STATE AUTO FINANCIAL CORP
EXHIBIT 10.4
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>6
<FILENAME>l03303aexv10w4.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
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                                  Exhibit 10.04




                  PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS
                              REINSURANCE CONTRACT
                             EFFECTIVE JULY 1, 2002
<PAGE>




                  PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS
                              REINSURANCE CONTRACT



                                    ISSUED TO


                    STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
                            MILBANK INSURANCE COMPANY
                      STATE AUTO NATIONAL INSURANCE COMPANY
                    STATE AUTO INSURANCE COMPANY OF WISCONSIN
                       FARMERS CASUALTY INSURANCE COMPANY
                          MID-PLAINS INSURANCE COMPANY
                      STATE AUTO INSURANCE COMPANY OF OHIO
                       MERIDIAN SECURITY INSURANCE COMPANY
                   MERIDIAN CITIZENS MUTUAL INSURANCE COMPANY



                                       BY






<PAGE>


                    STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
                            MILBANK INSURANCE COMPANY
                      STATE AUTO NATIONAL INSURANCE COMPANY
                    STATE AUTO INSURANCE COMPANY OF WISCONSIN
                       FARMERS CASUALTY INSURANCE COMPANY
                          MID-PLAINS INSURANCE COMPANY
                      STATE AUTO INSURANCE COMPANY OF OHIO
                       MERIDIAN SECURITY INSURANCE COMPANY
                   MERIDIAN CITIZENS MUTUAL INSURANCE COMPANY

                  PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS
                              REINSURANCE CONTRACT

                                TABLE OF CONTENTS

ARTICLE NO.                TITLE                                     PAGE
-----------                -----                                     ----
ARTICLE I                BUSINESS COVERED                            1
ARTICLE II               EXCLUSIONS                                  1 - 3
ARTICLE III              TERM                                        3
ARTICLE IV               TERRITORY                                   3
ARTICLE V                AMOUNT OF LIMIT AND RETENTION               3
ARTICLE VI               ULTIMATE NET LOSS                           4
ARTICLE VII              NET RETAINED LINES                          4
ARTICLE VIII             UNDERLYING EXCESS                           4
ARTICLE IX               DEFINITION OF LOSS OCCURRENCE               4 - 6
ARTICLE X                NOTICE OF LOSS AND LOSS SETTLEMENT          6
ARTICLE XI               PREMIUM                                     6
ARTICLE XII              CURRENCY                                    6
ARTICLE XIII             OFFSET                                      7
ARTICLE XIV              ACCESS TO RECORDS                           7
ARTICLE XV               ERRORS AND OMISSIONS                        7
ARTICLE XVI              TAXES                                       7
ARTICLE XVII             INSOLVENCY                                  7 - 8
ARTICLE XVIII            ARBITRATION                                 8 - 9

<PAGE>

                  PROPERTY CATASTROPHE OVERLYING EXCESS OF LOSS
                              REINSURANCE CONTRACT

                                     BETWEEN

                    STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
                            MILBANK INSURANCE COMPANY
                      STATE AUTO NATIONAL INSURANCE COMPANY
                    STATE AUTO INSURANCE COMPANY OF WISCONSIN
                       FARMERS CASUALTY INSURANCE COMPANY
                          MID-PLAINS INSURANCE COMPANY
                      STATE AUTO INSURANCE COMPANY OF OHIO
                       MERIDIAN SECURITY INSURANCE COMPANY
                   MERIDIAN CITIZENS MUTUAL INSURANCE COMPANY
             (HEREINAFTER COLLECTIVELY REFERRED TO AS THE "COMPANY")

                                       AND

               STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

            (HEREINAFTER REFERRED TO AS THE SUBSCRIBING "REINSURER")


                                    ARTICLE I

BUSINESS COVERED:

         The Reinsurer shall indemnify the Company for the net excess liability
         as hereinafter provided and specified, which may accrue to the Company
         as a result of any loss or losses which may occur during the currency
         of the Contract under any and all policies, contracts, binders and
         other evidence of insurance and reinsurance, oral or written
         (hereinafter referred to as "Policies") heretofore or hereafter issued
         or entered into by or on behalf of the Company and classified by the
         Company as Fire, Allied Lines, Homeowners (property coverages),
         Farmowners (property coverages), Commercial Multiple Peril policies
         (property coverages), Ocean Marine, Inland Marine and Automobile
         Physical Damage.


                                   ARTICLE II

EXCLUSIONS:

         The following shall be excluded from the scope of this Contract:

         1.       Business written and classified by the Company as:

                  a)       Aviation Insurance;
                  b)       Casualty Insurance (i.e. Accident, Health, Third
                           Party Liability, Workers Compensation and Employers
                           Liability, Fidelity, Plate Glass and Burglary and
                           Theft when written as such);
                  c)       Credit Insurance;
                  d)       Financial Guarantee Insurance;
                  e)       Insolvency Insurance;



<PAGE>

                  f)       Life Insurance;
                  g)       Mortgage Impairment Insurance;
                  h)       Title Insurance;
                  i)       Surety;
                  j)       Flood Insurance when written as such;
                  k)       Earthquake Insurance when written as such;
                  l)       Difference in Conditions Insurance;
                  m)       Ocean Marine Insurance, except yachts;
                  n)       Boiler and Machinery;
                  o)       Multiple Peril policies other than the Property
                           coverages as included in the Business Covered
                           Section, hereof;
                  p)       Reinsurance, but not to exclude so-called agency
                           reinsurance, reinsurance of an individual risk or
                           policy, or any intercompany pooling arrangements.

         2.       Wind and Hail on growing and standing crops.

         3.       Manufacture, processing, storage, filling or breaking down of
                  explosives.

         4.       Oil and petrochemical refineries and pipelines and oil or gas
                  drilling rigs.

         5.       Excess of Loss insurance or reinsurance where the deductible
                  exceeds $99,999.

         6.       Bridges and Tunnels where the Total Insured Value over all
                  interests exceeds $250,000,000.

         7.       Extra Contractual Obligations and Losses in Excess of Policy
                  Limits as per attached Exclusion Clause.

         8.       Loss/or Damage/or Costs/or Expenses arising from seepage
                  and/or Pollution and/or Contamination, other than
                  Contamination from Smoke Damage. Nevertheless, this exclusion
                  does not preclude payment of the cost of removal of debris of
                  property damaged by a loss otherwise covered hereunder, but
                  subject always to a limit of 25% of the Company's property
                  loss under the original policy.

         9.       Loss in respect of overhead transmission and distribution
                  lines and their supporting structure other than those on or
                  within 150 meters (or 500 feet) of the insured premises. It is
                  understood and agreed that public utilities extension and/or
                  suppliers extension and/or contingent business interruption
                  coverages are not subject to this exclusion, provided that
                  these are not part of a transmitters' or distributors' policy.

         10.      Insolvency Fund Exclusion Clause.

         11.      War Risk Exclusion Clause.

         12.      Pools and Associations Exclusion Clause.

         13.      Nuclear Incident Exclusion Clauses - Physical Damage -
                  Reinsurance - U.S.A. and Canada.

         14.      Biological, Nuclear, and Chemical Terrorism as per the
                  "Terrorism Exclusion" (NMA 2930b) attached hereto.



<PAGE>

                                   ARTICLE III

TERM:

         The term of this Contract shall be from 12:01 A.M. Standard Time, July
         1, 2002 to 12:01 A.M. Standard Time, July 1, 2003.

         If the liability of the Reinsurer under this Contract terminates while
         a loss occurrence giving rise to a claim hereunder is in progress, then
         the Reinsurer shall be liable as if the whole loss occurrence had
         occurred during the term of this Contract, provided that no part of
         that loss occurrence is claimed against any renewal or replacement of
         this Contract.


                                   ARTICLE IV

TERRITORY:

         This Contract shall cover wherever the Company's Policies cover.


                                    ARTICLE V

AMOUNT OF LIMIT AND RETENTION:

         No claim shall be made hereunder unless and until the Company and other
         members of the State Auto Insurance Companies Group, being State
         Automobile Mutual Insurance Company, State Auto Property and Casualty
         Insurance Company, Milbank Insurance Company, State Auto National
         Insurance Company, Midwest Security Insurance Company, Farmers Casualty
         Insurance Company, Mid-Plains Insurance Company, State Auto Insurance
         Company, Meridian Security Insurance Company, Meridian Citizens Mutual
         Insurance Company, hereinafter referred to as the "Group", on a pooled
         basis where applicable, shall first have sustained an Ultimate Net Loss
         in excess of $120,000,000, regardless of the number of Policies under
         which such loss is payable or the number of interests insured. The
         Reinsurer shall then be liable for the amount of Ultimate Net Loss for
         the Company in excess of $120,000,000 Ultimate Net Loss each
         occurrence, but the sum recoverable from the Reinsurer in respect of
         each loss occurrence shall not exceed $100,000,000, nor more than
         $100,000,000 in respect of all loss occurrences during the term of this
         contract.

         The amount of coverage is subject to at least two risks being involved
         in the same loss occurrence.



                                   ARTICLE VI

ULTIMATE NET LOSS:

         The term "ultimate net loss" shall mean the amount that the Company
         pays, such loss to include all expenses incurred by the Company in
         connection with the settlement of losses or resistance to or
         negotiations concerning a loss, including salaries and expenses of
         employees of the Company while diverted from their normal duties to the
         service of field adjustment but shall not include any office expenses
         of the Company. However, nothing in this Article shall be construed to
         prevent

<PAGE>

         the Company from including all such amounts defined as ultimate net
         loss attributable to the Group on a pooled basis for the first
         $120,000,000 of ultimate net loss.

         All salvages and recoveries and payments (net of the cost of obtaining
         any salvage, recovery or payment), whether recovered or received prior
         or subsequent to loss settlement under this Contract, including amounts
         recoverable under all Reinsurances whether collected or not, shall be
         applied as if recovered or received prior to the aforesaid settlement
         and shall be deducted from the actual loss incurred to arrive at the
         amount of ultimate net loss. Nothing in this Article shall be construed
         to mean losses are not recoverable until the ultimate net loss to the
         Company has been ascertained.


                                   ARTICLE VII

NET RETAINED LINES:

         This Contract applies to only that portion of any policy which the
         Company and the other members of the Group, on a pooled basis where
         applicable, retains net for its own account.

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


                                  ARTICLE VIII

UNDERLYING EXCESS:

         The Company has in force underlying catastrophe excess of loss
         reinsurance and recoveries thereunder shall be disregarded for all
         purposes of this Contract and shall inure to the sole benefit of the
         Company.


                                   ARTICLE IX

DEFINITION OF LOSS OCCURRENCE:

         The term "loss occurrence" shall mean the sum of all individual losses
         directly occasioned by any one disaster, accident or loss or series of
         disasters, accidents or losses arising out of one event which occurs
         within the area of one state of the United States or province of Canada
         and states or provinces contiguous thereto and to one another. However,
         the duration and extent of any one "loss occurrence" shall be limited
         to all individual losses sustained by the Company occurring during any
         period of one hundred sixty-eight (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:

                  A.       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 seventy-two (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.

<PAGE>

                  B.       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 seventy-two (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 seventy-two (72)
                           consecutive hours may be extended in respect of
                           individual losses which occur beyond such seventy-two
                           (72) consecutive hours during the continued
                           occupation of an insured's premises by strikers,
                           provided such occupation commenced during the
                           aforesaid period.

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

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

                  For all "loss occurrences" except as referred to under
                  sub-paragraph B, 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 one hundred and sixty-eight (168)
                  consecutive hours shall apply with respect to one event,
                  except for those "loss occurrences" referred to in
                  sub-paragraph A above, where only one such period of
                  seventy-two (72) consecutive hours shall apply with respect to
                  one event, regardless of the duration of the event.

                  As respect those "loss occurrences" referred to in
                  sub-paragraph B above, if the disaster, accident or loss
                  occasioned by the event is of greater duration than
                  seventy-two (72) consecutive hours, then the Company may
                  divide that disaster, accident or loss into two or more "loss
                  occurrences" provided no two periods overlap and no individual
                  loss is included in more than one such period and provided
                  that no period commences 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.

                  No individual losses occasioned by an event that would be
                  covered by seventy-two (72) hours clauses may be included in
                  any "loss occurrence" claimed under the one hundred and
                  sixty-eight (168) hours provision.


                                    ARTICLE X

NOTICE OF LOSS AND LOSS SETTLEMENT:

         The Company shall adjust, settle, or compromise all claims and losses
         hereunder.

         All loss settlements by the Company which comply with the terms hereof
         shall be unconditionally binding upon the Reinsurer.

<PAGE>

         The Company shall advise the Reinsurer promptly of all claims and any
         subsequent developments pertaining thereto, which may, in the Company's
         opinion, develop into losses involving Reinsurance hereunder.
         Inadvertent omission or oversight in dispatching such advices shall in
         no way affect the liability of the Reinsurer under this Contract
         provided the Company informs the Reinsurer of such omission or
         oversight promptly upon its discovery.

         The Reinsurer shall tender all loss payments as soon as practicable
         after receipt of any proof of loss.


                                   ARTICLE XI

PREMIUM:

         The premium to be paid to the Reinsurer shall be $3,450,000, payable in
         four equal quarterly installments. Each company shall pay a percentage
         of the premium based on its share of written premiums of the subject
         lines of businesss as estimated in Exhibit A.


                                   ARTICLE XII

CURRENCY:

         All retentions, limits and premiums referenced in this Contract are
         expressed in United States Dollars and all payments made by either
         party shall be made in United States Dollars.

         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 XIII

OFFSET:

         The Company and the Reinsurer, each at its option, may offset any
         balance or balances, whether on account of premiums, claims and losses,
         loss expenses or salvages due from one party to the other under this
         Contract; provided, however, that in the event of the insolvency of a
         party hereto, offsets shall only be allowed in accordance with
         applicable statutes and regulations.


                                   ARTICLE XIV

ACCESS TO RECORDS:

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

<PAGE>

                                   ARTICLE XV

ERRORS AND OMISSIONS:

         Any inadvertent delay, omission or error shall not be held to relieve
         either party hereto from any liability which would attach to either
         party if such delay, omission or error had not been made, provided such
         delay, omission or error is rectified as soon as practicable after
         discovery.


                                   ARTICLE XVI

TAXES:

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


                                  ARTICLE XVII

INSOLVENCY:

         The reinsurance under this Contract shall be payable by the Reinsurer
         on the basis of the liability of one or more of the Companies under the
         Policy or Policies reinsured without diminution because of the
         insolvency of one or more of the Companies reinsured or because the
         liquidator, receiver, conservator or statutory successor of the
         Company(ies) has failed to pay all or a portion of any claim.

         In the event of the insolvency of one or more of the Companies
         reinsured, the liquidator, receiver, conservator or statutory successor
         of the Company(ies) shall give written notice to the Reinsurer of the
         pendency of a claim against the insolvent Company(ies) on the Policy or
         Policies reinsured within a reasonable time after such claim is filed
         in the insolvency proceeding and 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 which it may deem available to the Company(ies) or its
         liquidator, receiver, conservator or statutory successor. The expense
         thus incurred by the Reinsurer shall be chargeable subject to court
         approval against the insolvent Company(ies) as part of the expense of
         liquidation to the extent of a proportionate share of the benefit which
         may accrue to the Company(ies) solely as a result of the defense
         undertaken by the Reinsurer.

         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(ies).

         In the event of the insolvency of one or more of the Companies
         reinsured, the reinsurance under this Contract shall be payable by the
         Reinsurer directly to the Company(ies) or to the liquidator, receiver,
         conservator or statutory successor, except as provided by subsection
         (A) of section 4118 of the Insurance Law of New York or except where
         (I) the Contract specifies another payee of such Reinsurance in the
         event of the insolvency of the Company(ies) and (II) the Reinsurer with
         the consent of the direct insureds and, with the prior approval of the
         Superintendent of Insurance of New York to the certificate of
         assumption issued to New York direct insureds, has assumed

<PAGE>

         such policy obligations of the Company(ies) as its direct obligations
         to the payees under such policies, in substitution for the obligations
         of the Company(ies) to such payees.


                                  ARTICLE XVIII

ARBITRATION:

         If any dispute shall arise between the parties to this Contract, either
         before or after its termination, with reference to the interpretation
         of this Contract or the rights of either party with respect to any
         transactions under this Contract, including the formation or validity
         thereof, the dispute shall be referred to three (3) arbitrators as a
         condition precedent to any right of action arising under this Contract.
         The arbitrators shall be active or retired disinterested officers of
         insurance or reinsurance companies or Lloyd's Underwriters other than
         the parties or their affiliates. One arbitrator shall be chosen by each
         party and the third by the two so chosen. If either party refuses or
         neglects to appoint an arbitrator within thirty (30) days after the
         receipt of written notice from the other party requesting it to do so,
         the requesting party may nominate two (2) arbitrators who shall choose
         the third.

         In the event the arbitrators do not agree on the selection of the third
         arbitrator within thirty (30) days after both arbitrators have been
         named, the Company shall petition the American Arbitration Association
         to appoint the third arbitrator. If the American Arbitration
         Association fails to appoint the third arbitrator within thirty (30)
         days after it has been requested to do so, either party may request a
         justice of a court of general jurisdiction of the state in which the
         arbitration is to be held, to appoint an officer or retired officer of
         an insurance or reinsurance company or Lloyd's Underwriter as the third
         arbitrator. In the event both parties request the appointment of the
         third arbitrator, the third arbitrator shall be the soonest named in
         writing by the justice of the court.

          Each party shall submit its case to the arbitrators within thirty (30)
         days of the appointment of the arbitrators. The arbitrators shall
         consider this Contract an honorable engagement rather than merely a
         legal obligation; they are relieved of all judicial formalities and may
         abstain from following the strict rules of law. The decision of a
         majority of the arbitrators shall be final and binding on both the
         Company and the Reinsurer. Judgment may be entered upon the award of
         the arbitrators in any court having jurisdiction.

         Each party shall bear the fee and expenses of its own arbitrator, one
         half of the fee and the expenses of the third arbitrator and one half
         of the other expenses of the arbitration. In the event both arbitrators
         are chosen by one party, the fees of the arbitrators shall be equally
         divided between the parties.

         Any such arbitration shall take place in Columbus, Ohio unless some
         other location is mutually agreed upon by the parties.



<PAGE>


                       INTERESTS AND LIABILITIES AGREEMENT

                                     BETWEEN

                    STATE AUTOMOBILE MUTUAL INSURANCE COMPANY
                            MILBANK INSURANCE COMPANY
                      STATE AUTO NATIONAL INSURANCE COMPANY
                    STATE AUTO INSURANCE COMPANY OF WISCONSIN
                       FARMERS CASUALTY INSURANCE COMPANY
                          MID-PLAINS INSURANCE COMPANY
                      STATE AUTO INSURANCE COMPANY OF OHIO
                       MERIDIAN SECURITY INSURANCE COMPANY
                   MERIDIAN CITIZENS MUTUAL INSURANCE COMPANY

                                 (THE "COMPANY")

                                       AND

               STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

                          (THE SUBSCRIBING "REINSURER")

It is hereby mutually agreed by and between the Company on the one part, and the
Subscribing Reinsurer on the other part that effective July 1, 2002, the
Subscribing Reinsurer's share of the Interests and Liabilities of the PROPERTY
CATASTROPHE OVERLYING EXCESS OF LOSS REINSURANCE CONTRACT attached hereto and
forming part of this Agreement, shall be for ONE HUNDRED PERCENT (100%).

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
in duplicate by their authorized representatives.


Signed in Columbus, Ohio this 11th day of February, 2003.


         STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY

         By /s/ John R. Lowther
            --------------------------------------------------

         Title  Senior Vice President, Secretary and General Counsel










Signed in Columbus, Ohio this 11th day of February, 2003.
<PAGE>


STATE AUTOMOBILE MUTUAL INSURANCE
COMPANY MILBANK INSURANCE COMPANY STATE
AUTO NATIONAL INSURANCE COMPANY STATE
AUTO INSURANCE COMPANY OF WISCONSIN
FARMERS CASUALTY INSURANCE COMPANY
MID-PLAINS INSURANCE COMPANY STATE AUTO
INSURANCE COMPANY OF OHIO MERIDIAN
SECURITY INSURANCE COMPANY MERIDIAN
CITIZENS MUTUAL INSURANCE COMPANY


By /s/ John R. Lowther
   ---------------------------------



<PAGE>


                       INSOLVENCY FUNDS EXCLUSIONS CLAUSE



This Agreement excludes: All liability of the Company arising, by contract,
operation of law, or otherwise, from its participation or membership, whether
voluntary or involuntary, in any insolvency fund. "Insolvency Fund" includes any
guaranty fund, insolvency fund, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed, which provides for
any assessment of or payment or assumption by 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.

















<PAGE>


                NORTH AMERICAN WAR EXCLUSION CLAUSE (REINSURANCE)

        Approved by Lloyd's Underwriters' Fire and Non-Marine Association



"As regards interests which at time of loss or damage are on shore, no liability
shall attach hereto in respect of any loss or damage which is occasioned by war,
invasion, hostilities, acts of foreign enemies, civil war, rebellion,
insurrection, military or usurped power, or martial law or confiscation by order
of any government or public authority.

This War Exclusion Clause shall not, however, apply to interests which at time
of loss or damage are within the territorial limits of the United States of
America (comprising the fifty States of the Union and the District of Columbia,
its territories and possessions including Panama Canal Zone and the Commonwealth
of Puerto Rico and including Bridges between the U.S.A. and Mexico provided they
are under United States ownership), Canada, St. Pierre and Miquelon, provided
such interests are insured under policies, endorsements or binders containing a
standard war or hostilities or warlike operations exclusion clause."

Nevertheless, this Clause shall not be construed to apply to riots, strikes,
civil commotion, vandalism, malicious damage including acts committed by the
agent of any government, party or faction engaged in war, hostilities, or other
warlike operation, providing such agent is acting secretly and not in connection
with any operations of military or naval armed forces in the country where the
interest insured is situated.







<PAGE>



              NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE -
                              REINSURANCE - CANADA

             APPLICABLE TO POLICIES BECOMING EFFECTIVE ON AND AFTER
                                 JANUARY 1, 1985
                                   (SEE NOTE)


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

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

         (A)      Nuclear reactor power plants including all auxiliary property
                  on the site, or

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

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

         (D)      Installations other than those listed in (C) above using
                  substantial quantities of radioactive isotopes or other
                  products of nuclear fission.

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

         (A)      Where the Reinsured does not have knowledge of such nuclear
                  reactor power plant or nuclear installation, or

         (B)      Where the said insurance contains a provision excluding
                  coverage for damage to property caused by or resulting from
                  radioactive contamination, however caused.

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

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

<PAGE>

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

7. The Reinsured to be sole judge of what constitutes:

     (A)  substantial quantities, and

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

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

NOTE:   In addition, this Clause is applicable to all original contracts of the
        Reinsured in effect prior to January 1, 1985 whether new, renewal or
        replacement which incorporate a Nuclear Incident/Radioactive
        Contamination Exclusion as contained in form IBC 1105 1-82.








<PAGE>



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


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

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

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

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

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

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

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

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

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

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


<PAGE>


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

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

         7. The Reassured to be sole judge of what constitutes:

               (A)  substantial quantities, and

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

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

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

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



<PAGE>



                POOLS, ASSOCIATIONS & SYNDICATES EXCLUSION CLAUSE


SECTION A:

EXCLUDING:

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

         (2)      Any Pool or Scheme (whether voluntary or mandatory) formed
                  after March 1, l968 for the purpose of insuring Property
                  whether on a country-wide basis or in respect of designated
                  areas. This exclusion shall not apply to so-called Automobile
                  Insurance Plans or other Pools formed to provide coverage for
                  Automobile Physical Damage.

SECTION B:

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

         Industrial Risk Insurers; Associated Factory Mutuals; Improved Risk
         Mutuals.

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

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

SECTION B does not apply:

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

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

         (3)      To Contingent Business Interruption, except when the Company
                  is aware that the key location is known at the time to be
                  insured in any Pool, Association or Syndicate named above,
                  other than as provided for under Section B (1).

         (4)      To risks as follows: Offices, Hotels, Apartments, Hospitals,
                  Educational Establishments, Public Utilities (other than
                  Railroad Schedules) and Builder's Risks on the classes of
                  risks specified in this subsection (4) only.



<PAGE>


SECTION C:

Where this Clause attaches to catastrophe excesses, the following Section C is
added:

NEVERTHELESS the Reinsurer specifically agree that liability accruing to the
Company from its participation in:

         (l)      The following so-called "Coastal Pools":

                  ALABAMA INSURANCE UNDERWRITING ASSOCIATION
                  FLORIDA WINDSTORM UNDERWRITING ASSOCIATION
                  LOUISIANA INSURANCE UNDERWRITING ASSOCIATION
                  MISSISSIPPI WINDSTORM UNDERWRITING ASSOCIATION
                  NORTH CAROLINA INSURANCE UNDERWRITING ASSOCIATION
                  SOUTH CAROLINA WINDSTORM AND HAIL UNDERWRITING
                          ASSOCIATION
                  TEXAS CATASTROPHE PROPERTY INSURANCE ASSOCIATION

                                       and

         (2)      All "FAIR Plan" and "Rural Risk Plan" business, including the
                  Florida Residential Property and Casualty Joint Underwriting
                  Association and the Florida Property and Casualty Joint
                  Underwriting Association ("JUA").

For all perils otherwise protected hereunder shall not be excluded, except,
however, that this reinsurance does not include any increase in such liability
resulting from:

         (1)      the inability of any other participant in such "Coastal Pool"
                  and/or "FAIR Plan" and/or "Rural Risk Plan" and/or Residual
                  Market Mechanisms to meet its liability.

         (2)      any claim against such "Coastal Pool" and/or "FAIR Plan"
                  and/or "Rural Risk Plan" and/or Residual Market Mechanisms or
                  any participant therein, including the Company, whether by way
                  of subrogation or otherwise, brought by or on behalf of any
                  Insolvency Fund (as defined in the Insolvency Fund Exclusion
                  Clause incorporated in this Contract).

SECTION D:

Notwithstanding Section C above, in respect of the FWUA, FPCJUA and RPCJUA,
where an assessment is made against the Company by the FWUA, the FPCJUA, the
RPCJUA, or any combination thereof, the maximum loss that the Company may
include in the Ultimate Net Loss in respect of any loss occurrence hereunder
shall not exceed the lesser of:

         (1)      The Company's assessment from the relevant entity (FWUA,
                  FPCJUA and/or RPCJUA) for the accounting year in which the
                  loss occurrence commenced, or

         (2)      The product of the following:

                  a)   The Company's percentage participation in the relevant
                       entity for the accounting year in which the loss
                       occurrence commenced; and

                  b)   The relevant entity's total losses in such loss
                       occurrence.
<PAGE>

Any assessments for accounting years subsequent to that in which the loss
occurrence commenced may not be included in the Ultimate Net Loss hereunder.
Moreover, notwithstanding Section C above, in respect of the FWUA, the FPCJUA
and/or the RPCJUA, the Ultimate Net Loss hereunder shall not include any monies
expended to purchase or retire bonds as a consequence of being a member of the
FWUA, the FPCJUA and/or the RPCJUA. For the purposes of this Contract, the
Company may not include in the Ultimate Net Loss any assessment or any
percentage assessment levied by the FWUA, the FPCJUA and/or the RPCJUA to meet
the obligations of an insolvent insurer member or other party, or to meet any
obligations arising from the deferment by the FWUA, FPCJUA and/or RPCJUA of the
collection of monies.



<PAGE>


                               TERRORISM EXCLUSION


Notwithstanding any provision to the contrary within this reinsurance agreement
or any endorsement thereto, it is agreed that this reinsurance agreement
excludes loss, damage, cost, or expense directly or indirectly caused by,
contributed to by, resulting from, or arising out of or in connection with any
act of terrorism, as defined herein, regardless of any other cause or event
contributing concurrently or in any other sequence to the loss.

An act of terrorism includes any act, or preparation in respect of action, or
threat of action designed to influence the government de jure or de facto of any
nation or any political division thereof, or in pursuit of political, religious,
ideological, or similar purposes to intimidate the public or a section of the
public of any nation by any person or group(s) of persons whether acting alone
or on behalf of or in connection with any organization(s) or government(s) de
jure or de facto, and which:

1.       Involves violence against one or more persons, or

2.       Involves damage to property; or

3.       Endangers life other than the person committing the action; or

4.       Creates a risk to health or safety of the public or a section of the
         public; or

5.       Is designed to interfere with or disrupt an electronic system.

This reinsurance agreement also excludes loss, damage, cost, or expense directly
or indirectly caused by, contributed to by, resulting from, or arising out of or
in connection with any action in controlling, preventing, suppressing,
retaliating against, or responding to any act of terrorism.

Notwithstanding the above and subject otherwise to the terms, conditions, and
limitations of this reinsurance agreement, in respect only of personal lines
this reinsurance agreement will pay actual loss or damage (but not related cost
and expense) caused by any act of terrorism provided such act is not directly or
indirectly caused by, contributed to by, resulting from, or arising out of or in
connection with biological, chemical, or nuclear pollution or contamination.

NMA 2930b



</TEXT>
</DOCUMENT>
