so included in this Prospectus
in reliance upon such report given upon the authority of that firm as experts in
accounting and auditing.
    
The matters of Barbados  law  referred  to in this  Prospectus  are set forth in
reliance upon the opinion of Evelyn,  Gittens & Farmer and upon their  authority
as experts in Barbados law. LeBoeuf,  Lamb,  Greene & MacRae,  L.L.P. has passed
upon  the  statements  concerning  United  States  tax  laws  contained  in  the
discussion under "United States Federal Tax  Considerations,"  which is included
herein in reliance upon their authority as experts with respect to such matters.

                INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
   
The Company's  Annual Report on Form 10-K for the year ended  December 31, 1996,
File No. 33- 6534,  as filed by the Company  with the  Securities  and  Exchange
Commission,  Washington,  D.C.  (the  "Commission"),  is  incorporated  in  this
Prospectus by reference.  Any statement contained in such Annual Report shall be
deemed to be modified or  superseded  for  purposes  of this  Prospectus  to the
extent that a statement contained herein modifies or supersedes such statement.
    
                             ADDITIONAL INFORMATION

A registration  statement  under the 1933 Act has been filed with the Commission
with respect to the Shares offered hereby.  This Prospectus does not contain all
of the  information  set forth in such  registration  statement,  certain  parts
having been omitted pursuant to the rules and regulations of the Commission. The
omitted information may be examined at the Commission's  principal office at 450
5th Street,  N.W.,  Washington,  D.C., or at the following regional offices: New
York City, 26 Federal Plaza, Room 1102; Chicago, 219 South Dearborn Street, Room
1204; and Los Angeles,  5757 Wilshire  Boulevard,  Suite 500 East. Copies may be
obtained upon payment of the fees prescribed from the public  reference  section
of the Commission, Washington, D.C. 20549.

Statements  contained in this  Prospectus  as to the contents of any contract or
other document are not necessarily complete and, in each instance,  reference is
hereby made to the copy of the contract or other document filed as an exhibit to
the  registration  statement,  of which this  Prospectus  is a part,  for a full
statement  of the  provisions,  and each such  statement in this  Prospectus  is
qualified in all respects by such reference.



   
                          INDEPENDENT AUDITORS' REPORT



To the Stockholders of
Motors Mechanical Reinsurance Company, Limited
Financial Services Centre
Bishops Court Hill
St. Michael, Barbados




We have audited the accompanying balance sheets of Motors Mechanical Reinsurance
Company,  Limited as of December 31, 1996 and 1995 and the related statements of
income and  retained  earnings and cash flows for each of the three years in the
period  ended   December  31,  1996.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position of Motors  Mechanical  Reinsurance  Company,
Limited as of December 31, 1996 and 1995 and the results of its  operations  and
its cash flows for each of the three years in the period ended December 31, 1996
in conformity with accounting principles generally accepted in the United States
of America.



                               s/DELOITTE & TOUCHE
                              CHARTERED ACCOUNTANTS



Bridgetown, Barbados
February 14, 1997



                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                                 BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1995

                                                     (Expressed in U.S. Dollars)

                                                         1996           1995
                                                      -----------   -----------

ASSETS
   Investments                                     $66,647,930      $59,898,265
   Cash and cash equivalents                        12,926,272        7,093,106
   Accrued investment income                         1,453,691        2,532,813
   Due from Motors Insurance Corporation             3,158,064        3,095,587
   Deferred acquisition costs                       21,855,207       18,907,205
                                                   -----------      -----------

Total Assets                                       $106,041,164     $91,526,976

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
   Unearned premiums                                $84,084,870     $72,752,532
   Loss reserves                                      4,284,304       3,480,334
   Accrued liabilities                                  110,416         117,447
                                                    -----------     -----------
                                                    
   Total Liabilities                                 88,479,590      76,350,313

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Share capital
     Common stock - no par value;
       Authorized - 2,000 shares;
       issued and outstanding -
       2,000 shares                                     200,000         200,000

     Participating stock - no par value;
       Authorized - 100,000 shares;
       issued and outstanding -
       25,400 shares at December 31,
       1996 and 24,100 shares at
       December 31, 1995                              1,905,000       1,807,500
                                                     ----------      ----------
                                                      2,105,000       2,007,050

   Retained earnings                                 14,913,053      11,517,542

   Unrealized appreciation
     on investments                                     543,521       1,651,621
                                                     ----------      ----------

   Total Stockholders' Equity                        17,561,574      15,176,663
                                                     ----------      ----------

Total Liabilities and
   Stockholders' Equity                            $106,041,164     $91,526,976
                                                   ============     ===========

The accompanying notes form an integral part of these financial statements.



                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                   STATEMENTS OF INCOME AND RETAINED EARNINGS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                           (Expressed in U.S. Dollars)



                                        1996           1995             1994
                                    -----------     -----------      ----------
INCOME

   Reinsurance
     premiums assumed               $47,410,037     $44,084,952     $38,371,896
   Increase in
     unearned premiums              (11,332,338)    (15,284,263)    (17,055,211)
                                    ------------    ------------    ------------

   Premiums earned                   36,077,699      28,800,689      21,316,685
                                    ------------    ------------    ------------


   Investment income:
     Interest earned                  5,277,680       4,159,341       2,771,174
     Realized gains (losses)
       on investments                    64,244       1,404,232      (1,543,358)
                                    ------------    ------------    ------------

   Investment income - net            5,341,924       5,563,573       1,227,816
                                    ------------    ------------    ------------

TOTAL INCOME                         41,419,623      34,364,262      22,544,501
                                    ------------    ------------    ------------

EXPENSES

   Acquisition costs                  9,378,748       7,486,469       5,540,539
   Losses paid                       23,233,857      18,610,968      14,079,926
   Increase in loss
     reserves                           803,970         820,064         750,240
   Administrative expenses:
     Related Parties                    211,001         174,443         171,135
     Other                              337,524         370,394         284,103
                                    ------------    ------------    ------------


TOTAL EXPENSES                       33,965,100      27,462,338      20,825,943
                                    ------------    ------------    ------------

NET INCOME                            7,454,523       6,901,924       1,718,558
RETAINED EARNINGS,
   beginning of year                 11,517,542       5,796,732       6,211,978

LESS: DIVIDENDS                      (4,007,483)     (1,188,614)     (2,156,304)

(DEDUCT)/ADD: REDEMPTION OF
         PARTICIPATING STOCK            (51,529)          7,500          22,500
                                    ------------    ------------    ------------


RETAINED EARNINGS, end of year      $14,913,053     $11,517,542     $ 5,796,732
                                    ============    ============    ============


The accompanying notes form an integral part of these financial statements.



                  MOTORS MECHANICAL REINSURANCE COMPANY LIMITED
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
                           (Expressed in U.S. dollars)

                                                                           
                                            1996               1995             1994
                                         -----------       -----------      -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Reinsurance premiums collected        $46,031,997       $42,818,628      $35,580,944
   Losses and acquisition
         expenses paid                   (34,302,453)      (28,599,428)     (22,168,851)
   Administrative expenses paid             (501,147)         (540,841)        (527,767)
   Investment income received              6,359,802         3,193,568        2,076,168

Net cash provided by operating
      activities                          17,588,199        16,871,927       14,960,494
                                         -----------       -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of investments             (232,194,343)     (182,526,749)     (70,748,944)
   Sales and maturities of investments   224,400,822       170,483,482       54,189,043


Net cash invested                        ( 7,793,521)      (12,043,267)     (16,559,901)
                                          -----------      -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of
     Participating Stock                     120,000           150,000          270,000
   Redemption of Participating Stock         (74,029)                0                0
   Dividends paid                        ( 4,007,483)       (1,188,614)      (2,156,304)
                                          ----------        ----------       ----------
Net cash used in financing
   activities                            ( 3,961,512)       (1,038,614)      (1,886,304)
                                          ----------       -----------       ----------

INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                             5,833,166         3,790,046       (3,485,711)

CASH AND CASH EQUIVALENTS, beginning
   of year                                 7,093,106         3,303,060        6,788,771
                                         -----------        ----------      -----------
CASH AND CASH EQUIVALENTS, end of
   year                                  $12,926,272       $ 7,093,106      $ 3,303,060
                                         ===========       ===========      ===========
RECONCILIATION OF NET INCOME TO
   NET CASH PROVIDED BY OPERATING
   ACTIVITIES:
   Net income                            $ 7,454,523       $ 6,901,924      $ 1,718,558
   Realized (gains) losses on
     investments                             (64,244)       (1,404,232)       1,543,358
   Change in:
     Accrued investment income             1,079,122          (973,618)        (698,005)
     Due from Motors Insurance
           Corporation                       (62,477)          219,919         (983,528)
     Deferred acquisition costs           (2,948,002)       (3,975,738)      (4,436,261)
     Unearned premiums                    11,332,338        15,284,263       17,055,211
     Loss reserves                           803,970           820,064          750,240
     Accrued liabilities                      (7,031)             (655)          10,921
                                         -----------       -----------      -----------

NET CASH PROVIDED BY OPERATING
   ACTIVITIES                            $17,588,199       $16,871,927      $14,960,494
                                         ===========       ===========      ===========



The accompanying notes form an integral part of these financial statements.



                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
                        NOTES TO THE FINANCIAL STATEMENTS

                           (Expressed in U.S. Dollars)

Note 1.  OPERATIONS

         The Company is incorporated  under the laws of Barbados and is
         a licensed  insurer under the Exempt  Insurance Act, 1983, and
         amendments thereto.

         All of the  common  stock of the  Company  is owned by  Motors
         Insurance Corporation ("MIC"). MIC is an indirect wholly-owned
         subsidiary  of  General  Motors  Corporation.   The  principal
         activity of the  Company is the  assumption  of motor  vehicle
         mechanical service agreements arising under insurance policies
         reinsured by MIC and attributable to an MIC Mechanical Account
         in respect of which shares of  Participating  Stock are issued
         and outstanding. All premiums received were assumed from MIC.

Note 2.  PRINCIPAL ACCOUNTING POLICIES

         Basis of Presentation

         The financial  statements  are stated in United States dollars
         and are  prepared in  conformity  with  accounting  principles
         generally accepted in the United States of America.

         The  preparation  of financial  statements in conformity  with
         generally accepted  accounting  principles requires management
         to make  estimates  and  assumptions  that affect the reported
         amounts of assets and  liabilities and disclosures at the date
         of the  financial  statements  and  the  reported  amounts  of
         revenues  and expenses  during the  reporting  period.  Actual
         results could differ from those estimates.

         Certain  amounts in the 1995  financial  statements  have been
         reclassified to conform with the 1996 presentation.

         Premium Income and Acquisition Costs

         Reinsurance  premiums are based on the Company assuming (after
         ceding  commission) 75% of the original policy premium written
         by the direct insurer. Of these reinsurance  premiums,  75% is
         retroceded to the Company when written and 25% when earned.

         Premiums  are written on the basis of  quarterly  cessions and
         earned  relative to anticipated  loss  exposures.  Acquisition
         costs,  consisting of ceding commissions and excise taxes, are
         expensed on the same basis as premiums are earned.

         Investments

         Investments  are  comprised  of  interest-bearing   marketable
         securities  which are  carried at fair  value  based on quoted
         market  prices and dealer  quotes  obtained  from an  external
         pricing service.  Investments with original maturities of less
         than 90 days are  classified as cash  equivalents.  Unrealized
         appreciation   (depreciation)  is  included  in  stockholders'
         equity.

         Realized  gains  and  losses  on the sale of  investments  are
         included  as  investment  income and are  calculated  based on
         average costs.

         Loss Reserves

         The Company  provides for unsettled,  reported losses based on
         estimates of the final  settlement,  with an experience factor
         added to provide for losses  incurred  but not  reported.  The
         final  settlement  may be  greater  or less  than the  amounts
         provided.  Any such  differences,  when they become known, are
         recognized in current operations.

         Taxation

         The Company has received a guarantee from the Barbados Goverment
         which limits its liability for all local income, capital gains
         or other direct taxes for a period ending December 31, 2016 to
         a maximum tax of 2% of taxable income provided that the amount
         of such tax will not exceed $2,500 per annum.

         Stockholders  who are United States residents are taxed in the
         United  States  on their  share of the  Company's  income on a
         deemed distribution basis.

         Earnings Per Share

         No  amount  has been  reported  as  earnings  per share as the
         earnings  applicable to the  Participating  Stockholders  vary
         with  the  underwriting  results  of  each  series.   Retained
         earnings   applicable  to  the  Common   Stockholder   include
         allocated investment income and operating expenses and amounts
         restricted  for advances to  Participating  Stockholders  (see
         Note 8).


Note 3.  INVESTMENTS

         The  cost  and  fair  value  of  investments  in debt securities are
         as follows:


                                                                             
                                                Gross               Gross
                                               Unrealized         Unrealized        Fair
                              Cost            Appreciation       Depreciation       Value
                         --------------      --------------      ------------    ----------- 
December 31, 1996:

Debt securities
  issued by foreign
  governments and
  their agencies           $31,595,722          $  351,461        $ (206,151)    $31,741,032

Debt securities
  issued by
  corporations              27,967,937             298,190           (37,604)     28,228,523

Debt securities
  issued by
  supra-nationals            6,540,750             137,625               -         6,678,375
                           ------------          ----------        -----------    -----------


     Total                 $66,104,409           $ 787,276         $ (243,755)   $66,647,930
                           ============          ==========        ===========   ============

December 31, 1995:

Debt securities
  issued by
  foreign
  governments
  and their
  agencies                 $56,243,544           $1,711,611        $ (135,765)   $57,819,390

Debt securities
  issued by
  supra-nationals            2,003,100               75,775                -       2,078,875
                           ------------          -----------       -----------   ------------

         Total             $58,246,644           $1,787,386        $ (135,765)   $59,898,265
                           ============          ===========       ===========   ============



Note 3.  INVESTMENTS (Cont'd)

         The  cost  and  fair  value  of  debt  securities  at
         December 31, 1996, by contractual maturity, are shown
         below.   Expected   maturities   will   differ   from
         contractual maturities because borrowers may have the
         right to call or prepay  obligations  with or without
         call or prepayment penalties.

                                                            Fair
                                         Cost              Value

         Due after one year
           through five years       $51,424,773         $51,784,023

         Due after five years
           through ten years         14,679,636          14,863,907
                                    -----------         -----------

                                    $66,104,409         $66,647,930
                                    ===========         ===========


         In 1996,  gross gains of $1,997,197  and gross losses
         of $1,932,953 were realized.  In 1995, gross gains of
         $2,694,685  and  gross  losses  of  $1,290,453   were
         realized.  In 1994, gross gains of $150,704 and gross
         losses of $1,694,062 were realized.

         The following summarizes net unrealized  appreciation
         (depreciation) on investments:

            Balance, December 31, 1993          $    99,886
            Net depreciation                     (1,995,975)
                                                -----------

            Balance, December 31, 1994          $(1,896,089)
            Net appreciation                      3,547,710
                                                -----------

            Balance, December 31, 1995          $ 1,651,621
            Net depreciation                     (1,108,100)
                                                -----------

            Balance, December 31, 1996          $   543,521
                                                ===========


         The investment portfolio is comprised of diverse debt
         securities  which do not result in any  concentration
         of credit risk.  At December  31,  1996,  100% of the
         Company's   investments   are   denominated  in  U.S.
         dollars.

         The Company uses forward currency  contracts to hedge
         its  exposure to changes in currency  exchange  rates
         relating to its investments denominated in currencies
         other than the U.S. dollar. The contracts provide for
         settlement in U.S. dollars in the future. Credit risk
         is   managed  by   dealing   with   financially-sound
         counterparties.  Market risk is mitigated because the
         forward contracts hedge corresponding non-U.S. dollar
         investments. The notional amount of forward contracts
         outstanding at December 31, 1996 was nil.


Note 4.  RESERVES FOR UNPAID LOSSES

         The following table sets forth an analysis of changes in the loss
         reserves for the years ended December 31, 1996, 1995 and 1994:



                                     1996             1995           1994
                                     ----             ----           ----


Beginning balance in
reserves for losses              $ 3,480,334      $ 2,660,270     $1,910,030
                                 ------------     -----------    -----------

Add-provision for losses incurred related to:

         Current claim year       24,080,078       19,540,192     14,893,890

         Prior claim years           (42,251)        (109,160)       (63,724)
                                  -----------     ------------   ------------

                    Total         24,037,827       19,431,032     14,830,166
                                  -----------     ------------   ------------

Deduct-paid losses
attributable to:

         Current claim year       20,330,269       16,461,768     12,527,026

         Prior claim yea           2,903,588        2,149,200      1,552,900
                                  -----------     ------------   ------------

                  Total           23,233,857       18,610,968     14,079,926
                                  -----------     ------------   ------------

Ending balance in
reserves for losses              $ 4,284,304      $ 3,480,334    $ 2,660,270
                                 ------------     ------------   ------------



As a result of change  in  estimates  of losses  incurred  in prior  years,  the
provisions  for losses  incurred in 1996,  1995 and 1994  decreased  by $42,251,
$109,160 and $63,724, respectively, because of lower actual claims.


Note 5.  STOCKHOLDERS' EQUITY

         All of the Company's  Common Stock is held by MIC. The Company
         is  offering,   on  a  continuous  basis,   12,000  shares  of
         Participating  Stock to persons certified by owners of certain
         motor vehicle franchises.  The offering consists of 120 series
         of 100 shares each at a price of $75 per share.

         During   1996,   16   additional   series  of  100  shares  of
         Participating  Stock were issued as  compared  with 20 for the
         year ended  December 31, 1995. In addition,  in 1996 the Board
         of Directors redeemed 3 series of 100 shares at the request of
         the  shareholders.  The  redeemed  series had been  previously
         placed  in run off and had  reached  a fully  earned  position
         during 1996.

         In the years ended December 31, 1996, 1995 and 1994,  costs in
         the amount of $64,848,  $171,079 and  $162,989,  respectively,
         were incurred in the sale of  Participating  Stock. The Common
         Stockholder   reimbursed   the  Company   directly  for  these
         expenses.

         The  holder  of  Common   Stock  is  entitled  to  elect  five
         directors,  at  least  one  of  whom  must  be a  resident  of
         Barbados. The holder of Common Stock has no right to vote with
         respect to  liquidation of the Company.  The holder  generally
         has  the  sole  right  to  vote on  matters  not  specifically
         reserved to Participating Stock.

         The holders of Participating  Stock as a class are entitled to
         elect one  director.  Generally,  liquidation  of the  Company
         requires approval by at least 75% of the outstanding shares of
         this class.  Any  redemption of a series of shares  requires a
         vote of the  Board  provided  that the  director  representing
         holders  of the  Participating  Stock  votes  in  favor of the
         redemption.   Any  changes  in  the   Company's   Articles  of
         Incorporation or By-Laws require the approval of a majority of
         the shares of Participating  Stock present and voting together
         with a majority of the shares of Common Stock.

         From time to time, funds are held in escrow on account of Partici
         pating Stock applications.  Such amounts are not included in cash
         and cash equivalents in the accompanying financial statements.
         At December 31, 1996, there were no funds held in escrow.

Note 6.  REINSURANCE PREMIUMS

         Under  the  provisions  of  the  retrocession  agreement,  the
         Company  will  assume   additional   cessions  of  $28,028,290
         ($24,250,844  at  December  31,  1995)  relating  to  premiums
         written by Motors  Insurance  Corporation  but unearned at the
         respective  period  ends.  The amounts will be received as the
         premiums are earned, net of related acquisition costs.

Note 7.  LETTERS OF CREDIT

         The Company has  provided an  irrevocable  letter of credit to
         MIC, in the amount of $67,350,000 to collateralize the amounts
         recoverable  from the Company related to the business ceded to
         it.  Cash   equivalents   and   investments  are  assigned  to
         collateralize the letter of credit.

Note 8.  RETAINED EARNINGS

         Items of income or loss and premiums and expenses attributable
         to insurance underwriting  activities are determined as of the
         end  of  each  calendar  quarter  and  are  allocated  to  the
         Participating Stockholders' capital accounts.

         An amount equal to 1-1/3  percent of assumed  premiums (net of
         related  ceding  commissions)  is  allocated  to  the  capital
         account of the Common Stockholder. Such allocations accumulate
         as  restricted  retained  earnings  and may be used to advance
         capital to any Participating  Stockholders who incur a deficit
         in their capital accounts; any such advances are repayable out
         of   future   profitable    operations   of   the   respective
         Participating  Stockholder.  Amounts  allocated  to the Common
         Stockholder,  net of advances to  Participating  Stockholders,
         are presented in the table below as "net transfers."

         Dividends may be declared and paid at the discretion of the
         Company's Board of Directors subject to the right of holders of
         Participating Stock to receive minimum dividends.  The minimum
         annual dividend payable on each share shall be such shares pro
         pro rata portion of an amount  equal to twenty  percent of the
         net income, if any, for the preceding year attributable to the
         subsidiary capital account associated with the series of which
         that share is part.

         Barbados  law  requires  that the  Company  maintain a minimum
         capitalization  based  generally  on the  amount  of  premiums
         earned  in  the  preceding  year.  At  January  1,  1997,  the
         Company's required minimum capital computed in accordance with
         Barbados law was approximately $4,107,770.

         Retained  earnings  applicable to the Common and Participating
         Stockholders are comprised of the following:


                                    Common     Participating      Total

Balance (Deficit),
  December 31, 1993                 (8,274)      6,220,252      6,211,978

Net income (loss) for the year      (7,536)      1,726,094      1,718,558

Net transfers                      (37,410)          7,410           -

Dividends paid                        -         (2,156,304)    (2,156,304)

Redemption of Participating
  Stock                               -             22,500         22,500
                                  ---------      ----------     ----------

Balance (Deficit)
  December 31, 1994                (53,220)       5,849,952     5,796,732

Net income for the year             18,627        6,883,297     6,901,924

Net transfers                       23,732          (23,732)         -

Dividend paid                         -          (1,188,614)   (1,188,614)

Redemption of Participating
  Stock                               -               7,500         7,500
                                  ---------      -----------    ----------

Balance (Deficit)
  December 31, 1995              $ (10,861)     $11,528,403   $11,517,542

Net income for the year             14,131        7,440,392     7,454,523

Net transfers                        6,147           (6,147)         -

Dividend paid                         -          (4,007,483)   (4,007,483)

Redemption of participating
  stock                               -             (51,529)      (51,529)
                                  ---------      -----------    ----------

Balance
  December 31, 1996              $   9,417      $14,903,636   $14,913,053
                                  =========     ===========   ===========
    


                      COMPANIES ACT OF BARBADOS                       APPENDIX A
                                  (Section 205)
                   RESTATED ARTICLES OF INCORPORATION                    FORM 13


1.    Name of Company
Motors Mechanical Reinsurance Company, Limited

2.    Company No.
1485

3.    THE  CLASSES  AND ANY  MAXIMUM  NUMBER OF  SHARES  THAT THE  COMPANY  IS
      AUTHORIZED TO ISSUE

The annexed Schedule is incorporated in this form.

4.    RESTRICTION IF ANY ON SHARE TRANSFERS

The annexed Schedule is incorporated in this form.

5.    NUMBER (OR MINIMUM AND MAXIMUM NUMBER) OF DIRECTORS

There shall be a minimum of 5 and a maximum of 6 directors.

6.    RESTRICTIONS IF ANY ON BUSINESS THE COMPANY MAY CARRY ON

The  principal  object  and  activity  of the  Company  is to  engage  in Exempt
Insurance  business  within the  meaning of the Exempt  Insurance  Act,  1983 of
Barbados and the business of the Company shall be restricted accordingly.

7.    OTHER PROVISIONS IF ANY

The annexed Schedule is incorporated in this form.

8.    Date                   Signatures                   Title

      June 27, 1996          Peter Evelyn                 Director


FOR MINISTRY USE ONLY

COMPANY NO.                FILED



         COMPANIES ACT OF BARBADOS SCHEDULE TO ARTICLES OF INCORPORATION

3.    The classes and any maximum number of shares that the Company is
authorized to issue:

The Company is authorized to issue:

(a)    2,000 shares of one class without nominal or par value to be designated 
Common shares; and

(b) 100,000  shares of one class  without  nominal or par value to be designated
Participating  shares  which  shall be divided  into 1,000  series and issued in
series of 100 shares.

The rights,  preferences  and  limitations  of the said classes of shares are as
follows:

DEFINITIONS

In these  Articles and any amendment  thereto and in the  Company's  By-Laws the
following terms shall mean:

Board -- The Company's Board of Directors.

Company -- Motors Mechanical Reinsurance Company, Limited.

Franchise -- A right  conferred by a motor  vehicle  manufacturer  pursuant to a
written agreement which permits the grantee to sell the manufacturer's new motor
vehicles.

MIC  --  Motors  Insurance   Corporation,   a  New  York  corporation  with  its
administrative offices in Detroit, Michigan.

MIC Agency Account -- The separate  business record  maintained by MIC or any of
its  subsidiaries to track volume,  experience,  and commissions with respect to
insurance business related to any one or more particular Franchises.

Restricted  Earned  Surplus -- At any point in time,  that portion of the earned
surplus,  if any, in the Subsidiary  Capital Account for the Common shares equal
to one and one-third percent (1-1/3%) of the premiums paid to the Company during
the immediately  preceding  five-year period,  net of deficits allocated to such
account pursuant to paragraph  3(1)(7)(a)(i) hereof during such five-year period
to the extent not  restored to such  account  pursuant to  paragraph  3(1)(7)(c)
hereof and net of return  premiums  allocated to such account during such period
pursuant to paragraph 3(1)(1)(d) hereof.

Shares -- Shares of the Participating Stock of the Company.

Stock Purchase  Agreement -- The agreement  entered into between the Company and
the purchaser of Shares, in the form approved by the Board.

Subsidiary  Capital Account -- The subsidiary  bookkeeping record established by
the Company for a particular  series or class of shares and  maintained  for the
purpose of accounting for items of income and expense, gains and losses, capital
contributions,   and  shareholder  distributions  which  are  allocated  to  the
particular series or class of shares.

(1)  ALLOCATIONS TO SUBSIDIARY CAPITAL ACCOUNTS

The Company  will  establish a  Subsidiary  Capital  Account with respect to the
Common  shares as a class,  and to each  series of Shares of the  Company at the
time a series is issued.

The  consideration  received by the Company  upon the  issuance of a  particular
series of Shares  and the  Common  shares as a class  will be  allocated  to the
Subsidiary  Capital  Account  for that  series  or class.  Items of  income  and
expense, and losses,  attributable to insurance underwriting activities shall be
determined as of the end of each calendar  quarter and shall be allocated to the
Subsidiary  Capital  Accounts as of the end of the fiscal quarter of the Company
in which the respective calendar quarter ends. Investment experience,  and other
items of income and expense,  gains and losses and distributions with respect to
shares of the Company will be determined and allocated to the Subsidiary Capital
Accounts  as of  the  end of  each  fiscal  quarter  of the  Company.  All  such
accounting  determinations  shall be made using United States generally accepted
accounting principles, unless otherwise required by these Articles. For purposes
of such  allocations,  items shall be "related" to a Subsidiary  Capital Account
which is identified  with the same MIC Agency Account to which such items can be
attributed.

(1)  Items  of  income  and  expense,  and  losses,  attributable  to  insurance
underwriting activities shall be allocated to the Subsidiary Capital Accounts in
accordance with the following paragraphs:

         (a) With respect to premiums ceded to the Company,  one hundred percent
         (100%) shall be allocated to the related  Subsidiary  Capital  Account;
         provided,  however,  that an amount equal to one and one-third  percent
         (1-1/3%) of such  premiums  shall be  subtracted  from such  Subsidiary
         Capital Account and allocated to the Subsidiary  Capital Account of the
         Common shares.

         (b)  With  respect  to  any  agents'  or  brokers'   commissions,   any
         commissions recaptured,  unearned premiums,  reinsurance premiums ceded
         by the Company,  and any United States excise tax, one hundred  percent
         (100%) shall be allocated to the related Subsidiary Capital Account.

         (c) With respect to losses incurred, and any amount of losses recovered
         through salvage,  subrogation,  reimbursement or otherwise, one hundred
         percent  (100%) shall be allocated  to the related  Subsidiary  Capital
         Account.  For this  purpose,  losses  incurred  includes  both paid and
         unpaid (reported and unreported) losses.

         (d) With  respect  to  return  premiums,  ninety-eight  and  two-thirds
         percent (98-2/3%) shall be allocated to the related  Subsidiary Capital
         Account and one and one-third  percent  (1-1/3%)  shall be allocated to
         the Subsidiary Capital Account for the Common shares.
   
(2) Any expenses or liabilities attributable to ordinary day-to-day Company
operations, excluding any United States Federal income taxes, shall be allocated
among all Subsidiary Capital Accounts for the Shares pro rata in accordance with
the number of series issued and  outstanding at the end of the fiscal quarter in
which the expense or liability is incurred,  provided, that for purposes of such
allocation,  series of Shares issued during the current calendar year and series
with  respect  to  which  unearned  premium  is  zero  as of the  date  of  such
allocation, shall be excluded.
    
(3) Any United States Federal income tax liability (and any interest  thereon or
any penalties  related thereto) incurred by the Company shall be allocated among
the Subsidiary Capital Accounts based upon the relative  contribution of each of
those  accounts to the taxable income of the Company upon which the tax (and any
interest or penalties) is imposed.

(4) Any expenses or liabilities  attributable to the organization of the Company
or to the offer,  sale or issuance of Shares,  including  but not limited to the
costs of  compliance  with  regulations  and  requirements  of the United States
Securities   and  Exchange   Commission   and  the  various   states  and  other
jurisdictions of the United States as they pertain  thereto,  shall be allocated
to the Subsidiary Capital Account for the Common shares.

(5) Any  expenses or  liabilities  of the Company  not  allocable  in the manner
described  in  paragraphs  (2) through (4) above  shall be  allocated  among the
Subsidiary  Capital  Accounts  on the  basis of the  relative  balances  of such
accounts  as of the end of the fiscal  quarter  preceding  the date on which the
expense or liability is incurred.

(6)      (a) Investment income, net of any direct investment  expense,  shall be
         allocated among the Subsidiary Capital Accounts pro rata based upon the
         relative  Investment  Asset  Balance  (as defined in  subparagraph  (b)
         below) of each such  account as of the last day of the  fiscal  quarter
         preceding  the  quarter  for  which  the  investment  income  is  being
         allocated.  For these  purposes,  net  investment  income will  include
         realized (but not unrealized) gains and losses.

         (b) The Investment  Asset Balance of each  Subsidiary  Capital  Account
         shall be equal to the capital and surplus  allocated  to such  account,
         increased by:

                  (i) the unearned  portions of the written  premiums  that have
                  been collected by the Company and allocated to such account as
                  of the last day of the fiscal  quarter  preceding  the quarter
                  for which the income is being allocated, net of any applicable
                  commissions and taxes;

                  (ii) the outstanding loss reserves attributable to such
                  account as of the last day of the fiscal quarter preceding the
                  quarter for which the income is being allocated; and

                  (iii) any other outstanding liability that has been charged to
                  such  account  as of  the  last  day  of  the  fiscal  quarter
                  preceding the quarter for which the income is being allocated.

(7)      (a) If,  after the credits  and charges  described  in  paragraphs  (1)
         through (6) above are made to the  Subsidiary  Capital  Accounts  there
         exists  a  deficit  in one or more of such  accounts,  then  each  such
         deficit will be allocated to and charged against:

                  (i) first, the Subsidiary Capital Account for the Common 
                  shares to the extent of Restricted Earned Surplus;

                  (ii) then, any remaining unallocated deficit to the Subsidiary
                  Capital  Accounts  for the  Shares,  pro rata,  based upon the
                  relative  earned  premiums  allocated to each such account for
                  the fiscal  quarter  for which the  allocation  is being made;
                  provided,  however,  that only  accounts  which have  positive
                  balances  will be taken into  account for the purposes of this
                  allocation;

                  (iii) then, any remaining unallocated deficit to the remaining
                  Subsidiary  Capital  Accounts  for the  Shares  with  positive
                  balances  as of the last day of the fiscal  quarter  for which
                  the  allocation  is being  made,  pro  rata,  based  upon such
                  balances; and

                  (iv) finally, to the extent necessary, the Subsidiary Capital 
                  Account for the Common shares.

         (b) If,  as a result of an  allocation  of a deficit  as  described  in
         subparagraph (ii) or (iii) of paragraph (a) above, a deficit is created
         in one or more of the Subsidiary  Capital Accounts,  then the resulting
         deficit(s)  will be further  allocated  in the manner  provided in that
         subparagraph.

         (c) Although this  paragraph (7) shall be applied in a manner that does
         not result in a balance in any Subsidiary  Capital Account for a series
         of Shares  that is less than zero,  if any such  account  had a deficit
         that was  allocated  to and  charged  against  the  Subsidiary  Capital
         Account of the Common shares pursuant to Section  3(1)(7)(a)(i) hereof,
         or to the Subsidiary  Capital Account for any series of Shares pursuant
         to Section  3(1)(7)(a)(ii)  or (iii) hereof  (after taking into account
         the provisions of Section  3(1)(7)(b))  after January 1, 1995,  then at
         the  end of any  succeeding  fiscal  quarter  for  which  that  account
         otherwise would show an account balance greater than zero, such balance
         will be reallocated and credited:

                           (i) first to the  Subsidiary  Capital  Account of the
                  Common shares until all reductions of such Subsidiary  Capital
                  Account  for the Common  shares  under  Section  3(1)(7)(a)(i)
                  hereof  with  respect  to said  series  of  Shares  have  been
                  restored, and

                           (ii)  then,  with  respect  to any  deficits  charged
                  against  the  Subsidiary  Capital  Account  for any  series of
                  Shares pursuant to Section 3(1)(7)(a)(ii) or (iii) for periods
                  after January 1, 1995, to the Subsidiary  Capital Accounts for
                  the Shares, pro rata, based upon the relative amounts, through
                  the end of the  fiscal  quarter  for  which  the  reallocation
                  hereunder is being made,  of deficits  that were  allocated to
                  those accounts (whether under Section 3(1)(7)(a)(ii) or (iii))
                  from the Subsidiary  Capital  Account for the series of Shares
                  for which the  reallocation  hereunder  is being made and that
                  have not  previously  been  restored,  until all reductions of
                  such Subsidiary  Capital  Accounts after January 1, 1995 under
                  Section  3(1)(7)(a) with respect to said series of Shares have
                  been restored.


(8)      (a)  Dividends,  payments  upon  redemption or  liquidation  (described
         below),  and any  other  distributions  with  respect  to shares of the
         Company  will be allocated to the  Subsidiary  Capital  Account for the
         class  or  series  with  respect  to which  the  dividend,  payment  or
         distribution was made.

         (b) Where all  shares of a series  of  Shares  are  repurchased  by the
         Company pursuant to Section 4 below, or redeemed in accordance with the
         Company's  procedures  for  redemption set forth in Section 3(6) below,
         the Subsidiary  Capital  Account for such series shall be terminated as
         of the Repurchase  Date or Redemption  Date (as those terms are defined
         in  Sections  4  and  3(6),  respectively).   Thereafter,  all  income,
         expenses,  gains and  losses  that  would  have been  allocated  to the
         terminated  account  will be  allocated  among the  Subsidiary  Capital
         Accounts of the existing  series of Shares pro rata based upon relative
         earned premiums  attributable to such accounts for the calendar quarter
         in which the item was earned or incurred; provided, however, that a net
         deficit for any such period shall be allocated in  accordance  with the
         provisions of Section 3(1)(7).

The  allocations to the Subsidiary  Capital  Accounts  described  above shall be
approved  by  the  Board,  and  when  finally  so  approved  all   calculations,
allocations  and  determinations  shall be final  and  conclusive  and  shall be
binding on all  holders of shares of the  Company  for all  purposes,  including
without  limitation  any  redemption  of shares of the  Company  pursuant to the
Company's  procedures for  redemption.  The Board is authorized to interpret and
apply the provisions of these Articles and to promulgate such  additional  rules
and  guidelines as the Board deems  appropriate to carry out the intent of these
Articles and such interpretations,  rules and guidelines shall be binding on all
shareholders.

(2)      PARTICIPATING SHARES

(a) If any Share shall be redeemed,  repurchased or otherwise retired,  it shall
return to the status of an authorized but unissued share of such class.

(b) A series of Shares  shall be issued  with  respect to a specific  MIC Agency
Account. Only one series of Shares shall be issued with respect to an MIC Agency
Account.  A series  of  Shares  shall be  issued  only to  persons  or  entities
acceptable  to the Board and  certified by the owner(s) of the  Franchise(s)  to
which  the  MIC  Agency  Account  relates.  Certification  will be  effected  in
accordance with  procedures  adopted by the Board from time to time. No share of
any particular series of Shares shall be issued unless all shares of such series
are issued.

(c) Each outstanding Share shall entitle the registered holder of record of such
Share to  dividends  in  accordance  with the rules set forth in Section 3(5) of
these Articles.

(d) The holders of Shares  shall among them have the right to elect one director
of the  Company  and  shall  otherwise  have  only  such  voting  rights  as are
specifically  provided herein.  On all such matters each share shall entitle the
registered holder thereof to one vote.

(e) The rights  associated with any Shares of a series shall be identical to the
rights associated with all other Shares of the same series.

(3)      COMMON SHARES

(a) Each  outstanding  Common share shall entitle the registered  holder of such
shares to  dividends in  accordance  with the rules set forth in Section 3(5) of
these Articles.

(b) Each outstanding Common share shall entitle the registered holder thereof to
one vote per share on all  resolutions of the Company other than as specifically
provided herein.

(c) The holders of the Common  shares shall be entitled to elect five  directors
of the Company, one of whom must be a resident citizen of Barbados.

(4)      LIQUIDATION

The  Company  may be  liquidated  upon  the  vote  of the  holders  of at  least
seventy-five  percent  (75%) of the  Shares.  In the event of any  voluntary  or
involuntary  liquidation,  dissolution  or  winding  up of  the  affairs  of the
Company,  after payment of all liabilities of the Company, each holder of Shares
of a series  shall be entitled to receive an amount equal to his share (based on
his  proportionate  ownership of such series) of the Subsidiary  Capital Account
balance related to his series of Shares before any distribution of the assets of
the Company  shall be made to holders of the Common  shares.  After such payment
shall have been made in full to the holders of the outstanding  Shares, or funds
necessary for such payment shall have been set aside in trust for the account of
the  holders  of the  outstanding  Shares so as to be  available  therefor,  the
holders of the outstanding Shares shall be entitled to no further  participation
in the  distribution of the assets of the Company,  and the remaining  assets of
the Company,  if any, shall be divided and distributed  among the holders of the
Common shares then  outstanding  pro rata based on their  respective  shares.  A
consolidation  or  merger  of  the  Company,  or  sale  or  transfer  of  all or
substantially  all its assets,  or any purchase or  redemption  of shares of the
Company  of any  class or  series,  shall  not be  regarded  as a  "liquidation,
dissolution, or winding up" within the meaning of this paragraph.

(5)      DIVIDENDS

(a)  Subject to the following paragraphs, dividends may be paid at the
discretion of the Board.

(b)  Dividends,  payable  in  cash or  such  other  property  as the  Board  may
determine,  on a series of Shares or on Common  shares,  shall be  declared  and
payable only if the Company  shall have,  after giving  effect to the  dividend,
sufficient net assets,  without regard to any Letter of Credit or Guarantee,  to
meet the general business solvency margin prescribed by the Exempt Insurance Act
and Section 51 of the Act; provided that dividends with respect to any series of
Shares may be paid only out of earned  surplus  attributable  to the  Subsidiary
Capital Account identified with those Shares, and only to the extent that, after
giving  effect to the  dividend,  the capital and surplus  identified  with that
Subsidiary Capital Account (without regard to any Guarantee or Letter of Credit)
would meet its pro rata share, based on allocable premium income, of the minimum
net assets  required of the Company under the Exempt  Insurance Act.  Subject to
the right of the holders of Shares to receive minimum dividends  pursuant to the
following  paragraph,  to the extent a dividend is  declared  on the Shares,  it
shall be declared and paid subject to the foregoing  limitations for each series
of Shares as a  percentage  of the net income for the  preceding  calendar  year
and/or earned surplus as of the end of the preceding calendar year, attributable
to each series,  provided that such  percentage  may vary among series of Shares
with the level of net income  and/or  earned  surplus.  Dividends  shall only be
declared  and paid on  Common  shares  to the  extent  that the  earned  surplus
attributable to Common shares exceeds Restricted Earned Surplus.

(c) Subject to the preceding  paragraph,  the holders of the Shares of each
series shall be entitled to receive minimum annual  dividends,  payable annually
within the first 120 days of each fiscal year, in cash or such other property as
the Board may determine. The minimum annual dividend payable on each Share shall
be such Share's pro rata portion of an amount equal to twenty  percent  (20%) of
the net  income,  if any,  for the  preceding  fiscal year  attributable  to the
Subsidiary  Capital Account  associated with the series of which that Share is a
part.  If a holder of Shares  receives no dividend or a limited  dividend in any
annual  period  as a  result  of the  limitations  set  forth  in the  preceding
paragraph, any unpaid portion of the minimum dividend otherwise payable pursuant
to this  paragraph  shall not become  payable  pursuant to this paragraph in any
subsequent year.

(d) In no event  shall any  dividend  whatever  be paid upon or  declared or set
apart for the Common  shares,  unless  and until all  minimum  annual  dividends
required to be paid on the then  outstanding  Shares for the then current period
shall have been paid or declared and set apart for payment.

(6)      REDEMPTION

The Common shares are non-redeemable.  Subject to compliance with any applicable
statute or act the company may redeem any of its issued and  outstanding  Shares
if all Shares of the series  involved are redeemed  and the  redemption  of such
Shares is  approved  by a majority  of the  Board,  provided  that the  Director
representing holders of the Shares votes in favor of the redemption.

The redemption of Shares shall be effective on such future date as determined by
the Board,  which shall be no later than the last  business  day of the calendar
year in which the  redemption  was  approved  by the Board.  Such date is herein
called the "Redemption Date."

The  consideration  payable  to the  holders  of  redeemed  Shares  shall be the
Subsidiary  Capital  Account  balance  for the  series of such  Shares as of the
Redemption Date, as adjusted by the Board to reflect unrealized gains and losses
on investments held by the Company and any contingent  liabilities  allocable to
such  account.  Such  consideration  shall be paid within five (5) months of the
Redemption  Date,  provided that the holder(s) of the redeemed Shares shall have
delivered to the Company,  certificates  representing  the Shares being redeemed
duly  endorsed  and  accompanied  by such other  documents  as the  Company  may
require.  Such consideration  shall bear interest from the Redemption Date until
the  earlier of the date of payment or the date that is five (5) months from the
Redemption  Date, at a rate equal to the rate of interest paid on 26-week United
States Treasury Bills for the issue following the Redemption Date.

Upon redemption of the Shares as aforesaid, the holder(s) thereof shall cease to
have any further interest in the shares being redeemed. Shares redeemed pursuant
to this  Section  3(6) shall  return to the status of  authorized  but  unissued
Shares.

4.       Restrictions, if any, on share transfers:

         (a) Subject to the exceptions listed below, Shares (whether owned by 
         the original or any subsequent holder thereof) shall not be 
         transferred in any manner unless the holder(s) has received a bona 
         fide written offer to purchase such Shares, a copy of which has been 
         furnished to the Company, and the Company is thereafter offered the 
         opportunity to purchase such Shares.  The Company  shall have sixty 
         (60) days during which to exercise the rights  conferred upon it by 
         this paragraph.  If the Company  accepts  such offer,  the price will 
         be the lesser of the balance of the Subsidiary  Capital  Account  
         related to such series of Shares as of the last day of the fiscal 
         quarter immediately  preceding the date on which the offer to purchase
         was accepted by the Company (the "Repurchase  Date") (or if less than 
         all such Shares are offered, then the pro rata portion of such account 
         attributable to the Shares offered), or the bona fide offering price.
         Payment by the Company may be deferred  until the end of the fiscal 
         quarter in which the offer to purchase was accepted by the Company.  
         Shares purchased by the Company pursuant to this paragraph shall return
         to the status of authorized but unissued  shares of such class.  If the
         Company does not elect to purchase the Shares  pursuant to this 
         paragraph,  they may be sold in accordance  with the bona fide written 
         offer  referred to above within the  following  sixty (60) days,  
         subject to the  requirements  of the following  paragraphs.   After  
         such  further  sixty  (60)  days,  any  attempted  sale or transfer of
         the Shares  shall be subject to all the requirements of this paragraph.

         (b) In addition to the  requirements  of the  preceding  paragraph  and
         except as provided in paragraph  (d) below,  transfers of less than all
         Shares of a series shall not be made unless the  holder(s) has received
         the written consent of the Company thereto.  A request for such consent
         must be made in writing and set forth the name(s)  and  address(es)  of
         the intended  transferee(s),  the desired date of the transfer, and the
         consideration  to be paid.  The Company shall have sixty (60) days from
         receipt  of such  request  to  grant or  withhold  its  consent  to the
         intended  transfer.  If the Company fails to give its written  consent,
         any subsequent transfer shall be void and of no effect.

         (c)  Shares  may not be  transferred  unless  and  until  the Board has
         received such  assurances of compliance  with all  applicable  laws and
         regulations  as it may deem  necessary and the transferee has agreed to
         abide by the  requirements  set forth in the Stock  Purchase  Agreement
         entered into by the transferor. Certificates representing shares of any
         class of the Company's shares shall bear a legend  substantially to the
         effect of this Section 4 of these Articles.

         (d) A sale, gift, assignment,  pledge or other transfer of Shares shall
         be  exempt  from the  requirements  of  paragraphs  (a) and (b) of this
         Section 4 if the Board  determines  that the  transferee or assignee of
         the shares is: (i) a member of the transferring shareholder's immediate
         family;  (ii) a trust for the benefit of the transferring  shareholder,
         or for the  benefit of other  exempted  transferees  described  in this
         paragraph; (iii) if the transferor is a corporation, any shareholder of
         the  transferor;  (iv) if the transferor is a  partnership,  any of its
         partners;  (v) a  corporation  which is  controlled  by or under common
         control with the transferor;  (vi) the estate of a deceased shareholder
         or legatees and heirs of such deceased shareholder;  (vii) a charitable
         or other qualifying  organization described in Section 170(c)(2) of the
         United States  Internal  Revenue Code of 1986;  (viii) in the case of a
         transfer  of less  than all of the  Shares of a  series,  a person  who
         immediately  prior to such  transfer  is a  holder  of  Shares  of that
         series;  or (ix) a key employee with respect to a Franchise  previously
         designated  in  the  Stock  Purchase  Agreement  entered  into  by  the
         transferor.

7.       Other provisions if any:

No holder of shares of the Company of any class,  now or  hereafter  authorized,
shall have any  preferential or preemptive  right to subscribe for,  purchase or
receive any shares of the Company of any class, now or hereafter authorized,  or
any options or  warrants  for such  shares,  or any rights to  subscribe  for or
purchase such shares,  or any securities  convertible  into or exchangeable  for
such  shares,  which may at any time be issued,  sold or offered for sale by the
Company.

Amendment of Articles and By-Laws:

The Company's Articles and By-Laws shall not be altered, amended or repealed and
no provision  inconsistent  therewith shall be adopted,  without the affirmative
vote of the  holders  of a  majority  of the  Common  shares  and of the  Shares
present; provided that the rights associated with any series of Shares shall not
be varied,  unless the rights  associated  with all other  series are  similarly
changed, without the affirmative vote of the holders of a majority of the Shares
of each series present.


                                                                     APPENDIX B

                            STOCK PURCHASE AGREEMENT

                                     BETWEEN

                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED

                                       AND

                              (Certified Purchaser)

                                                               _________  , 19

Motors Mechanical Reinsurance
  Company, Limited
Financial Services Centre
Bishops Court Hill
St Michael, Barbados

Gentlemen:

The undersigned  Shareholder  (as more fully  described  below) hereby offers to
purchase  certain  shares of stock of  Motors  Mechanical  Reinsurance  Company,
Limited, a Barbados  Corporation (the "Company"),  upon the terms and conditions
set forth herein.  The  Shareholder  hereby tenders a check in the amount of the
Purchase  Payment  (as defined  herein),  to be held in an escrow  account  with
Barclays Bank PLC (the "Escrow  Account").  This offer shall expire on the 120th
day  after the date  hereof if the  Company  has not  accepted  it prior to such
expiration date. The Shareholder acknowledges receipt of a prospectus dated with
respect to the stock described herein.

1.   DEFINITIONS
   
1.1  Franchisee.  The term "Franchisee"  means (insert name(s) and address(es) 
of Franchisee(s) of the automobile sales franchise(s) related to the applicable 
MIC Mechanical Account).
    
1.2  MIC.  The term "MIC" means Motors Insurance Corporation, a New York 
corporation.
   
1.3  MIC Mechanical Account. The term "MIC Mechanical Account" means the
separate business  record  maintained by MIC or any of its  subsidiaries or
affiliates to track volume,  experience  and  commissions  with respect to
mechanical  service agreements sold by one or more particular franchise(s).
    
1.4  Purchase Payment.  The term "Purchase Payment" means the $ ($75 (U.S.) x  
number of shares) paid hereunder as consideration for the purchase of the
Shares.

1.5  Shareholder.  The term "Shareholder" means        , taxpayer identification
number            , who is a citizen of                  ,
and who resides at                               .

1.6  Shares.  The term "Shares" means shares (number of shares) of the
authorized shares of a series  of the  participating  stock of the  Company,
which series consists  of 100  shares,  and which is issued in respect of the
MIC  Mechanical Account.

1.7  The  masculine gender is to be  construed  to include a female or an entity
where the context of this Agreement so requires.

2.   REPRESENTATIONS

2.1  Representation of Shareholder.  The Shareholder represents that he has been
duly certified (on the form furnished by the Company and attached hereto) by the
Franchisee and meets the requirements for this purchase and sale as set forth in
the Articles of Incorporation of the Company (the  "Articles"),  copies of which
are  attached to the  prospectus.  (It is  understood  that,  if the  Franchisee
consists  of  more  than  one  person,   all  such  persons  must  join  in  the
certification of the Shareholder.)

2.2  Representation of Company. The Company represents that the issuance and 
sale of the Shares pursuant to this Agreement has been duly authorized by the
Board in accordance with the  Articles, and  is consistent with the applicable
provisions of Barbados law.

3.   PURCHASE AND SALE OF SHARES

Upon acceptance of this Agreement by the Company, the Company agrees to sell and
issue to the Shareholder,  and the Shareholder agrees to purchase, the Shares in
consideration of the Purchase Payment.

4.   ESCROW OF PURCHASE PAYMENT

Subject to the following  sentence,  the Purchase Payment will remain on deposit
in the  Escrow  Account  until the Shares  are  issued by the  Company.  If this
Agreement is not executed by the Company within 120 days of the date hereof, the
Purchase  Payment shall be refunded  promptly  together with any interest earned
thereon. Following execution by the Company, the Shareholder shall have no right
to withdraw the amount of the Purchase Payment or any interest earned thereon.

5.   COVENANTS OF THE COMPANY
   
5.1  Series of Participating Stock. No more than 100 shares of the same series 
of participating  stock as the Shares shall be issued by the Company, and no
other series of such stock shall be issued with respect to the MIC Mechanical
Account.

5.2  Reinsurance Business.  The business of the Company shall be limited to the
reinsurance  of  mechanical   breakdown   risks   underwritten  by  MIC  or  its
subsidiaries  or affiliates and identified  with the MIC Mechanical  Account and
similar MIC accounts maintained with respect to automobile  franchises for which
series of participating stock of the Company are issued and outstanding.
    
6.   LIMITATIONS BASED ON INADEQUATE CAPITAL

The  Shareholder  and the Company agree that if the Company cannot meet the
minimum margin of solvency  requirements  under Barbados insurance law, then, to
the extent the net asset value  attributable  to the Subsidiary  Capital Account
(the  "Account")  for the shares issued  pursuant to this Agreement is less than
its pro rata share  (based on  proportionate  earned  premium) of the  Company's
required net asset value, the Company shall reduce the business  attributable to
the Account,  on a pro rata basis with such other  accounts  that are  similarly
deficient, by retrocession or some other means acceptable to the Company, to the
extent  necessary to permit the Company to meet the Company's  required  minimum
margin of solvency.

7.   RESTRICTIONS ON TRANSFER

The Shareholder  agrees to be bound by and shall be subject to all provisions in
the Articles  (including  without limitation those with respect to the ownership
and transfer of the Shares) that are in effect as of the date of this  Agreement
or that may be added in the future, and any amendments to such provisions. It is
understood that the Company may place on the certificate for the Shares a legend
stating in substance:

         The sale,  transfer,  or other  disposition of the shares  evidenced by
         this  certificate is restricted  pursuant to provisions of the Articles
         of Motors Mechanical Reinsurance Company, Limited ("Company"),  and the
         Stock  Purchase  Agreement  ("Agreement")  between  the Company and the
         Shareholder,  dated , 19 , pursuant  to which the shares  were  issued.
         Copies  of the  Articles  and  the  Agreement  may be  examined  at the
         registered office of the Company.

8.   MISCELLANEOUS

8.1  Severability.  If for any reason any provision of this Agreement  shall be
invalid or unenforceable, the validity of any or all of the remaining provisions
shall not be  affected  thereby;  provided,  however,  that the  absence of such
illegal or invalid  provisions does not so materially  alter the purpose of this
Agreement such that the  continuation  of the  arrangement  contemplated by this
Agreement  would no longer be mutually  beneficial  to the  Shareholder  and the
Company.

8.2  No Waiver.  The failure of any party to insist upon strict performance of
any obligation hereunder shall not be a waiver of the party's right to demand
strict compliance therewith in the future.

8.3  Governing Law.  This Agreement shall be governed by and construed in
accordance with the laws of Barbados.

8.4  Counterparts.  This Agreement has been executed in multiple copies, each of
which shall for all purposes constitute one Agreement, binding on the parties.

8.5  Assignment.  This  Agreement  is  personal to the  parties  and,  except as
contemplated herein and in the Articles, no party shall have any right to assign
any  right  or  to  delegate  any  duty   hereunder,   either   voluntarily   or
involuntarily, or by operation of law.

8.6  Term of Agreement. Except as herein expressly provided, this Agreement 
shall remain in force as long as the  Shares  remain  outstanding.  If not
terminated sooner, this Agreement shall terminate upon the earlier of the
redemption of the Shares or the liquidation of the Company.

8.7  Effect of Transfer. The Shareholder  shall be relieved of all  restrictions
and  obligations  and shall not be entitled to any further  benefits  under this
Agreement  upon  transfer  of all the  Shares  and  upon  the  agreement  of the
transferee to be bound by the terms and conditions of this Agreement.

8.8  Amendment. No change, modification, or amendment to this Agreement shall be
valid or binding upon the parties  hereto unless such change,  modification,  or
amendment shall be in writing signed by all of the parties.

8.9  Integration.  This Agreement constitutes the full and complete agreement
between the Shareholder and the Company.

8.10 Captions. Titles or captions of sections,  paragraphs or exhibits contained
in or made a part of this Agreement are inserted only as a matter of convenience
and for reference,  and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof.

8.11 Notices.  Any and all notifications  permitted or required to be made under
this  Agreement   shall  be  in  writing,   signed  by  the  party  giving  such
notification, and shall be sent by registered or certified mail, postage prepaid
(1) if to the  Shareholder,  at the  address  set forth in  Section  1.5 of this
Agreement or at such other address as may have been furnished by the Shareholder
to the  Company  in  writing;  or (2) if to the  Company,  in care of  Alexander
Insurance Managers (Barbados) Limited,  Financial Services Centre, Bishops Court
Hill, St. Michael,  Barbados,  W.I. For purposes of computing a time period, the
date of mailing shall be the date of notification.

8.12 Survival   of   Representations    and   Warranties.    All   agreements,
representations,  and  warranties  contained  herein or made in  writing  by the
Shareholder  or the Company in  connection  with the  transactions  contemplated
hereby shall survive the execution and delivery of this Agreement,  and the sale
and purchase of the Shares under this Agreement.

8.13 Relationship  to  Articles.   The  provisions  of  the  Articles  are
incorporated herein to the extent relevant to this Agreement.  If the authorized
representative  of the Company executes this Agreement on its behalf,  then this
Agreement shall become a binding  contract,  subject to the terms and conditions
set forth herein,  between the Company and the Shareholder as of the date of the
execution on behalf of the Company.


                                             Very truly yours,


- ------------------------------               ----------------------------------
Date                                         Signature of Shareholder


                                             ----------------------------------
                                             Print Name of Shareholder

The  foregoing  Agreement  is hereby  accepted  and agreed to as of the date set
forth below.  Series P- is hereby  designated  for the Shares  described in this
Agreement.

MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED

By ___________________________               Dated: __________________________

Title ________________________

Note:    Upon acceptance by the Company, a duly signed copy of this Agreement 
         shall be sent to the Shareholder.


                                                                     APPENDIX C

                 MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED

                               CERTIFICATION FORM

The  undersigned  represent(s)  that he  (she)(they) is (are) the owner(s) of an
automobile  sales  franchise doing business as  ______________________  (name of
dealership),  with respect to which MIC Mechanical Account___ is maintained. The
undersigned  hereby  designate(s)  ___________________________________  (name of
purchaser), who resides at ____________________________  (address of purchaser),
to be deemed eligible to purchase shares of a series of the participating  stock
of Motors Mechanical  Reinsurance  Company,  Limited (the "Company") pursuant to
the  Articles  of  Incorporation  of  the  Company.   The  undersigned   further
represent(s) that all beneficial owners of the dealership have consented to this
designation.



- ------------------------------               ----------------------------------
Date                                         Signature of Franchise Owner

                                             ----------------------------------
                                             Print Name of Franchise Owner



                          (Names of Co-Owners, if any)


- ------------------------------               ----------------------------------
Date                                         Signature of Co-Owner

                                             ----------------------------------
                                             Print Name of Co-Owner



- ------------------------------               ----------------------------------
Date                                         Signature of Co-Owner

                                             ----------------------------------
                                             Print Name of Co-Owner




                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses, all of which were paid by
Motors Insurance Corporation,  in connection with the initial offering described
in the Registration Statement:

      Registration Fee -- Securities
       and Exchange Commission ................  $    310

      State "Blue Sky" fees ...................  $ 16,476

      Accountants Fees and Expenses ...........  $ 10,000

      Legal Fees and Expenses .................  $ 30,000

      Printing and Engraving ..................  $  8,000

      Miscellaneous ...........................  $    -
                                                 --------
           Total Expenses .....................  $ 64,786
                                                 --------


ITEM 15.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

Paragraph  10 of  Registrant's  By-Laws  provides  for  the  indemnification  of
Registrant's  officers and  directors  (and such persons'  heirs,  executors and
administrators) against any and all judgments, fines, amounts paid in settlement
and reasonable  expenses,  including attorneys' fees, incurred by such person in
connection with any claim, action, suit or proceeding,  whether civil, criminal,
administrative or investigative by reason of the fact that such person is or was
a director or officer of the Company, or is or was serving at the request of the
Company  as a  director,  officer,  employee,  fiduciary  or member of any other
corporation,  partnership,  joint venture,  trust,  enterprise or  organization,
except  with  respect  to any  matter  for which  indemnification  would be void
pursuant to the Companies Act, 1982 of Barbados (the "Companies Act").

Under the Companies Act,  indemnification of Registrant's officers and directors
against any liability which would attach by reason of any contract  entered into
or act or  thing  done or  omitted  to be done by them in  performance  of their
office  or in any way in the  discharge  of their  duties,  if the same  happens
through  their  not  acting  in  good  faith  and in the  best  interest  of the
Registrant is void.

The position of the Securities and Exchange Commission regarding indemnification
for liabilities arising under the Securities Act of 1933 is set forth under Item
17, paragraph 4 of this Part II.


ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

A. Exhibits:


         4        Restated Articles of Incorporation (filed as Appendix A to 
                  the Prospectus).

         5        Opinion of Evelyn, Gittens & Farmer filed by reference to
                  Exhibit 5 to Registration Statement on Form S-2, File 
                  No. 33-60105, filed June 9, 1995.

         10 (a)   Form of Principal  Retrocession  Agreement  between Motors
                  Insurance  Corporation  and  Registrant  filed by reference to
                  Exhibit 10(a) of the Registration  Statement on Form S-1, File
                  No. 33-6534, dated June 18, 1986.

            (b)   Form of  Supplemental  Retrocession  Agreement  between
                  Motors   Insurance   Corporation  and  Registrant  filed  by
                  reference to Exhibit 10(b) of the Registration  Statement on
                  From S-1, File No. 33-6534 dated June 18, 1986.

            (c)   Specimen Stock Purchase  Agreement (filed as Appendix B
                  to the Prospectus).

            (d)   Amended and Restated Stock Purchase  Agreement  between
                  Registrant  and  Motors  Insurance   Corporation   filed  by
                  reference   to  Exhibit   10(d)  to   Amendment   No.  1  to
                  Registration  Statement on Form S-1, File No. 33-6534, dated
                  February 12, 1987.
   
            (e)   Insurance  Management  Agreement between Registrant and
                  Alexander   Insurance  Managers  (Barbados)  Ltd.  effective
                  January  1, 1996,  filed by  reference  to Exhibit  10(e) to
                  Annual Report on From 10-K, File No.  33-6534,  for the year
                  ended December 31, 1996.
    
         23 (a)   Consent of Evelyn, Gittens & Farmer.

            (b)   Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P.

            (c)   Consent of Deloitte & Touche, Independent Chartered
                  Accountants.

         99 (a)   Certification Form (filed as Appendix C to the Prospectus).
   
            (b)   Guarantee issued by the Ministry of Finance of Barbados
                  filed by  reference to Exhibit  99(b) to Amendment  No. 2 to
                  Registration Statement on Form S-2, File No. 33-60105.
    
            (c)   Certificate of Barbados Residency filed by reference to
                  Exhibit 28(c) of Amendment No. 1 to  Registration  Statement
                  on Form S-1, File No. 33-6534, dated February 12, 1987.


B. Financial Statement Schedules:

No financial  statement schedules are submitted herewith because the information
is included  elsewhere in the financial  statements or the notes thereto or such
schedules are not applicable.


ITEM 17.   UNDERTAKINGS

The Company hereby undertakes:

(1) To file,  during any period in which offers or sales of the securities being
registered  are being made,  a  post-effective  amendment  to this  Registration
Statement:

         (i)  To include any prospectus required by Section 10(a)(3) of the
         Securities Act of 1933;

         (ii) To reflect in the prospectus any facts or events arising after the
         effective  date  of the  Registration  Statement  (or the  most  recent
         post-effective  amendment  thereof)  which,   individually  or  in  the
         aggregate,  represent a fundamental change in the information set forth
         in the Registration Statement, and

         (iii) To include any material  information  with respect to the plan of
         distribution not previously disclosed in the Registration  Statement or
         any material change to such information in the Registration Statement;

(2) That, for the purpose of determining  any liability under the 1933 Act, each
such post-effective amendment shall be deemed to be a new Registration Statement
relating to the securities offered therein,  and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof;

(3) To remove from  registration by means of a  post-effective  amendment any of
the securities  being  registered  which remain unsold at the termination of the
offering.

(4) Insofar as indemnification  for liabilities arising under the Securities Act
of 1933 (the "1933 Act") may be permitted to directors, officers and controlling
persons of the registrant  pursuant to the foregoing  provisions,  or otherwise,
the  registrant  has been  advised  that in the  opinion of the  Securities  and
Exchange  Commission such  indemnification is against public policy as expressed
in the Act and is,  therefore,  unenforceable.  In the  event  that a claim  for
indemnification  against  such  liabilities  (other  than  the  payment  by  the
registrant of expenses  incurred or paid by a director,  officer or  controlling
person of the  registrant  in the  successful  defense  of any  action,  suit or
proceeding)  is  asserted by such  director,  officer or  controlling  person in
connection with the securities being registered,  the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.


                                   SIGNATURES


Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  Registration  Statement  to be signed  on its  behalf by the
undersigned, thereunto duly authorized, in the City of St. Michael, Barbados, on
April 8, 1997.

                                MOTORS MECHANICAL
                                REINSURANCE COMPANY, LIMITED


                                By s/Ronald W. Jones
                                      Ronald W. Jones, Vice-President,
                                        Finance

Pursuant to the  requirements of the Securities Act of 1933,  this  Registration
Statement has been signed by the following  persons in the capacities and on the
dates indicated.

        SIGNATURE                        TITLE                         DATE


 s/William B. Noll            Chairman and Chief Executive        April 8, 1997
- --------------------------
   William B. Noll            Officer and Director
                              (Principal Executive Officer)

 s/Ronald W. Jones            Vice-President (Principal           April 8, 1997
- --------------------------
   Ronald W. Jones            Financial and Accounting
                              Officer)

 s/Louis S. Carrio, Jr.       Vice-President and Director        April 14, 1997
- --------------------------
   Louis S. Carrio, Jr.

 s/Bernard J. Buselmeier      Vice-President and Director         April 8, 1997
- --------------------------
   Bernard J. Buselmeier

 s/John J. Dunn, Jr.          Vice-President and Director         April 8, 1997
- --------------------------
   John J. Dunn, Jr.

 s/Peter R. P. Evelyn         Director                            April 8, 1997
- --------------------------
   Peter R. P. Evelyn

- --------------------------    Director
   Gregory Greenwood