E. W. BLANCH CO.
R:\98R\14128.DOC Reinsurance Services
Page 2

External Third through Sixth Catastrophe Excess
Reinsurance Contract
Effective: January 1, 1998

issued to

Associated International Insurance Company
Woodland Hills, California
Calvert Insurance Company
Hoboken, New Jersey
and
any additional company established or acquired
by Associated International Insurance Company, Calvert Insurance
Company
or Gryphon Holdings, Inc., New York, New York,
to be included hereunder

E. W. Blanch Co.

Reinsurance Services

3500 West 80th Street

Minneapolis, Minnesota 55431
Table of Contents

Article Page

I Classes of Business Reinsured 3
II Term 3
III Territory 4
IV Exclusions 4
V Retention and Limit 7
VI Other Reinsurance 7
VII Definitions 8
VIII Reinstatement 9
IX Loss Notices and Settlements 10
X Special Provisions 10
XI Salvage and Subrogation 10
XII Premium 11
XIII Offset (BRMA 36C) 12
XIV Access to Records (BRMA 1D) 12
XV Net Retained Lines (BRMA 32E) 12
XVI Errors and Omissions (BRMA 14F) 12
XVII Currency (BRMA 12A) 12
XVIII Taxes (BRMA 50C) 13
XIX Federal Excise Tax (BRMA 17A) 13
XX Unauthorized Reinsurers 13
XXI Insolvency 14
XXII Arbitration 15
XXIII Service of Suit (BRMA 49C) 16
XXIV Agency Agreement 17
XXV Intermediary (BRMA 23A) 17
Schedule A

External Third through Sixth Catastrophe Excess
Reinsurance Contract
Effective: January 1, 1998

issued to

The Subscribing Reinsurer(s) Executing the
Interests and Liabilities Agreement(s)
Attached Hereto
(hereinafter referred to as the "Reinsurer")

Article I - Classes of Business Reinsured

By this Contract the Reinsurer agrees to reinsure the excess
liability which may accrue to the Company under its policies,
contracts and binders of insurance or reinsurance (hereinafter
called "policies") in force at the effective date hereof or
issued or renewed on or after that date, and classified by the
Company as Property business underwritten by Associated
International Insurance Company, Woodland Hills, California,
subject to the terms, conditions and limitations set forth herein
and in Schedule A attached to and forming part of this Contract.

Article II - Term

A. This Contract shall become effective on January 1, 1998, with
respect to losses arising out of loss occurrences commencing
on or after that date, and shall remain in force until
December 31, 1998, both days inclusive.

B. If this Contract expires while a loss occurrence covered
hereunder is in progress, the Reinsurer's liability hereunder
shall, subject to the other terms and conditions of this
Contract, be determined as if the entire loss occurrence had
occurred prior to the expiration of this Contract, provided
that no part of such loss occurrence is claimed against any
renewal or replacement of this Contract.

Article III - Territory

As respects the External Third and Fourth Excess Catastrophe
Reinsurance layers hereunder and subject to all other terms and
conditions of this Contract, this Contract shall apply to the
territorial limits of the Company's policies reinsured hereunder.
As respects the External Fifth and Sixth Excess Catastrophe
Reinsurance layers hereunder and subject to all other terms and
conditions of this Contract, this Contract shall apply to losses
occurring anywhere within the State of California.

Article IV - Exclusions

A. This Contract does not apply to and specifically excludes the
following:

1. Loss or liability excluded under the provisions of
the "Pools, Associations and Syndicates Exclusion Clause"
attached to and forming part of this Contract.

2. Nuclear risks as defined in the "Nuclear Incident
Exclusion Clause - Physical Damage - Reinsurance (U.S.A.)"
and the "Nuclear Incident Exclusion Clause - Physical
Damage - Reinsurance (Canada)" attached to and forming
part of this Contract.

3. All reinsurance assumed, with the exception of intra-
company reinsurance and specific insureds whose
reinsurance is written through their own captive company
and quoted by a non-related entity.

4. Risks of war, whether or not declared, invasion,
civil war, insurrection, rebellion, revolution or
confiscation by duly constituted governmental or civil
authority as excluded under a standard policy containing a
standard War Exclusion Clause.

5. Hail insurance or reinsurance covering growing,
drying or standing crops when written as such.

6. Flood when written as such; however, this exclusion
shall not apply to flood when included in Difference in
Conditions, Inland Marine and All Risk policies.

7. All armored car business except when written in
excess of $500,000.

8. Credit, financial or insolvency guarantees.

9. Livestock insurance or reinsurance when written as
such.

10. Third Party Bodily Injury and Property Damage
Liability, Medical Payments, Workers' Compensation,
Fidelity and Surety, whether written separately or as part
of a Multiple Peril policy. However, nothing herein
contained shall be construed as excluding liability for
damage to property in an insured's care, custody or
control or for which the insured may be liable.

11. Ocean Marine when written as such.

12. Aircraft, meaning direct damage to hulls insured
under Aircraft Hull policies, but not to exclude aircraft
hulls insured under regular Fire, Inland Marine and All
Risk policies (other than Aircraft Hull policies). In no
event shall any liability attach to the Reinsurer
hereunder in respect of aircraft while in flight or
taxiing.

13. Offshore drilling rigs.

14. Automobile risks insured under Automobile policies.

15. Boiler and Machinery when written as such.

16. Space and space related risks for the intention of
ignition of the launch vehicle which includes taxiing
within the launch site area and in flight.

17. Grain elevators.

18. Mechanical breakdowns when written as such.

19. Petrochemical risks and refineries.

20. Underground mining.

21. Inland Marine policies covering jewelers block and
motor truck cargo.

22. Mortgage Impairment insurance.

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

24 Kidnap and Ransom.

25. Residual Value and Credit insurance.

26. Crop insurance.

27. Burglary and Theft when written as such.

28. Strike insurance.

29. Product impairment, recall and tampering.

30. Data processing companies whose sole purpose is to
provide data processing services to other companies which
include media exposures defined as material on which data
is to be or is already stored (i.e., disks, magnetic and
paper tapes, drums, cores and programs).

31. Transmission and distribution lines.

32. Onshore drilling rigs.

33. Course of Construction risks covering dams, bridges,
tunnels, subways, construction work over water, or any
project involving water, unless the aforementioned
projects are incidental to the insured's total
construction project.

34. Rolling stock owned or operated by a railroad, but
this exclusion shall not apply to interests while
contained in buildings owned or leased by an insured.

35. Risks excluded under the provisions of the "Total
Insured Value Exclusion Clause" attached to and forming
part of this Contract.

36. Extra contractual obligations (i.e., any punitive,
exemplary, compensatory or consequential damages paid or
payable by the Company as a result of an action against it
by its insured or its insured's assignee, which action
alleges negligence or bad faith on the part of the Company
in handling a claim under a policy subject to this
Contract).

37. Loss in excess of policy limits (i.e., any amount
paid or payable by the Company in excess of its policy
limits, but otherwise within the terms of its policy, as a
result of an action against it by its insured or its
insured's assignee to recover damages the insured is
legally obligated to pay to a third party claimant because
of the Company's alleged or actual negligence or bad faith
in rejecting a settlement within policy limits, or in
discharging its duty to defend or prepare the defense in
the trial of an action against its insured, or in
discharging its duty to prepare or prosecute an appeal
consequent upon such an action).

B. Notwithstanding the foregoing, any exclusion set forth in
paragraph A (except subparagraphs 2, 3, 4, 6, 8, 11, 12, 13,
16, 23, 36 and 37 shall be waived automatically when, in the
opinion of the Company, the exposure excluded therein is
incidental to the principal exposure on the risk in question.

C. As regards business underwritten in the General E&S Division
of the Company:

1. Exclusions 15, 18, 33 and 34 of paragraph A shall be
waived.

2. Exclusion 35(Total Insured Value) and Section B of
Exclusion 1 (Pools, Associations) of paragraph A shall be
waived except for risks with total insured values greater
than $300,000,000 in the State of California. This
exception contained in this paragraph only applies to
risks in the State of California.

3. Exclusion 14 (Automobile) of paragraph A shall be
waived as regards Automobile Floor Plans.

Article V - Retention and Limit

A. As respects each excess layer of reinsurance coverage provided
by this Contract, the Company shall retain and be liable for
the first amount of ultimate net loss, shown as "Company's
Retention" for that excess layer in Schedule A attached
hereto, arising out of each loss occurrence. The Reinsurer
shall then be liable (subject to the provisions of paragraph B
below), as respects each excess layer, for the amount by which
such ultimate net loss exceeds the Company's applicable
retention, but the liability of the Reinsurer under each
excess layer shall not exceed the amount, shown as
"Reinsurer's Per Occurrence Limit" for that excess layer in
Schedule A attached hereto, as respects any one loss
occurrence.

B. No claim shall be made under any excess layer of reinsurance
coverage provided by this Contract in any one loss occurrence
unless at least two risks insured or reinsured by the Company
are involved in such loss occurrence. "Risk" to be defined as
all the values at one location unless otherwise stated in the
Company's risk file but not less than all the values within
four walls. For purposes of this Article, the Company shall
be the sole judge of what constitutes one risk, except that in
no event shall a building and its contents be considered more
than one risk.

Article VI - Other Reinsurance

A. The Company shall be permitted to carry underlying excess
catastrophe reinsurance, recoveries under which shall inure
solely to the benefit of the Company and be entirely
disregarded in applying all of the provisions of this
Contract.

B. As regards DIC business, the Company shall purchase or be
deemed to have purchased inuring excess per risk and/or pro
rata facultative reinsurance to limit its ultimate net loss on
any one risk, each loss (exclusive of extra contractual
obligations) to $100,000 subject to the following occurrence
limits by layer of inuring excess per risk reinsurance:

Layer Limit Retention Occurrence Limit

1 4,900,000 100,000 12,500,000 Per Occurrence
2 5,000,000 5,000,000 10,000,000 Per Occurrence

C. As regards business underwritten in the General E&S division,
the Company shall be permitted to purchase inuring coverage as
follows:

1. West Coast earthquake incurred loss shall be ceded to
the DIC Excess Per Risk noted in paragraph B above.

2. As regards all other incurred loss, $12,000,000
excess $500,000 per risk; subject to a per occurrence
limit of $20,000,000.

3. The only exception to subparagraph 1 above is Course
of Construction (COC) policies written in the General E&S
division. The California earthquake portions of those
policies are ceded 100% to the E&S treaty.

Article VII - Definitions

A. "Ultimate net loss" as used herein is defined as the sum or
sums (including litigation expenses, interest on judgments and
all other loss adjustment expenses, including a pro rata share
of the salaries and expenses of the Company's field employees
according to the time occupied adjusting the loss and expenses
of the Company's officials incurred in connection with the
loss, but excluding office expenses and salaries of the
Company's officials and any normal overhead charges) paid or
payable by the Company in settlement of claims and in
satisfaction of judgments rendered on account of such claims,
after deduction of all salvage, all recoveries and all claims
on inuring insurance or reinsurance, whether collectible or
not. Nothing herein shall be construed to mean that losses
under this Contract are not recoverable until the Company's
ultimate net loss has been ascertained.

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

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

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

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

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

For all "loss occurrences," the Company may choose the date
and time when any such period of consecutive hours commences,
provided that it is not earlier than the date and time of the
occurrence of the first recorded individual loss sustained by
the Company arising out of that disaster, accident or loss,
and provided that only one such period of
168 consecutive hours shall apply with respect to one event
except for those "loss occurrences" referred to in
subparagraphs 1 and 2 above where only one such period of
72 consecutive hours shall apply with respect to one event.

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

C. "Net earned premium" as used herein is defined as the
Company's gross earned premium on the classes of business
subject to this Contract, less only the earned portion of
premiums, if any, ceded by the Company for reinsurance which
inures to the benefit of this Contract.

Article VIII - Reinstatement

A. In the event all or any portion of the reinsurance under any
excess layer of reinsurance coverage provided by this Contract
is exhausted by loss, the amount so exhausted shall be
reinstated immediately from the time the loss occurrence
commences hereon. For each amount so reinstated the Company
agrees to pay additional premium equal to the product of the
following:

1. The percentage of the occurrence limit for the excess
layer reinstated (based on the loss paid by the Reinsurer
under that excess layer); times

2. The earned reinsurance premium for the excess layer
reinstated for the term of this Contract (exclusive of
reinstatement premium).

B. Whenever the Company requests payment by the Reinsurer of any
loss under any excess layer hereunder, the Company shall
submit a statement to the Reinsurer of reinstatement premium
due the Reinsurer for that excess layer. If the earned
reinsurance premium for any excess layer for the term of this
Contract has not been finally determined as of the date of any
such statement, the calculation of reinstatement premium due
for that excess layer shall be based on the annual deposit
premium for that excess layer and shall be readjusted when the
earned reinsurance premium for that excess layer for the term
of this Contract has been finally determined. Any
reinstatement premium shown to be due the Reinsurer for any
excess layer as reflected by any such statement (less prior
payments, if any, for that excess layer) shall be payable by
the Company concurrently with payment by the Reinsurer of the
requested loss for that excess layer. Any return reinstatement
premium shown to be due the Company shall be remitted by the
Reinsurer as promptly as possible after receipt and
verification of the Company's statement.

C. Notwithstanding anything stated herein, the liability of the
Reinsurer under any excess layer of reinsurance coverage
provided by this Contract shall not exceed either of the
following:

1. The amount, shown as "Reinsurer's Per Occurrence
Limit" for that excess layer in Schedule A attached
hereto, as respects loss or losses arising out of any one
loss occurrence; or

2. The amount, shown as "Reinsurer's Annual Limit" for
that excess layer in Schedule A attached hereto, in all
during the term of this Contract.

Article IX - Loss Notices and Settlements

A. Whenever losses sustained by the Company appear likely to
result in a claim hereunder, the Company shall notify the
Reinsurer, and the Reinsurer shall have the right to
participate in the adjustment of such losses at its own
expense.

B. All loss settlements made by the Company, provided they are
within the terms of this Contract, shall be binding upon the
Reinsurer, and the Reinsurer agrees to pay all amounts for
which it may be liable upon receipt of reasonable evidence of
the amount paid (or scheduled to be paid) by the Company.

Article X - Special Provisions

As respects loss or damage or costs or expenses arising from
asbestos or seepage and/or pollution and/or contamination, other
than contamination from smoke damage, the maximum sublimit shall
be $25,000 per risk, each loss, or so deemed. Nevertheless, this
does not preclude payment of the cost of removal of debris of
property damaged by a loss otherwise covered hereunder.

Article XI - Salvage and Subrogation

The Reinsurer shall be credited with salvage (i.e., reimbursement
obtained or recovery made by the Company, less the actual cost,
excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such
reimbursement or making such recovery) on account of claims and
settlements involving reinsurance hereunder. Salvage thereon
shall always be used to reimburse the excess carriers in the
reverse order of their priority according to their participation
before being used in any way to reimburse the Company for its
primary loss. The Company hereby agrees to enforce its rights to
salvage or subrogation relating to any loss, a part of which loss
was sustained by the Reinsurer, and to prosecute all claims
arising out of such rights.

Article XII - Premium

A. As premium for each excess layer of reinsurance coverage
provided by this Contract, the Company shall pay the Reinsurer
the greater of the following:

1. The amount, shown as "Annual Minimum Premium" for
that excess layer in Schedule A attached hereto; or

2. An amount equal to the sum of the percentages shown
as "DIC" and "AOP" percentages for that excess layer in
Schedule A attached hereto, of the Company's net earned
premium for the DIC business and AOP business respectively
for the term of this Contract.

B. The Company shall pay the Reinsurer an annual deposit premium
for each excess layer of an amount, shown as "Annual Deposit
Premium" for that excess layer in Schedule A attached hereto,
in two equal installments of an amount, shown as "Semiannual
Deposit Premium" for that excess layer in Schedule A attached
hereto, on January 1 and July 1 of 1998.

C. Within 60 days after the expiration of this Contract, the
Company shall provide a report to the Reinsurer setting forth
the premium due hereunder for each excess layer, computed in
accordance with paragraph A, and any additional premium due
the Reinsurer or return premium due the Company for each such
excess layer shall be remitted promptly.

D. As respects the Third and/or Fourth Excess Catastrophe
reinsurance layers hereunder, in the event that no claims
arise under this Contract, certain reinsurers participating
hereunder on the Third and/or Fourth Excess Catastrophe
reinsurance layers shall pay the Company a no claims bonus
equal to 20.0% of the adjusted premium under this Contract
subject to the following:

1. The Company shall only be entitled to the no claims
bonus if this Contract and the two prior renewals are loss
free for a continuous period of three years.

2. When such no claims bonus is calculated, it shall be
calculated on the premium for this Contract and for the
prior and subsequent renewals. Payment of the no claims
bonus by the reinsurers to the Company shall constitute a
commutation of this Contract and such payment once
effected shall constitute a full and final release of the
reinsurers from all liability hereunder.

3. Should the Reinsurer decline to offer a renewal of
this Contract at similar terms as expiring in relation to
the exposure presented, the no claims bonus shall be
calculated for the years actually reinsured subject to the
above provisions.

It is understood that these no claims bonus provisions shall
only apply to certain reinsurers hereunder participating on
the Third and/or Fourth Excess Catastrophe reinsurance layers.
The figures listed under "With `No Claims Bonus'" in
Schedule A attached to and forming part of this Contract shall
apply to such reinsurers. The figures listed under "Without
`No Claims Bonus'" in Schedule A attached to and forming part
of this Contract shall apply to the remaining reinsurers on
those layers.

Article XIII - Offset (BRMA 36C)

The Company and the Reinsurer shall have the right to offset any
balance or amounts due from one party to the other under the
terms of this Contract. The party asserting the right of offset
may exercise such right any time whether the balances due are on
account of premiums or losses or otherwise.

Article XIV - Access to Records (BRMA 1D)

The Reinsurer or its designated representatives shall have access
at any reasonable time to all records of the Company which
pertain in any way to this reinsurance.

Article XV - Net Retained Lines (BRMA 32E)

A. This Contract applies only to that portion of any policy which
the Company retains net for its own account (prior to
deduction of any underlying reinsurance specifically permitted
in this Contract), and in calculating the amount of any loss
hereunder and also in computing the amount or amounts in
excess of which this Contract attaches, only loss or losses in
respect of that portion of any policy which the Company
retains net for its own account shall be included.

B. The amount of the Reinsurer's liability hereunder in respect
of any loss or losses shall not be increased by reason of the
inability of the Company to collect from any other
reinsurer(s), whether specific or general, any amounts which
may have become due from such reinsurer(s), whether such
inability arises from the insolvency of such other
reinsurer(s) or otherwise.

Article XVI - Errors and Omissions (BRMA 14F)

Inadvertent delays, errors or omissions made in connection with
this Contract or any transaction hereunder shall not relieve
either party from any liability which would have attached had
such delay, error or omission not occurred, provided always that
such error or omission is rectified as soon as possible after
discovery.

Article XVII - Currency (BRMA 12A)

A. Whenever the word "Dollars" or the "$" sign appears in this
Contract, they shall be construed to mean United States
Dollars and all transactions under this Contract shall be in
United States Dollars.

B. Amounts paid or received by the Company in any other currency
shall be converted to United States Dollars at the rate of
exchange at the date such transaction is entered on the books
of the Company.

Article XVIII - Taxes (BRMA 50C)

In consideration of the terms under which this Contract is
issued, the Company will not claim a deduction in respect of the
premium hereon when making tax returns, other than income or
profits tax returns, to any state or territory of the United
States of America, the District of Columbia or Canada.

Article XIX - Federal Excise Tax (BRMA 17A)

(Applicable to those reinsurers, excepting Underwriters at
Lloyd's London and other reinsurers exempt from Federal Excise
Tax, who are domiciled outside the United States of America.)

A. The Reinsurer has agreed to allow for the purpose of paying
the Federal Excise Tax the applicable percentage of the
premium payable hereon (as imposed under Section 4371 of the
Internal Revenue Code) to the extent such premium is subject
to the Federal Excise Tax.

B. In the event of any return of premium becoming due hereunder
the Reinsurer will deduct the applicable percentage from the
return premium payable hereon and the Company or its agent
should take steps to recover the tax from the United States
Government.

Article XX - Unauthorized Reinsurers

A. If the Reinsurer is unauthorized in any state of the United
States of America or the District of Columbia, the Reinsurer
agrees to fund its share of the Company's ceded United States
outstanding loss and loss adjustment expense reserves by:

1. Clean, irrevocable and unconditional letters of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
bank or banks meeting the NAIC Securities Valuation Office
credit standards for issuers of letters of credit and
acceptable to said insurance regulatory authorities;
and/or

2. Escrow accounts for the benefit of the Company;
and/or

3. Cash advances;

if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved. The Reinsurer,
at its sole option, may fund in other than cash if its method
and form of funding are acceptable to the insurance regulatory
authorities involved.

B. If the Reinsurer is unauthorized in any province or
jurisdiction of Canada, the Reinsurer agrees to fund 115% of
its share of the Company's ceded Canadian outstanding loss and
loss adjustment expense reserves by:

1. A clean, irrevocable and unconditional letter of
credit issued and confirmed, if confirmation is required
by the insurance regulatory authorities involved, by a
Canadian bank or banks meeting the NAIC Securities
Valuation Office credit standards for issuers of letters
of credit and acceptable to said insurance regulatory
authorities, for no more than 15/115ths of the total
funding required; and/or

2. Cash advances for the remaining balance of the
funding required;

if, without such funding, a penalty would accrue to the
Company on any financial statement it is required to file with
the insurance regulatory authorities involved.

C. With regard to funding in whole or in part by letters of
credit, it is agreed that each letter of credit will be in a
form acceptable to insurance regulatory authorities involved,
will be issued for a term of at least one year and will
include an "evergreen clause," which automatically extends the
term for at least one additional year at each expiration date
unless written notice of non-renewal is given to the Company
not less than 30 days prior to said expiration date. The
Company and the Reinsurer further agree, notwithstanding
anything to the contrary in this Contract, that said letters
of credit may be drawn upon by the Company or its successors
in interest at any time, without diminution because of the
insolvency of the Company or the Reinsurer, but only for one
or more of the following purposes:

1. To reimburse itself for the Reinsurer's share of
losses and/or loss adjustment expense paid under the terms
of policies reinsured hereunder, unless paid in cash by
the Reinsurer;

2. To reimburse itself for the Reinsurer's share of any
other amounts claimed to be due hereunder, unless paid in
cash by the Reinsurer;

3. To fund a cash account in an amount equal to the
Reinsurer's share of any ceded outstanding loss and loss
adjustment expense reserves funded by means of a letter of
credit which is under non-renewal notice, if said letter
of credit has not been renewed or replaced by the
Reinsurer 10 days prior to its expiration date;

4. To refund to the Reinsurer any sum in excess of the
actual amount required to fund the Reinsurer's share of
the Company's ceded outstanding loss and loss adjustment
expense reserves, if so requested by the Reinsurer.

In the event the amount drawn by the Company on any letter of
credit is in excess of the actual amount required for C(1) or
C(3), or in the case of C(2), the actual amount determined to
be due, the Company shall promptly return to the Reinsurer the
excess amount so drawn.

Article XXI - Insolvency

A. In the event of the insolvency of one or more of the reinsured
companies, this reinsurance shall be payable directly to the
company or to its liquidator, receiver, conservator or
statutory successor immediately upon demand, with reasonable
provision for verification, on the basis of the liability of
the company without diminution because of the insolvency of
the company or because the liquidator, receiver, conservator
or statutory successor of the company has failed to pay all or
a portion of any claim. It is agreed, however, that the
liquidator, receiver, conservator or statutory successor of
the company shall give written notice to the Reinsurer of the
pendency of a claim against the company indicating the policy
or bond reinsured which claim would involve a possible
liability on the part of the Reinsurer within a reasonable
time after such claim is filed in the conservation or
liquidation proceeding or in the receivership, and that during
the pendency of such claim, the Reinsurer may investigate such
claim and interpose, at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses
that it may deem available to the company or its liquidator,
receiver, conservator or statutory successor. The expense thus
incurred by the Reinsurer shall be chargeable, subject to the
approval of the Court, against the company as part of the
expense of conservation or liquidation to the extent of a pro
rata share of the benefit which may accrue to the company
solely as a result of the defense undertaken by the Reinsurer.

B. Where two or more reinsurers are involved in the same claim
and a majority in interest elect to interpose defense to such
claim, the expense shall be apportioned in accordance with the
terms of this Contract as though such expense had been
incurred by the company.

C. It is further understood and agreed that, in the event of the
insolvency of one or more of the reinsured companies, the
reinsurance under this Contract shall be payable directly by
the Reinsurer to the company or to its liquidator, receiver or
statutory successor, except as provided by Section 4118(a) of
the New York Insurance Law or except (1) where this Contract
specifically provides another payee of such reinsurance in the
event of the insolvency of the company or (2) where the
Reinsurer with the consent of the direct insured or insureds
has assumed such policy obligations of the company as direct
obligations of the Reinsurer to the payees under such policies
and in substitution for the obligations of the company to such
payees.

Article XXII - Arbitration

A. As a condition precedent to any right of action hereunder, in
the event of any dispute or difference of opinion hereafter
arising with respect to this Contract, it is hereby mutually
agreed that such dispute or difference of opinion shall be
submitted to arbitration. One Arbiter shall be chosen by the
Company, the other by the Reinsurer, and an Umpire shall be
chosen by the two Arbiters before they enter upon arbitration,
all of whom shall be active or retired disinterested executive
officers of insurance or reinsurance companies or Lloyd's
London Underwriters. In the event that either party should
fail to choose an Arbiter within 30 days following a written
request by the other party to do so, the requesting party may
choose two Arbiters who shall in turn choose an Umpire before
entering upon arbitration. If the two Arbiters fail to agree
upon the selection of an Umpire within 30 days following their
appointment, each Arbiter shall nominate three candidates
within 10 days thereafter, two of whom the other shall
decline, and the decision shall be made by drawing lots.

B. Each party shall present its case to the Arbiters within 30
days following the date of appointment of the Umpire. The
Arbiters shall consider this Contract as an honorable
engagement rather than merely as a legal obligation and they
are relieved of all judicial formalities and may abstain from
following the strict rules of law. The decision of the
Arbiters shall be final and binding on both parties; but
failing to agree, they shall call in the Umpire and the
decision of the majority shall be final and binding upon both
parties. Judgment upon the final decision of the Arbiters may
be entered in any court of competent jurisdiction.

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

D. Each party shall bear the expense of its own Arbiter, and
shall jointly and equally bear with the other the expense of
the Umpire and of the arbitration. In the event that the two
Arbiters are chosen by one party, as above provided, the
expense of the Arbiters, the Umpire and the arbitration shall
be equally divided between the two parties.

E. Any arbitration proceedings shall take place at Woodland
Hills, California, unless otherwise mutually agreed.

Article XXIII - Service of Suit (BRMA 49C)

(Applicable if the Reinsurer is not domiciled in the United
States of America, and/or is not authorized in any State,
Territory or District of the United States where authorization is
required by insurance regulatory authorities)

A. It is agreed that in the event the Reinsurer fails to pay any
amount claimed to be due hereunder, the Reinsurer, at the
request of the Company, will submit to the jurisdiction of a
court of competent jurisdiction within the United States.
Nothing in this Article constitutes or should be understood to
constitute a waiver of the Reinsurer's rights to commence an
action in any court of competent jurisdiction in the United
States, to remove an action to a United States District Court,
or to seek a transfer of a case to another court as permitted
by the laws of the United States or of any state in the United
States.

B. Further, pursuant to any statute of any state, territory or
district of the United States which makes provision therefor,
the Reinsurer hereby designates the party named in its
Interests and Liabilities Agreement, or if no party is named
therein, the Superintendent, Commissioner or Director of
Insurance or other officer specified for that purpose in the
statute, or his successor or successors in office, as its true
and lawful attorney upon whom may be served any lawful process
in any action, suit or proceeding instituted by or on behalf
of the Company or any beneficiary hereunder arising out of
this Contract.

Article XXIV - Agency Agreement

Associated International Insurance Company shall be deemed the
agent of the other reinsured companies for purposes of sending or
receiving notices required by the terms and conditions of this
Contract, and for purposes of remitting or receiving any monies
due any party.

Article XXV - Intermediary (BRMA 23A)

E. W. Blanch Co. is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All
communications (including but not limited to notices, statements,
premium, return premium, commissions, taxes, losses, loss
adjustment expense, salvages and loss settlements) relating
thereto shall be transmitted to the Company or the Reinsurer
through E. W. Blanch Co., Reinsurance Services, 3500 West 80th
Street, Minneapolis, Minnesota 55431. Payments by the Company to
the Intermediary shall be deemed to constitute payment to the
Reinsurer. Payments by the Reinsurer to the Intermediary shall be
deemed to constitute payment to the Company only to the extent
that such payments are actually received by the Company.

In Witness Whereof, the Company by its duly authorized
representative has executed this Contract as of the date
undermentioned at:

Woodland Hills, California,this _______ day of ________________199___.

__________________________________________________
Associated International Insurance Company
Calvert Insurance Company

Schedule A
External Third through Sixth Catastrophe Excess
Reinsurance Contract
Effective: January 1, 1998

issued to

Associated International Insurance Company
Woodland Hills, California
Calvert Insurance Company
Hoboken, New Jersey
and
any additional company established or acquired
by Associated International Insurance Company, Calvert Insurance Company
or Gryphon Holdings, Inc., New York, New York,
to be included hereunder

Third Excess Fourth Excess Fifth Sixth
Excess Excess
With "No Without With "No Without
Claims "No Claims Claims "No Claims
Bonus" Bonus" Bonus" Bonus"

Company's $17,500,000 $17,500,000 $22,500,000 $22,500,000 $32,500,000 $ 65,000,000
Retention

Reinsurer's Per $ 5,000,000 $ 5,000,000 $10,000,000 $10,000,000 $32,500,000 $ 78,000,000
Occurrence Limit

Reinsurer's $10,000,000 $10,000,000 $20,000,000 $20,000,000 $65,000,000 $156,000,000
Annual Limit

Annual Minimum $ 780,000 $ 700,000 $ 1,240,000 $ 1,080,000 $ 2,405,000 $ 3,744,000
Premium

Rate-DIC/CA EQ 2.925% 2.625% 4.649% 4.049% 9.017% 14.037%
Business "DIC"

Rate=General E&S 0.540% 0.540% 0.833% 0.833% 1.854% 2.887%
Business "AOP"

Annual Deposit $ 975,000 $ 875,000 $ 1,550,000 $ 1,350,000 $ 3,006,250 $ 4,680,000
Premium

Semiannual $ 487,500 $ 437,500 $ 775,000 $ 675,000 $ 1,503,125 $ 2,340,000
Deposit Premium

The figures listed above for each exess layer shall apply to each
Subscribing Reinsurer in the percentage share for that excess layer
as expressed in the Interests and Liabilities Agreement attached
hereto.