10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

(MARK ONE)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

OR

/  / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________ TO __________

Commission File Number 000-22761

PMA Capital Corporation
(Exact name of registrant as specified in its charter)

Pennsylvania	23-2217932
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
Mellon Bank Center, Suite 2800
1735 Market Street
Philadelphia, Pennsylvania	19103-7590
(Address of principal executive offices)	(Zip Code)

(215) 665-5046
(Registrant's telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES /X/ NO / /

There were 21,513,406 shares outstanding of the registrant’s Class A Common Stock, $5 par value per share, as of the close of business on April 30, 2001.

INDEX

		Page
Part I.	Financial Information
Item 1.	Financial statements
	Consolidated balance sheets as of March 31, 2001 (unaudited) and December 31, 2000	1
	Consolidated statements of operations for the three months ended March 31, 2001 and 2000 (unaudited)	2
	Consolidated statements of cash flows for the three months ended March 31, 2001 and 2000 (unaudited)	3
	Consolidated statements of comprehensive income for the three months ended March 31, 2001 and 2000 (unaudited)	4
	Notes to the consolidated financial statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Part II.	Other Information
Item 6.	Exhibits and reports on Form 8-K	23
Signatures		24
Exhibit Index		25

Part 1. Financial Information
Item 1. Financial Statements

PMA Capital Corporation
Consolidated Balance Sheets

(dollar amounts in thousands)	(Unaudited) As of March 31, 2001			As of December 31, 2000
Assets:
Investments and cash:
Fixed maturities available for sale, at fair value
(amortized cost: 2001 - $1,393,383; 2000 - $1,507,667)	$	1,394,420		$	1,485,308
Short-term investments, at amortized cost which approximates fair value		222,008			341,641
Cash		130,862			5,604
Total investments and cash		1,747,290			1,832,553
Accrued investment income		22,224			20,867
Premiums receivable (net of valuation allowance:
2001 - $16,850; 2000 - $16,630)		320,364			299,342
Reinsurance receivables (net of valuation allowance:
2001 - $4,328; 2000 - $4,328)		977,474			933,889
Deferred income taxes, net		89,062			89,011
Deferred acquisition costs		55,962			48,522
Funds held by reinsureds		86,964			73,999
Other assets		218,747			171,223
Total assets	$	3,518,087		$	3,469,406
Liabilities:
Unpaid losses and loss adjustment expenses	$	2,088,063		$	2,053,138
Unearned premiums		314,273			269,734
Long-term debt		125,000			163,000
Accounts payable, accrued expenses and other liabilities		270,508			207,211
Funds held under reinsurance treaties		182,725			173,762
Dividends to policyholders		17,785			17,246
Payable under securities loan agreements		60,384			145,269
Total liabilities		3,058,738			3,029,360
Commitments and contingencies (Note 7)
Shareholders' Equity:
Class A Common stock, $5 par value (40,000,000 shares authorized;
2001 - 24,442,945 shares issued and 21,513,406 outstanding
2000 - 24,442,945 shares issued and 21,573,316 outstanding)		122,214			122,214
Additional paid-in capital		339			339
Retained earnings		390,381			384,694
Accumulated other comprehensive income (loss)		396			(14,373	)
Notes receivable from officers		(166	)		(56	)
Treasury stock, at cost (shares: 2001 - 2,929,539 and 2000 - 2,869,629)		(53,815	)		(52,772	)
Total shareholders' equity		459,349			440,046
Total liabilities and shareholders' equity	$	3,518,087		$	3,469,406

See accompanying notes to the consolidated financial statements.

1

PMA Capital Corporation
Consolidated Statement of Operations
(Unaudited)

	Three Months Ended March 31,
(dollar amounts in thousands, except per share data)	2001			2000
Revenues:
Net premiums written	$	195,021		$	164,339
Change in net unearned premiums		(40,809	)		(38,112	)
Net premiums earned		154,212			126,227
Net investment income		22,333			27,402
Net realized investment gains (losses)		3,751			(5,461	)
Other revenues		13,303			3,387
Total revenues		193,599			151,555
Losses and expenses:
Losses and loss adjustment expenses		145,679			94,288
Acquisition expenses		24,986			26,311
Operating expenses		19,177			16,452
Dividends to policyholders		4,111			4,690
Interest expense		2,195			3,075
Total losses and expenses		196,148			144,816
Income (loss) before income taxes		(2,549	)		6,739
Income tax expense (benefit):
Current		(2,641	)		2,099
Deferred		(7,999	)		262
Total		(10,640	)		2,361
Net income	$	8,091		$	4,378
Net income per share:
Basic	$	0.38		$	0.20
Diluted	$	0.37		$	0.19

See accompanying notes to the consolidated financial statements.

2

PMA Capital Corporation
Consolidated Statements of Cash Flows
(Unaudited)

	Three Months Ended March 31,
(dollar amounts in thousands)	2001			2000
Cash flows from operating activities:
Net income	$	8,091		$	4,378
Adjustments to reconcile net income to net cash flows provided by (used in)
operating activities:
Deferred income tax expense (benefit)		(7,999	)		262
Net realized investment (gains) losses		(3,751	)		5,461
Gain on sale of real estate		(9,763	)		-
Change in:
Premiums receivable and unearned premiums, net		23,517			36,052
Dividends to policyholders		539			854
Reinsurance receivables		(43,585	)		(44,711	)
Unpaid losses and loss adjustment expenses		34,925			(4,846	)
Funds held, net		(4,002	)		(3,357	)
Accrued investment income		(1,357	)		(425	)
Deferred acquisition costs		(7,440	)		(4,709	)
Accounts payable, accrued expenses and other liabilities		25,679			(7,761	)
Other, net		(1,332	)		(1,156	)
Net cash flows provided by (used in) operating activities		13,522			(19,958	)
Cash flows from investing activities:
Fixed maturities available for sale:
Purchases		(237,337	)		(247,036	)
Maturities or calls		70,274			45,187
Sales		271,971			236,789
Equity securities:
Purchases		-			(14,539	)
Sales		-			6,142
Net sales (purchases) of short-term investments		35,710			(72,420	)
Proceeds from sale of real estate		14,401			-
Other, net		(1,726	)		(813	)
Net cash flows provided by (used in) investing activities		153,293			(46,690	)
Cash flows from financing activities:
Dividends paid to shareholders		(2,258	)		(1,887	)
Proceeds from exercise of stock options		229			1,338
Purchase of treasury stock		(1,418	)		(6,024	)
Repayments of long-term debt		(38,000	)		-
Net issuance of notes receivable from officers		(110	)		-
Net cash flows used in financing activities		(41,557	)		(6,573	)
Net increase (decrease) in cash		125,258			(73,221	)
Cash - beginning of period		5,604			84,261
Cash - end of period	$	130,862		$	11,040
Supplementary cash flow information:
Income taxes paid (refunded)	$	(8,250	)	$	1,500
Interest paid	$	2,708		$	3,014

See accompanying notes to the consolidated financial statements.

3

PMA Capital Corporation
Consolidated Statements of Comprehensive Income
(Unaudited)

	Three Months Ended March 31,
(dollar amounts in thousands)	2001			2000
Net income	$	8,091		$	4,378
Other comprehensive income, net of tax:
Unrealized gains on securities:
Holding gains arising during the period		17,645			8,107
Less: reclassification adjustment for (gains)
losses included in net income (net of tax
expense (benefit): 2001 - $1,313;
2000 - ($1,911))		(2,438	)		3,550
Total unrealized gain on securities		15,207			11,657
Foreign currency translation loss, net of tax
benefit: 2001 - ($242); 2000 - $0		(438	)		-
Other comprehensive income, net of tax		14,769			11,657
Comprehensive income	$	22,860		$	16,035

See accompanying notes to the consolidated financial statements.

4

PMA Capital Corporation
Notes to the Consolidated Financial Statements

1. BUSINESS DESCRIPTION

The accompanying consolidated financial statements include the accounts of PMA Capital Corporation and its subsidiaries (collectively referred to as “PMA Capital” or the “Company”). PMA Capital is an insurance holding company that operates three specialty risk management businesses:

PMA Re — PMA Capital’s reinsurance operations conduct business mainly in the brokered market offering excess of loss and pro rata property and casualty reinsurance protection. PMA Re provides reinsurance coverages on traditional treaty, finite and facultative bases.

The PMA Insurance Group — PMA Capital’s property and casualty insurance subsidiaries include Pennsylvania domiciled insurance companies as well as certain foreign subsidiaries. The PMA Insurance Group primarily writes workers’ compensation, integrated disability, and to a lesser extent, other standard lines of commercial insurance, primarily in the Mid-Atlantic and Southern regions of the U.S. The majority of The PMA Insurance Group’s business is produced by independent agents and brokers.

Caliber One — PMA Capital’s specialty property and casualty operations write excess and surplus lines of business nationally on a non-admitted basis through surplus lines brokers and, to a lesser extent, managing general agents.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Basis of Presentation — The consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. It is management’s opinion that all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Certain reclassifications of prior year amounts have been made to conform to the 2001 presentation.

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Due to this and certain other factors, such as the seasonal nature of portions of the insurance business as well as competitive and other market conditions, operating results for the three months ended March 31, 2001 are not necessarily indicative of the results to be expected for the full year.

The information included in this Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in its 2000 Annual Report to Shareholders and incorporated by reference in its Form 10-K for the year ended December 31, 2000.

B. Recent Accounting Pronouncements — Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as “derivatives”) and for hedging activities. SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation. The Company does not have any derivative instruments that are impacted by the accounting requirements of SFAS No. 133 and the Company does not currently participate in any hedging activities. Accordingly, the adoption of SFAS No. 133 did not have a material impact on the Company’s financial condition, results of operations or liquidity.

Effective January 1, 2000, the Company adopted Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements.”SAB No. 101 summarizes certain interpretations of the staff of the Securities and Exchange

5

Commission regarding the application of GAAP to revenue recognition in financial statements. The adoption of SAB No. 101 did not have a material impact on the Company’s financial condition, results of operations or liquidity.

Effective January 1, 2000, the Company adopted Statement of Position (“SOP”) 98-7, “Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk.”This statement identifies several methods of deposit accounting and provides guidance on the application of each method. This statement classifies insurance and reinsurance contracts for which the deposit method is appropriate as contracts that (i) transfer only significant timing risk, (ii) transfer only significant underwriting risk, (iii) transfer neither significant timing nor underwriting risk and (iv) have an indeterminate risk. The adoption of SOP 98-7 did not have a material impact on the Company’s financial condition, results of operations or liquidity.

In September 2000, the Financial Accounting Standards Board ("FASB") issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities-a Replacement of FASB Statement No. 125." SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. SFAS No. 140 revises the standards for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but carries over most of the provisions of SFAS No. 125 without reconsideration. The Company's existing policies and practices for its securities lending program are in conformity with SFAS No. 140, accordingly, the adoption of SFAS No. 140 is not expected to have a material impact on the Company's financial condition, results of operations or liquidity.

3. UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

Unpaid losses and loss adjustment expenses (“LAE”) reflect management’s best estimate of future amounts needed to pay claims and related settlement costs with respect to insured events which have occurred, including events that have not been reported to the Company. In many cases, significant periods of time, ranging up to several years or more, may elapse between the occurrence of an insured loss, the reporting of the loss to the Company and the Company’s payment of that loss. In general, liabilities for reinsurers become known more slowly than for primary insurers and are subject to more unforeseen development and uncertainty. As part of the process in determining these amounts, historical data is reviewed and consideration is given to the impact of various factors, such as legal developments, changes in social attitudes and economic conditions.

During the first quarter of 2001, Caliber One reported net unfavorable prior year development of $13.4 million, which is net of losses of $11.8 million ceded to a third party reinsurer under an existing reinsurance contract covering the 2000 accident year. These losses reflect higher than expected claim frequency and severity that emerged in the first quarter of 2001 on certain casualty and property lines of business, primarily professional liability policies for the nursing home class of business. As a result of its quarterly reserve review, Caliber One revised its estimate of ultimate expected claim activity and, accordingly, increased its estimate of ultimate losses for accident years 1999 and 2000.

Management believes that its unpaid losses and LAE are fairly stated at March 31, 2001. However, estimating the ultimate claims liability is necessarily a complex and judgmental process inasmuch as the amounts are based on management’s informed estimates and judgments using data currently available. As additional experience and data become available regarding claims payment and reporting patterns, legislative developments, regulatory trends on benefit levels for both medical and indemnity payments, and economic conditions, the estimates are revised accordingly. If the Company’s ultimate losses, net of reinsurance, prove to differ substantially from the amounts recorded at March 31, 2001, the related adjustments could have a material adverse impact on the Company’s financial condition, results of operations and liquidity.

6

4. REINSURANCE

In the ordinary course of business, PMA Capital’s reinsurance and insurance subsidiaries assume and cede premiums with other insurance companies and are members of various pools and associations. The reinsurance and insurance subsidiaries cede business in order to limit the maximum net loss from large risks and limit the accumulation of many smaller losses from a catastrophic event. The reinsurance and insurance subsidiaries remain primarily liable to their clients in the event their reinsurers are unable to meet their financial obligations.

The components of net premiums earned and losses and LAE incurred are as follows:

	Three Months Ended March 31,
(dollar amounts in thousands)	2001			2000
Premiums earned:
Direct	$	117,533		$	98,049
Assumed		94,183			82,679
Ceded		(57,504	)		(54,501	)
Net	$	154,212		$	126,227
Losses and LAE:
Direct	$	129,776		$	101,489
Assumed		77,043			59,433
Ceded		(61,140	)		(66,634	)
Net	$	145,679		$	94,288

5. EARNINGS PER SHARE

A reconciliation of the shares used as the denominator of the basic and diluted earnings per share computations is presented below. For all periods presented, there were no differences in the numerator (net income) for the basic and diluted earnings per share calculation:

	Three Months Ended March 31,
	2001		2000
Denominator:
Basic shares - weighted average shares outstanding		21,503,327		22,265,688
Effect of dilutive stock options		404,637		550,599
Total diluted shares		21,907,964		22,816,287

7

6. BUSINESS SEGMENTS

The Company’s revenues, substantially all of which are generated within the U.S., and pre-tax operating income (loss) by principal business segment were as follows:

	Three Months Ended March 31,
(dollar amounts in thousands)	2001			2000
Revenues:
PMA Re	$	86,067		$	77,605
The PMA Insurance Group
Excluding Run-off Operations		92,494			70,870
Run-off Operations (1)		-			1,086
Total		92,494			71,956
Caliber One		1,089			6,975
Corporate and Other		10,198			480
Net realized investment gains (losses)		3,751			(5,461	)
Total revenues	$	193,599		$	151,555
Components of pre-tax operating
income (loss)(2) and net income:
PMA Re	$	5,922		$	13,983
The PMA Insurance Group:
Excluding Run-off Operations		5,717			5,383
Run-off Operations (1)		-			219
Total		5,717			5,602
Caliber One		(22,313	)		(2,273	)
Corporate and Other		4,374			(5,112	)
Pre-tax operating income (loss)		(6,300	)		12,200
Net realized investment gains (losses)		3,751			(5,461	)
Income (loss) before income taxes		(2,549	)		6,739
Income tax expense (benefit)		(10,640	)		2,361
Net income	$	8,091		$	4,378

(1) Effective December 31, 2000, all of the remaining loss reserves of the Run-off Operations were ceded to a third party under an assumption reinsurance agreement. As a result of this transaction, The PMA Insurance Group no longer reports separate results for the Run-off Operations.

(2) Operating income differs from net income under GAAP because operating income excludes net realized investment gains and losses. Pre-tax operating income is defined as income from continuing operations before income taxes, excluding net realized investment gains and losses. The Company excludes net realized investment gains (losses) from the profit and loss measure it utilizes to assess the performance of its operating segments because (i) net realized investment gains (losses) are unpredictable and not necessarily indicative of current operating fundamentals or future performance and (ii) in many instances, decisions to buy and sell securities are made at the holding company level, and such decisions result in net realized gains (losses) that do not relate to the operations of the individual segments.

8

7. COMMITMENTS AND CONTINGENCIES

The Company’s businesses are subject to a changing social, economic, legal, legislative and regulatory environment that could affect them. Such changes could include various legislative and regulatory changes which may affect the pricing or profitability of the insurance products sold by the Company. In addition, it is always possible that judicial reinterpretation of insurance contracts after the policies were written may result in coverage unanticipated by the Company at the time the policies were issued, such as tobacco and other claims. The eventual effect on the Company of the changing environment in which it operates remains uncertain.

In the event a property and casualty insurer operating in a jurisdiction where the Company’s insurance subsidiaries also operate becomes or is declared insolvent, state insurance regulations provide for the assessment of other insurers to fund any capital deficiency of the insolvent insurer. Generally, this assessment is based upon the ratio of an insurer’s voluntary premiums written to the total premiums written for all insurers in that particular jurisdiction. The Company is not aware of any material potential assessments at March 31, 2001.

The Company has provided guarantees of approximately $9.7 million, primarily related to loans on properties in which the Company has an interest.

The Company is continuously involved in numerous lawsuits arising, for the most part, in the ordinary course of business, either as a liability insurer defending third party claims brought against its insureds, or as an insurer defending coverage claims brought against it by its policyholders or other insurers. While the outcome of all litigation involving the Company, including insurance-related litigation, cannot be determined, litigation is not expected to result in losses that differ from recorded reserves by amounts that would be material to the Company’s financial condition, results of operations or liquidity. In addition, reinsurance recoveries related to claims in litigation, net of the allowance for uncollectible reinsurance, are not expected to result in recoveries that differ from recorded recoverables by amounts that would be material to the Company’s financial condition, results of operations or liquidity.

9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of the financial condition of PMA Capital as of March 31, 2001, compared with December 31, 2000, and the results of operations of PMA Capital for the quarter ended March 31, 2001, compared with the same period last year. This discussion should be read in conjunction with Management’s Discussion and Analysis included in PMA Capital’s 2000 Annual Report to Shareholders (pages 28 through 44), to which the reader is directed for additional information. The term “SAP” refers to the statutory accounting practices prescribed or permitted by applicable state insurance departments and the term “GAAP” refers to generally accepted accounting principles.

Consolidated Results

The major components of operating revenues, pre-tax operating income (loss) and net income are as follows:

	Three Months Ended March 31,
(dollar amounts in thousands)	2001			2000
Operating revenues:
Net premiums written	$	195,021		$	164,339
Net premiums earned	$	154,212		$	126,227
Net investment income		22,333			27,402
Other revenues		13,303			3,387
Total operating revenues	$	189,848		$	157,016
Components of pre-tax operating
income (loss) (1) and net income:
PMA Re	$	5,922		$	13,983
The PMA Insurance Group:
Excluding Run-off Operations		5,717			5,383
Run-off Operations (2)		-			219
Total		5,717			5,602
Caliber One		(22,313	)		(2,273	)
Corporate and Other		4,374			(5,112	)
Pre-tax operating income (loss)		(6,300	)		12,200
Net realized investment gains (losses)		3,751			(5,461	)
Income (loss) before income taxes		(2,549	)		6,739
Income tax expense (benefit)		(10,640	)		2,361
Net income	$	8,091		$	4,378

(1) Operating income differs from net income under GAAP because operating income excludes net realized investment gains and losses. Pre-tax operating income is defined as income from continuing operations before income taxes, excluding net realized investment gains and losses. The Company excludes net realized investment gains (losses) from the profit and loss measure it utilizes to assess the performance of its operating segments because (i) net realized investment gains (losses) are unpredictable and not necessarily indicative of current operating fundamentals or future performance and (ii) in many instances, decisions to buy and sell securities are made at the holding company level, and such decisions result in net realized gains (losses) that do not relate to the operations of the individual segments.

(2) Effective December 31, 2000, all of the remaining loss reserves of the Run-off Operations were ceded to a third party under an assumption reinsurance agreement. As a result of this transaction, The PMA Insurance Group no longer reports separate results for the Run-off Operations.

10

Consolidated operating revenues increased to $189.8 million for the three months ended March 31, 2001, compared to $157.0 million for the three months ended March 31, 2000. The increase in operating revenues for the first quarter of 2001, compared to the first quarter of 2000, primarily reflects higher net premiums earned by The PMA Insurance Group and PMA Re, and the gain on the sale of certain real estate properties (included in Other Revenues), partially offset by lower net premiums earned by Caliber One and lower net investment income.

Operating income is one of the primary performance measures the Company uses to monitor and assess the performance of its insurance operations. Operating income differs from net income under GAAP because operating income excludes net realized investment gains and losses. The Company recorded a pre-tax operating loss of $6.3 million for the quarter ended March 31, 2001, compared to pre-tax operating income of $12.2 million for the same period last year. The pre-tax operating loss in 2001, compared to the pre-tax operating income in 2000, primarily reflects higher than expected losses at Caliber One and lower pre-tax operating income at PMA Re, partially offset by a pre-tax gain of $9.8 million on the sale of certain real estate properties recorded in Corporate and Other. After-tax operating income was $5.7 million and $7.9 million for the quarters ended March 31, 2001 and 2000, respectively. After-tax operating income for 2001 includes a tax benefit of $10.1 million resulting from the completion of an IRS examination of the Company’s 1996 tax return.

Net income was $8.1 million for the first quarter of 2001, compared to $4.4 million for the same period in 2000. Net income includes after-tax gains and losses on the sale of investments. Throughout 2000 and into the first quarter of 2001, the Company shifted the mix of its invested asset portfolio from U.S. Treasury and agency securities to corporate bonds and structured securities as a means to enhance the portfolio's yield. As a result of investment sales pursuant to this strategy and given the declining interest rates in the first quarter of 2001, PMA Capital recorded $2.4 million of after-tax net realized investment gains. After-tax realized investment losses of $3.5 million were recognized in the first quarter of 2000 due to sales of invested assets in an environment of rising interest rates.

Business Outlook

Based on management’s current expectations, the estimated range of consolidated after-tax operating earnings for 2001 is between $0.70 and $1.00 per diluted share. Management currently expects improved earnings in 2001, compared to 2000, resulting in part from the rate increases achieved in all three of PMA Capital’s specialty insurance businesses and lower prior year net unfavorable loss development, as well as the first quarter’s gain on the sale of real estate and tax benefit. Any unexpected emergence of losses may cause actual results to differ materially from current earnings expectations.

These statements are forward-looking, and actual results may differ materially from management’s current expectations, as a result of the Cautionary Statements accompanying the forward-looking statements, and the additional Cautionary Statements on page 22, which describe other factors.

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PMA Re

Summarized financial results of PMA Re are as follows:

	Three Months Ended March 31,
(dollar amounts in thousands)	2001		2000
Net premiums written	$	63,927	$	67,313
Net premiums earned	$	73,894	$	63,458
Net investment income		12,173		14,147
Operating revenues		86,067		77,605
Losses and LAE		64,883		45,416
Acquisition and operating expenses		15,262		18,206
Total losses and expenses		80,145		63,622
Pre-tax operating income	$	5,922	$	13,983

PMA Re’s pre-tax operating income decreased to $5.9 million for the three months ended March 31, 2001, compared to $14.0 million for the same period in 2000, due to a decrease in underwriting results of $6.1 million caused primarily by the absence of favorable prior year development in the first quarter of 2001, and lower net investment income.

Premiums

PMA Re’s gross premiums written by business unit and major lines of business are as follows:

	Three Months Ended March 31,
(dollar amounts in thousands)	2001		2000
Business Unit:
Traditional - Treaty	$	35,813	$	48,504
Finite Risk and Financial Products		33,863		23,095
Specialty - Treaty		6,959		14,198
Facultative		4,276		1,683
Total	$	80,911	$	87,480
Major Lines of Business:
Property lines	$	44,250	$	25,712
Casualty lines		36,476		61,311
Other lines		185		457
Total	$	80,911	$	87,480

12

PMA Re’s net premiums written by business unit and major lines of business are as follows:

	Three Months Ended March 31,
(dollar amounts in thousands)	2001		2000
Business Unit:
Traditional - Treaty	$	26,176	$	33,392
Finite Risk and Financial Products		30,830		21,355
Specialty - Treaty		5,473		11,607
Facultative		1,448		959
Total	$	63,927	$	67,313
Major Lines of Business:
Property lines	$	38,191	$	21,176
Casualty lines		25,555		45,686
Other lines		181		451
Total	$	63,927	$	67,313

Net premiums written were $63.9 million in the first quarter of 2001, compared with $67.3 million for the same period last year. The Finite Risk and Financial Products unit achieved targeted growth by providing non-traditional reinsurance coverages mostly to small- and medium-sized insurers. However, this growth was more than offset by lower premiums from the Specialty and Traditional units, primarily in casualty lines of business, reflecting PMA Re’s decision to non-renew accounts that did not meet its price guidelines. This was due in part to the highly competitive conditions in the professional liability reinsurance market. Also, during the first quarter of 2001, net premiums written for property lines increased due to the desirable rate increases being achieved on these coverages.

Net premiums earned increased 16.4% in 2001, compared to 2000. Traditionally, trends in net premiums earned follow patterns similar to net premiums written, with premiums being earned principally on a pro rata basis over the coverage periods of the underlying policies. Many of PMA Re’s Traditional and Specialty contracts are written on a policy attaching basis, where premiums are earned over 24 months. Due to a shift in the business mix towards Finite Risk and Financial Products contracts, where coverages are typically placed on a loss occurring basis with premiums being earned over twelve months, net premiums earned in the first quarter of 2001 increased while net premiums written for the same period decreased.

Losses and Expenses

The components of the GAAP combined ratios are as follows:

	Three Months Ended March 31,
	2001		2000
Loss and LAE ratio		87.8%		71.6%
Expense ratio:
Acquisition expenses		15.4%		23.0%
Operating expenses		5.2%		5.7%
Total expense ratio		20.6%		28.7%
GAAP combined ratio(1)		108.4%		100.3%

(1) The combined ratio computed on a GAAP basis is equal to losses and LAE, plus acquisition expenses and operating expenses, all divided by net premiums earned.

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The loss and LAE ratio increased 16.2 points in the first quarter of 2001, compared with the same period of 2000, due to an increase in the current accident year loss and LAE ratio and the absence of favorable prior year development in the first quarter of 2001. The current accident year loss and LAE ratio increased 8.4 points in the first quarter of 2001, compared to the same period last year, primarily reflecting a shift in business towards Finite Risk and Financial Products business, which traditionally carries a higher loss and LAE ratio than PMA Re’s other business units, but also carries a lower acquisition expense ratio. In addition, the loss and LAE ratio increased 7.8 points in the first quarter of 2001 due to the absence of favorable prior year development and, to a lesser extent, higher discount accretion.

The acquisition expense ratio decreased 7.6 points for the three months ended March 31, 2001, compared to the same period in 2000, primarily due to the shift in business towards Finite Risk and Financial Products business which, as discussed above, generates with a lower acquisition expense ratio than traditional treaty business. The operating expense ratio decreased 0.5 points for the three months ended March 31, 2001, compared to the same period in 2000, primarily reflecting an increase in earned premiums that outpaced an increase in operating expenses.

Net Investment Income

Net investment income was $12.2 million for the first quarter of 2001, compared to $14.1 million for the same period last year. The decrease in net investment income primarily reflects lower average invested assets and an increase in interest on funds held on retrocessional contracts, caused primarily by cessions in the third quarter of 2000.

14

The PMA Insurance Group

Summarized financial results of The PMA Insurance Group are as follows:

	Three Months Ended March 31,
(dollar amounts in thousands)	2001		2000
The PMA Insurance Group
Net premiums written	$	127,865	$	87,446
Net premiums earned	$	80,118	$	57,092
Net investment income		9,648		12,233
Other revenues		2,728		2,631
Operating revenues		92,494		71,956
Losses and LAE		58,934		42,653
Acquisition and operating expenses		23,732		19,011
Dividends to policyholders		4,111		4,690
Total losses and expenses		86,777		66,354
Pre-tax operating income	$	5,717	$	5,602
The PMA Insurance Group
Excluding Run-off Operations (1)
Net premiums written	$	127,865	$	87,446
Net premiums earned	$	80,118	$	57,092
Net investment income		9,648		11,147
Other revenues		2,728		2,631
Operating revenues		92,494		70,870
Losses and LAE		58,934		41,950
Acquisition and operating expenses		23,732		18,847
Dividends to policyholders		4,111		4,690
Total losses and expenses		86,777		65,487
Pre-tax operating income	$	5,717	$	5,383

(1)   Run-off operations (“Run-off Operations”) of The PMA Insurance Group reinsured certain obligations primarily associated with workers’compensation claims written by The PMA Insurance Group’s Pooled Companies for the years 1991 and prior. For the first quarter of 2000, net investment income was $1.1 million, losses and expenses were $867,000 and pre-tax operating income was $219,000 for Run-off operations. Effective December 31, 2000, all of the remaining loss reserves of the Run-off operations were ceded to a third party under an assumption reinsurance agreement. As a result of this transaction, The PMA Insurance Group no longer reports separate results for the Run-off operations.

Pre-tax operating income for The PMA Insurance Group was $5.7 million for the three months ended March 31, 2001, compared to $5.6 million for the same period in 2000. The increase in operating income for The PMA Insurance Group was primarily due to premium growth which outpaced higher losses and expenses, partially offset by lower net investment income.

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The PMA Insurance Group Excluding Run-off Operations

Premiums

	Three Months Ended March 31,
(dollar amounts in thousands)	2001			2000
Workers' compensation and integrated disability:
Direct premiums written	$	108,092		$	77,475
Premiums assumed		878			357
Premiums ceded		(6,119	)		(10,783	)
Net premiums written	$	102,851		$	67,049
Commercial Lines:
Direct premiums written	$	33,224		$	26,752
Premiums assumed		384			549
Premiums ceded		(8,594	)		(6,904	)
Net premiums written	$	25,014		$	20,397
Total:
Direct premiums written	$	141,316		$	104,227
Premiums assumed		1,262			906
Premiums ceded		(14,713	)		(17,687	)
Net premiums written	$	127,865		$	87,446

Direct workers’ compensation and integrated disability premiums written increased by $30.6 million for the three months ended March 31, 2001, compared to the same period in 2000, primarily due to rate increases and, to a lesser extent, an increase in the level of workers’ compensation risks underwritten. Direct writings of commercial lines of business other than workers’ compensation, such as commercial auto, general liability, umbrella, multi-peril and commercial property lines (collectively, “Commercial Lines”) increased by $6.5 million for the three months ended March 31, 2001, compared to the same period in 2000, primarily due to rate increases for commercial automobile and commercial package lines.

The decrease in premiums ceded primarily reflects a $4.7 million decrease in premiums ceded for workers’ compensation for the three months ended March 31, 2001, compared to the same period in 2000, as a result of The PMA Insurance Group increasing its net retention by adding a deductible limit of approximately $10 million to its workers’ compensation reinsurance program, effective January 1, 2001. Partially offsetting this decrease was a $1.7 million increase in premiums ceded for Commercial Lines, as a result of the increase in direct premiums written quarter over quarter.

Net premiums earned increased 40.3% in 2001, compared to 2000, while net premiums written increased 46.2%. Generally, trends in net premiums earned follow patterns similar to net premiums written adjusted for the customary lag related to the timing of premium writings within the year. Direct premiums are earned principally on a pro rata basis over the terms of the policies.

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Losses and Expenses

The components of the GAAP combined ratios are as follows:

	Three Months Ended March 31,
	2001		2000
Loss and LAE ratio		73.6%		73.5%
Expense ratio:
Acquisition expenses		17.5%		18.9%
Operating expenses (1)		9.5%		11.0%
Total expense ratio		27.0%		29.9%
Policyholders' dividend ratio		5.1%		8.2%
GAAP combined ratio (2)(3)		105.7%		111.6%

(1) The expense ratio and the combined ratio exclude $2.1 million and $1.8 million for 2001 and 2000, respectively, for direct expenses related to service revenues, which are not included in premiums earned.

(2) The combined ratio computed on a GAAP basis is equal to losses and LAE, plus acquisition expenses, operating expenses and policyholders’dividends, all divided by net premiums earned.

(3) The GAAP combined ratio for The PMA Insurance Group including the Run-off Operations was 113.1% in the first quarter of 2000.

The loss and LAE ratio in the first quarter of 2001 was essentially level with the same period last year. The PMA Insurance Group experienced $214,000, or 0.3 points, of favorable prior year development for the first quarter of 2001, compared to $475,000, or 0.8 points, of favorable prior year development for the same period in 2000. The favorable prior year development in 2001 and 2000 reflects better than expected loss emergence on rent-a-captive workers’ compensation business. Policyholders’ dividends for rent-a-captive business substantially offset the favorable prior year development in 2001 and 2000. The current accident year loss and LAE ratio increased by 0.2 points in 2001, compared to 2000. The loss and LAE ratio is negatively impacted by accretion of discount on prior year reserves and favorably impacted by setting up discount for current year reserves. The net of these amounts is referred to as net discount accretion. Accretion of prior year discounted reserves exceeded the setting up of discount by $15,000 and $384,000 for the three months ended March 31, 2001 and 2000, respectively. The decline in net discount accretion reflects the increase in workers’ compensation writings during the first quarter of 2001, compared to the same period last year, and favorably impacts the loss and LAE ratio by 0.6 points quarter over quarter.

Overall, the GAAP expense ratio decreased by 2.9 points for the three months ended March 31, 2001, compared to the same period in 2000, as premium growth, driven mainly by pricing increases, outpaced expenses.

The policyholders’ dividend ratio was 5.1% for the three months ended March 31, 2001, compared to 8.2% for the same period in 2000. Under policies that are subject to dividend plans, the customer may receive a dividend based upon loss experience during the policy period. The decrease in the policyholders’ dividend ratio occurred primarily because The PMA Insurance Group sold less business under dividend plans in the first quarter of 2001 than in the first quarter of 2000 and wrote business under lower paying dividend plans in 2001, compared to 2000.

Net Investment Income

Net investment income was $9.6 million for the three months ended March 31, 2001, compared to $11.1 million for the same period in 2000. The decrease in net investment income primarily reflects a lower asset base resulting from the paydown of loss reserves from prior accident years.

17

Caliber One

Summarized financial results of Caliber One are as follows:

	Three Months Ended March 31,
(dollar amounts in thousands)	2001			2000
Net premiums written	$	3,431		$	9,674
Net premiums earned	$	402		$	5,771
Net investment income		687			1,204
Operating revenues		1,089			6,975
Losses and LAE		21,862			6,219
Acquisition and operating expenses		1,540			3,029
Total losses and expenses		23,402			9,248
Pre-tax operating loss	$	(22,313	)	$	(2,273	)

Caliber One recorded pre-tax operating losses of $22.3 million and $2.3 million for the three months ended March 31, 2001 and 2000, respectively. The increase in pre-tax operating losses primarily reflects $18.8 million resulting from unfavorable prior year loss development of $13.4 million in the 1999 and 2000 accident years, particularly in the professional liability line of business, and $5.4 million of additional net ceded premiums (after ceding commissions) under existing reinsurance contracts relating to the 2000 accident year.

Premiums

Caliber One’s gross and net premiums written are as follows:

	Three Months Ended March 31,
(dollar amounts in thousands)	2001			2000
Gross premiums written:
Property	$	20,961		$	10,647
Products liability		5,191			5,462
General liability		4,511			3,310
Professional liability		735			10,617
Other liability		1,328			3,172
Total	$	32,726		$	33,208
Net premiums written:
Property	$	7,535		$	3,406
Products liability		815			4,018
General liability		1,780			310
Professional liability		(7,530	)		846
Other liability		831			1,094
Total	$	3,431		$	9,674

Gross premiums written decreased slightly for the three months ended March 31, 2001, compared to the same period last year. Gross premiums written in 2001 reflect growth in property and certain classes of liability lines of business due to rate increases, offset by the Company’s decision in 2000 to de-emphasize certain segments of the professional liability, primarily the nursing homes class of business, and commercial automobile (included in “Other Liability” in the table

18

above) lines of business. Net premiums written decreased $6.2 million in the first quarter of 2001, compared to the first quarter of 2000, reflecting additional premiums ceded pertaining to existing reinsurance contracts covering adverse loss development in the first quarter of 2001, partially offset by growth in the property line of business.

Net premiums earned decreased $5.4 million for the three months ended March 31, 2001, compared to the same period in 2000. Generally, trends in net premiums earned follow patterns similar to net premiums written adjusted for the customary lag related to the timing of premium writings within the year.

Losses and Expenses

During the first quarter of 2001, Caliber One’s incurred losses and LAE were $21.9 million, representing an increase of $15.6 million over the same period last year. This increase includes net unfavorable prior year development of $13.4 million, which is net of losses of $11.8 million ceded to a third party reinsurer under an existing reinsurance contract covering the 2000 accident year. These losses reflect higher than expected claim frequency and severity that emerged in the first quarter of 2001 on certain casualty and property lines of business, primarily professional liability policies for the nursing home class of business. As a result of its quarterly reserve review, Caliber One revised its estimate of ultimate expected claim activity and, accordingly, increased its estimate of ultimate losses for accident years 1999 and 2000.

Acquisition expenses for the first quarter of 2001 declined, reflecting a higher level of ceding commissions on the premiums ceded in the first quarter of 2001 to cover prior year losses. For the first quarter of 2001, operating expenses were $2.0 million, essentially level with the same period last year, reflecting the substantial completion of Caliber One’s infrastructure development in 2000. As a percentage of gross premiums written, operating expenses for the first quarter of 2001 were approximately 6%, which is comparable to the level for the first quarter of 2000.

Net Investment Income

Net investment income decreased to $687,000 in the first quarter of 2001, compared to $1.2 million in the first quarter of 2000. The effects of a larger average invested asset base, due mainly to premium collections in excess of paid losses and expenses, were more than offset by an increase of $710,000 for interest charged on funds held reinsurance contracts.

Loss Reserves

Unpaid losses and LAE reflect management’s best estimate of future amounts needed to pay claims and related settlement costs with respect to insured events which have occurred, including events that have not been reported to the Company. In many cases, significant periods of time, ranging up to several years or more, may elapse between the occurrence of an insured loss, the reporting of the loss to the Company and the Company’s payment of that loss. In general, liabilities for reinsurers become known more slowly than for primary insurers and are subject to more unforeseen development and uncertainty. As part of the process for determining the Company’s unpaid losses and LAE, historical data is reviewed and consideration is given to the impact of various factors, such as legal developments, changes in social attitudes and economic conditions.

Management believes that its unpaid losses and LAE are fairly stated at March 31, 2001. However, estimating the ultimate claims liability is necessarily a complex and judgmental process inasmuch as the amounts are based on management’s informed estimates and judgments using data currently available. As additional experience and data become available regarding claims payment and reporting patterns, legislative developments, regulatory trends on benefit levels for both medical and indemnity payments, and economic conditions, the estimates are revised accordingly. If the Company’s ultimate losses, net of reinsurance, prove to differ substantially from the amounts recorded at March 31, 2001, the related adjustments could have a material adverse effect on the Company’s financial condition, results of operations and liquidity.

See the discussion under Losses and Expenses above for additional information regarding Caliber One’s first quarter 2001 loss reserve increase.

For additional discussion of loss reserves and reinsurance, see pages 37 to 39 of the Management’s Discussion and Analysis included in the Company’s 2000 Annual Report to Shareholders, as well as pages 14 to 20 of the Company’s Form 10-K for the year ended December 31, 2000.

19

Corporate and Other

The Corporate and Other segment includes unallocated investment income, expenses, including debt service, as well as the results of certain of the Company’s real estate properties. For the three months ended March 31, 2001, Corporate and Other recorded pre-tax operating income of $4.4 million, compared to a pre-tax operating loss of $5.1 million for the three months ended March 31, 2000. During the first quarter of 2001, the Company sold certain real estate properties for net proceeds totaling $14.4 million, resulting in a pre-tax gain of $9.8 million, which is recorded in other revenues. Additionally, Corporate and Other benefited from a decline of $880,000 in interest expense in 2001, due primarily to the $38.0 million paydown of outstanding debt early in the first quarter of 2001.

Liquidity and Capital Resources

Liquidity is a measure of an entity’s ability to secure sufficient cash to meet its contractual obligations and operating needs. At the holding company level, PMA Capital’s primary sources of liquidity are dividends from subsidiaries, net tax payments received from subsidiaries and borrowings. The Company utilizes cash to pay debt obligations, including interest costs; dividends to shareholders; taxes to the Federal government; and corporate expenses. In addition, the Company utilizes cash resources to repurchase shares of its common stock and to capitalize subsidiaries from time to time.

The Company’s domestic insurance subsidiaries’ ability to pay dividends to the holding company is limited by the insurance laws and regulations of Pennsylvania. Under Pennsylvania laws and regulations, dividends may not be paid without prior approval of the Pennsylvania Insurance Commissioner in excess of the greater of (i) 10% of policyholders’ surplus as of the end of the preceding year or (ii) statutory net income for the preceding year, but in no event to exceed statutory unassigned surplus. As of December 31, 2000, approximately $53 million of dividends are available to be paid to PMA Capital without the prior approval of the Pennsylvania Insurance Commissioner during 2001. As of December 31, 2000, The PMA Insurance Group can pay up to $20.1 million in dividends to PMA Capital Insurance Company during 2001. Under Delaware law (which is substantially similar to Pennsylvania law with respect to dividends), Caliber One can pay up to $5.5 million in dividends to PMA Capital Insurance Company in 2001. Dividends received from subsidiaries were $7.0 million and $4.8 million for the first quarter of 2001 and 2000, respectively.

Net tax payments received from subsidiaries were $2.9 million and $4.4 million for the three months ended March 31, 2001 and 2000, respectively.

The Company had $125.0 million and $163.0 million outstanding under its existing Revolving Credit Facility (“Credit Facility”) at March 31, 2001 and December 31, 2000, respectively. In accordance with the terms of the Credit Facility, the Company repaid $38.0 million on January 2, 2001 thereby reducing the outstanding debt to $125.0 million, which is the maximum amount PMA Capital can borrow under the Credit Facility. The Credit Facility matures as follows: $62.5 million on December 31, 2001 and $62.5 million on December 31, 2002. During the first quarter of 2001 and 2000, the Company incurred $2.2 million and $3.1 million of interest expense related to the Credit Facility, substantially all of which was paid in each respective quarter.

In addition to the Credit Facility, the Company maintains a committed facility of $67.5 million for letters of credit (the “Letter of Credit Facility”). The Letter of Credit Facility is utilized primarily for securing reinsurance obligations of the Company’s insurance subsidiaries. As of March 31, 2001, the Company had $29.2 million outstanding under the Letter of Credit facility, compared to $40.1 million at December 31, 2000.

During the first quarters of 2001 and 2000, the Company paid dividends to shareholders of $2.3 million and $1.9 million, respectively. Dividends paid to shareholders increased in 2001, compared to 2000, due to an increase in the annual dividend rate to $0.42 from $0.36 commencing with the fourth quarter 2000 dividend payment. Partially offsetting the higher dividend rate were fewer shares outstanding due to share repurchase activities in 2000. PMA Capital’s dividends to shareholders are restricted by its debt agreements. Based upon the terms of the Credit Facility, under the most restrictive debt covenant, PMA Capital would be able to pay dividends of approximately $9.5 million in 2001.

The Company repurchased approximately 80,000 shares at a total cost of $1.4 million and approximately 318,000 shares at a cost of $6.0 million in the first quarters of 2001 and 2000, respectively. Since the inception of its share repurchase program in 1998, PMA Capital has repurchased a total of approximately 3.6 million shares at a cost of $68.9 million,

20

which represents approximately 15% of the outstanding shares. PMA Capital’s remaining share repurchase authorization at March 31, 2001 is $21.1 million. Decisions regarding share repurchases are subject to prevailing market conditions and an evaluation of the costs and benefits associated with alternative uses of capital.

Management believes that the Company’s available sources of funds will provide sufficient liquidity to meet its short-term and long-term obligations. In addition, management currently believes that the existing capital structure is appropriate. However, management continually monitors the capital structure in light of developments in its businesses, and the present assessment could change as management becomes aware of new opportunities and challenges in the Company’s business.

Other Matters

The Company’s businesses are subject to a changing social, economic, legal, legislative and regulatory environment that could affect them. Some of the changes include initiatives to restrict insurance pricing and the application of underwriting standards and reinterpretations of insurance contracts long after the policies were written in an effort to provide coverage unanticipated by the Company. The eventual effect on the Company of the changing environment in which it operates remains uncertain.

Comparison of SAP and GAAP Results

Results presented in accordance with GAAP vary in certain respects from statutory accounting practices prescribed or permitted by the Pennsylvania Insurance Department and the Delaware Insurance Department, (collectively “SAP”). Prescribed SAP includes state laws, regulations and general administrative rules, as well as a variety of National Association of Insurance Commissioners (“NAIC”) publications. Permitted SAP encompasses all accounting practices that are not prescribed. Effective December 31, 2000, the Company’s insurance subsidiaries implemented the NAIC Codification of Statutory Accounting Principles, resulting in an increase of $20.5 million in its statutory surplus.

Recent Accounting Pronouncements

Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as “derivatives”) and for hedging activities. SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The accounting for changes in the fair value of a derivative (that is, gains and losses) depends on the intended use of the derivative and the resulting designation. The Company does not have any derivative instruments that are impacted by the accounting requirements of SFAS No. 133 and the Company does not currently participate in any hedging activities. Accordingly, the adoption of SFAS No. 133 did not have a material impact on the Company’s financial condition, results of operations or liquidity.

Effective January 1, 2000, the Company adopted Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 summarizes certain interpretations of the staff of the Securities and Exchange Commission regarding the application of GAAP to revenue recognition in financial statements. The adoption of SAB No. 101 did not have a material impact on the Company's financial condition, results of operations or liquidity.

Effective January 1, 2000, the Company adopted Statement of Position (“SOP”) 98-7, “Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk.” This statement identifies several methods of deposit accounting and provides guidance on the application of each method. This statement classifies insurance and reinsurance contracts for which the deposit method is appropriate as contracts that (i) transfer only significant timing risk, (ii) transfer only significant underwriting risk, (iii) transfer neither significant timing nor underwriting risk and (iv) have an indeterminate risk. The adoption of SOP 98-7 did not have a material impact on the Company’s financial condition, results of operations or liquidity.

In September 2000, the Financial Accounting Standards Board ("FASB") issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities-a Replacement of FASB Statement No.

21

125." SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. SFAS No. 140 revises the standards for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but carries over most of the provisions of SFAS No. 125 without reconsideration. The Company's existing policies and practices for its securities lending program are in conformity with SFAS No. 140, accordingly, the adoption of SFAS No. 140 is not expected to have a material impact on the Company's financial condition, results of operations or liquidity.

Cautionary Statements

Except for historical information provided in Management’s Discussion and Analysis and otherwise in this report, statements made throughout, including in the Business Outlook section are forward-looking and contain information about financial results, economic conditions, trends and known uncertainties. These forward-looking statements are based on currently available financial, competitive and economic data and the Company’s current operating plans based on assumptions regarding future events. The Company’s actual results could differ materially from those expected by the Company’s management. The factors that could cause actual results to vary materially, some of which are described with the forward-looking statements, include, but are not limited to:

• changes in general economic conditions, including the performance of financial markets, interest rates and the level of unemployment;

• regulatory or tax changes, including changes in risk-based capital or other regulatory standards that affect the cost of or demand for the Company’s products or otherwise affect the ability of the Company to conduct its business;

• competitive conditions resulting from the significant amount of capital in the property and casualty insurance marketplace that may affect the level of rate adequacy related to the amount of risk undertaken and that may influence the sustainability of adequate rate changes;

• the effect of changes in workers' compensation statutes and their administration;

• the Company's ability to predict and effectively manage claims related to insurance and reinsurance policies;

• the lowering or loss of one or more of the financial strength or claims-paying ratings of the Company's insurance subsidiaries;

• adequacy of reserves for claims liabilities;

• adverse property and casualty loss development for events the Company insured in prior years;

• adequacy and collectibility of reinsurance purchased by the Company;

• severity of natural disasters and other catastrophes;

• reliance on key management; and

• other factors disclosed from time to time in the Company’s most recent Forms 10-K, 10-Q and 8-K filed by the Company with the Securities and Exchange Commission.

Investors should not place undue reliance on any such forward-looking statements. The Company disclaims any obligation to update forward-looking information and to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

22

Part II. Other Information

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

The Exhibits are listed in the Index to Exhibits on page 25.

(b) Reports on Form 8-K filed during the quarter ended March 31, 2001:

During the quarterly period ended March 31, 2001, the Company filed the following Reports on Form 8-K:

- dated February 8, 2001, Item 5 – containing a news release regarding its 2000 results.

- dated March 23, 2001, Item 5 – containing a news release regarding its 2001 Annual Meeting of Shareholders.

23

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PMA CAPITAL CORPORATION
Date: May 14, 2001	By: /s/ Francis W. McDonnell
	Francis W. McDonnell
	Senior Vice President,
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

24

Exhibit Index

Exhibit No.	Description of Exhibit	Method of Filing
(10)	Compensatory Plans
10.1	PMA Capital Corporation 401(k) Excess Plan, dated March 29, 2001	Filed herewith
10.2	PMA Capital Corporation Executive Deferred Compensation Plan (as Amended and Restated Effective January 1, 1999), dated March 29, 2001	Filed herewith
10.3	PMA Capital Corporation Supplemental Executive Retirement Plan (as Amended and Restated Effective January 1, 1999), dated March 7, 2001	Filed herewith
10.4	PMA Capital Corporation Executive Management Pension Plan, dated March 7, 2001	Filed herewith
(12)	Computation of Ratio of Earnings to Fixed Charges	Filed herewith

25

EX-10

PMA CAPITAL CORPORATION
401(k) EXCESS PLAN

MARCH 2001

TABLE OF CONTENTS

			Page
ARTICLE I - INTRODUCTION			1
	1.1	Introduction	1
ARTICLE II - DEFINITIONS			1
	2.1	Administrator	1
	2.2	Affiliated Employer	1
	2.3	Annual Distribution Period	1
	2.4	Beneficiary	1
	2.5	Board of Directors	2
	2.6	Change of Control	2
	2.7	Code	2
	2.8	Compensation	2
	2.9	Deferred Compensation Plan	2
	2.10	Determination Date	2
	2.11	Effective Date	2
	2.12	Eligible Employee	2
	2.13	Employee Pre-Tax Contributions	2
	2.14	Employee Pre-Tax Credits	2
	2.15	Employer Matching Contributions	3
	2.16	Employer Matching Credits	3
	2.17	Employment Termination Date	3
	2.18	ERISA	3
	2.19	Excess 401(k) Plan Account	3
	2.20	Excess Salary Reduction Agreement	3
	2.21	Participant	3
	2.22	Participating Company	3
	2.23	Payroll Period	3
	2.24	Plan	3
	2.25	Plan Sponsor	3
	2.26	Plan Year	3
	2.27	Qualified Plan	3
	2.28	Total Disability	3
	2.29	Valuation Date	3
	2.30	Vanguard Funds	3
ARTICLE III - PARTICIPATION			4
	3.1	Eligibility to Participate	4
	3.2	Procedure for and Effect of Admission	4
ARTICLE IV - CREDITS TO EXCESS 401(K) PLAN ACCOUNTS			4
	4.1	Establishment of Plan Accounts	4
	4.2	Investment Obligation of the Plan Sponsor	4
	4.3	Employee Pre-Tax Credit	4
	4.4	Salary Reduction Agreement	5
	4.5	Employer Matching Credits	5
	4.6	Allocation Among Investment Options	5
	4.7	Administration of Investments	5
	4.8	Valuation of Excess 401(k) Plan Accounts	5
ARTICLE V - VESTING			6

-i-

	5.1	Immediate Vesting	6
ARTICLE VI - PAYMENT OF BENEFITS			6
	6.1	Benefit upon Termination of Employment	6
	6.2	Payment of Benefits at Retirement	6
	6.3	Payment of Benefits Following Death	7
	6.4	Earnings where Installment Payments Are Made	7
	6.5	Form of Payment	7
	6.6	Change of Control where Installment Payments Are Made	7
	6.7	Reduced Benefit upon Request following a Change of Control	7
	6.8	Total Disability	7
ARTICLE VII - ADMINISTRATION OF THE PLAN			7
	7.1	Administrator	7
	7.2	Committee Action	7
	7.3	Powers and Duties of the Administrator	8
	7.4	Decisions of Administrator	8
	7.5	Administrative Expenses	8
	7.6	Eligibility to Participate	9
	7.7	Insurance and Indemnification for Liability	9
	7.8	Agent for Service of Legal Process	9
	7.9	Delegation of Responsibility	9
	7.10	Claims Procedure	9
ARTICLE VIII - AMENDMENT AND TERMINATION			10
	8.1	Amendment or Termination	10
ARTICLE IX - MISCELLANEOUS			11
	9.1	Funding	11
	9.2	Status of Employment	11
	9.3	Payments to Minors and Incompetents	11
	9.4	Inalienability of Benefits	11
	9.5	Governing Law	12
	9.6	Severability	12
	9.7	Required Information to Administrator	12
	9.8	Income and Payroll Tax Withholding	12
	9.9	Application of Plan	12
	9.10	No Effect on Other Benefits	12
	9.11	Inurement	12
	9.12	Notice	13
	9.13	Captions	13
	9.14	Acceleration of Payments	13
	9.15	Reporting and Disclosure Requirements	13
	9.16	Gender and Number	13
ARTICLE X - ADOPTION BY AFFILIATED EMPLOYERS			13
	10.1	Adoption of Plan	13
	10.2	Withdrawal from Plan	14
	10.3	Application of Withdrawal Provisions	14
	10.4	Plan Sponsor Appointed Agent of Participating Companies	14
APPENDIX A - INVESTMENT OPTIONS AVAILABLE FOR MEASUREMENT OF              INVESTMENT EARNINGS OR LOSSES UNDER PLAN			15

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APPENDIX B - LIST OF PARTICIPATING COMPANIES	16
PLAN EXHIBIT A - PLAN ADOPTION AGREEMENT	17
PLAN ADOPTION AGREEMENT - PENNSYLVANIA MANUFACTURERS'             ASSOCIATION INSURANCE COMPANY	18
PLAN ADOPTION AGREEMENT - PMA CAPITAL INSURANCE COMPANY             (FORMERLY PMA REINSURANCE CORPORATION)	19
PLAN ADOPTION AGREEMENT - CALIBER ONE INDEMNITY COMPANY	20
PLAN ADOPTION AGREEMENT - CALIBER ONE MANAGEMENT COMPANY, INC.	21
PLAN ADOPTION AGREEMENT - PMA MANAGEMENT CORP	22
PLAN ADOPTION AGREEMENT - PMA RE MANAGEMENT COMPANY	23

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PMA CAPITAL CORPORATION
401(k) EXCESS PLAN

ARTICLE I —INTRODUCTION

        1.1 Introduction. PMA Capital Corporation (then known as the Pennsylvania Manufacturers Corporation) (the “Plan Sponsor”) previously established the PMA Capital Corporation Executive Deferred Compensation Plan (then known as the PMC Executive Deferred Compensation Plan) (the “Deferred Compensation Plan”) to provide certain benefits in excess of the benefit provided under the PMA Capital Corporation 401(k) Plan (then known as The PMC 401(k) Plan) (the “Qualified Plan”). The Plan Sponsor has decided to provide certain benefits previously provided under the Deferred Compensation Plan in a separate plan to be known as the PMA Capital Corporation 401(k) Excess Plan (the “Plan”), as set forth herein, and has restated the Deferred Compensation Plan to, among other things, reflect the removal from the Deferred Compensation Plan of those provisions set forth herein.

        The Plan is established for the purpose of providing certain employees of the Plan Sponsor and certain of its affiliated employers with certain benefits that would be provided under the Qualified Plan but for the limitations imposed by Sections 401(k), 401(m), 415 and 401(a)(17) of the Internal Revenue Code of 1986, as amended. The Plan is intended to be an unfunded arrangement, maintained primarily for the purpose of providing deferred compensation for a select group of management and/or highly compensated employees of the Plan Sponsor and its affiliated employers within the meaning of Sections 201(2) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended.

ARTICLE II —DEFINITIONS

        The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:

        2.1 Administrator means the committee (hereinafter referred to as “Committee”) appointed by the President of the Plan Sponsor to serve as the Administrator of the Plan. If no such Committee is appointed, the Plan Sponsor shall be the Administrator of the Plan.

        2.2 Affiliated Employer means a member of a group of employers, of which the Plan Sponsor is a member and which group constitutes:

     (a) A controlled group of corporations (as defined in Section 414(b) of the Code);

     (b) Trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c) of the Code);

     (c) Trades or businesses (whether or not incorporated) which constitute an affiliated service group (as defined in Section 414(m) of the Code); or

     (d) Any other entity required to be aggregated with the Plan Sponsor pursuant to Section 414(o) of the Code and the Treasury regulations thereunder.

        2.3 Annual Distribution Period means the first 60 days of a Plan Year.

        2.4 Beneficiary means the Participant’s designated beneficiary under the Qualified Plan, unless the Participant designates a different beneficiary (or, in the event there is no designated beneficiary under the Qualified Plan, (a) the Participant’s surviving spouse, or (b) if there is no surviving spouse, the Participant’s beneficiary under the Plan

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Sponsor’s group term life insurance program, or (c) if neither (a) nor (b) is applicable, the executors and/or administrators of the Participant’s estate).

        2.5 Board of Directors means the Board of Directors of the Plan Sponsor, as from time to time constituted, or any committee thereof which is authorized to act on behalf of the Board of Directors.

        2.6 Change of Control means a change of control of the Plan Sponsor of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or Item 1(a) of a Current Report on Form 8-K or any successor rule, whether or not the Plan Sponsor is then subject to such reporting requirements; provided that, without limitation, such a Change of Control shall be deemed to have occurred if:

     (a) Any “person”(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or first becomes the “beneficial owner”(as determined for purposes of Regulation 13D-G under the Exchange Act as currently in effect), directly or indirectly, in a transaction or series of transactions, of securities of the Plan Sponsor representing more than 50% of the voting power of the Plan Sponsor’s voting capital stock (the “Voting Stock”); or

     (b) The consummation of a merger, or other business combination after which the holders of the Voting Stock do not collectively own 50% or more of the voting capital stock of the entity surviving such merger or other business combination, or the sale, lease, exchange or other transfer in a transaction or series of transactions of all or substantially all of the assets of the Plan Sponsor; or

     (c) At any time individuals who were either nominated for election by the Plan Sponsor’s Board of Directors or were elected by the Plan Sponsor’s Board of Directors cease for any reason to constitute at least a majority of the Plan Sponsor’s Board of Directors.

        2.7 Code means the Internal Revenue Code of 1986, as amended. Reference to a specific Section of the Code shall include such Section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such Section.

        2.8 Compensation means a Participant’s Compensation as such term is defined in the Qualified Plan, without taking into account the Code Section 401(a)(17) limitation and before reduction for employee contributions under this or any other nonqualified savings plan.

        2.9 Deferred Compensation Plan means the PMA Capital Corporation Executive Deferred Compensation Plan (formerly known as the PMC Executive Deferred Compensation Plan).

        2.10 Determination Date means March 31, June 30, September 30 and December 31 of each Plan Year.

        2.11 Effective Date means January 1, 1999.

        2.12 Eligible Employee means an officer of a Participating Company, provided such officer is a member of a select group of management and highly compensated employees within the meaning of Section 201(2) of ERISA.

        2.13 Employee Pre-Tax Contributions means the employee pre-tax contributions (i.e., Basic Contributions) that a Participant may elect to make to the Qualified Plan.

        2.14 Employee Pre-Tax Credits means the amounts credited to a Participant’s Excess 401(k) Plan Account pursuant to Section 4.3.

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        2.15 Employer Matching Contributions means the employer matching contributions made by the Participating Company on behalf of a Participant to the Qualified Plan.

        2.16 Employer Matching Credits means the amounts credited to a Participant’s Excess 401(k) Plan Account pursuant to Section 4.5.

        2.17 Employment Termination Date means the date on which the Participant’s status as an employee of a Participating Company terminates.

        2.18 ERISA means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific Section of ERISA shall include such Section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such Section.

        2.19 Excess 401(k) Plan Account means the separate account established and maintained, solely as a bookkeeping entry, by the Plan Sponsor in the name of each Participant pursuant to, and in accordance with, Section 4.1.

        2.20 Excess Salary Reduction Agreement means the written salary reduction agreement entered into by a Participant and the Participating Company pursuant to this Plan and which is made on a form prescribed by the Administrator.

        2.21 Participant means an Eligible Employee who is participating in the Plan in accordance with the provisions of Article III.

        2.22 Participating Company means the Plan Sponsor and each of its Affiliated Employers which, upon the approval of the Board of Directors, has agreed to participate in this Plan in accordance with the provisions of Article X. Each Participating Company is listed on Appendix B.

        2.23 Payroll Period means the regular payroll period used by the Participating Company for the payment of wages and salaries to employees.

        2.24 Plan means the PMA Capital Corporation 401(k) Excess Plan, as set forth in this document and as amended from time to time.

        2.25 Plan Sponsor means PMA Capital Corporation (formerly known as Pennsylvania Manufacturers Corporation), a Pennsylvania corporation.

        2.26 Plan Year means the calendar year.

        2.27 Qualified Plan means the PMA Capital Corporation 401(k) Plan, as amended from time to time.

        2.28 Total Disability shall mean a medically determinable physical or mental condition of such severity and probable prolonged duration as to render the Participant, as determined by the Administrator, upon the advice of a licensed physician the Administrator may consult, unable to meet the requirements of his or her customary employment in a satisfactory manner. A Participant’s Total Disability shall be determined by the Administrator upon the basis of a medical examination and of such other evidence as the Administrator deems necessary and desirable. However, a Participant’s eligibility for disability benefits under Title II of the Federal Social Security Act or under the Plan Sponsor’s insured long term disability plan shall be conclusive proof of the Participant’s Total Disability.

        2.29 Valuation Date shall mean each day on which the NYSE is open for business and such other date(s), if any, as the Administrator shall determine.

        2.30 Vanguard Funds means any of the mutual funds of The Vanguard Group of Investment Companies listed in Appendix A.

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ARTICLE III —PARTICIPATION

        3.1 Eligibility to Participate. Any Eligible Employee who is participating in the Qualified Plan shall be eligible to become a Participant in this Plan.

        3.2 Procedure for and Effect of Admission. An Eligible Employee shall become a Participant once he/she has completed an Excess Salary Reduction Agreement and such other forms and provided such data as are reasonably required by the Administrator. By becoming a Participant, an Eligible Employee shall for all purposes be deemed conclusively to have assented to the provisions of this Plan and all amendments hereto.

ARTICLE IV —CREDITS TO EXCESS 401(K) PLAN ACCOUNTS

        4.1 Establishment of Plan Accounts. The Plan Sponsor shall establish and maintain on its books and records, solely as a bookkeeping entry, an Excess 401(k) Plan Account for each Participant. Each Excess 401(k) Plan Account will be used to record:

     (a) The Employee Pre-Tax Credits and Employer Matching Credits credited under this Plan on behalf of the Participant pursuant to Sections 4.3 and 4.5;

     (b) The credits or debits for investment earnings or losses under Section 4.6; and

     (c) The payments of benefits to the Participant or the Participant's Beneficiary under Article VI.

        4.2 Investment Obligation of the Plan Sponsor. Benefits are payable as they become due irrespective of any actual investments the Plan Sponsor may make to meet its obligations. Neither the Plan Sponsor, nor any trustee (in the event the Plan Sponsor elects to use a grantor trust to accumulate funds) shall be obligated to purchase or maintain any asset, and any reference to investments or Vanguard Funds is solely for the purpose of computing the value of benefits. To the extent a Participant or any person acquires a right to receive payments from the Plan Sponsor under this Plan, such right shall be no greater than the right of any unsecured creditor of the Plan Sponsor. Neither this Plan nor any action taken pursuant to the terms of this Plan shall be considered to create a fiduciary relationship between the Plan Sponsor and the Participants or any other persons or to establish a trust in which the assets are beyond the claims of any unsecured creditor of the Plan Sponsor.

        4.3 Employee Pre-Tax Credit.

     (a) Manner of Election. A Participant may elect, by completing an Excess Salary Reduction Agreement, to reduce the amount of Compensation that the Participant would otherwise receive from the Participating Companies and have the amount of such reduction credited to the Participant’s Excess 401(k) Plan Account as an Employee Pre-Tax Credit.

     (b) Condition Precedent to Employee Pre-Tax Credits under Plan. In order to be eligible to have the Plan Sponsor credit amounts as Employee Pre-Tax Credits to the Participant’s Excess 401(k) Plan Account under this Plan, the Participant must have elected to make the maximum Employee Pre-Tax Contributions (i.e.,Basic Contributions) permitted by the Qualified Plan after taking into account any limitations imposed on such Employee Pre-Tax Contributions by Sections 401(a)(17), 401(k), 401(m), 402(g), or 415 of the Code or any other limitation imposed by the Qualified Plan. Further, in no event shall any Employee Pre-Tax Contributions (i.e.,Basic Contributions) or Employer Matching Contributions contributed to the Qualified Plan on behalf of any Participant be transferred to this Plan from the Qualified Plan.

     (c) Participant Employed during Plan Year. For purposes of determining the Employee Pre-Tax Credit of a Participant who (1) was previously employed by an unrelated employer, (2) was covered by a qualified cash or deferred arrangement described in Section 401(k)(2) of the Code of such unrelated employer, and (3) is first employed by a Participating Company during a Plan Year, the maximum salary deferral that such

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Participant may have credited to his or her Excess 401(k) Plan Account for any Plan Year as an Employee Pre-Tax Credit under the Plan shall be the amount determined by multiplying his or her Compensation by the salary deferral percentage elected by the Participant under this Plan after taking into account (i) the Employee Pre-Tax Contributions for such Plan Year under the Qualified Plan, plus (ii) the elective deferrals made by such Participant under the unrelated employer’s qualified cash or deferred arrangement for such Plan Year.

        4.4 Salary Reduction Agreement. An Excess Salary Reduction Agreement for any Plan Year shall be made before the beginning of that Plan Year and shall remain in full force and effect for subsequent Plan Years unless revoked by the Participant. In the case of an Eligible Employee who is hired during a Plan Year or an employee who becomes an Eligible Employee during a Plan Year, such Eligible Employee may enter into an Excess Salary Reduction Agreement within sixty days after the date he/she becomes eligible. In the case of the Plan Year in which the Plan is first implemented, Eligible Employees may enter into an Excess Salary Reduction Agreement within two months prior to the Effective Date of the Plan.

        4.5 Employer Matching Credits. For each Payroll Period, the Plan Sponsor shall credit each Participant’s Excess 401(k) Plan Account with Employer Matching Credits in an amount equal to:

     (a) The lesser of: (1) 5% of the Eligible Employee's Compensation for the Payroll Period; or (2) the sum of the Employee Pre-Tax Contributions and Employee Pre-Tax Credits on behalf of the Participant for the Payroll Period; minus

     (b) The amount of Employer Matching Contributions made to the Qualified Plan on behalf of the Participant for the Payroll Period.

        4.6 Allocation Among Investment Options. A Participant may direct that the Employee Pre-Tax Credits and the Employer Matching Credits credited to his or her Excess 401(k) Plan Accounts be valued, in accordance with Section 4.8, as if the balance credited to the Excess 401(k) Plan Account were invested in one or more Vanguard Funds or other investments selected by the Participant. The Participant may select any of the investment options set forth in Appendix A in multiples of 5% (or such smaller percentage as the Administrator may determine). The designation of one or more investment options, whether a Vanguard Fund or otherwise, by a Participant under this Section 4.6 shall be used solely to measure the amounts of investment earnings or losses that will be credited or debited to the Participant’s Excess 401(k) Plan Account on the Plan Sponsor’s books and records, and the Plan Sponsor shall not be required under the Plan to establish any account in the Vanguard Funds or to purchase any Vanguard Fund shares or other investment on the Participant’s behalf. The designation by a Participant of any investment option under this Section 4.6 shall be made in accordance with the rules and procedures prescribed by the Administrator.

        4.7 Administration of Investments. The investment gain or loss with respect to Employee Pre-Tax Credits and the Employer Matching Credits credited to the Participant’s Excess 401(k) Plan Account on behalf of such Participant shall continue to be determined in the manner selected by the Participant pursuant to Section 4.6 until a new designation is filed with the Administrator or its appointee. If any Participant fails to file a designation, he or she shall be deemed to have elected to continue to follow the investment designation, if any, in effect for the immediately preceding Plan Year. A designation filed by a Participant changing his or her investment option selection shall apply to either future contributions, amounts already accumulated in his or her Excess 401(k) Plan Account, or both. A Participant may change his or her investment selection on any Valuation Date and such change shall be effected as soon as administratively practicable.

        4.8 Valuation of Excess 401(k) Plan Accounts. The Excess 401(k) Plan Account of each Participant shall be valued on each Valuation Date based upon the performance of the investment option or options selected by the Participant. Such valuation shall reflect the net asset value expressed per share of each designated investment option. Each Excess 401(k) Plan Account shall be valued separately. A valuation summary shall be prepared on each Determination Date and/or such other dates as may be determined by the Administrator.

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ARTICLE V —VESTING

        5.1 Immediate Vesting. At all times, a Participant will be 100% vested in his or her Excess 401(k) Plan Account.

ARTICLE VI —PAYMENT OF BENEFITS

        6.1 Benefit upon Termination of Employment. Upon a Participant’s Employment Termination Date, the Plan Sponsor shall pay to the Participant an amount equal to the balance in the Participant’s Excess 401(k) Plan Account in two installments:

     (a) The first installment, in an amount equal to 50% of the balance in the Excess 401(k) Plan Account, shall be paid within 60 days following his/her Employment Termination Date; and

     (b) The second installment, in an amount equal to the then remaining balance in the Excess 401(k) Plan Account, shall be paid during the first Annual Distribution Period following the date on which the first installment was paid.

        6.2 Payment of Benefits at Retirement. If a Participant remains continuously employed by a Participating Company until he or she reaches his or her “Early Retirement Date” (as such term is defined in the PMA Capital Corporation Pension Plan), the Plan Sponsor shall pay the Participant a benefit either:

     (a) In two installments, according to the provisions of Section 6.1 above; or

     (b) If the Participant makes an irrevocable election at least 90 days prior to the Plan Year in which he or she retires, in the following five annual installments:

     (1) During the first Annual Distribution Period following the Participant’s Employment Termination Date, a cash payment in an amount equal to 20% of the balance in the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made;

     (2) During the second Annual Distribution Period following the Participant’s Employment Termination Date, a cash payment in an amount equal to 25% of the then balance in the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made;

     (3) During the third Annual Distribution Period following the Participant’s Employment Termination Date, a cash payment in an amount equal to 33% of the then balance in the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made;

     (4) During the fourth Annual Distribution Period following the Participant’s Employment Termination Date, a cash payment in an amount equal to 50% of the then balance in the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made; and

     (5) During the fifth Annual Distribution Period following the Participant’s Employment Termination Date, a cash payment in an amount equal to the then remaining balance in the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made.

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        6.3 Payment of Benefits Following Death. Upon a Participant’s date of death, the Administrator shall reduce the balance in the Participant’s Excess 401(k) Plan Account by the amount that the Participant has previously received or shall receive pursuant to Section 6.2. Thereafter, the Plan Sponsor shall pay to the Participant’s Beneficiary a single sum payment, in cash, equal to the balance credited to the Participant’s Excess 401(k) Plan Account on the Valuation Date coincident with, or next preceding, the date payment is made. Payment under this Section 6.3 shall be made as soon as practicable following the receipt by the Plan Sponsor of acceptable proof of the Participant’s death.

        6.4 Earnings where Installment Payments Are Made. Where any benefit is paid in annual installments, the undistributed balance credited to the Account during the period of the installment payments and ending on the date of the last installment payment shall be credited with investment earnings or debited with investment losses in accordance with Section 4.6.

        6.5 Form of Payment. All payments under this Plan shall be in cash only and no Participant or Beneficiary shall have any right to receive a distribution in any other form of payment.

        6.6 Change of Control where Installment Payments Are Made. In the event of a Change of Control of the Plan Sponsor, a terminated or retired Participant, who has not received his or her entire balance under Section 6.1 or 6.2, shall be paid by the Plan Sponsor any undistributed balance credited to the Participant’s Excess 401(k) Plan Account, in a single sum payment, in cash, as soon as practicable following such Change of Control.

        6.7 Reduced Benefit upon Request following a Change of Control. Within 60 days following a Change of Control, a Participant may elect in writing to receive an immediate distribution of a reduced benefit under the Plan. If the Participant makes such an election under this Section 6.7, the amount of the reduced benefit shall equal the balance credited to the Participant’s Excess 401(k) Plan Account, reduced by the lesser of 5% of the balance or $25,000.

        6.8 Total Disability. If a Participant incurs a Total Disability, he or she will be deemed to have incurred his or her Employment Termination Date on the date that is 26 weeks after the date he or she commenced receiving short term disability benefits under the Plan Sponsor’s Health and Welfare Plan and the provisions of Section 6.1 shall apply to such Participant.

ARTICLE VII —ADMINISTRATION OF THE PLAN

        7.1 Administrator. The Committee appointed by the President of the Plan Sponsor is hereby designated as the administrator of the Plan. If no Committee is appointed by the Plan Sponsor as the Administrator, the Plan Sponsor shall be the Administrator of the Plan. The Administrator shall have the authority to control and manage the operation and administration of the Plan. The President of the Plan Sponsor may appoint another person to be the Administrator at any time. The President of the Plan Sponsor may also remove an Administrator and fill any vacancy which may arise.

        7.2 Committee Action. If a Committee is appointed as Administrator, the following rules apply:

     (a) On all matters within the jurisdiction of the Committee, the decision of a majority of the members of the Committee shall govern and control. The Committee may take action either at a meeting or in writing without a meeting, provided that in the latter instance all members of the Committee shall have been advised of the action contemplated and that the written instrument evidencing the action shall be signed by a majority of the members.

     (b) The President of the Plan Sponsor shall appoint the Chair of the Committee. The Committee may appoint, either from among its members or otherwise, a secretary who shall keep a record of all meetings and actions taken by the Committee. Either the Chair of the Committee or any member of the Committee designated by the Chair shall execute any certificate, instrument or other written direction on behalf of the Committee. Any action taken on matters within the discretion of the

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Committee. Any action taken on matters within the discretion of the Committee shall be final and conclusive as to the parties thereto and as to all Participants or beneficiaries claiming any right under the Plan.

        7.3 Powers and Duties of the Administrator. The Administrator shall have all powers necessary to supervise the administration of the Plan and to control its operation in accordance with its terms, including, without limiting the generality of the foregoing, the power to:

     (a) Appoint, retain, and terminate such persons as it deems necessary or advisable to assist in the administration of the Plan or to render advice with respect to the responsibilities of the Administrator under the Plan, including accountants, attorneys and physicians;

     (b) Make use of the services of the employees of the Participating Company in administrative matters;

     (c) Obtain and act on the basis of all valuations, certificates, opinions and reports furnished by the persons described in (a) or (b) above;

     (d) Review the manner in which benefit claims and other aspects of the Plan administration have been handled by the employees of the Participating Company;

     (e) Determine all benefits and resolve all questions pertaining to the administration and interpretation of the Plan provisions, either by rules of general applicability or by particular decisions; to the maximum extent permitted by law, all interpretations of the Plan and other decisions of the Administrator shall be conclusive and binding on all parties;

     (f) Adopt such forms, rules and regulations as it shall deem necessary or appropriate for the administration of the Plan and the conduct of its affairs, provided that any such forms, rules and regulations shall not be inconsistent with the provisions of the Plan;

     (g) Remedy any inequity from incorrect information received or communicated or from administrative error;

     (h) Commence or defend any litigation arising from the operation of the Plan in any legal or administrative proceeding;

     (i) Determine all considerations affecting the eligibility of any Eligible Employee to become a Participant or remain a Participant in the Plan;

     (j) Determine the status and rights of Participants and their Beneficiaries;

     (k) Direct the Plan Sponsor to pay benefits under the Plan, and to give such other directions and instructions as may be necessary for the proper administration of the Plan; and

     (l) Be responsible for the preparation, filing and disclosure on behalf of the Plan of such documents and reports as are required by any applicable federal or state law.

        7.4 Decisions of Administrator. All decisions of the Administrator, and any action taken by it in respect of the Plan shall be conclusive and binding on all persons, subject to the claims and appeal procedure described in Section 7.10 hereof.

        7.5 Administrative Expenses. All expenses incident to the operation and administration of the Plan reasonably incurred, including, without limitation by way of specification, the fees and expenses of attorneys and

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advisors, and for such other professional, technical and clerical assistance as may be required, shall be paid by the Plan Sponsor.

        7.6 Eligibility to Participate. No member of the Administrator who is also an Eligible Employee shall be precluded from participating in the Plan if otherwise eligible, but he or she shall not be entitled, as a member of the Administrator, to act or pass upon any matters pertaining specifically to his or her own benefit under the Plan.

        7.7 Insurance and Indemnification for Liability. The rules relating to the insurance and indemnification for liability are as follows:

     (a) Insurance.The Plan Sponsor may, in its discretion, obtain, pay for, and keep current a policy or policies of insurance, insuring members of the Administrator and other employees to whom any responsibility with respect to administration of the Plan has been delegated against any and all liabilities, costs and expenses incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities and obligations under the Plan and any applicable federal or state law.

     (b) Indemnity.If the Plan Sponsor does not obtain, pay for, and keep current the type of insurance policy or policies referred to in Section 7.7(a) above, or if such insurance is provided but any of the members of the Administrator or other employees referred to in Section 7.7(a) above incur any costs or expenses which are not covered under such policies, then, in either event, the Plan Sponsor shall, to the extent permitted by law, indemnify and hold harmless such parties against any and all costs, expenses and liabilities incurred by such parties in performing their duties and responsibilities under this Plan, provided such party or parties were acting in good faith within what was reasonably believed to have been in the best interests of the Plan and its Participants.

        7.8 Agent for Service of Legal Process. The name and address of the person designated as the agent for service of legal process are:

Plan Administrator
PMA Capital Corporation
1735 Market Street, 27th Floor
Philadelphia, PA 19103

        7.9 Delegation of Responsibility. The Administrator may designate a committee of one or more persons to carry out any of the responsibilities or functions assigned or allocated to the Administrator under the Plan. Each reference to the Administrator in this Plan shall include the Administrator as well as any person to whom the Administrator may have delegated the performance of a particular function or responsibility under this Section 7.9.

        7.10 Claims Procedure.

     (a) Claim for Benefits.All claims for benefits under the Plan shall be made in writing and shall be signed by the applicant. Claims shall be submitted to a representative designated by the Administrator and hereinafter referred to as the “Claims Coordinator”.

     Each claim hereunder shall be acted on and approved or disapproved by the Claims Coordinator within 60 days following the receipt by the Claims Coordinator of the information necessary to process the claim.

     In the event the Claims Coordinator denies a claim for benefits, in whole or in part, the Claims Coordinator shall notify the applicant in writing of the denial of the claim and notify such applicant of his or her right to a review of the Claims Coordinator’s decision by the Administrator. Such notice by the Claims Coordinator shall also set forth, in a manner calculated to be understood by the applicant, the specific reason for such denial, the specific Plan provisions on which the denial is based, a description of any additional

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material or information necessary to perfect the claim, with an explanation of why such material or information is necessary, and an explanation of the Plan’s claims review procedure as set forth in this Section 7.10.

     If no action is taken by the Claims Coordinator on an applicant’s claim within 60 days after receipt by the Claim Coordinator, such application shall be deemed to be denied for purposes of the following appeals procedure.

     (b) Appeals Procedure.Any applicant whose claim for benefits is denied in whole or in part (“Claimant”) may appeal from such denial to the Administrator for a review of the decision by the Administrator. Such appeal must be made within six months after the Claimant has received written notice of the denial as provided above in Section 7.10(a). An appeal must be submitted in writing within such period and must:

     (1) Request a review by the Administrator of the claim for benefits under the Plan;

     (2) Set forth all of the grounds upon which the Claimant's request for review is based and any facts in support thereof; and

     (3) Set forth any issues or comments which the Claimant deems pertinent to the appeal.

     The Administrator shall regularly review appeals by Claimants. The Administrator shall act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing the Claimant’s request for review. If such an extension of time for processing is required, written notice of the extension shall be forwarded to the Claimant prior to the commencement of the extension. In no event shall such extension exceed a period of 120 days after the request for review is received by the Administrator.

     The Administrator shall make a full and fair review of each appeal and any written materials submitted by the Claimant and/or the Participating Company in connection therewith. The Administrator may require the Claimant and/or the Participating Company to submit such additional facts, documents or other evidence as the Administrator in its discretion deems necessary or advisable in making its review. The Claimant shall be given the opportunity to review pertinent documents or materials upon submission of a written request to the Administrator, provided the Administrator finds the requested documents or materials are pertinent to the appeal.

     On the basis of its review, the Administrator shall make an independent determination of the Claimant’s eligibility for benefits under the Plan. The decision of the Administrator on any claim for benefits shall be final and conclusive upon all parties thereto.

     In the event the Administrator denies an appeal, in whole or in part, the Administrator shall give written notice of the decision to the Claimant, which notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reasons for such denial and which shall make specific reference to the pertinent Plan provisions on which the Administrator’s decision was based.

     (c) Compliance with Regulations.It is intended that the claims procedure of this Plan be administered in accordance with the claims procedure regulations of the Department of Labor set forth in 29 CFR § 2560.503-1.

ARTICLE VIII —AMENDMENT AND TERMINATION

        8.1 Amendment or Termination.

     (a) The Board of Directors shall have the right to alter, amend, modify, restate or terminate the

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Plan, or any part thereof, through the adoption of a written resolution when in its absolute discretion, it determines such action to be advisable; provided, however, that no such action by the Board of Directors shall reduce the amount credited to a Participant’s Excess 401(k) Plan Account at the time of the adoption of the amendment, modification or restatement and no such amendment, modification or restatement or termination may occur as a result of a Change of Control, within two years after a Change of Control, or as part of any plan to effect a Change of Control. Each amendment shall be set forth in a written instrument.

     (b) In the event of termination, the Plan Sponsor, at its option, may pay each Participant an amount equal to the total amount credited to the Participant’s Excess 401(k) Plan Account in a single sum payment of cash or, in the alternative, pay such amount in accordance with the provisions of Article VI. Termination of the Plan shall not serve to reduce the amount credited to a Participant’s Excess 401(k) Plan Account on the date of termination. Moreover, no such termination may occur as a result of a Change of Control, within two years after a Change of Control, or as part of any plan to effect a Change of Control.

ARTICLE IX —MISCELLANEOUS

        9.1 Funding. Nothing contained in this Plan and no action taken pursuant to this Plan will create or be construed to create or require a funded arrangement or any kind of fiduciary duty between the Plan Sponsor and/or the Administrator and a Participant. Benefits payable under this Plan to a Participant or Beneficiary, if applicable, shall be paid directly by the Plan Sponsor from a grantor trust (the “Trust”) within the meaning of Section 671 of the Code, to the extent that such benefits are not paid from the general assets of the Plan Sponsor or other Participating Company. The Trust must be an irrevocable grantor trust, the assets of which are subject to the claims of the general creditors of the Plan Sponsor in the event of its insolvency, defined for the purposes of this provision as the Plan Sponsor’s inability to pay its debts as they become due or that the Plan Sponsor is subject to a pending proceeding under the United States Bankruptcy Code. Except as to any amounts paid or payable to the Trust, the Plan Sponsor shall not be obligated to set aside, earmark or escrow any funds or other assets to satisfy its obligations under this Plan, and the Participant and his or her Beneficiary shall not have any property interest in any specific assets of the Plan Sponsor other than an unsecured right to receive payments from the Plan Sponsor as provided herein. To the extent any person acquires a right hereunder, such right(s) shall be no greater than those of a general, unsecured creditor of the Plan Sponsor. In the event that the amounts accumulated in the Trust are not sufficient to pay the benefits payable under this Plan, such benefits shall be paid directly from the general assets of the Plan Sponsor or other Participating Company.

        9.2 Status of Employment. Neither the establishment or maintenance of the Plan, nor any action of the Plan Sponsor or any Participating Company or the Administrator shall be held or construed to confer upon any individual any right to be continued as an employee nor, upon dismissal, any right or interest in any assets of the Plan Sponsor or a Participating Company nor to affect any Participant’s right to terminate his/her employment at any time.

        9.3 Payments to Minors and Incompetents. If a Participant or Beneficiary entitled to receive any benefits hereunder is a minor or is deemed by the Administrator or is adjudged to be legally incapable of giving a valid receipt and discharge for such benefits, they will be paid to the duly appointed guardian of such minor or incompetent or to such other legally appointed person as the Administrator may designate. Such payment shall, to the extent made, be deemed a complete discharge of any liability for such payment under the Plan.

        9.4 Inalienability of Benefits.

     (a) Benefits payable under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, whether voluntary or involuntary. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits under the Plan shall be void. The Plan Sponsor or other Participating Company shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits under the Plan.

     (b) Notwithstanding Section 9.4(a), if a Participant is indebted to the Plan Sponsor or other

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Participating Company at any time when payments are to be made by the Plan Sponsor to the Participant under the provisions of the Plan, the Plan Sponsor shall have the right to reduce the amount of payment to be made to the Participant (or the Participant’s Beneficiary) to the extent of such indebtedness. Any election by the Plan Sponsor not to reduce such payment shall not constitute a waiver of its claim for such indebtedness.

        9.5 Governing Law. Except to the extent preempted by federal law, the Plan shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania.

        9.6 Severability. In case any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal and invalid provisions had never been set forth.

        9.7 Required Information to Administrator. Each Participant will furnish to the Administrator such information as the Administrator considers necessary or desirable for purposes of administering the Plan, and the provisions of the Plan respecting any payments thereunder are conditional upon the Participant’s furnishing promptly such true, full and complete information as the Administrator may request. The Administrator, in its sole discretion, may request a Participant to submit proof of his/her age. The Administrator will, if such proof of age is not submitted when requested, use as conclusive evidence thereof such information as is deemed by it to be reliable, regardless of the lack of proof. Any notice or information which, according to the terms of the Plan or the rules of the Administrator, must be filed with the Administrator, shall be deemed so filed if addressed and either delivered in person or mailed to and received by the Administrator at the following address:

Plan Administrator
PMA Capital Corporation
1735 Market Street, 27th Floor
Philadelphia, PA 19103

Failure on the part of the Participant or Beneficiary to comply with any such request within a reasonable period of time shall be sufficient grounds for delay in the payment of benefits under the Plan until such information or proof is received by the Administrator.

        9.8 Income and Payroll Tax Withholding. To the extent required by the laws in effect at the time payments are made under this Plan, the Plan Sponsor shall withhold from such deferred compensation payments any taxes required to be withheld for federal, state or local tax purposes.

        9.9 Application of Plan. The Plan, as set forth herein, shall apply to any Participant terminating employment on or after the Effective Date. The Deferred Compensation Plan, as in effect on a Participant’s Employment Termination Date, shall apply to any such Participant terminating employment before the Effective Date.

        9.10 No Effect on Other Benefits. No amount credited under this Plan shall be deemed part of the total compensation for the purpose of computing benefits to which a Participant may be entitled under any pension plan or other supplemental compensation arrangement, unless such plan or arrangement specifically provides to the contrary. The amounts payable to the Participant hereunder will be in addition to any benefits paid or payable to the Participant under any other pension, disability, annuity or retirement plan or policy whatsoever. Nothing herein contained will in any manner modify, impair or affect any existing or future rights of the Participant to participate in any other employee benefits plan or receive benefits in accordance with such plan or to participate in any current or future pension plan of the Plan Sponsor or any supplemental arrangement which constitutes a part of the Plan Sponsor’s regular compensation structure.

        9.11 Inurement. The Plan shall be binding upon, and shall inure to, the benefit of the Participating Company and its successors and assigns, and the Participant and the Participant’s Beneficiaries, successors, heirs, executors and administrators.

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        9.12 Notice. Any notices or elections required or permitted to be given or made under this Plan will be sufficient if in writing and if sent by first class, postage paid mail to the Participant’s last known address as shown on the Participating Company’s personnel records or to the principal office of the Participating Company, as the case may be. The date of such mailing shall be deemed the date of notice, consent or demand. Either party may change the address to which notice is to be sent by giving notice of the change of address in the manner aforesaid.

        9.13 Captions. The captions contained in, and the table of contents prefixed to, the Plan are inserted only as a matter of convenience and for ease of reference in no way define, limit, enlarge or describe the scope or intent of this Plan or in any way affect the Plan or the construction of any provision thereof.

        9.14 Acceleration of Payments. Notwithstanding any other provision of the Plan, if the Administrator determines, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his/her delegate, a decision by a court of competent jurisdiction involving a Participant, or a closing agreement involving a Participant made under Section 7121 of the Code that is approved by the Commissioner, that such Participant or Beneficiary has recognized or will recognize income for federal income tax purposes with respect to benefits that are or will be payable to the Participant under the Plan before they otherwise would be paid to the Participant or Beneficiary (as applicable), upon the request of the Participant or Beneficiary, the Administrator shall immediately make distribution to the Participant or Beneficiary of the amount so taxable.

        9.15 Reporting and Disclosure Requirements. In order to comply with the requirements of Title I of ERISA, the Administrator shall:

     (a) File a statement with the Secretary of Labor that includes the name and address of the employer, the employer identification number assigned by the Internal Revenue Service, a declaration that the employer maintains the Plan primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and a statement of the number of such plans and the number of employees in each; and

     (b) Provide plan documents, if any, to the Secretary of Labor upon request as required by Section 104(a)(1) of ERISA. It is intended that this provision comply with the requirements of 29 CFR §2520.104-23.

        This method of compliance is available to the Plan only so long as the Plan is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and for which benefits are paid as needed solely from the general assets of the employer or are provided exclusively through insurance contracts or policies, the premiums for which are paid directly by the employer from its general assets, issued by an insurance company or similar organization which is qualified to do business in any State, or both.

        9.16 Gender and Number. Whenever any words are used herein in any specific gender, they shall be construed as though they were used in any other applicable gender. The singular form, whenever used herein, shall mean or include the plural form where applicable and vice versa.

ARTICLE X — ADOPTION BY AFFILIATED EMPLOYERS

        10.1 Adoption of Plan. The following rules shall apply with respect to the adoption of the Plan:

     (a) Adoption by Affiliated Employers. The terms of this Plan may be adopted by any Affiliated Employer, provided:

     (1) The Board of Directors consents to such adoption by an appropriate written resolution;

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     (2) The board of directors of the Affiliated Employer adopts this Plan by an appropriate written resolution which defines the Eligible Employees; and

     (3) The Affiliated Employer executes a Plan Adoption Agreement in the form attached hereto as Plan Exhibit A, applicable to the Eligible Employees of such Affiliated Employer. The Affiliated Employer may elect in such Adoption Agreement to have special provisions apply with respect to the Eligible Employees of the Affiliated Employer which differ from the provisions of the Plan applicable to other Eligible Employees; and

     (4) The Affiliated Employer executes such other documents as may be required to make such Affiliated Employer a party to the Plan as a Participating Company.

     (b) Effect of Adoption. An Affiliated Employer that adopts the Plan is thereafter a Participating Company with respect to its Eligible Employees.

        10.2 Withdrawal from Plan. Any Participating Company may at any time withdraw from the Plan upon giving the Board of Directors at least 30 days prior written notice of its intention to withdraw.

        10.3 Application of Withdrawal Provisions. The withdrawal provisions contained in Section 10.2 shall be applicable only if the withdrawing Participating Company continues to cover its Participants under a plan similar to this Plan. Otherwise the termination provisions of the Plan shall apply.

        10.4 Plan Sponsor Appointed Agent of Participating Companies. As a condition precedent to the adoption of the Plan, each Affiliated Employer must appoint the Board of Directors as its agent to exercise on its behalf all of the power and authority conferred upon the Plan Sponsor by the Plan, including, without limitation, the power to amend or to terminate the Plan.

        TO RECORD the adoption of this Plan, the Plan Sponsor on behalf of itself and each other Participating Company has caused this document to be executed by its duly authorized officers as of the 29th day of March, 2001.

ATTEST:	PMA CAPITAL CORPORATION
/s/ Robert L. Pratter	By: /s/ Francis W. McDonnell
Robert L. Pratter, Secretary	Francis W. McDonnell, Senior Vice President,
	Treasurer & Chief Financial Officer

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APPENDIX A - INVESTMENT OPTIONS AVAILABLE FOR MEASUREMENT OF INVESTMENT
EARNINGS OR LOSSES UNDER PLAN

        (a)   Morgan Growth Fund

        (b)   Total Bond Market Index Fund

        (c)   LIFEStrategy - Moderate Growth Fund (not available after March 31, 2001)

        (d)   LIFEStrategy - Growth Fund (not available after March 31, 2001)

        (e)   500 Index Fund

        (f)   Treasury Money Market Fund

        (g)   STAR Fund

        (h)   Windsor II Fund

        (i)   International Growth Fund

        (j)   Retirement Savings Trust

        (k)   Any other investment option selected by the Administrator

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APPENDIX B —LIST OF PARTICIPATING COMPANIES

        (a)   PMA Capital Corporation

        (b)   Pennsylvania Manufacturers’Association Insurance Company

        (c)   PMA Capital Insurance Company (formerly PMA Reinsurance Corporation)

        (d)   Caliber One Indemnity Company

        (e)   Caliber One Management Company, Inc.

        (f)   PMA Management Corp.

        (g)   PMA Re Management Company

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PLAN EXHIBIT A —PLAN ADOPTION AGREEMENT

[INSERT NAME OF ADOPTING AFFILIATED EMPLOYER]

PMA CAPITAL CORPORATION 401(k) EXCESS PLAN

[NOTE: Plan Exhibit A is not to be completed or executed. If an Affiliated Employer adopts the Plan, a separate instrument following the form of this Plan Exhibit A shall be completed and filed with the Administrator.]

By executing this Adoption Agreement, [ NAME OF ADOPTING AFFILIATED EMPLOYER], on this __________ day of ____, 19___ hereby adopts the PMA CAPITAL CORPORATION 401(k) EXCESS PLAN (“Plan”), the terms of which Plan are incorporated herein by reference, and by adopting said Plan hereby becomes a Participating Company in said Plan effective , 20 .

        1. The Effective Date of the Plan hereby created or continued is ______________, 20__.

        2. The Board of Directors of PMA CAPITAL CORPORATION consented to the adoption of the Plan by the Affiliated Employer named herein on ________________, 20__.

        3. The Board of Directors of [NAME OF ADOPTING AFFILIATED EMPLOYER] adopted the Plan on ________________, 20__.

Attest:	Name of Participating Company
[SEAL]
	By
Secretary	President
Attest:	ADOPTION CONSENTED TO BY:       PMA CAPITAL CORPORATION
[SEAL]
	By
Secretary	President

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EX-10

PMA CAPITAL CORPORATION EXECUTIVE
DEFERRED COMPENSATION PLAN
(As Amended and Restated Effective January 1, 1999)

MARCH 2001

TABLE OF CONTENTS

			PAGE
PREAMBLE			1
ARTICLE I - DEFINITIONS			1
	1.1	Administrator	1
	1.2	Affiliated Employer	1
	1.3	Annual Distribution Period	2
	1.4	Beneficiary	2
	1.5	Board of Directors	2
	1.6	Change of Control	2
	1.7	Code	2
	1.8	Compensation	2
	1.10	Deferral Agreement	2
	1.11	Deferred Benefit Account	2
	1.12	Determination Date	3
	1.13	Education Account	3
	1.14	Eligible Dependent	3
	1.15	Eligible Employee	3
	1.16	Employment Termination Date	3
	1.17	Enrollment Period	3
	1.18	ERISA	3
	1.19	Executive Deferral Contribution	3
	1.20	Fixed Period Benefit Account	3
	1.21	Investment Fund or Fund	3
	1.22	Matching Contribution	3
	1.23	Participant	3
	1.24	Participating Company	3
	1.25	Plan	3
	1.26	Plan Sponsor	3
	1.27	Plan Year	3
	1.28	Restatement Effective Date	3
	1.29	Retirement Account	3
	1.30	Unforeseen Financial Emergency	4
	1.31	Vested	4
ARTICLE II - PARTICIPATION			4
	2.1	Commencement of Participation	4
	2.2	Procedure For and Effect of Admission	4
ARTICLE III - PLAN CONTRIBUTIONS			4
	3.1	Executive Deferral Contribution	4
	3.2	Rules Governing Executive Deferral Contributions	4
	3.3	No Matching Contribution	5
ARTICLE IV - PARTICIPANTS' ACCOUNTS			5
	4.1	Establishment of Accounts	5
	4.2	Executive Benefit Allocation	5
	4.3	Irrevocable Allocation	5
	4.4	Allocation Among Investment Funds	5
	4.5	Administration of Investments	6

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	4.6	Valuation of Deferred Benefit Accounts	6
	4.7	Suballocation Within Deferred Benefit Accounts	6
	4.8	Investment Obligation of the Plan Sponsor	6
ARTICLE V - VESTING			6
	5.1	Vesting Schedule	6
ARTICLE VI - BENEFITS			7
	6.1	Normal Payment of Benefits	7
	6.2	Special Payment of Benefits	8
	6.3	Reduction of Amount of Benefit Payment in Certain Cases	9
ARTICLE VII - ADMINISTRATION OF THE PLAN			10
	7.1	Administrator	10
	7.2	Committee Action	10
	7.3	Powers and Duties of the Administrator	11
	7.4	Decisions of Administrator	12
	7.5	Expenses	12
	7.6	Eligibility to Participate	12
	7.7	Insurance and Indemnification for Liability	12
	7.8	Agent for Service of Legal Process	12
	7.9	Delegation of Responsibility	12
	7.10	Claims Procedure	12
ARTICLE VIII - AMENDMENT AND TERMINATION			14
	8.1	Amendment or Termination	14
ARTICLE IX - MISCELLANEOUS			14
	9.1	Funding	14
	9.2	Status of Employment	14
	9.3	Payments to Minors and Incompetents	14
	9.4	Inalienability of Benefits	14
	9.5	Governing Law	15
	9.6	Severability	15
	9.7	Required Information to Administrator	15
	9.8	Income and Payroll Tax Withholding	15
	9.9	Application of Plan	15
	9.10	No Effect on Other Benefits	15
	9.11	Inurement	16
	9.12	Notice	16
	9.13	Captions	16
	9.14	Acceleration of Payments	16
	9.15	Reporting and Disclosure Requirements	16
	9.16	Gender and Number	16
ARTICLE X - ADOPTION BY AFFILIATED EMPLOYERS			17
	10.1	Adoption of Plan	17
	10.2	Withdrawal from Plan	17
	10.3	Application of Withdrawal Provisions	17
	10.4	Plan Sponsor Appointed Agent of Participating Companies	17
APPENDIX A - LIST OF PARTICIPATING COMPANIES			18

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PLAN EXHIBIT A - PLAN ADOPTION AGREEMENT	19
PLAN ADOPTION AGREEMENT - PENNSYLVANIA MANUFACTURERS'             ASSOCIATION INSURANCE COMPANY	20
PLAN ADOPTION AGREEMENT - PMA CAPITAL INSURANCE COMPANY             (FORMERLY PMA REINSURANCE CORPORATION)	21
PLAN ADOPTION AGREEMENT - CALIBER ONE INDEMNITY COMPANY	22
PLAN ADOPTION AGREEMENT - CALIBER ONE MANAGEMENT COMPANY, INC.	23
PLAN ADOPTION AGREEMENT - PMA MANAGEMENT CORPORATION	24
PLAN ADOPTION AGREEMENT - PMA RE MANAGEMENT COMPANY	25

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PMA CAPITAL CORPORATION EXECUTIVE
DEFERRED COMPENSATION PLAN
(As Amended and Restated Effective January 1, 1999)

PREAMBLE

        WHEREAS, PMA CAPITAL CORPORATION, a Pennsylvania corporation (the “Plan Sponsor”) (then known as the Pennsylvania Manufacturers Corporation) and certain of its affiliated employers adopted the PMA CAPITAL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN (the “Plan”) (then known as the PMC Executive Deferred Compensation Plan) originally effective February 1, 1988, to permit their eligible executives to defer receipt of a portion of their annual compensation, provided such executives are members of a select group of management and highly compensated employees within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); and

        WHEREAS, the Plan Sponsor’s Board of Directors has reserved the right, in Article VIII of the Plan, to amend the Plan, provided that no amendment may reduce a participant’s benefit accrued as of the date of the amendment and further provided that written notice of such amendment is given to each participant and the beneficiary of any deceased participant; and

        WHEREAS, the Plan has been amended and restated several times, most recently in 1998; and

        WHEREAS, the Plan Sponsor desires to permit participants to defer receipt of compensation on an annual basis as well as during the annual enrollment period, to request the distribution of benefits in the event of unexpected hardship, to freeze employer matching contributions and to provide for immediate distribution of benefits under certain circumstances in the event of a change of control of the Plan Sponsor, effective January 1, 1999; and

        WHEREAS, the Plan Sponsor desires to have the rights to benefits, if any, of an eligible employee who neither renders personal services to the Plan Sponsor or one of its affiliated employers after December 31, 1998, nor has a balance credited to any account under the Plan as of December 31, 1998, to be determined in accordance with the provisions of the Plan in effect on the date that the employee’s personal services ceased;

        NOW THEREFORE, the Plan Sponsor hereby amends and restates the Plan, effective January 1, 1999, as follows:

ARTICLE I —DEFINITIONS

        The following words and phrases shall have the following meanings unless a different meaning is clearly required by the context:

        1.1 Administrator means the committee (hereinafter referred to as “Committee”) appointed by the President of the Plan Sponsor to serve as the Administrator of the Plan. If no such committee is appointed, the Plan Sponsor shall be the Administrator of the Plan.

        1.2 Affiliated Employer means a member of a group of employers, of which the Plan Sponsor is a member and which group constitutes:

     (a) A controlled group of corporations (as defined in Section 414(b) of the Code);

     (b) Trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c) of the Code);

     (c) Trades or businesses (whether or not incorporated) which constitute an affiliated service group (as defined in Section 414(m) of the Code); or

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     (d) Any other entity required to be aggregated with the Plan Sponsor pursuant to Section 414(o) of the Code and the Treasury regulations thereunder.

        1.3 Annual Distribution Period means the first 60 days of a Plan Year.

        1.4 Beneficiary means the individual, trust or other entity, designated in writing by a Participant, on a form filed with the Administrator, to receive payments in the event of the Participant’s death. In the event there is no designated beneficiary under the Plan, the beneficiary shall be (a) the Participant’s surviving spouse, or (b) if there is no surviving spouse, the Participant’s beneficiary under the Plan Sponsor’s group term life insurance program, or (c) if neither (a) nor (b) is applicable, the executors and/or administrators of the Participant’s estate.

        1.5 Board of Directors means the Board of Directors of the Plan Sponsor, as from time to time constituted, or any committee thereof which is authorized to act on behalf of the Board of Directors.

        1.6 Change of Control means a change of control of the Plan Sponsor of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or Item 1(a) of a Current Report on Form 8-K or any successor rule, whether or not the Plan Sponsor is then subject to such reporting requirements; provided that, without limitation, such a Change of Control shall be deemed to have occurred if:

     (a) Any “person”(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or first becomes the “beneficial owner”(as determined for purposes of Regulation 13D-G under the Exchange Act as currently in effect), directly or indirectly, in a transaction or series of transactions, of securities of the Plan Sponsor representing more than 50% of the voting power of the Plan Sponsor’s voting capital stock (the “Voting Stock”); or

     (b) The consummation of a merger, or other business combination after which the holders of the Voting Stock do not collectively own 50% or more of the voting capital stock of the entity surviving such merger or other business combination, or the sale, lease, exchange or other transfer in a transaction or series of transactions of all or substantially all of the assets of the Plan Sponsor; or

     (c) At any time individuals who were either nominated for election by the Plan Sponsor’s Board of Directors or were elected by the Plan Sponsor’s Board of Directors cease for any reason to constitute at least a majority of the Plan Sponsor’s Board of Directors.

        1.7 Code means the Internal Revenue Code of 1986, as amended. Reference to a specific Section of the Code shall include such Section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such Section.

        1.8 Compensation means a Participant’s salary and any incentive pay, before reduction for employee contributions under this or any other nonqualified savings plan, a savings plan qualified under Section 401(k) of the Code or a cafeteria plan qualified under Section 125 of the Code and before reduction for qualified transportation fringes described in Prop. Treas. Reg. § 1.132-9, Q and A-11 et seq.

        1.9 Credit means additions to a Deferred Benefit Account.

        1.10 Deferral Agreement means a written agreement between a Participant and the Participating Company that employs him/her, whereby the Participant agrees to defer a portion of his/her Compensation and the Participating Company agrees to provide benefits under the Plan.

        1.11 Deferred Benefit Account means a bookkeeping account that is credited with a Participant’s Executive Deferral Contributions and, for Plan Years before January 1, 1999, Matching Contributions.

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        1.12 Determination Date means March 31, June 30, September 30 and December 31 of each Plan Year.

        1.13 Education Account means a Deferred Benefit Account established for an Eligible Dependent of a Participant pursuant to Section 4.1.

        1.14 Eligible Dependent means a dependent of a Participant for federal income tax purposes who is less than 16 years old at the time that an Education Account is first established for him/her hereunder. An Eligible Dependent for whom an Education Account is established shall remain an Eligible Dependent until he/she attains age 18.

        1.15 Eligible Employee means an officer of a Participating Company, provided such officer is a member of a select group of management and highly compensated employees within the meaning of Section 201(2) of ERISA.

        1.16 Employment Termination Date means the date on which the Participant’s status as an employee of any Participating Company terminates.

        1.17 Enrollment Period means, for a calendar year, the 60 day period ending on the December 14th immediately preceding such calendar year.

        1.18 ERISA means the Employee Retirement Income Security Act of 1974, as amended. Reference to a specific Section of ERISA shall include such Section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such Section..

        1.19 Executive Deferral Contribution means the Plan contribution described in Section 3.1.

        1.20 Fixed Period Benefit Account means a Deferred Benefit Account established pursuant to Section 4.1.

        1.21 Investment Fund or Fund means any of the mutual funds which comprise The Vanguard Group of Investment Companies, other than a fund offered only to participants in tax-qualified retirement plans or a tax-advantaged fund except as otherwise restricted by the Administrator.

        1.22 Matching Contribution means a Participating Company’s contribution to the Plan for a Plan Year before 1999.

        1.23 Participant means an Eligible Employee who has met the conditions for participation contained in Article II. An individual who ceases to be an Eligible Employee shall nonetheless remain a Participant for purposes of benefit payments only, until all amounts due him/her under the Plan have been paid.

        1.24 Participating Company means the Plan Sponsor and each of its Affiliated Employers which, upon the approval of the Board of Directors, has agreed to participate in this Plan in accordance with the provisions of Article X. Each Participating Company is listed on Appendix A.

        1.25 Plan means the PMA CAPITAL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN, as set forth in this document and as it may be amended from time to time.

        1.26 Plan Sponsor means PMA Capital Corporation, a Pennsylvania corporation.

        1.27 Plan Year means the calendar year.

        1.28 Restatement Effective Date means January 1, 1999. The original effective date of the Plan was February 1, 1988.

        1.29 Retirement Account means a Deferred Benefit Account established pursuant to Section 4.1.

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        1.30 Unforeseen Financial Emergency means a Participant’s severe financial hardship due to an unforeseeable emergency resulting from a sudden and unexpected illness or accident of the Participant, or, a sudden and unexpected illness or accident of a dependent (as defined by Section 152(a) of the Code) of the Participant, or loss of the Participant’s property due to casualty, or other similar and extraordinary unforeseeable circumstances arising as a result of events beyond the control of the Participant. A need to send the Participant’s child to college or a desire to purchase a home is not an unforeseeable emergency. No Unforeseen Financial Emergency shall be deemed to exist to the extent that the financial hardship is or may be relieved (a) through reimbursement or compensation by insurance or otherwise, (b) by borrowing from commercial sources on reasonable commercial terms to the extent that this borrowing would not itself cause a severe financial hardship, (c) by cessation of deferrals under the Plan, or (d) by liquidation of the Participant’s other assets (including assets of the Participant’s spouse and minor children that are reasonably available to the Participant) to the extent that this liquidation would not itself cause severe financial hardship. For the purposes of the preceding sentence, the Participant’s resources shall be deemed to include those assets of his or her spouse and minor children that are reasonably available to the Participant; however, property held for the Participant’s child under an irrevocable trust or under a Uniform Gifts to Minors Act custodianship or Uniform Transfers to Minors Act custodianship shall not be treated as a resource of the Participant. The Administrator shall determine whether the circumstances of the Participant constitute an unforeseeable emergency and thus an Unforeseen Financial Emergency within the meaning of this Section. Following a uniform procedure, the Administrator’s determination shall consider any facts or conditions deemed necessary or advisable by the Administrator, and the Participant shall be required to submit any evidence of the Participant’s circumstances that the Administrator requires. The determination as to whether the Participant’s circumstances are a case of an Unforeseen Financial Emergency shall be based on the facts of each case; provided however, that all determinations as to an Unforeseen Financial Emergency shall be uniformly and consistently made according to the provisions of this Section for all Participants in similar circumstances.

        1.31 Vested means the balance in a Participant’s Deferred Benefit Accounts to which the Participant has a nonforfeitable right, as determined under Section 5.1.

ARTICLE II —PARTICIPATION

        2.1 Commencement of Participation. Each employee who is a Participant in the Plan on January 1, 1999, shall remain a Participant. Each other employee shall become eligible to participate in the Plan when he/she becomes an Eligible Employee.

        2.2 Procedure For and Effect of Admission. An Eligible Employee shall become a Participant once he/she has completed such forms and provided such data as are reasonably required by the Administrator. By becoming a Participant, an Eligible Employee shall for all purposes be deemed conclusively to have assented to the provisions of this Plan and all amendments hereto.

ARTICLE III —PLAN CONTRIBUTIONS

        3.1 Executive Deferral Contribution. Subject to the provisions of Section 3.2, a Participant may authorize the Participating Company that employs him/her to reduce his/her Compensation by any fixed dollar amount and to have a corresponding amount credited to his/her Deferred Benefit Accounts, in accordance with Section 4.2. Such deferral election shall be made prior to the date on which the Participant performs services with respect to which the Compensation is earned. A Participant may make a separate election to reduce the amount of incentive pay paid to him/her by any percent of such incentive pay awarded.

        3.2 Rules Governing Executive Deferral Contributions

     (a) The minimum amount that a Participant may elect to defer for a Plan Year is $1,000.

     (b) A Participant may elect any Annual Distribution Period with respect to a Fixed Period Benefit Account which is at least twenty-four months after the Enrollment Period in which the Annual Distribution

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Period is elected. Notwithstanding the prior sentence, an individual who first becomes a Participant after the first day of a Plan Year may make an election under Section 3.1 effective as of the payroll period coincident with or next following the date such election is received by the Administrator and may further elect any Annual Distribution Period that is at least the second Annual Distribution Period following the date on which the individual became a Participant.

     (c) The amount of Compensation that a Participant elects to defer shall be credited to the Participant’s Deferred Benefit Accounts on or about the date on which the Participant is paid the nondeferred portion of the Compensation which is the source of the deferral.

     (d) A Participant’s election to defer Compensation is irrevocable once the Enrollment Period ends and shall remain in effect until the earlier of the Participant’s Employment Termination Date, or the end of the Plan Year for which the deferral is effective; provided, however, that once during the Plan Year the Participant may modify his/her election to change the amount of Compensation he/she elects to defer for the remainder of the Plan Year, such change to be effective for the pay period which is at least two months after the date it is received by the Plan Administrator.

     (e) Notwithstanding any provision to the contrary, once payments commence to be made pursuant to Section 6.1(b), a Participant may not allocate credits to the Education Account with respect to which such payments are made.

        3.3 No Matching Contribution. No Participating Company shall make a Matching Contribution to the Plan for any Plan Year beginning after 1998.

ARTICLE IV —PARTICIPANTS’ACCOUNTS

        4.1 Establishment of Accounts. One or more of the following Deferred Benefit Accounts shall be established with respect to each Participant:

     (a) Retirement Account;

     (b) Education Account; and

     (c) Fixed Period Benefit Account.

        All contributions on behalf of a Participant shall be credited to the appropriate Deferred Benefit Accounts, in accordance with Section 4.2.

        4.2 Executive Benefit Allocation. A Participant's Deferral Agreement shall contain a written statement specifying the allocation of his/her anticipated Credits.

        4.3 Irrevocable Allocation. A Participant’s election to allocate anticipated Credits shall remain in effect until the earlier of his/her Employment Termination Date or the end of the Plan Year for which the election is effective; provided, however, that a Participant may modify his/her election to allocate Credits at any time he/she would be permitted to change the amount of Compensation he/she elects to defer for subsequent calendar quarters pursuant to Section 3.2(d) and subject to the limitations provided in Section 3.2(d).

        4.4 Allocation Among Investment Funds.

     (a) General. Except as provided in Section 4.4(b), a Participant may direct that the Credits be valued, in accordance with Section 4.6, as if the balance credited to the account were invested in one or more Investment Funds. The Participant may select up to six (or such greater number as the Administrator may

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determine). A Participant may make a separate selection with respect to each of his/her Deferred Benefit Accounts, but overall the Participant may not have investments in more than six (or such greater number as the Administrator may determine) Investment Funds.

     (b) Deferred Incentive Pay. A Participant's election regarding the allocation among investment options for valuation purposes in connection with a deferral of incentive pay under the PMA Capital Corporation Annual Incentive Plan shall be irrevocable, shall remain in effect until payment of the deferred incentive pay and may not at any time be modified. This provision shall be administered in accordance with Section 162(m) of the Code and Treas. Reg.ss. 1.162-27(e)(2)(iii)(B).

        4.5 Administration of Investments. The investment gain or loss with respect to Credits on behalf of a Participant shall continue to be determined in the manner selected by the Participant pursuant to Section 4.4. If any Participant fails to file a designation, under either Section 4.4(a) or 4.4(b), he/she shall be deemed to have elected to continue to follow the investment designation, if any, in effect for the immediately preceding Plan Year as to all amounts deferred under this Plan. A designation filed by a Participant changing his/her Investment Funds, to the extent permitted under Section 4.4(a), shall apply to either future contributions, amounts already accumulated in his/her Deferred Benefit Accounts, or both. A Participant may change his/her investment selection under Section 4.4(a) no more than once each calendar quarter.

        4.6 Valuation of Deferred Benefit Accounts. The Deferred Benefit Accounts of each Participant shall be valued daily based upon the performance of the Investment Fund or Funds selected by the Participant. Such valuation shall reflect the net asset value expressed per share of each designated Investment Fund. The fair market value of an Investment Fund shall be determined by the Administrator. Each Deferred Benefit Account shall be valued separately. A valuation summary shall be prepared on each Determination Date.

        4.7 Suballocation Within Deferred Benefit Accounts.

     (a) In the event a Participant allocates a portion of his/her anticipated Credits to an Education Account, the Participant may further allocate among subaccounts on behalf of any Eligible Dependent. In the absence of such suballocation, all Credits to the Participant’s Education Account shall be equally allocated among the Participant’s Eligible Dependents.

     (b) In the event a Participant allocates a portion of his/her anticipated Credits to a Fixed Period Benefit Account, the Participant may further allocate among subaccounts differentiated by benefit distribution dates.

     (c) Notwithstanding the foregoing, at any point in time a Participant may not have more than a total of five Accounts and subaccounts.

        4.8 Investment Obligation of the Plan Sponsor. Benefits are payable as they become due irrespective of any actual investments the Plan Sponsor may make to meet its obligations. Neither the Plan Sponsor, nor any trustee (in the event the Plan Sponsor elects to use a grantor trust to accumulate funds) shall be obligated to purchase or maintain any asset, and any reference to investments or Investment Funds is solely for the purpose of computing the value of benefits. To the extent a Participant or any person acquires a right to receive payments from the Plan Sponsor under this Plan, such right shall be no greater than the right of any unsecured creditor of the Plan Sponsor. Neither this Plan nor any action taken pursuant to the terms of this Plan shall be considered to create a fiduciary relationship between the Plan Sponsor and the Participants or any other persons or to establish a trust in which the assets are beyond the claims of any unsecured creditor of the Plan Sponsor.

ARTICLE V —VESTING

        5.1 Vesting Schedule. A Participant shall, subject to Section 6.2(b), at all times have a fully Vested

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interest with respect to the Executive Deferral Contributions to his/her Deferred Benefit Accounts. A Participant shall also have shall, subject to Section 6.2(b), a fully Vested interest in the Matching Contributions previously made to his/her Deferred Benefit Accounts as of January 1, 1999.

ARTICLE VI —BENEFITS

        6.1 Normal Payment of Benefits. Except as provided in Section 6.2, a Participant's benefits shall be paid as follows:

     (a) Retirement Account. If a Participant remains continuously employed by a Participating Company until he/she satisfies the age and service requirements for retirement under the PMA Capital Corporation Pension Plan, the Plan Sponsor shall pay the Participant a benefit either:

     (1) In an amount equal to the balance in the Participant's Retirement Account in two installments:

     (i) The first installment, in an amount equal to 50% of the balance in the Retirement Account, shall be paid within 60 days following his/her Employment Termination Date; and

     (ii) The second installment, in an amount equal to the remaining balance in the Retirement Account, shall be paid during the first Annual Distribution Period following the date on which the first installment was paid; or

     (2) If the Participant makes an irrevocable election at least 90 days prior to the Plan Year in which he/she retires, in the following five annual installments:

     (i) During the first Annual Distribution Period following the Participant’s Employment Termination Date, an amount equal to 20% of the balance in the Participant’s Retirement Account;

     (ii) During the second Annual Distribution Period following the Participant’s Employment Termination Date, an amount equal to 25% of the then balance in the Participant’s Retirement Account;

     (iii) During the third Annual Distribution Period following the Participant’s Employment Termination Date, an amount equal to 33% of the then balance in the Participant’s Retirement Account;

     (iv) During the fourth Annual Distribution Period following the Participant’s Employment Termination Date, an amount equal to 50% of the then balance in the Participant’s Retirement Account; and

     (v) During the fifth Annual Distribution Period following the Participant’s Employment Termination Date, an amount equal to the then remaining balance in the Participant’s Retirement Account.

     (b) Education Account. If a Participant who has established a subaccount in his/her Education Account for an Eligible Dependent remains continuously employed by a Participating Company until January 1st of the year in which the Eligible Dependent reaches an age set forth below, the Plan Sponsor shall pay to the Participant during the Annual Distribution Period for that year a benefit determined as follows:

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Age Eligible Dependent Will Attain During Year	Percent of Eligible Dependent's Subaccount
18	25 %
19	33 %
20	50 %
21	remainder

     In the event an Eligible Dependent, with respect to whom an Education Account is maintained, dies prior to the payment of the balance to the credit of such Education Account, then the Plan Sponsor shall pay an amount equal to the remaining balance to the credit of such Education Account to the Participant within a reasonable time following receipt of proof of such death.

     (c) Fixed Period Benefit Account. As long as the Participant remains continuously employed by the Participating Company, the Plan Sponsor shall pay to the Participant an amount equal to the balance in the Participant’s Fixed Period Benefit Account in accordance with the pre-existing distribution schedule applicable thereto.

     (d) Benefit Upon Termination of Employment or Following Death.

     (1) Benefit Upon Termination of Employment. Upon a Participant’s Employment Termination Date, the Plan Sponsor shall pay to the Participant an amount equal to the balance in the Participant’s Deferred Benefit Accounts in two installments:

     (i) The first installment, in an amount equal to 50% of the balance in the Deferred Benefit Accounts, shall be paid within 60 days following his/her Employment Termination Date; and

     (ii) The second installment, in an amount equal to the then remaining balance in the Deferred Benefit Accounts, shall be paid during the first Annual Distribution Period following the date on which the first installment was paid.

     For purposes of this Section 6.1(d)(1), a Participant who has been out of work for twenty-six weeks due to short-term disability shall be deemed to have terminated his or her employment on the last day of the twenty-six week period and such last day shall be deemed to be such Participant’s Employment Termination Date.

     (2) Benefit Following Death. Upon a Participant’s date of death, the Administrator shall reduce the balance in the Participant’s Retirement Account by the amount that the Participant has previously received or shall receive pursuant to Section 6.1(a). Thereafter, the Plan Sponsor shall pay to the Participant’s Beneficiary a single sum payment, in cash, equal to the remaining balance in the Participant’s Deferred Benefit Accounts. Payment under this Section 6.1(d)(2) shall be made as soon as practicable following the receipt by the Plan Sponsor of acceptable proof of the Participant’s death.

     (e) Earnings where Installment Payments Are Made.Where any benefit is paid in annual installments, the undistributed balance credited to the Account during the period of the installment payments and ending on the date of the last installment payment shall be credited with investment earnings or debited with investment losses in accordance with Section 4.6.

        6.2 Special Payment of Benefits.

     (a) Payment in Event of Unforeseen Financial Emergency. A Participant may request an accelerated

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payment of some or all of his/her benefit under the Plan to meet an Unforeseen Financial Emergency.

     (1) The request must be made in writing and filed with the Administrator and must be supported by evidence of the Unforeseen Financial Emergency. It must also specify the Deferred Benefit Accounts from which the benefit is to be paid.

     (2) The Administrator shall have sole and absolute discretion to grant or deny the Participant’s request. If the request is granted, the accelerated payment shall not be more than the amount deemed necessary by the Administrator to meet the Unforeseen Financial Emergency.

     (3) Payments under this Section 6.2(a) shall reduce the remaining benefits to, or related to, the Participant under this Plan.

     (b) Reduced Benefit Upon Request. A Participant may elect in writing at any time to receive an immediate distribution of a reduced benefit under the Plan. The Participant shall specify in his/her election the Deferred Benefit Accounts from which the benefit shall be paid.

     (1) Except as otherwise provided in Section 6.2(b)(2), the amount of the benefit shall equal the amount requested by the Participant, reduced by the lesser of 10% of the amount the Participant requested or $50,000.

     (2) If the Participant’s election under this Section 6.2(b) is made within 60 days following a Change of Control, the amount of the benefit shall equal the amount requested by the Participant, reduced by the lesser of 5% of the amount the Participant requested or $25,000.

     (3) Upon receipt of a Participant’s election, the Administrator shall (i) reduce the balance of the Participant’s Deferred Benefit Accounts by the full amount that the Participant has requested, and (ii) direct the Plan Sponsor to pay the Participant the reduced benefit. The amount by which the benefit is reduced shall be automatically forfeited without any further action or consent of the Participant.

     (c) Change of Control where Installment Payments Being Made. In the event installment payments are being made to a Participant under Section 6.1 and a Change of Control of the Plan Sponsor occurs prior to the Participant’s receiving all installment payments under Section 6.1, any undistributed balance credited to the Participant’s Deferred Benefit Accounts shall be paid by the Plan Sponsor in a single sum payment, in cash, to the Participant as soon as practicable following the Change of Control.

        6.3 Reduction of Amount of Benefit Payment in Certain Cases.

     (a) Reduction of Benefit Payments. Notwithstanding any provision of the Plan to the contrary, the Administrator shall cause any payment under this Plan to a Participant who is a “Covered Employee,”as defined below, to be reduced to the extent that such Participant’s scheduled distribution under the Plan, when added to such Participant’s estimated “Applicable Employee Remuneration,”as defined below, from the Plan Sponsor and any other Participating Company for the taxable year would exceed the “Code Section 162(m) Deduction Limitation,”as defined below. The amount of any scheduled distribution which is not paid to the Participant under this Section 6.3(a) shall be transferred to the Participant’s Retirement Account and distributed in accordance with Section 6.1(a).

     (b) Definitions.

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     (1) Covered Employee. The term “Covered Employee”means an executive officer of the Plan Sponsor or other Participating Company designated by the Plan Administrator to be a “Covered Employee”.

     (2) Code Section 162(m) Deduction Limitation. The term “Code Section 162(m) Deduction Limitation”means the Applicable Employee Remuneration of any Covered Employee for the taxable year that exceeds $1,000,000 or any comparable limit specified in any future legislation amending, supplementing or superseding Code Section 162(m).

     (3) Applicable Employee Remuneration. The term “Applicable Employee Remuneration,”except as otherwise provided below, means, with respect to any Covered Employee for any taxable year, the aggregate amount allowable as a deduction under Chapter 1 of Subtitle A of the Code for such taxable year (determined without regard to section 162(m) of the Code) for “Remuneration,”as defined below, for services performed by such Covered Employee (whether or not during the taxable year). The term “Applicable Employee Remuneration”shall not include:

     (i) Any Remuneration payable on a commission basis solely on account of income generated directly by the individual performance of the individual to whom such Remuneration is payable.

     (ii) Any Remuneration that is “qualified performance based compensation”under Code Section 162(m).

     (iii) Any Remuneration payable under a written binding contract which was in effect on February 17, 1993, and which was not modified thereafter in any material respect before such Remuneration is paid.

     (4) Remuneration. The term "Remuneration" includes any remuneration (including benefits) in any medium other than cash, but shall not include -

     (i) Any payment referred to in so much of Code section 3121(a)(5) as precedes subparagraph (E) thereof , and

     (ii) Any benefit provided to or on behalf of an employee if at the time such benefit is provided it is reasonable to believe that the employee will be able to exclude such benefit from gross income under Chapter 1 of Subtitle A of the Code.

For purposes of (i) above, Code section 3121(a)(5) shall be applied without regard to Code section 3121(v)(1).

ARTICLE VII —ADMINISTRATION OF THE PLAN

        7.1 Administrator. The Committee appointed by the President of the Plan Sponsor is hereby designated as the administrator of the Plan. If no Committee is appointed by the Plan Sponsor as the Administrator, the Plan Sponsor shall be the Administrator of the Plan. The Administrator shall have the authority to control and manage the operation and administration of the Plan. The President of the Plan Sponsor may appoint another person to be the Administrator at any time. The President of the Plan Sponsor may also remove an Administrator and fill any vacancy which may arise.

        7.2 Committee Action. If a Committee is appointed as Administrator, the following rules apply:

     (a) On all matters within the jurisdiction of the Committee, the decision of a majority of the members of the Committee shall govern and control. The Committee may take action either at a meeting or in

writing without a meeting, provided that in the latter instance all members of the Committee shall have been advised of the action contemplated and that the written instrument evidencing the action shall be signed by a majority of the members.

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     (b) The President of the Plan Sponsor shall appoint the Chair of the Committee. The Committee may appoint, either from among its members or otherwise, a secretary who shall keep a record of all meetings and actions taken by the Committee. Either the Chair of the Committee or any member of the Committee designated by the Chair shall execute any certificate, instrument or other written direction on behalf of the Committee. Any action taken on matters within the discretion of the Committee shall be final and conclusive as to the parties thereto and as to all Participants or Beneficiaries claiming any right under the Plan.

        7.3 Powers and Duties of the Administrator. The Administrator shall have all powers necessary to supervise the administration of the Plan and to control its operation in accordance with its terms, including, without limiting the generality of the foregoing, the power to:

     (a) Appoint, retain, and terminate such persons as it deems necessary or advisable to assist in the administration of the Plan or to render advice with respect to the responsibilities of the Administrator under the Plan, including accountants, attorneys and physicians;

     (b) Make use of the services of the employees of the Participating Company in administrative matters;

     (c) Obtain and act on the basis of all valuations, certificates, opinions and reports furnished by the persons described in (a) or (b) above;

     (d) Review the manner in which benefit claims and other aspects of the Plan administration have been handled by the employees of the Participating Company;

     (e) Determine all benefits and resolve all questions pertaining to the administration and interpretation of the Plan provisions, either by rules of general applicability or by particular decisions; to the maximum extent permitted by law, all interpretations of the Plan and other decisions of the Administrator shall be conclusive and binding on all parties;

     (f) Adopt such forms, rules and regulations as it shall deem necessary or appropriate for the administration of the Plan and the conduct of its affairs, provided that any such forms, rules and regulations shall not be inconsistent with the provisions of the Plan;

     (g) Remedy any inequity from incorrect information received or communicated or from administrative error;

     (h) Commence or defend any litigation arising from the operation of the Plan in any legal or administrative proceeding;

     (i) To determine all considerations affecting the eligibility of any Eligible Employee to become a Participant or remain a Participant in the Plan;

     (j) To determine the status and rights of Participants and their Eligible Dependents and Beneficiaries:

     (k) Direct the Plan Sponsor to pay benefits under the Plan, and to give such other directions and instructions as may be necessary for the proper administration of the Plan; and

     (l) Be responsible for the preparation, filing and disclosure on behalf of the Plan of such documents and reports as are required by any applicable federal or state law.

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        7.4 Decisions of Administrator. All decisions of the Administrator, and any action taken by it in respect of the Plan shall be conclusive and binding on all persons, subject to the claims and appeal procedure described in Section 7.10 hereof.

        7.5 Expenses. All expenses incident to the operation and administration of the Plan reasonably incurred, including, without limitation by way of specification, the fees and expenses of attorneys and advisors, and for such other professional, technical and clerical assistance as may be required, shall be paid by the Plan Sponsor.

        7.6 Eligibility to Participate. No member of the Administrator who is also an officer shall be precluded from participating in the Plan if otherwise eligible, but he or she shall not be entitled, as a member of the Administrator, to act or pass upon any matters pertaining specifically to his or her own benefit under the Plan.

        7.7 Insurance and Indemnification for Liability. The rules relating to the insurance and indemnification for liability are as follows:

     (a) Insurance.The Plan Sponsor may, in its discretion, obtain, pay for, and keep current a policy or policies of insurance, insuring members of the Administrator and other employees to whom any responsibility with respect to administration of the Plan has been delegated against any and all liabilities, costs and expenses incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities and obligations under the Plan and any applicable Federal or state law.

     (b) Indemnity.If the Plan Sponsor does not obtain, pay for, and keep current the type of insurance policy or policies referred to in Section 7.7(a) above, or if such insurance is provided but any of the members of the Administrator or other employees referred to in Section 7.7(a) above incur any costs or expenses which are not covered under such policies, then, in either event, the Plan Sponsor shall, to the extent permitted by law, indemnify and hold harmless such parties against any and all costs, expenses and liabilities incurred by such parties in performing their duties and responsibilities under this Plan, provided such party or parties were acting in good faith within what was reasonably believed to have been in the best interests of the Plan and its Participants.

        7.8 Agent for Service of Legal Process. The name and address of the person designated as the agent for service of legal process are:

Plan Administrator
PMA Capital Corporation
1735 Market Street, 27th Floor
Philadelphia, PA 19103

        7.9 Delegation of Responsibility. The Administrator may designate a committee of one or more persons to carry out any of the responsibilities or functions assigned or allocated to the Administrator under the Plan. Each reference to the Administrator in this Plan shall include the Administrator as well as any person to whom the Administrator may have delegated the performance of a particular function or responsibility under this Section 7.9.

        7.10 Claims Procedure.

     (a) Claim for Benefits.All claims for benefits under the Plan shall be made in writing and shall be signed by the applicant. Claims shall be submitted to a representative designated by the Administrator and hereinafter referred to as the “Claims Coordinator”.

     Each claim hereunder shall be acted on and approved or disapproved by the Claims Coordinator within 60 days following the receipt by the Claims Coordinator of the information necessary to process the claim.

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     In the event the Claims Coordinator denies a claim for benefits, in whole or in part, the Claims Coordinator shall notify the applicant in writing of the denial of the claim and notify such applicant of his or her right to a review of the Claims Coordinator’s decision by the Administrator. Such notice by the Claims Coordinator shall also set forth, in a manner calculated to be understood by the applicant, the specific reason for such denial, the specific Plan provisions on which the denial is based, a description of any additional material or information necessary to perfect the claim, with an explanation of why such material or information is necessary, and an explanation of the Plan’s claims review procedure as set forth in this Section 7.10.

     If no action is taken by the Claims Coordinator on an applicant’s claim within 60 days after receipt by the Claim Coordinator, such application shall be deemed to be denied for purposes of the following appeals procedure.

     (b) Appeals Procedure.Any applicant whose claim for benefits is denied in whole or in part (“Claimant”) may appeal from such denial to the Administrator for a review of the decision by the Administrator. Such appeal must be made within six months after the Claimant has received written notice of the denial as provided above in Section 7.10(a). An appeal must be submitted in writing within such period and must:

     (1) Request a review by the Administrator of the claim for benefits under the Plan;

     (2) Set forth all of the grounds upon which the Claimant's request for review is based and any facts in support thereof; and

     (3) Set forth any issues or comments which the Claimant deems pertinent to the appeal.

     The Administrator shall regularly review appeals by Claimants. The Administrator shall act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing the Claimant’s request for review. If such an extension of time for processing is required, written notice of the extension shall be forwarded to the Claimant prior to the commencement of the extension. In no event shall such extension exceed a period of 120 days after the request for review is received by the Administrator.

     The Administrator shall make a full and fair review of each appeal and any written materials submitted by the Claimant and/or the Participating Company in connection therewith. The Administrator may require the Claimant and/or the Participating Company to submit such additional facts, documents or other evidence as the Administrator in its discretion deems necessary or advisable in making its review. The Claimant shall be given the opportunity to review pertinent documents or materials upon submission of a written request to the Administrator, provided the Administrator finds the requested documents or materials are pertinent to the appeal.

     On the basis of its review, the Administrator shall make an independent determination of the Claimant’s eligibility for benefits under the Plan. The decision of the Administrator on any claim for benefits shall be final and conclusive upon all parties thereto.

     In the event the Administrator denies an appeal, in whole or in part, the Administrator shall give written notice of the decision to the Claimant, which notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reasons for such denial and which shall make specific reference to the pertinent Plan provisions on which the Administrator’s decision was based.

     (c) Compliance with Regulations.It is intended that the claims procedure of this Plan be administered in accordance with the claims procedure regulations of the Department of Labor set forth in 29 CFR § 2560.503-1.

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ARTICLE VIII —AMENDMENT AND TERMINATION

        8.1 Amendment or Termination.

     (a) The Board of Directors shall have the right to alter, amend, modify, restate or terminate the Plan, or any part thereof, through the adoption of a written resolution when in its absolute discretion, it determines such action to be advisable; provided, however, that no such action by the Board of Directors shall reduce the amount credited to any Account at the time of the adoption of the amendment, modification or restatement and no such amendment, modification or restatement or termination may occur as a result of a Change of Control, within two years after a Change of Control, or as part of any plan to effect a Change of Control. Each amendment shall be set forth in a written instrument.

     (b) In the event of termination, the Plan Sponsor, at its option, may pay each Participant an amount equal to the total amount credited to the Participant’s Accounts in a single sum payment of cash or, in the alternative, pay such amount in accordance with the provisions of Article VI. Termination of the Plan shall not serve to reduce the amount credited to a Participant’s Accounts on the date of termination. Moreover, no such termination may occur as a result of a Change of Control, within two years after a Change of Control, or as part of any plan to effect a Change of Control.

ARTICLE IX —MISCELLANEOUS

        9.1 Funding. Nothing contained in this Plan and no action taken pursuant to this Plan will create or be construed to create or require a funded arrangement or any kind of fiduciary duty between the Plan Sponsor and/or the Administrator and a Participant. Benefits payable under this Plan to a Participant or Beneficiary, if applicable, shall be paid directly by each Plan Sponsor from a grantor trust (the “Trust”) within the meaning of Section 671 of the Code, to the extent that such benefits are not paid from the general assets of the Plan Sponsor. The Trust must be an irrevocable grantor trust, the assets of which are subject to the claims of the general creditors of the Plan Sponsor in the event of its insolvency, defined for the purposes of this provision as the Plan Sponsor’s inability to pay its debts as they become due or that the Plan Sponsor is subject to a pending proceeding under the United States Bankruptcy Code. Except as to any amounts paid or payable to the Trust, the Plan Sponsor shall not be obligated to set aside, earmark or escrow any funds or other assets to satisfy its obligations under this Plan, and the Participant and his or her Beneficiary shall not have any property interest in any specific assets of the Plan Sponsor other than an unsecured right to receive payments from the Plan Sponsor as provided herein. To the extent any person acquires a right hereunder, such right(s) shall be no greater than those of a general, unsecured creditor of the Plan Sponsor. In the event that the amounts accumulated in the Trust are not sufficient to pay the benefits payable under this Plan, such benefits shall be paid directly from the general assets of the Plan Sponsor.

        9.2 Status of Employment. Neither the establishment or maintenance of the Plan, nor any action of the Plan Sponsor or any Participating Company or the Administrator shall be held or construed to confer upon any individual any right to be continued as an officer or other employee nor, upon dismissal, any right or interest in any assets of the Plan Sponsor or a Participating Company nor to affect any Participant’s right to terminate his/her employment at any time.

        9.3 Payments to Minors and Incompetents. If a Participant or Beneficiary or Eligible Dependent entitled to receive any benefits hereunder is a minor or is deemed by the Administrator or is adjudged to be legally incapable of giving a valid receipt and discharge for such benefits, they will be paid to the duly appointed guardian of such minor or incompetent or to such other legally appointed person as the Administrator may designate. Such payment shall, to the extent made, be deemed a complete discharge of any liability for such payment under the Plan.

        9.4 Inalienability of Benefits.

     (a) Benefits payable under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind,

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whether voluntary or involuntary. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits under the Plan shall be void. Neither the Plan Sponsor nor any other Participating Company shall in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits under the Plan.

     (b) Notwithstanding Section 9.4(a), if a Participant is indebted to the Plan Sponsor or any other Participating Company at any time when payments are to be made by the Plan Sponsor to the Participant under the provisions of the Plan, the Plan Sponsor shall have the right to reduce the amount of payment to be made to the Participant (or the Participant’s Beneficiary or Eligible Dependent) to the extent of such indebtedness. Any election by the Plan Sponsor not to reduce such payment shall not constitute a waiver of its claim for such indebtedness.

        9.5 Governing Law. Except to the extent preempted by Federal law, the Plan shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania.

        9.6 Severability. In case any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal and invalid provisions had never been set forth.

        9.7 Required Information to Administrator. Each Participant will furnish to the Administrator such information as the Administrator considers necessary or desirable for purposes of administering the Plan, and the provisions of the Plan respecting any payments thereunder are conditional upon the Participant’s furnishing promptly such true, full and complete information as the Administrator may request. The Administrator, in its sole discretion, may request a Participant to submit proof of his/her age. The Administrator will, if such proof of age is not submitted when requested, use as conclusive evidence thereof such information as is deemed by it to be reliable, regardless of the lack of proof. Any notice or information which, according to the terms of the Plan or the rules of the Administrator, must be filed with the Administrator, shall be deemed so filed if addressed and either delivered in person or mailed to and received by the Administrator at the following address:

Plan Administrator
PMA Capital Corporation
1735 Market Street, 27th Floor
Philadelphia, PA 19103

Failure on the part of the Participant or Beneficiary or Eligible Dependent to comply with any such request within a reasonable period of time shall be sufficient grounds for delay in the payment of benefits under the Plan until such information or proof is received by the Administrator.

        9.8 Income and Payroll Tax Withholding. To the extent required by the laws in effect at the time payments are made under this Plan, the Plan Sponsor shall withhold from such deferred compensation payments any taxes required to be withheld for federal, state or local tax purposes.

        9.9 Application of Plan. The Plan, as set forth herein, shall apply to any Participant terminating employment on or after the Restatement Effective Date.

        9.10 No Effect on Other Benefits. No amount credited under this Plan shall be deemed part of the total compensation for the purpose of computing benefits to which a Participant may be entitled under any pension plan or other supplemental compensation arrangement, unless such plan or arrangement specifically provides to the contrary. The amounts payable to the Participant hereunder will be in addition to any benefits paid or payable to the Participant under any other pension, disability, annuity or retirement plan or policy whatsoever. Nothing herein contained will in any manner modify, impair or affect any existing or future rights of the Participant to participate in any other employee benefits plan or receive benefits in accordance with such plan or to participate in any current or future pension plan

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of a Participating Company or any supplemental arrangement which constitutes a part of the Participating Company’s regular compensation structure.

        9.11 Inurement. The Plan shall be binding upon, and shall inure to, the benefit of the Participating Company and its successors and assigns, and the Participant and the Participant’s Beneficiaries, Eligible Dependents, successors, heirs, executors and administrators.

        9.12 Notice. Any notices or elections required or permitted to be given or made under this Plan will be sufficient if in writing and if sent by first class, postage paid mail to the Participant’s last known address as shown on the Participating Company’s personnel records or to the principal office of the Participating Company, as the case may be. The date of such mailing shall be deemed the date of notice, consent or demand. Either party may change the address to which notice is to be sent by giving notice of the change of address in the manner aforesaid.

        9.13 Captions. The captions contained in and the table of contents prefixed to the Plan are inserted only as a matter of convenience and for ease of reference in no way define, limit, enlarge or describe the scope or intent of this Plan or in any way affect the Plan or the construction of any provision thereof.

        9.14 Acceleration of Payments. Notwithstanding any other provision of the Plan, if the Administrator determines, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his/her delegate, a decision by a court of competent jurisdiction involving a Participant, or a closing agreement involving a Participant made under Section 7121 of the Code that is approved by the Commissioner, that such Participant or Beneficiary or Eligible Dependent has recognized or will recognize income for federal income tax purposes with respect to benefits that are or will be payable to the Participant under the Plan before they otherwise would be paid to the Participant or the Beneficiary or Eligible Dependent (as applicable), upon the request of the Participant or Beneficiary or Eligible Dependent, the Administrator shall immediately make distribution to the Participant or Beneficiary or Eligible Dependent of the amount so taxable.

        9.15 Reporting and Disclosure Requirements. In order to comply with the requirements of Title I of ERISA, the Administrator shall:

     (a) File a statement with the Secretary of Labor that includes the name and address of the employer, the employer identification number assigned by the Internal Revenue Service, a declaration that the employer maintains the Plan primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and a statement of the number of such plans and the number of employees in each; and

     (b) Provide plan documents, if any, to the Secretary of Labor upon request as required by Section 104(a)(1) of ERISA. It is intended that this provision comply with the requirements of 29 CFR §2520.104-23.

        This method of compliance is available to the Plan only so long as the Plan is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and for which benefits are paid as needed solely from the general assets of the employer or are provided exclusively through insurance contracts or policies, the premiums for which are paid directly by the employer from its general assets, issued by an insurance company or similar organization which is qualified to do business in any State, or both.

        9.16 Gender and Number. Whenever any words are used herein in any specific gender, they shall be construed as though they were used in any other applicable gender. The singular form, whenever used herein, shall mean or include the plural form where applicable and vice versa.

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ARTICLE X —ADOPTION BY AFFILIATED EMPLOYERS

        10.1 Adoption of Plan. The following rules shall apply with respect to the adoption of the Plan:

     (a) Adoption by Affiliated Employers. The terms of this Plan may be adopted by any Affiliated Employer, provided:

     (1) The Board of Directors consents to such adoption by an appropriate written resolution;

     (2) The board of directors of the Affiliated Employer adopts this Plan by an appropriate written resolution which defines the Eligible Employees;

     (3) The Affiliated Employer executes a Plan Adoption Agreement in the form attached hereto as Plan Exhibit A, applicable to the Eligible Employees of such Affiliated Employer. The Affiliated Employer may elect in such Adoption Agreement to have special provisions apply with respect to the Eligible Employees of the Affiliated Employer which differ from the provisions of the Plan applicable to other Eligible Employees; and

     (4) The Affiliated Employer executes such other documents as may be required to make such Affiliated Employer a party to the Plan as a Participating Company.

     (b) Effect of Adoption. An Affiliated Employer which adopts the Plan and the Trust Agreement is thereafter a Participating Company with respect to its Eligible Employees.

        10.2 Withdrawal from Plan. Any Participating Company may at any time withdraw from the Plan upon giving the Board of Directors at least 30 days prior written notice of its intention to withdraw.

        10.3 Application of Withdrawal Provisions. The withdrawal provisions contained in Section 10.2 shall be applicable only if the withdrawing Participating Company continues to cover its Participants under a plan similar to this Plan. Otherwise the termination provisions of the Plan shall apply.

        10.4 Plan Sponsor Appointed Agent of Participating Companies. As a condition precedent to the adoption of the Plan, each Affiliated Employer must appoint the Board of Directors as its agent to exercise on its behalf all of the power and authority conferred upon the Plan Sponsor by the Plan, including, without limitation, the power to amend or to terminate the Plan.

        TO RECORD the adoption of this amendment and restatement of the Plan, the Plan Sponsor has caused this document to be executed by its duly authorized officers as of the 29th day of March, 2001.

ATTEST:	PMA CAPITAL CORPORATION
/s/ Robert L. Pratter	By: /s/ Francis W. McDonnell
Robert L. Pratter, Secretary	Francis W. McDonnell, Senior Vice President,
	Treasurer & Chief Financial Officer

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APPENDIX A —LIST OF PARTICIPATING COMPANIES

(a)    PMA Capital Corporation

(b)    Pennsylvania Manufacturers’Association Insurance Company

(c)    PMA Capital Insurance Company (formerly PMA Reinsurance Corporation)

(d)    Caliber One Indemnity Company

(e)    Caliber One Management Company, Inc.

(f)    PMA Management Corporation

(g)    PMA Re Management Company

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PLAN EXHIBIT A —PLAN ADOPTION AGREEMENT

[INSERT NAME OF ADOPTING AFFILIATED EMPLOYER]

PMA CAPITAL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN

[NOTE: Plan Exhibit A is not to be completed or executed. If an Affiliated Employer adopts the Plan, a separate instrument following the form of this Plan Exhibit A shall be completed and filed with the Administrator.]

By executing this Adoption Agreement, [ NAME OF ADOPTING AFFILIATED EMPLOYER], on this ________ day of __________, ___________ hereby adopts the PMA CAPITAL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN (“Plan”), the terms of which Plan are incorporated herein by reference, and by adopting said Plan hereby becomes a Participating Company in said Plan effective __________, ____.

        1. The Effective Date of the Plan hereby created or continued is __________, ____.

        2. The Board of Directors of PMA CAPITAL CORPORATION consented to the adoption of the Plan by the Affiliated Employer named herein on __________, ____.

        3. The Board of Directors of [NAME OF ADOPTING AFFILIATED EMPLOYER] adopted the Plan on __________, ___.

Attest:	Name of Participating Company
[SEAL]
	By
Secretary	President
Attest:	ADOPTION CONSENTED TO BY: PMA CAPITAL CORPORATION
[SEAL]
	By
Secretary	President

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EX-10

PMA CAPITAL CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1999)

MARCH 2001

TABLE OF CONTENTS

			PAGE
ARTICLE I - DEFINITIONS			1
	1.1	Actuarial Equivalent	1
	1.2	Administrator	1
	1.3	Affiliated Employer	1
	1.4	Board of Directors	2
	1.5	Cause	2
	1.6	Change of Control	2
	1.7	Code	2
	1.8	Effective Date	2
	1.9	Early Retirement Date	3
	1.10	Eligible Officer	3
	1.11	Excess Retirement Benefit	3
	1.12	Good Reason	3
	1.13	Grandfathered Early Retirement Benefit	3
	1.14	Grandfathered Normal Retirement Benefit	4
	1.15	Grandfathered Separation from Service Benefit	4
	1.16	Limited Benefit Assumptions	4
	1.17	Limited Early Retirement Benefit	4
	1.18	Limited Normal Retirement Benefit	4
	1.19	Limited Separation from Service Benefit	4
	1.20	New Early Retirement Benefit	4
	1.21	New Normal Retirement Benefit	4
	1.22	New Separation from Service Benefit	4
	1.23	Normal Retirement Date	4
	1.24	Participant	4
	1.25	Participating Company	5
	1.26	Pension Plan	5
	1.27	Plan	5
	1.28	Plan Sponsor	5
	1.29	Plan Year	5
	1.30	Section 401(a)(17) Limitation	5
	1.31	Section 415 Limitation	5
	1.32	Spouse	5
	1.33	Termination of Employment	5
	1.34	Unlimited Benefit Assumptions	5
	1.35	Unlimited Early Retirement Benefit	5
	1.36	Unlimited Normal Retirement Benefit	5
	1.37	Unlimited Separation from Service Benefit	6
ARTICLE II - EXCESS RETIREMENT BENEFITS			6
	2.1	Excess Retirement Benefit	6
	2.2	Reemployment	6
ARTICLE III - VESTING OF EXCESS RETIREMENT BENEFITS			6
	3.1	Full Vesting	6
	3.2	Forfeitures	7

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ARTICLE IV - FORM OF PAYMENT OF EXCESS RETIREMENT BENEFITS			7
	4.1	Payment of Excess Retirement Benefit	7
	4.2	Form of Payment	7
	4.3	Change of Control During Employment	7
	4.4	Change of Control During Retirement	7
	4.5	Failure to Assume Plan upon Change of Control	7
	4.6	Actuarial Equivalent	8
ARTICLE V - DEATH BENEFIT			8
	5.1	Death Benefit	8
	5.2	Simultaneous Death	8
ARTICLE VI - ADMINISTRATION OF THE PLAN			8
	6.1	Administrator	8
	6.2	Committee Action	8
	6.3	Powers of Administrator	9
	6.4	Decisions of Administrator	9
	6.5	Administrative Expenses	9
	6.6	Eligibility to Participate	9
	6.7	Insurance and Indemnification for Liability	10
	6.8	Agent for Service of Legal Process	10
	6.9	Delegation of Responsibility	10
	6.10	Claims Procedure	10
ARTICLE VII - MISCELLANEOUS			11
	7.1	Funding	11
	7.2	Amendment or Termination	11
	7.3	Status of Employment	12
	7.4	Payments to Minors and Incompetents	12
	7.5	Inalienability of Benefits	12
	7.6	Governing Law	12
	7.7	Severability	12
	7.8	Required Information to Administrator	12
	7.9	Income and Payroll Tax Withholding	13
	7.10	Application of Plan	13
	7.11	No Effect on Other Benefits	13
	7.12	Inurement	13
	7.13	Notice	13
	7.14	Captions	13
	7.15	Acceleration of Payments	13
	7.16	Reporting and Disclosure Requirements	14
	7.17	Gender and Number	14
ARTICLE VIII - ADOPTION BY AFFILIATED EMPLOYERS			14
	8.1	Adoption of Plan	14
	8.2	Withdrawal from Plan	15
	8.3	Application of Withdrawal Provisions	15
	8.4	Plan Sponsor Appointed Agent of Participating Companies	15
APPENDIX A - LIST OF PARTICIPATING COMPANIES			16
PLAN EXHIBIT A - PLAN ADOPTION AGREEMENT			17

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PLAN ADOPTION AGREEMENT - PENNSYLVANIA MANUFACTURERS' ASSOCIATION             INSURANCE COMPANY	18
PLAN ADOPTION AGREEMENT - PMA CAPITAL INSURANCE COMPANY
(FORMERLY PMA REINSURANCE CORPORATION)	19
PLAN ADOPTION AGREEMENT - CALIBER ONE INDEMNITY COMPANY	20
PLAN ADOPTION AGREEMENT - CALIBER ONE MANAGEMENT COMPANY, INC.	21
PLAN ADOPTION AGREEMENT - PMA MANAGEMENT CORP	22
PLAN ADOPTION AGREEMENT - PMA RE MANAGEMENT COMPANY	23

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PMA CAPITAL CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

        WHEREAS, Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as amended, place limitations (the “Sections 401(a)(17) and 415 Limitations”) on the retirement benefits which can be paid to participants in the PMA Capital Corporation Pension Plan (formerly known as The PMC Pension Plan (the “Pension Plan”); and

        WHEREAS, some executives hired in mid-career by PMA Capital Corporation (formerly known as the Pennsylvania Manufacturers Corporation) (the “Plan Sponsor”) are not able to be credited with the maximum number of years of Benefit Service allowable under the Pension Plan (“Short Service Reduction”); and

        WHEREAS, the Plan Sponsor established the PMA Capital Corporation Supplemental Executive Retirement Plan (formerly known as The PMC Supplemental Executive Retirement Plan) (the “Plan”) to provide supplemental executive retirement benefits for the purposes of offsetting the Sections 401(a)(17) and 415 Limitations and the Short Service Reduction to a select group of management and highly compensated employees within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); and

        WHEREAS, the Plan Sponsor has decided to provide to a select group of management and highly compensated employees within the meaning of Section 201(2) of ERISA the Short Service Reduction benefits previously provided under the Plan in a separate plan to be known as the PMA Capital Corporation Executive Management Pension Plan (the “EMPP”); and

        WHEREAS, the Plan Sponsor has established the EMPP, effective January 1, 1999, to provide for the Short Service Reduction benefits; and

        WHEREAS, the Plan Sponsor now desires to amend and restate the Plan to, among other things, reflect the removal from the Plan of the Short Service Reduction benefit which shall now be provided in the EMPP;

        NOW THEREFORE, the Plan Sponsor does hereby amend and restate the Plan, as of January 1, 1999, as hereinafter set forth.

ARTICLE I —DEFINITIONS

        The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:

        1.1 Actuarial Equivalent. An amount or benefit of equivalent present value to the amount or benefit which otherwise would have been provided to, or on account of, a Participant determined on the basis of the actuarial assumptions then in effect under the Pension Plan.

        1.2 Administrator. The committee (hereinafter referred to as “Committee”) appointed by the President of the Plan Sponsor to serve as the Administrator of the Plan. If no such Committee is appointed, the Plan Sponsor shall be the Administrator of the Plan.

        1.3 Affiliated Employer. A member of a group of employers, of which the Plan Sponsor is a member and which group constitutes:

     (a) A controlled group of corporations (as defined in Section 414(b) of the Code);

     (b) Trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c) of the Code);

     (c) Trades or businesses (whether or not incorporated) which constitute an affiliated service group (as defined in Section 414(m) of the Code); or

     (d) Any other entity required to be aggregated with the Plan Sponsor pursuant to Section 414(o) of the Code and the Treasury regulations thereunder.

        1.4 Board of Directors. The Board of Directors of the Plan Sponsor, as from time to time constituted, or any committee thereof which is authorized to act on behalf of the Board of Directors.

        1.5 Cause. Termination by a Participating Company of employment with the Participating Company for “Cause” shall mean termination upon the willful engaging by the Participant in misconduct which is materially injurious to the Participating Company or any Affiliated Employer. No act, or failure to act, on the Participant’s part shall be considered “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that such action or omission was in the best interest of the Participating Company or its Affiliated Employers. Notwithstanding the foregoing, a Participant shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Participant a copy of a written determination by the Administrator (after reasonable notice to the Participant and an opportunity for the Participant, together with the Participant’s counsel, to be heard before the Administrator), finding that in the good faith opinion of the Administrator the Participant was guilty of misconduct as set forth above in this Section and specifying the particulars thereof in detail. If the Administrator consists of more than one individual, the Administrator’s determination shall be made by written resolution duly adopted by the affirmative vote of a majority of the entire membership of the Administrator at a meeting of the Administrator called and held for the purpose (after reasonable notice to the Participant and an opportunity for the Participant, together with the Participant’s counsel, to be heard before the Administrator), finding that in the good faith opinion of the Administrator the Participant was guilty of misconduct as set forth above in this Section and specifying the particulars thereof in detail.

        1.6 Change of Control. A change of control of the Plan Sponsor of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or Item 1(a) of a Current Report on Form 8-K or any successor rule, whether or not the Plan Sponsor is then subject to such reporting requirements; provided that, without limitation, such a Change of Control shall be deemed to occur if:

     (a) Any “person”(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or first becomes the “beneficial owner”(as determined for purposes of Regulation 13D-G under the Exchange Act as currently in effect), directly or indirectly, in a transaction or series of transactions, of securities of the Plan Sponsor representing more than 50% of the voting power of the Plan Sponsor’s voting capital stock (the “Voting Stock”); or

     (b) The consummation of a merger, or other business combination after which the holders of the Voting Stock do not collectively own 50% or more of the voting capital stock of the entity surviving such merger or other business combination, or the sale, lease, exchange or other transfer in a transaction or series of transactions of all or substantially all of the assets of the Plan Sponsor; or

     (c) At any time individuals who were either nominated for election by the Plan Sponsor’s Board of Directors or were elected by the Plan Sponsor’s Board of Directors cease for any reason to constitute at least a majority of the Plan Sponsor’s Board of Directors.

        1.7 Code. Internal Revenue Code of 1986, as amended. Reference to a specific Section of the Code shall include such Section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.

        1.8 Effective Date. As amended and restated herein, January 1, 1999. The original effective date was January 1, 1993.

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        1.9 Early Retirement Date. A Participant's Early Retirement Date under the Pension Plan.

        1.10 Eligible Officer. Any officer of a Participating Company who is:

     (a) Engaged in rendering personal services under the direction or control of the Participating Company on or after January 1, 1998; and

     (b) A Participant in the Pension Plan.

        1.11 Excess Retirement Benefit. A Participant's excess retirement benefit under this Plan determined in accordance with Section 2.1 hereof.

        1.12 Good Reason. For purposes of this Plan, “Good Reason” shall mean any of the following events which occurs, following a Change of Control, without the Participant’s express written consent:

     (a) The assignment to the Participant of any duties materially inconsistent with the Participant’s status, position, duties, and responsibilities with the Participating Company immediately prior to such Change of Control or a substantial alteration in the nature or status of the Participant’s responsibilities from those in effect immediately prior to such Change of Control;

     (b) A reduction by the Participating Company in the Participant’s annual base salary as in effect on the Effective Date or thereafter, as the same may be increased from time to time, except for across-the-board salary reductions similarly affecting all executives of the Participating Company and of any organization in control of the Participating Company;

     (c) The Participating Company’s requiring the Participant to be based anywhere other than the Participant’s office prior to the Change of Control, except for required travel on the Participating Company’s business to an extent substantially consistent with the Participant’s prior travel obligations;

     (d) The failure by the Participating Company to continue in effect any compensation plan of the Participating Company in which the Participant participates, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan in connection with such Change of Control, or the failure by the Participating Company to continue the Participant’s participation therein;

     (e) The failure by the Participating Company to continue to provide the Participant with benefits substantially similar to those provided under the Plan Sponsor’s 401(k) Plan or any of the pension, life insurance, medical, health and accident, or disability plans of the Participating Company in which the Participant was participating at the time of such Change of Control, or the taking of any action by the Participating Company which would directly or indirectly materially reduce any of such benefits or deprive the Participant of any material fringe benefit enjoyed by the Participant at the time of such Change of Control, or the failure by the Participating Company or its subsidiaries to provide the number of paid vacation days to which the Participant was entitled on the basis of years of service with the Participating Company in accordance with the normal vacation policy of the Participating Company as in effect at the time of such Change of Control;

     (f) Any purported termination of a Participant’s employment which is not effected pursuant to a written notice setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant’s employment; and for purposes of this Plan, no such purported termination shall be effective.

        1.13 Grandfathered Early Retirement Benefit. The amount determined using the formula in the Pension Plan, as in effect before June 1, 1999, but after December 31, 1992, for determining the benefit thereunder on or after a Participant’s retirement on or after his/her Early Retirement Date (as defined in Article I of the Pension Plan) but before his/her Normal Retirement Date (as defined in Article I of the Pension Plan).

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        1.14 Grandfathered Normal Retirement Benefit. The amount determined using the formula in the Pension Plan, as in effect before June 1, 1999, but after December 31, 1992, for determining the benefit thereunder upon a Participant’s retirement on or after his/her Normal Retirement Date (as defined in Article I of the Pension Plan).

        1.15 Grandfathered Separation from Service Benefit. The amount determined using the formula in the Pension Plan, as in effect before June 1, 1999, for determining the benefit thereunder upon a Participant’s separation from service before his/her Early Retirement Date (as defined in Article I of the Pension Plan).

        1.16 Limited Benefit Assumptions. The Limited Benefit Assumptions are that Compensation (as defined in Article I of the Pension Plan) is subject to the Section 401(a)(17) Limitation and the annual benefit is subject to the Section 415 Limitation.

        1.17 Limited Early Retirement Benefit. The greater of:

     (a) The Grandfathered Early Retirement Benefit determined using the Limited Benefit Assumptions; or

     (b) The New Early Retirement Benefit determined using the Limited Benefit Assumptions.

        1.18 Limited Normal Retirement Benefit. The greater of:

     (a) The Grandfathered Normal Retirement Benefit determined using the Limited Benefit Assumptions; or

     (b) The New Normal Retirement Benefit determined using the Limited Benefit Assumptions.

        1.19 Limited Separation from Service Benefit. The greater of:

     (a) The Grandfathered Separation from Service Benefit determined using the Limited Benefit Assumptions; or

     (b) The New Separation from Service Benefit determined using the Limited Benefit Assumptions.

        1.20 New Early Retirement Benefit. The amount determined using the formula in the Pension Plan, as in effect on and after June 1, 1999, for determining the benefit thereunder upon a Participant’s retirement on or after his/her Early Retirement Date (as defined in Article I of the Pension Plan) but before his/her Normal Retirement Date (as defined in Article I of the Pension Plan).

        1.21 New Normal Retirement Benefit. The amount determined using the formula in the Pension Plan, as in effect on and after June 1, 1999, for determining the benefit thereunder upon a Participant’s retirement on or after his/her Normal Retirement Date (as defined in Article I of the Pension Plan).

        1.22 New Separation from Service Benefit. The amount determined using the formula in the Pension Plan, as in effect on and after June 1, 1999, for determining the benefit thereunder upon a Participant’s separation from service before his/her Early Retirement Date (as defined in Article I of the Pension Plan).

        1.23 Normal Retirement Date. A Participant's Normal Retirement Date under the Pension Plan.

        1.24 Participant. An Eligible Officer or a former Eligible Officer who is accruing, or who has accrued, benefits under this Plan.

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        1.25 Participating Company. The Plan Sponsor and each of its Affiliated Employers which, upon the approval of the Board of Directors, has agreed to participate in this Plan in accordance with the provisions of Article VIII. Each Participating Company is listed on Appendix A.

        1.26 Pension Plan. The PMA Capital Corporation Pension Plan (formerly known as The PMC Pension Plan) as in effect on the Effective Date and as such plan may be further amended and/or restated from time to time and each successor or replacement tax-qualified pension plan. In addition, the Pension Plan shall also include such other retirement plans of the Plan Sponsor or of such other affiliates, subsidiaries or divisions of the Plan Sponsor as the Administrator may expressly include from time to time.

        1.27 Plan. The PMA Capital Corporation Supplemental Executive Retirement Plan (formerly known as The PMC Supplemental Executive Retirement Plan) as set forth herein and as it may be amended and/or restated from time to time.

        1.28 Plan Sponsor. PMA Capital Corporation (formerly known as Pennsylvania Manufacturers Corporation), a Pennsylvania corporation.

        1.29 Plan Year. Each calendar year beginning on January 1 and ending on the following December 31.

        1.30 Section 401(a)(17) Limitation. The limitation on compensation taken into account under the Pension Plan pursuant to Section 401(a)(17) of the Code.

        1.31 Section 415 Limitation. The limitation on benefits payable from the Pension Plan imposed by Section 415 of the Code.

        1.32 Spouse. A person who is married to a Participant and who is recognized as the Participant’s Spouse for purposes of the Pension Plan.

        1.33 Termination of Employment. A termination of the employer — employee relationship under circumstances which give rise to a “Separation from Service” under the Pension Plan.

        1.34 Unlimited Benefit Assumptions. The Unlimited Benefit Assumptions are:

     (a) The Participant shall be deemed to receive Compensation (as such term is defined in Article I of the Pension Plan) without taking into account the Section 401(a)(17) Limitation and without taking into account any salary reduction contributions by such Participant to the PMA Capital Corporation 401(k) Excess Plan or to the PMA Capital Corporation Executive Deferred Compensation Plan; and

     (b) The Section 415 Limitations contained in Article XI of the Pension Plan shall not be taken into account.

        1.35 Unlimited Early Retirement Benefit. The greater of:

     (a) The Grandfathered Early Retirement Benefit determined using the Unlimited Benefit Assumptions; or

     (b) The New Early Retirement Benefit determined using the Unlimited Benefit Assumptions.

        1.36 Unlimited Normal Retirement Benefit. The greater of:

     (a) The Grandfathered Normal Retirement Benefit determined using the Unlimited Benefit Assumptions; or

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     (b) The New Normal Retirement Benefit determined using the Unlimited Benefit Assumptions.

        1.37 Unlimited Separation from Service Benefit. The greater of:

     (a) The Grandfathered Separation from Service Benefit determined using the Unlimited Benefit Assumptions; or

     (b) The New Separation from Service Benefit determined using the Unlimited Benefit Assumptions.

ARTICLE II —EXCESS RETIREMENT BENEFITS

        2.1 Excess Retirement Benefit. Subject to Sections 2.2 and 7.2 hereof, the Excess Retirement Benefit of a Participant who is an Eligible Officer shall be determined as follows:

     (a) Normal Retirement Benefit. A Participant's Excess Retirement Benefit at his or her Normal Retirement Date shall be the benefit equal to:

     (1) The Participant's Unlimited Normal Retirement Benefit, less

     (2) The Participant's Limited Normal Retirement Benefit.

     (b) Early Retirement Benefit. A Participant's Excess Retirement Benefit at his or her Early Retirement Date shall be the benefit equal to:

     (1) The Participant's Unlimited Early Retirement Benefit, less

     (2) The Participant's Limited Early Retirement Benefit.

     (c) Separation from Service Benefit. A Participant's Excess Retirement Benefit on his or her separation from service date shall be the benefit equal to:

     (1) The Participant's Unlimited Separation from Service Benefit, less

     (2) The Participant's Limited Separation from Service Benefit.

        2.2 Reemployment. If a Participant whose employment with the Participating Company was terminated at a time when such Participant had an Excess Retirement Benefit and whose benefit had commenced to be paid under this Plan becomes reemployed by the Participating Company, payment of such Excess Retirement Benefit shall be suspended until such individual again ceases to be employed by the Participating Company. Thereupon, payment of such Excess Retirement Benefit shall recommence, but after taking into account any additional Benefit Service (as such term is defined in Article I of the Pension Plan) earned during such period of reemployment.

ARTICLE III —VESTING OF EXCESS RETIREMENT BENEFITS

        3.1 Full Vesting. Except as otherwise provided in this Section 3.1 and in Section 7.2 hereof, a Participant shall have a fully (100%) vested and nonforfeitable interest in his/her Excess Retirement Benefit, if any, once he/she has satisfied the requirements for a fully vested and nonforfeitable benefit under the Pension Plan. Notwithstanding the foregoing, a Participant shall forfeit his/her vested interest, if any, in his/her Excess Retirement Benefit if his/her employment is terminated for Cause.

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        3.2 Forfeitures. Any amount forfeited hereunder by a Participant who has not become vested in a Excess Retirement Benefit under this Plan shall constitute a reduction of the Participating Company’s liability under the Plan and shall not be allocated to the remaining Participants.

ARTICLE IV —FORM OF PAYMENT OF EXCESS RETIREMENT BENEFITS

        4.1 Payment of Excess Retirement Benefit. Except as otherwise provided in Sections 4.3 and 7.2 hereof, a Participant’s vested Excess Retirement Benefit, if any, shall commence to be paid at the time retirement income payments commence being made to the Participant under the Pension Plan.

        4.2 Form of Payment. The normal form of payment of a Participant’s Excess Retirement Benefit shall be the same as that provided under the Pension Plan. Subject to Section 4.5 hereof, a Participant’s Excess Retirement Benefit shall be paid, however, in the same form which the Participant has elected, or is deemed to have elected, pursuant to the Pension Plan. The Participant’s election under the Pension Plan (with the valid consent of his/her Spouse where required under the Pension Plan) shall also be applicable to the payment of his/her Excess Retirement Benefit. Notwithstanding the foregoing, any Participant who elects a Social Security level income option to augment his/her benefit under the Pension Plan on account of his/her retirement before he/she is eligible for retirement benefits under the Federal Social Security system (as such optional form is described in Section 7.2 of the Pension Plan) shall receive his/her Excess Retirement Benefit in the form of a single life annuity. The Administrator shall have the sole and absolute discretion and authority to approve or reject a Participant’s request for a different method of payment than specified herein.

        4.3 Change of Control During Employment. Upon a Change of Control, or within two years thereafter, regardless of whether or not the Plan has been terminated during such period, if the Participating Company (or any successor corporation) shall terminate the Participant’s employment for other than Cause, or if the Participant shall terminate employment for Good Reason or retirement, death, or total disability (as defined in the Pension Plan), then the Participant shall become eligible for, and entitled to receive, the Participant’s Excess Retirement Benefit determined as of the date Participant’s employment terminated, i.e., if the termination date is on or after the Normal Retirement Date then the Excess Retirement Benefit will be determined under Section 2.1(a), if the termination date is on or after the Early Retirement Date but before the Normal Retirement Date, then under Section 2.1(b) and if prior to the Early Retirement Date, then under Section 2.1(c). The Participant’s Excess Retirement Benefit under this provision shall be paid to the Participant in a lump sum upon such termination of employment by the Participating Company (or any successor corporation) in cash within ninety days following the date of termination. Such amount will be calculated as the Actuarial Equivalent of the Participant’s Excess Retirement Benefit using the assumptions for determining Actuarial Equivalence provided under the Pension Plan for determining lump sum distributions. Any Participant who remains employed by the Participating Company (or any successor corporation) for two or more years after a Change of Control shall receive the Excess Retirement Benefit in accordance with Sections 4.1 and 4.2 hereof.

        4.4 Change of Control During Retirement. In the event of a Change of Control of the Plan Sponsor, any Participant who has previously retired from the Participating Company and is receiving payment of the Participant’s Excess Retirement Benefit shall receive, within ninety days following such Change of Control, a single payment in cash which is the Actuarial Equivalent of the Participant’s remaining benefit under this Plan using the assumptions for determining Actuarial Equivalence provided under the Pension Plan for determining lump sum distributions.

        4.5 Failure to Assume Plan upon Change of Control. In the event the Plan is not assumed by a successor upon a Change of Control of the Plan Sponsor, then all Participants shall become eligible for, and entitled to receive, their Excess Retirement Benefit determined in the manner described in Section 4.3. Such Excess Retirement Benefit shall be paid out in a lump sum upon such failure to assume the Plan. Such benefit shall be paid by the Participating Company (or any successor corporation) to the Participant in a lump sum, in cash, within ninety days following the date of the failure to assume the Plan. Such amount will be calculated as the Actuarial Equivalent of the Participant’s Excess Retirement Benefit using the assumptions for determining Actuarial Equivalence provided under the Pension Plan for determining lump sum distributions.

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        4.6. Actuarial Equivalent. An Excess Retirement Benefit which is payable in any form other than the normal form under the Pension Plan, i.e., a straight life annuity over the lifetime of the Participant, or which commences at any time prior to the Participant’s Normal Retirement Date, shall be the Actuarial Equivalent of the Excess Retirement Benefit payable hereunder using the assumptions for determining Actuarial Equivalence provided under the Pension Plan for making a comparable determination.

ARTICLE V —DEATH BENEFIT

        5.1 Death Benefit. Except as otherwise provided herein, a death benefit shall be payable:

     (a) To the surviving Spouse of a Participant who dies before commencement of his/her Excess Retirement Benefit, if the Spouse is entitled to a qualified pre-retirement survivor annuity under Section 6.1 of the Pension Plan. The amount of the death benefit hereunder shall be based on the amount of the Participant’s Excess Retirement Benefit determined using the date of death as the date of retirement or separation from service and calculated using the rules contained in Section 6.1 of the Pension Plan. The death benefit shall be administered and distributed in accordance with the provisions of Sections 6.1 and 6.2 of the Pension Plan.

     (b) In the event of a Change of Control of the Plan Sponsor, any surviving Spouse who is receiving payment of a death benefit pursuant to this Section 5.1 shall receive a single lump sum payment which is the Actuarial Equivalent of the surviving Spouse’s remaining death benefit. Such benefit shall be paid by the Participating Company (or any successor corporation) to the surviving Spouse within ninety days following the date of the Change of Control.

        5.2 Simultaneous Death. In the event of the simultaneous death of a Participant eligible for a death benefit under this Article V and his/her Spouse so that it is not possible to determine which one was the survivor, it shall be presumed for purposes of this Article V that the Spouse predeceased the Participant.

ARTICLE VI —ADMINISTRATION OF THE PLAN

        6.1 Administrator. The Committee appointed by the President of the Plan Sponsor is hereby designated as the administrator of the Plan (within the meaning of Section 3(16)(A) of ERISA). If no Committee is appointed by the Plan Sponsor as the Administrator, the Plan Sponsor shall be the Administrator of the Plan. The Administrator shall have the authority to control and manage the operation and administration of the Plan as the named fiduciary under Section 402(a)(1) of ERISA. The President of the Plan Sponsor may appoint another person to be the Administrator at any time. The President of the Plan Sponsor may also remove a Administrator and fill any vacancy which may arise.

        6.2 Committee Action. If a Committee is appointed as Administrator, the following rules apply:

     (a) On all matters within the jurisdiction of the Committee, the decision of a majority of the members of the Committee shall govern and control. The Committee may take action either at a meeting or in writing without a meeting, provided that in the latter instance all members of the Committee shall have been advised of the action contemplated and that the written instrument evidencing the action shall be signed by a majority of the members.

     (b) The President of the Plan Sponsor shall appoint the Chair of the Committee. The Committee may appoint, either from among its members or otherwise, a secretary who shall keep a record of all meetings and actions taken by the Committee. Either the Chair of the Committee or any member of the Committee designated by the Chair shall execute any certificate, instrument or other written direction on behalf of the Committee. Any action taken on matters within the discretion of the Committee shall be final and conclusive as to the parties thereto and as to all Participants or beneficiaries claiming any right under the Plan.

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        6.3 Powers of Administrator. The Administrator shall have all powers necessary to supervise the administration of the Plan and to control its operation in accordance with its terms, including, but not by way of limitation, the following powers:

     (a) Appoint, retain, and terminate such persons as it deems necessary or advisable to assist in the administration of the Plan or to render advice with respect to the responsibilities of the Administrator under the Plan, including accountants, actuaries, administrators, attorneys and physicians.

     (b) Make use of the services of the employees of the Participating Company in administrative matters.

     (c) Obtain and act on the basis of all tables, valuations, certificates, opinions, and reports furnished by the persons described in paragraph (a) or (b) above. Any determination of Actuarially Equivalent benefits by the actuary selected by the Administrator shall be conclusive and binding on the Participating Company, the Administrator and all Participants.

     (d) Review the manner in which benefit claims and other aspects of the Plan administration have been handled by the employees of the Participating Company.

     (e) Determine all benefits and resolve all questions pertaining to the administration and interpretation of the Plan provisions, either by rules of general applicability or by particular decisions. To the maximum extent permitted by law, all interpretations of the Plan and other decisions of the Administrator shall be conclusive and binding on all parties.

     (f) Adopt such forms, rules and regulations as it shall deem necessary or appropriate for the administration of the Plan and the conduct of its affairs, provided that any such forms, rules and regulations shall not be inconsistent with the provisions of the Plan.

     (g) Remedy any inequity from incorrect information received or communicated or from administrative error.

     (h) Commence or defend any litigation arising from the operation of the Plan in any legal or administrative proceeding.

     (i) To determine all considerations affecting the eligibility of any Employee to become a Participant or remain a Participant in the Plan;

     (j) To determine the status and rights of Participants and their Spouses, beneficiaries or estates;

        6.4 Decisions of Administrator. All decisions of the Administrator, and any action taken by it in respect of the Plan and within the powers granted to it under the Plan, shall be conclusive and binding on all persons, subject to the claims and appeal procedure described in Section 6.10 hereof.

        6.5 Administrative Expenses. All expenses incident to the operation and administration of the Plan reasonably incurred, including, without limitation by way of specification, the fees and expenses of attorneys and advisors, and for such other professional, technical and clerical assistance as may be required, shall be paid by the Participating Company.

        6.6 Eligibility to Participate. No member of the Administrator who is also an Eligible Officer shall be precluded from participating in the Plan if otherwise eligible, but he or she shall not be entitled, as a member of the Administrator, to act or pass upon any matters pertaining specifically to his or her own benefit under the Plan.

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        6.7 Insurance and Indemnification for Liability. The rules relating to the insurance and indemnification for liability are as follows:

     (a) Insurance.The Plan Sponsor may, in its discretion, obtain, pay for, and keep current a policy or policies or insurance, insuring members of the Administrator and other employees to whom any fiduciary responsibility with respect to administration of the Plan has been delegated against any and all liabilities, costs and expenses incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities and obligations under the Plan and any applicable Federal or state law.

     (b) Indemnity.If the Plan Sponsor does not obtain, pay for, and keep current the type of insurance policy or policies referred to in Section 6.7(a) above, or if such insurance is provided but any of the members of the Administrator or other employees referred to in Section 6.7(a) above incur any costs or expenses which are not covered under such policies, then, in either event, the Plan Sponsor shall, to the extent permitted by law, indemnify and hold harmless such parties against any and all costs, expenses and liabilities incurred by such parties in performing their duties and responsibilities under this Plan, provided such party or parties were acting in good faith within what was reasonably believed to have been in the best interests of the Plan and its Participants.

        6.8 Agent for Service of Legal Process. The Administrator shall be the designated agent for the service of legal process with respect to any matter concerning the Plan.

        6.9 Delegation of Responsibility. The Administrator may designate a committee of one or more persons to carry out any of the responsibilities or functions assigned or allocated to the Administrator under the Plan. Each reference to the Administrator in this Plan shall include the Administrator as well as any person to whom the Administrator may have delegated the performance of a particular function or responsibility under this Section 6.9.

        6.10 Claims Procedure.

     (a) Claim for Benefits.All claims for benefits under the Plan shall be made in writing and shall be signed by the applicant. Claims shall be submitted to a representative designated by the Administrator and hereinafter referred to as the “Claims Coordinator”.

     Each claim hereunder shall be acted on and approved or disapproved by the Claims Coordinator within 60 days following the receipt by the Claims Coordinator of the information necessary to process the claim.

     In the event the Claims Coordinator denies a claim for benefits, in whole or in part, the Claims Coordinator shall notify the applicant in writing of the denial of the claim and notify such applicant of his or her right to a review of the Claims Coordinator’s decision by the Administrator. Such notice by the Claims Coordinator shall also set forth, in a manner calculated to be understood by the applicant, the specific reason for such denial, the specific Plan provisions on which the denial is based, a description of any additional material or information necessary to perfect the claim, with an explanation of why such material or information is necessary, and an explanation of the Plan’s claims review procedure as set forth in this Section 6.10.

     If no action is taken by the Claims Coordinator on an applicant’s claim within 60 days after receipt by the Claim Coordinator, such application shall be deemed to be denied for purposes of the following appeals procedure.

     (b) Appeals Procedure.Any applicant whose claim for benefits is denied in whole or in part (“Claimant”) may appeal from such denial to the Administrator for a review of the decision by the Administrator. Such appeal must be made within six months after the Claimant has received written notice of the denial as provided above in Section 6.10(a). An appeal must be submitted in writing within such period and must:

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     (1) Request a review by the Administrator of the claim for benefits under the Plan;

     (2) Set forth all of the grounds upon which the Claimant's request for review is based and any facts in support thereof; and

     (3) Set forth any issues or comments which the Claimant deems pertinent to the appeal.

     The Administrator shall regularly review appeals by Claimants. The Administrator shall act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing the Claimant’s request for review. If such an extension of time for processing is required, written notice of the extension shall be forwarded to the Claimant prior to the commencement of the extension. In no event shall such extension exceed a period of 120 days after the request for review is received by the Administrator.

     The Administrator shall make a full and fair review of each appeal and any written materials submitted by the Claimant and/or the Participating Company in connection therewith. The Administrator may require the Claimant and/or the Participating Company to submit such additional facts, documents or other evidence as the Administrator in its discretion deems necessary or advisable in making its review. The Claimant shall be given the opportunity to review pertinent documents or materials upon submission of a written request to the Administrator, provided the Administrator finds the requested documents or materials are pertinent to the appeal.

     On the basis of its review, the Administrator shall make an independent determination of the Claimant’s eligibility for benefits under the Plan. The decision of the Administrator on any claim for benefits shall be final and conclusive upon all parties thereto.

     In the event the Administrator denies an appeal, in whole or in part, the Administrator shall give written notice of the decision to the Claimant, which notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reasons for such denial and which shall make specific reference to the pertinent Plan provisions on which the Administrator’s decision was based.

     (c) Compliance with Regulations.It is intended that the claims procedure of this Plan be administered in accordance with the claims procedure regulations of the Department of Labor set forth in 29 CFR § 2560.503-1.

ARTICLE VII —MISCELLANEOUS

        7.1 Funding. Nothing contained in this Plan and no action taken pursuant to this Plan will create or be construed to create or require a funded arrangement or any kind of fiduciary duty between the Participating Company and/or the Administrator and a Participant. Benefits payable under this Plan shall be paid directly from the general assets of each Participating Company. The Participating Company shall not be obligated to set aside, earmark or escrow any funds or other assets to satisfy its obligations under this Plan. The Participating Company’s obligation hereunder will be an unfunded and unsecured promise to make payments in the future. A Participant and his/her Spouse shall not have any property interest, claim or legal or equitable right in or to any specific assets of the Participating Company other than the unsecured right to receive payments from the Participating Company as provided herein. To the extent any person acquires a right hereunder, such right(s) will be no greater than those of a general, unsecured creditor of the Participating Company.

        7.2 Amendment or Termination.

     (a) The Board of Directors reserves the right to alter, amend or terminate the Plan, or any part thereof, through the adoption of a written resolution; provided, however, that no such action by the

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Board of Directors shall reduce a Participant’s Excess Retirement Benefit accrued as of the time thereof and no such amendment or termination may occur as a result of a Change of Control, within two years after a Change of Control, or as part of any plan to effect a Change of Control. Each amendment shall be set forth in a written instrument.

     (b) If the Plan is terminated, a determination shall be made of each Participant’s Excess Retirement Benefit as of the Plan termination date. The amount of a Participant’s benefit or benefits shall be payable to the Participant at the time it would have been payable under Article IV hereof if the Plan had not been terminated. If a Participant dies after termination of the Plan, but prior to his/her Termination of Employment, his/her surviving Spouse shall receive a distribution of his/her death benefit, determined in accordance with Article V hereof, but based on the Participant’s Excess Retirement Benefit as of the Plan termination date.

        7.3 Status of Employment. Neither the establishment or maintenance of the Plan, nor any action of the Plan Sponsor or any Participating Company or the Administrator shall be held or construed to confer upon any individual any right to be continued as an Employee nor, upon dismissal, any right or interest in any assets of the Plan Sponsor or a Participating Company nor to affect any Participant’s right to terminate his/her employment at any time.

        7.4 Payments to Minors and Incompetents. If a Participant or surviving Spouse entitled to receive any benefits hereunder is a minor or is deemed by the Administrator or is adjudged to be legally incapable of giving a valid receipt and discharge for such benefits, they will be paid to the duly appointed guardian of such minor or incompetent or to such other legally appointed person as the Administrator may designate. Such payment shall, to the extent made, be deemed a complete discharge of any liability for such payment under the Plan.

        7.5 Inalienability of Benefits

     (a) Benefits payable under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, whether voluntary or involuntary. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits under the Plan shall be void. The Participating Company shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits under the Plan.

     (b) Notwithstanding Section 7.5(a), if a Participant is indebted to the Participating Company at any time when payments are to be made by the Participating Company to the Participant under the provisions of the Plan, the Participating Company shall have the right to reduce the amount of payment to be made to the Participant (or the Participant’s surviving Spouse) to the extent of such indebtedness. Any election by the Participating Company not to reduce such payment shall not constitute a waiver of its claim for such indebtedness.

        7.6 Governing Law. Except to the extent preempted by federal law, the Plan shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania.

        7.7 Severability. In case any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal and invalid provisions had never been set forth.

        7.8 Required Information to Administrator. Each Participant will furnish to the Administrator such information as the Administrator considers necessary or desirable for purposes of administering the Plan, and the provisions of the Plan respecting any payments thereunder are conditional upon the Participant’s furnishing promptly such true, full and complete information as the Administrator may request. The Administrator, in its sole discretion, may request a Participant to submit proof of his/her age. The Administrator will, if such proof of age is not submitted when requested, use as conclusive evidence thereof such information as is deemed by it to be reliable, regardless of the lack

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of proof. Any notice or information which, according to the terms of the Plan or the rules of the Administrator, must be filed with the Administrator, shall be deemed so filed if addressed and either delivered in person or mailed to and received by the Administrator at the following address:

Plan Administrator
PMA Capital Corporation
1735 Market Street, 27th Floor
Philadelphia, PA 19103

Failure on the part of the Participant or Spouse to comply with any such request within a reasonable period of time shall be sufficient grounds for delay in the payment of benefits under the Plan until such information or proof is received by the Administrator.

        7.9 Income and Payroll Tax Withholding. To the extent required by the laws in effect at the time payments are made under this Plan, the Plan Sponsor shall withhold from such deferred compensation payments any taxes required to be withheld for federal, state or local tax purposes.

        7.10 Application of Plan. The Plan, as set forth herein, shall apply to any Participant terminating employment on or after the Effective Date. The Plan, as in effect on a Participant’s Termination of Employment date, shall apply to any such Participant terminating employment before the Effective Date.

        7.11 No Effect on Other Benefits. No amount credited under this Plan shall be deemed part of the total compensation for the purpose of computing benefits to which a Participant may be entitled under any pension plan or other supplemental compensation arrangement, unless such plan or arrangement specifically provides to the contrary. The amounts payable to the Participant hereunder will be in addition to any benefits paid or payable to the Participant under any other pension, disability, annuity or retirement plan or policy whatsoever. Nothing herein contained will in any manner modify, impair or affect any existing or future rights of the Participant to participate in any other employee benefits plan or receive benefits in accordance with such plan or to participate in any current or future pension plan of a Participating Company or any supplemental arrangement which constitutes a part of the Participating Company’s regular compensation structure.

        7.12 Inurement. The Plan shall be binding upon and inure to the benefit of the Participating Company and its successors and assigns, and the Participant and the Participant’s beneficiaries, successors, heirs, executors and administrators.

        7.13 Notice. Any notices or elections required or permitted to be given or made under this Plan will be sufficient if in writing and if sent by first class, postage paid mail to the Participant’s last known address as shown on the Participating Company’s personnel records or to the principal office of the Participating Company, as the case may be. The date of such mailing shall be deemed the date of notice, consent or demand. Either party may change the address to which notice is to be sent by giving notice of the change of address in the manner aforesaid.

        7.14 Captions. The captions contained in and the table of contents prefixed to the Plan are inserted only as a matter of convenience and for ease of reference in no way define, limit, enlarge or describe the scope or intent of this Plan or in any way affect the Plan or the construction of any provision thereof.

        7.15 Acceleration of Payments. Notwithstanding any other provision of the Plan, if the Administrator determines, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his/her delegate, a decision by a court of competent jurisdiction involving a Participant, or a closing agreement involving a Participant made under Section 7121 of the Code that is approved by the Commissioner, that such Participant or Spouse has recognized or will recognize income for federal income tax purposes with respect to benefits that are or will be

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payable to the Participant under the Plan before they otherwise would be paid to the Participant or the Spouse (as applicable), upon the request of the Participant or Spouse, the Administrator shall immediately make distribution to the Participant or Spouse of the amount so taxable.

        7.16 Reporting and Disclosure Requirements. In order to comply with the requirements of Title I of ERISA, the Administrator shall:

     (a) File a statement with the Secretary of Labor that includes the name and address of the employer, the employer identification number assigned by the Internal Revenue Service, a declaration that the employer maintains the Plan primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and a statement of the number of such plans and the number of employees in each; and

     (b) Provide plan documents, if any, to the Secretary of Labor upon request as required by Section 104(a)(1) of ERISA. It is intended that this provision comply with the requirements of DOL Reg. ss. 2520.104-23.

        This method of compliance is available to the Plan only so long as the Plan is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and for which benefits are paid as needed solely from the general assets of the employer or are provided exclusively through insurance contracts or policies, the premiums for which are paid directly by the employer from its general assets, issued by an insurance company or similar organization which is qualified to do business in any State, or both.

        7.17 Gender and Number. Whenever any words are used herein in any specific gender, they shall be construed as though they were used in any other applicable gender. The singular form, whenever used herein, shall mean or include the plural form where applicable and vice versa.

ARTICLE VIII —ADOPTION BY AFFILIATED EMPLOYERS

        8.1 Adoption of Plan. The following rules shall apply with respect to the adoption of the Plan:

     (a) Adoption by Affiliated Employers. The terms of this Plan may be adopted by any Affiliated Employer, provided:

     (1) The Board of Directors consents to such adoption by an appropriate written resolution;

     (2) The board of directors of the Affiliated Employer adopts this Plan by an appropriate written resolution which identifies the Eligible Officers;

     (3) The Affiliated Employer executes a Plan Adoption Agreement in the form attached hereto as Plan Exhibit A, applicable to the Eligible Officers of such Affiliated Employer. The Affiliated Employer may elect in such Adoption Agreement to have special provisions apply with respect to the Eligible Officers of the Affiliated Employer which differ from the provisions of the Plan applicable to other Eligible Officers; and

     (4) The Affiliated Employer executes such other documents as may be required to make such Affiliated Employer a party to the Plan as a Participating Company.

     (b) Effect of Adoption. An Affiliated Employer that adopts the Plan is thereafter a Participating Company with respect to its Eligible Officers.

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        8.2 Withdrawal from Plan. Any Participating Company may at any time withdraw from the Plan upon giving the Board of Directors at least 30 days prior written notice of its intention to withdraw.

        8.3 Application of Withdrawal Provisions. The withdrawal provisions contained in Section 8.2 shall be applicable only if the withdrawing Participating Company continues to cover its Participants under a plan similar to this Plan. Otherwise the termination provisions of the Plan shall apply.

        8.4 Plan Sponsor Appointed Agent of Participating Companies. As a condition precedent to the adoption of the Plan, each participating Affiliated Employer appoints the Board of Directors as its agent to exercise on its behalf all of the power and authority conferred upon the Plan Sponsor by the Plan, including, without limitation, the power to amend or to terminate the Plan.

        TO RECORD the adoption of this Plan, the Plan Sponsor on behalf of itself and each other Participating Company has caused this document to be executed by its duly authorized officers as of the 7th day of March, 2001.

ATTEST:	PMA CAPITAL CORPORATION
[SEAL]
/s/ Robert L. Pratter	By: /s/ Francis W. McDonnell
Robert L. Pratter, Secretary	Francis W. McDonnell, Senior Vice President,
	Treasurer & Chief Financial Officer

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APPENDIX A —LIST OF PARTICIPATING COMPANIES

(a)   PMA Capital Corporation

(b)   Pennsylvania Manufacturers’Association Insurance Company

(c)   PMA Capital Insurance Company (formerly PMA Reinsurance Corporation)

(d)   Caliber One Indemnity Company

(e)   Caliber One Management Company, Inc.

(f)   PMA Management Corp.

(g)   PMA Re Management Company

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PLAN EXHIBIT A —PLAN ADOPTION AGREEMENT

[Insert Name of Adopting Affiliated Employer]

PMA CAPITAL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

[NOTE: Plan Exhibit A is not to be completed or executed. If an Affiliated Employer adopts the Plan, a separate instrument following the form of this Plan Exhibit A shall be completed and filed with the Administrator.]

By executing this Adoption Agreement, [NAME OF ADOPTING AFFILIATED EMPLOYER], on this ____ day of __________, 20__ hereby adopts the PMA CAPITAL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("Plan"), the terms of which Plan are incorporated herein by reference, and by adopting said Plan hereby becomes a Participating Company in said Plan effective __________, 20__.

        1 The Effective Date of the Plan hereby created or continued is __________, 20__.

        2 The Board of Directors of PMA CAPITAL CORPORATION consented to the adoption of the Plan by the Affiliated Employer named herein on __________, 20__.

        3 The Board of Directors of [NAME OF ADOPTING AFFILIATED EMPLOYER] adopted the Plan on __________, 20__.

Attest:	Name of Participating Company
[SEAL]
	By
Secretary	President
Attest:	ADOPTION CONSENTED TO BY: PMA CAPITAL CORPORATION
[SEAL]
	By
Secretary	President

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EX-10

PMA CAPITAL CORPORATION

EXECUTIVE MANAGEMENT PENSION PLAN

MARCH 2001

TABLE OF CONTENTS

			PAGE
ARTICLE I - DEFINITIONS			1
	1.1	Actuarial Equivalent	1
	1.2	Administrator	1
	1.3	Affiliated Employer	1
	1.4	Board of Directors	2
	1.5	Cause	2
	1.6	Change of Control	2
	1.7	Code	2
	1.8	Effective Date	2
	1.9	Eligible Executive	2
	1.10	Good Reason	3
	1.11	Participant	3
	1.12	Participating Company	3
	1.13	Past Service Credit	3
	1.14	Past Service Retirement Benefit	3
	1.15	Pension Plan	3
	1.16	Plan.	4
	1.17	Plan Sponsor	4
	1.18	Plan Year	4
	1.19	PMA SERP	4
	1.20	Section 401(a)(17) Limitation	4
	1.21	Section 415 Limitation	4
	1.22	Spouse	4
	1.23	Termination of Employment	4
ARTICLE II - PAST SERVICE RETIREMENT BENEFITS			4
	2.1	Past Service Credit	4
	2.2	Past Service Retirement Benefit	4
	2.3	Reemployment	5
ARTICLE III - VESTING OF PAST SERVICE RETIREMENT BENEFITS			5
	3.1	Full Vesting	5
	3.2	Forfeitures	5
ARTICLE IV - FORM OF PAYMENT OF PAST SERVICE RETIREMENT BENEFITS			5
	4.1	Payment of Past Service Retirement Benefit	5
	4.2	Form of Payment	5
	4.3	Change of Control During Employment	5
	4.4	Change of Control During Retirement	6
	4.5	Failure to Assume Plan upon Change of Control	6
	4.6.	Actuarial Equivalent	6
ARTICLE V - DEATH BENEFIT			6
	5.1	Death Benefit	6
	5.2	Simultaneous Death	6
ARTICLE VI - ADMINISTRATION OF THE PLAN			6
	6.1	Administrator	6

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	6.2	Committee Action	7
	6.3	Powers of Administrator	7
	6.4	Decisions of Administrator	8
	6.5	Administrative Expenses	8
	6.6	Eligibility to Participate	8
	6.7	Insurance and Indemnification for Liability	8
	6.8	Agent for Service of Legal Process	8
	6.9	Delegation of Responsibility	8
	6.10	Claims Procedure	8
ARTICLE VII - MISCELLANEOUS			10
	7.1	Funding	10
	7.2	Amendment or Termination	10
	7.3	Status of Employment	10
	7.4	Payments to Minors and Incompetents	10
	7.5	Inalienability of Benefits	10
	7.6	Governing Law	11
	7.7	Severability	11
	7.8	Required Information to Administrator	11
	7.9	Income and Payroll Tax Withholding	11
	7.10	Application of Plan	11
	7.11	No Effect on Other Benefits	11
	7.12	Inurement	12
	7.13	Notice	12
	7.14	Captions	12
	7.15	Acceleration of Payments	12
	7.16	Reporting and Disclosure Requirements	12
	7.17	Gender and Number	12
ARTICLE VIII - ADOPTION BY AFFILIATED EMPLOYERS			12
	8.1	Adoption of Plan	12
	8.2	Withdrawal from Plan	13
	8.3	Application of Withdrawal Provisions	13
	8.4	Plan Sponsor Appointed Agent of Participating Companies	13
APPENDIX A - LIST OF PARTICIPATING COMPANIES			14
PLAN EXHIBIT A - PLAN ADOPTION AGREEMENT			15
PLAN ADOPTION AGREEMENT - PENNSYLVANIA MANUFACTURERS'             ASSOCIATION INSURANCE COMPANY			16
PLAN ADOPTION AGREEMENT - PMA CAPITAL INSURANCE COMPANY             (FORMERLY PMA REINSURANCE CORPORATION)			17
PLAN ADOPTION AGREEMENT - CALIBER ONE INDEMNITY COMPANY			18
PLAN ADOPTION AGREEMENT - CALIBER ONE MANAGEMENT COMPANY, INC.			19
PLAN ADOPTION AGREEMENT - PMA MANAGEMENT CORP.			20
PLAN ADOPTION AGREEMENT - PMA RE MANAGEMENT COMPANY			21

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PMA CAPITAL CORPORATION
EXECUTIVE MANAGEMENT PENSION PLAN

        WHEREAS, some executives hired in mid-career by the PMA Capital Corporation (formerly known as the Pennsylvania Manufacturers Corporation) (the “Plan Sponsor”) are not able to be credited with the maximum number of years of Benefit Service allowable under the PMA Capital Corporation Pension Plan (formerly known as The PMC Pension Plan (the “Pension Plan”)), due to the age of the executive when hired (“Short Service Reduction”); and

        WHEREAS, Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as amended (the “Code”) place limitations (the “Sections 401(a)(17) and 415 Limitations”) on the retirement benefits which can be paid to participants in the Pension Plan; and

        WHEREAS, the Plan Sponsor established the PMA Capital Corporation Supplemental Executive Retirement Plan (formerly known as The PMC Supplemental Executive Retirement Plan) (the “PMA SERP”), effective January 1, 1993, to provide supplemental executive retirement benefits for the purposes of offsetting the Short Service Reduction and the Sections 401(a)(17) and 415 Limitations to a select group of management and highly compensated employees within the meaning of Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); and

        WHEREAS, the Plan Sponsor has decided to provide to a select group of management and highly compensated employees within the meaning of Section 201(2) of ERISA the Short Service Reduction benefits previously provided under the PMA SERP in a separate plan to be known as the PMA Capital Corporation Executive Management Pension Plan (the “Plan”), as set forth herein, and has restated the PMA SERP to, among other things, reflect the removal from the PMA SERP of those provisions set forth herein;

        NOW THEREFORE, the Plan Sponsor does hereby adopt the Plan as of January 1, 1999, as hereinafter set forth.

ARTICLE I —DEFINITIONS

        The following words and phrases shall have the following meanings unless a different meaning is plainly required by the context:

        1.1 Actuarial Equivalent. An amount or benefit of equivalent present value to the amount or benefit which otherwise would have been provided to, or on account of, a Participant determined on the basis of the actuarial assumptions then in effect under the Pension Plan.

        1.2 Administrator. The committee (hereinafter referred to as “Committee”) appointed by the President of the Plan Sponsor to serve as the Administrator of the Plan. If no such Committee is appointed, the Plan Sponsor shall be the Administrator of the Plan.

        1.3 Affiliated Employer. A member of a group of employers, of which the Plan Sponsor is a member and which group constitutes:

     (a) A controlled group of corporations (as defined in Section 414(b) of the Code);

     (b) Trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c) of the Code);

     (c) Trades or businesses (whether or not incorporated) which constitute an affiliated service group (as defined in Section 414(m) of the Code); or

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     (d) Any other entity required to be aggregated with the Plan Sponsor pursuant to Section 414(o) of the Code and the Treasury regulations thereunder.

        1.4 Board of Directors. The Board of Directors of the Plan Sponsor, as from time to time constituted, or any committee thereof which is authorized to act on behalf of the Board of Directors.

        1.5 Cause. Termination by a Participating Company of employment with the Participating Company for “Cause” shall mean termination upon the willful engaging by the Participant in misconduct which is materially injurious to the Participating Company or any Affiliated Employer. No act, or failure to act, on the Participant’s part shall be considered “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that such action or omission was in the best interest of the Participating Company or its Affiliated Employers. Notwithstanding the foregoing, a Participant shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Participant a copy of a written determination by the Administrator (after reasonable notice to the Participant and an opportunity for the Participant, together with the Participant’s counsel, to be heard before the Administrator), finding that in the good faith opinion of the Administrator the Participant was guilty of misconduct as set forth above in this Section and specifying the particulars thereof in detail. If the Administrator consists of more than one individual, the Administrator’s determination shall be made by written resolution duly adopted by the affirmative vote of a majority of the entire membership of the Administrator at a meeting of the Administrator called and held for the purpose (after reasonable notice to the Participant and an opportunity for the Participant, together with the Participant’s counsel, to be heard before the Administrator), finding that in the good faith opinion of the Administrator the Participant was guilty of misconduct as set forth above in this Section and specifying the particulars thereof in detail.

        1.6 Change of Control. A change of control of the Plan Sponsor of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or Item 1(a) of a Current Report on Form 8-K or any successor rule, whether or not the Plan Sponsor is then subject to such reporting requirements; provided that, without limitation, such a Change of Control shall be deemed to occur if:

     (a) Any “person”(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or first becomes the “beneficial owner”(as determined for purposes of Regulation 13D-G under the Exchange Act as currently in effect), directly or indirectly, in a transaction or series of transactions, of securities of the Plan Sponsor representing more than 50% of the voting power of the Plan Sponsor’s voting capital stock (the “Voting Stock”); or

     (b) The consummation of a merger, or other business combination after which the holders of the Voting Stock do not collectively own 50% or more of the voting capital stock of the entity surviving such merger or other business combination, or the sale, lease, exchange or other transfer in a transaction or series of transactions of all or substantially all of the assets of the Plan Sponsor; or

     (c) At any time individuals who were either nominated for election by the Plan Sponsor’s Board of Directors or were elected by the Plan Sponsor’s Board of Directors cease for any reason to constitute at least a majority of the Plan Sponsor’s Board of Directors.

        1.7 Code. Internal Revenue Code of 1986, as amended. Reference to a specific Section of the Code shall include such Section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.

        1.8 Effective Date. January 1, 1999.

        1.9 Eligible Executive. Any executive of a Participating Company who is hired as a Vice President or as a more senior officer on or after January 1, 1990.

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        1.10 Good Reason. For purposes of this Plan, “Good Reason” shall mean any of the following events which occurs, following a Change of Control, without the Participant’s express written consent:

     (a) The assignment to the Participant of any duties materially inconsistent with the Participant’s status, position, duties, and responsibilities with the Participating Company immediately prior to such Change of Control or a substantial alteration in the nature or status of the Participant’s responsibilities from those in effect immediately prior to such Change of Control;

     (b) A reduction by the Participating Company in the Participant’s annual base salary as in effect on the Effective Date or thereafter, as the same may be increased from time to time, except for across-the-board salary reductions similarly affecting all executives of the Participating Company and of any organization in control of the Participating Company;

     (c) The Participating Company’s requiring the Participant to be based anywhere other than the Participant’s office prior to the Change of Control except for required travel on the Participating Company’s business to an extent substantially consistent with the Participant’s prior travel obligations;

     (d) The failure by the Participating Company to continue in effect any compensation plan of the Participating Company in which the Participant participates, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan in connection with such Change of Control, or the failure by the Participating Company to continue the Participant’s participation therein;

     (e) The failure by the Participating Company to continue to provide the Participant with benefits substantially similar to those provided under the Plan Sponsor’s 401(k) Plan or any of the pension, life insurance, medical, health and accident, or disability plans of the Participating Company in which the Participant was participating at the time of such Change of Control, or the taking of any action by the Participating Company which would directly or indirectly materially reduce any of such benefits or deprive the Participant of any material fringe benefit enjoyed by the Participant at the time of such Change of Control, or the failure by the Participating Company or its subsidiaries to provide the number of paid vacation days to which the Participant was entitled on the basis of years of service with the Participating Company in accordance with the normal vacation policy of the Participating Company as in effect at the time of such Change of Control;

     (f) Any purported termination of a Participant’s employment which is not effected pursuant to a written notice setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Participant’s employment; and for purposes of this Plan, no such purported termination shall be effective.

        1.11 Participant. An Eligible Executive or former Eligible Executive who accrues, or who has accrued, benefits under this Plan on and after January 1, 1999.

        1.12 Participating Company. The Plan Sponsor and each of its Affiliated Employers which, upon the approval of the Board of Directors, has agreed to participate in this Plan in accordance with the provisions of Article VIII. Each Participating Company is listed on Appendix A.

        1.13 Past Service Credit. A Participant’s past service credit under this Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999, both as determined in accordance with Section 2.1 hereof.

        1.14 Past Service Retirement Benefit. A Participant’s past service retirement benefit under this Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999, both as determined in accordance with Section 2.2 hereof.

        1.15 Pension Plan. The PMA Capital Corporation Pension Plan (formerly known as The PMC Pension Plan) as in effect on the Effective Date and as such plan may be further amended and/or restated from time to time and

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each successor or replacement tax-qualified pension plan. In addition, the Pension Plan shall also include such other retirement plans of the Plan Sponsor, or of such other affiliates, subsidiaries or divisions of the Plan Sponsor as the Administrator may expressly include from time to time.

        1.16 Plan. The PMA Capital Corporation Executive Management Pension Plan as set forth herein and as it may be amended and/or restated from time to time.

        1.17 Plan Sponsor. PMA Capital Corporation, a Pennsylvania corporation.

        1.18 Plan Year. Each calendar year beginning on January 1 and ending on the following December 31.

        1.19 PMA SERP. The PMA Capital Corporation Supplemental Executive Retirement Plan, as in effect before January 1, 1999.

        1.20 Section 401(a)(17) Limitation. The limitation on compensation taken into account under the Pension Plan pursuant to Section 401(a)(17) of the Code.

        1.21 Section 415 Limitation. The limitation on benefits payable from the Pension Plan imposed by Section 415 of the Code.

        1.22 Spouse. A person who is married to a Participant and who is recognized as the Participant’s Spouse for purposes of the Pension Plan.

        1.23 Termination of Employment. A termination of the employer — employee relationship under circumstances which give rise to a “Separation from Service” under the Pension Plan.

ARTICLE II —PAST SERVICE RETIREMENT BENEFITS

        2.1 Past Service Credit. A Participant’s Past Service Credit under the Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999, shall be determined as follows. A Participant who is or was an Eligible Executive shall be credited with one additional year of Benefit Service (as such term is defined in Article I of the Pension Plan) under this Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999, for each year of Benefit Service credited under the Pension Plan until the sum of the Participant’s years of Benefit Service credited under this Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999 (i.e., the Participant’s Past Service Credit under the Plan on and after January 1, 1999, and under the PMA SERP before January 1, 1999) and the Participant’s years of Benefit Service credited under the Pension Plan equal twenty-five (25) years of Benefit Service. If the sum of a Participant’s Past Service Credit under the Plan on and after January 1, 1999, the PMA SERP before January 1, 1999, and such Participant’s years of Benefit Service under the Pension Plan is greater than twenty-five (25), such Participant’s Past Service Credit under the Plan and under the PMA SERP shall be reduced first so that said sum does not exceed twenty-five (25). Any such reduction shall be made first under the PMA SERP and then under the Plan. (All references in this Plan to Articles, Sections or specific paragraphs of the Pension Plan shall include any successor Article, Section or paragraph or any amendment thereto.)

        2.2 Past Service Retirement Benefit. Subject to Sections 2.3 and 7.2 hereof, a Participant’s Past Service Retirement Benefit, if any, shall be an amount equal to the amount that would be payable under the benefit formula actually used in determining such Participant’s benefit under Article V of the Pension Plan at the time such benefit becomes payable but using only the Participant’s Past Service Credit determined under Section 2.1 as his/her Years of Benefit Service (as defined in Article I of the Pension Plan) under the Pension Plan and the following additional assumptions:

     (a) The Participant shall be deemed to receive Compensation (as such term is defined in Article I of the Pension Plan) during each year of past service equal to such Participant’s annual rate of pay as in effect on

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the Participant’s Employment Commencement Date (as such term is defined in Article I of the Pension Plan) without taking into account the Section 401(a)(17) Limitation or any salary reduction contributions by such Participant to the PMA Capital Corporation 401(k) Excess Plan or to the PMA Capital Corporation Executive Deferred Compensation Plan; and

     (b) The Section 415 Limitation contained in Article XI of the Pension Plan shall not be taken into account.

        2.3 Reemployment. If a Participant whose employment with a Participating Company was terminated at a time when such Participant had a Past Service Retirement Benefit and whose benefit had commenced to be paid under this Plan or under the PMA SERP becomes reemployed by the Participating Company, payment of such Past Service Retirement Benefit shall be suspended until such individual again ceases to be employed by the Participating Company. Thereupon, payment of such Past Service Retirement Benefit shall recommence, but only if such Participant is still entitled, after taking into account the additional Benefit Service earned by such Participant during his or her period of reemployment, under the terms of Sections 2.1 and 2.2 to a Past Service Retirement Benefit under the Plan or PMA SERP.

ARTICLE III —VESTING OF PAST SERVICE RETIREMENT BENEFITS

        3.1 Full Vesting. Except as otherwise provided in this Section 3.1 and in Section 7.2 hereof, a Participant shall have a fully (100%) vested and nonforfeitable interest in his/her Past Service Retirement Benefit, if any, once he/she has satisfied the age and service requirements for early or normal retirement under the Pension Plan, as amended effective June 1, 1999, whichever occurs first. Notwithstanding the foregoing, a Participant shall forfeit his/her vested interest, if any, in his/her Past Service Retirement Benefit if his/her employment is terminated for Cause.

        3.2 Forfeitures. Any amount forfeited hereunder by a Participant pursuant to Section 3.1 shall constitute a reduction of the Participating Company’s liability under the Plan and/or PMA SERP and shall not be allocated to the remaining Participants.

ARTICLE IV —FORM OF PAYMENT OF PAST SERVICE RETIREMENT BENEFITS

        4.1 Payment of Past Service Retirement Benefit. Except as otherwise provided in Sections 4.3 and 7.2 hereof, a Participant’s vested Past Service Retirement Benefit, if any, shall commence to be paid at the time retirement income payments commence being made to the Participant under the Pension Plan. If a Participant elects early retirement under the Pension Plan, then the Participant’s Past Service Retirement Benefit shall commence at the same time as payments from the Pension Plan and shall be reduced by the same early retirement reduction factors, if any, applicable to his/her retirement income from the Pension Plan, as amended effective June 1, 1999.

        4.2 Form of Payment. The normal form of payment of a Participant’s Past Service Retirement Benefit shall be the same as that provided under the Pension Plan. Subject to Section 4.5 hereof, a Participant’s Past Service Retirement Benefit shall be paid, however, in the same form which the Participant has elected, or is deemed to have elected, pursuant to the Pension Plan. The Participant’s election under the Pension Plan (with the valid consent of his/her Spouse where required under the Pension Plan) shall also be applicable to the payment of his/her Past Service Retirement Benefit. Notwithstanding the foregoing, any Participant who elects a Social Security level income option to augment his/her benefit under the Pension Plan on account of his/her retirement before he/she is eligible for retirement benefits under the Federal Social Security system (as such optional form is described in Section 7.2 of the Pension Plan) shall receive his/her Past Service Retirement Benefit in the form of a single life annuity, as reduced, if necessary, in the manner set forth in Section 4.1 hereof. The Administrator shall have the sole and absolute discretion and authority to approve or reject a Participant’s request for a different method of payment than specified herein.

        4.3 Change of Control During Employment. Upon a Change of Control, or within two years thereafter, regardless of whether or not the Plan has been terminated during such period, if the Participating Company (or any successor corporation) shall terminate the Participant’s employment for other than Cause, or if the Participant shall

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terminate employment for Good Reason or retirement, death, or total disability (as defined in the Pension Plan), then the Participant shall become eligible for, and entitled to receive, the Participant’s Past Service Retirement Benefit. The Participant’s Past Service Retirement Benefit under this provision shall be paid out in a lump sum upon such termination of employment. Such benefit shall be paid by the Participating Company (or any successor corporation) to the Participant in a lump sum, in cash, within ninety days following the date of termination. Such amount will be calculated as the Actuarial Equivalent of the Participant’s Past Service Retirement Benefit using the assumptions for determining Actuarial Equivalence provided under the Pension Plan for determining lump sum distributions. Any Participant who remains employed by the Participating Company (or any successor corporation) for two or more years after a Change of Control shall receive the Past Service Retirement Benefit in accordance with Sections 4.1 and 4.2 hereof.

        4.4 Change of Control During Retirement. In the event of a Change of Control of the Plan Sponsor, any Participant who has previously retired from the Participating Company and is receiving payment of the Participant’s Past Service Retirement Benefit shall receive, within ninety days following such Change of Control, a single payment in cash which is the Actuarial Equivalent of the Participant’s remaining benefit under this Plan using the assumptions for determining Actuarial Equivalence provided under the Pension Plan for determining lump sum distributions.

        4.5 Failure to Assume Plan upon Change of Control. In the event the Plan is not assumed by a successor upon a Change of Control of the Plan Sponsor, then all Participants shall become eligible for, and entitled to receive, their Past Service Retirement Benefit. Such Past Service Retirement Benefit shall be paid out in a lump sum upon such failure to assume the Plan. Such benefit shall be paid by the Participating Company (or any successor corporation) to the Participant in a lump sum, in cash, within ninety days following the date of the failure to assume the Plan. Such amount will be calculated as the Actuarial Equivalent of the Participant’s Past Service Retirement Benefit.

        4.6. Actuarial Equivalent. A Past Service Retirement Benefit which is payable in any form other than the normal form under the Pension Plan, i.e., a straight life annuity over the lifetime of the Participant, or which commences at any time prior to the Participant’s Normal Retirement Date, shall be the Actuarial Equivalent of the Past Service Retirement Benefit payable hereunder using the assumptions for determining Actuarial Equivalence provided under the Pension Plan for making a comparable determination..

ARTICLE V —DEATH BENEFIT

        5.1 Death Benefit. Except as otherwise provided herein, a death benefit shall be payable to the surviving Spouse of a Participant who dies before commencement of his/her Past Service Retirement Benefit, if the Spouse is entitled to a qualified pre-retirement survivor annuity under Article VI of the Pension Plan. The amount of the death benefit hereunder shall be based on the amount of the Participant’s Past Service Retirement Benefit determined using the date of death as the date of retirement or separation from service and, for purposes of converting the Past Service Retirement Benefit to a spousal survivor death benefit, using the rules contained in Article VI of the Pension Plan. The death benefit shall be administered and distributed in accordance with the provisions of Article VI of the Pension Plan.

In the event of a Change of Control of the Plan Sponsor, any surviving Spouse who is receiving payment of a death benefit pursuant to this Section 5.1 shall receive a single lump sum cash payment which is the Actuarial Equivalent of the surviving Spouse’s remaining death benefit. Such benefit shall be paid by the Participating Company (or any successor corporation) to the surviving Spouse within ninety days following the date of the Change of Control.

        5.2 Simultaneous Death. In the event of the simultaneous death of a Participant eligible for a death benefit under this Article V and his/her Spouse so that it is not possible to determine which one was the survivor, it shall be presumed for purposes of this Article V that the Spouse predeceased the Participant.

ARTICLE VI —ADMINISTRATION OF THE PLAN

        6.1 Administrator. The Committee appointed by the President of the Plan Sponsor is hereby designated as the administrator of the Plan. If no Committee is appointed by the Plan Sponsor as the

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Administrator, the Plan Sponsor shall be the Administrator of the Plan. The Administrator shall have the authority to control and manage the operation and administration of the Plan. The President of the Plan Sponsor may appoint another person to be the Administrator at any time. The President of the Plan Sponsor may also remove an Administrator and fill any vacancy which may arise.

        6.2 Committee Action. If a Committee is appointed as Administrator, the following rules apply:

     (a) On all matters within the jurisdiction of the Committee, the decision of a majority of the members of the Committee shall govern and control. The Committee may take action either at a meeting or in writing without a meeting, provided that in the latter instance all members of the Committee shall have been advised of the action contemplated and that the written instrument evidencing the action shall be signed by a majority of the members.

     (b) The President of the Plan Sponsor shall appoint the Chair of the Committee. The Committee may appoint, either from among its members or otherwise, a secretary who shall keep a record of all meetings and actions taken by the Committee. Either the Chair of the Committee or any member of the Committee designated by the Chair shall execute any certificate, instrument or other written direction on behalf of the Committee. Any action taken on matters within the discretion of the Committee shall be final and conclusive as to the parties thereto and as to all Participants or beneficiaries claiming any right under the Plan.

        6.3 Powers of Administrator. The Administrator shall have all powers necessary to supervise the administration of the Plan and to control its operation in accordance with its terms, including, but not by way of limitation, the following powers:

     (a) Appoint, retain, and terminate such persons as it deems necessary or advisable to assist in the administration of the Plan or to render advice with respect to the responsibilities of the Administrator under the Plan, including accountants, actuaries, administrators, attorneys and physicians.

     (b) Make use of the services of the employees of the Participating Company in administrative matters.

     (c) Obtain and act on the basis of all tables, valuations, certificates, opinions, and reports furnished by the persons described in paragraph (a) or (b) above. Any determination of Actuarially Equivalent benefits by the actuary selected by the Administrator shall be conclusive and binding on the Participating Company, the Administrator and all Participants.

     (d) Review the manner in which benefit claims and other aspects of the Plan administration have been handled by the employees of the Participating Company.

     (e) Determine all benefits and resolve all questions pertaining to the administration and interpretation of the Plan provisions, either by rules of general applicability or by particular decisions. To the maximum extent permitted by law, all interpretations of the Plan and other decisions of the Administrator shall be conclusive and binding on all parties.

     (f) Adopt such forms, rules and regulations as it shall deem necessary or appropriate for the administration of the Plan and the conduct of its affairs, provided that any such forms, rules and regulations shall not be inconsistent with the provisions of the Plan.

     (g) Remedy any inequity from incorrect information received or communicated or from administrative error.

     (h) Commence or defend any litigation arising from the operation of the Plan in any legal or administrative proceeding.

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     (i) To determine all considerations affecting the eligibility of any Employee to become a Participant or remain a Participant in the Plan;

     (j) To determine the status and rights of Participants and their Spouses, beneficiaries or estates;

        6.4 Decisions of Administrator. All decisions of the Administrator, and any action taken by it in respect of the Plan and within the powers granted to it under the Plan, shall be conclusive and binding on all persons, subject to the claims and appeal procedure described in Section 6.10 hereof.

        6.5 Administrative Expenses. All expenses incident to the operation and administration of the Plan reasonably incurred, including, without limitation by way of specification, the fees and expenses of attorneys and advisors, and for such other professional, technical and clerical assistance as may be required, shall be paid by the Participating Company.

        6.6 Eligibility to Participate. No member of the Administrator who is also an Eligible Officer shall be precluded from participating in the Plan if otherwise eligible, but he or she shall not be entitled, as a member of the Administrator, to act or pass upon any matters pertaining specifically to his or her own benefit under the Plan.

        6.7 Insurance and Indemnification for Liability. The rules relating to the insurance and indemnification for liability are as follows:

     (a) Insurance.The Plan Sponsor may, in its discretion, obtain, pay for, and keep current a policy or policies or insurance, insuring members of the Administrator and other employees to whom any responsibility with respect to administration of the Plan has been delegated against any and all liabilities, costs and expenses incurred by such persons as a result of any act, or omission to act, in connection with the performance of their duties, responsibilities and obligations under the Plan and any applicable Federal or state law.

     (b) Indemnity.If the Plan Sponsor does not obtain, pay for, and keep current the type of insurance policy or policies referred to in Section 6.7(a) above, or if such insurance is provided but any of the members of the Administrator or other employees referred to in Section 6.7(a) above incur any costs or expenses which are not covered under such policies, then, in either event, the Plan Sponsor shall, to the extent permitted by law, indemnify and hold harmless such parties against any and all costs, expenses and liabilities incurred by such parties in performing their duties and responsibilities under this Plan, provided such party or parties were acting in good faith within what was reasonably believed to have been in the best interests of the Plan and its Participants.

        6.8 Agent for Service of Legal Process. The Administrator shall be the designated agent for the service of legal process with respect to any matter concerning the Plan.

        6.9 Delegation of Responsibility. The Administrator may designate a committee of one or more persons to carry out any of the responsibilities or functions assigned or allocated to the Administrator under the Plan. Each reference to the Administrator in this Plan shall include the Administrator as well as any person to whom the Administrator may have delegated the performance of a particular function or responsibility under this Section 6.9.

        6.10 Claims Procedure.

     (a) Claim for Benefits.All claims for benefits under the Plan shall be made in writing and shall be signed by the applicant. Claims shall be submitted to a representative designated by the Administrator and hereinafter referred to as the “Claims Coordinator”.

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     Each claim hereunder shall be acted on and approved or disapproved by the Claims Coordinator within 60 days following the receipt by the Claims Coordinator of the information necessary to process the claim.

     In the event the Claims Coordinator denies a claim for benefits, in whole or in part, the Claims Coordinator shall notify the applicant in writing of the denial of the claim and notify such applicant of his or her right to a review of the Claims Coordinator’s decision by the Administrator. Such notice by the Claims Coordinator shall also set forth, in a manner calculated to be understood by the applicant, the specific reason for such denial, the specific Plan provisions on which the denial is based, a description of any additional material or information necessary to perfect the claim, with an explanation of why such material or information is necessary, and an explanation of the Plan’s claims review procedure as set forth in this Section 6.10.

     If no action is taken by the Claims Coordinator on an applicant’s claim within 60 days after receipt by the Claim Coordinator, such application shall be deemed to be denied for purposes of the following appeals procedure.

     (b) Appeals Procedure.Any applicant whose claim for benefits is denied in whole or in part (“Claimant”) may appeal from such denial to the Administrator for a review of the decision by the Administrator. Such appeal must be made within six months after the Claimant has received written notice of the denial as provided above in Section 6.10(a). An appeal must be submitted in writing within such period and must:

     (1) Request a review by the Administrator of the claim for benefits under the Plan;

     (2) Set forth all of the grounds upon which the Claimant's request for review is based and any facts in support thereof; and

     (3) Set forth any issues or comments which the Claimant deems pertinent to the appeal.

     The Administrator shall regularly review appeals by Claimants. The Administrator shall act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing the Claimant’s request for review. If such an extension of time for processing is required, written notice of the extension shall be forwarded to the Claimant prior to the commencement of the extension. In no event shall such extension exceed a period of 120 days after the request for review is received by the Administrator.

     The Administrator shall make a full and fair review of each appeal and any written materials submitted by the Claimant and/or the Participating Company in connection therewith. The Administrator may require the Claimant and/or the Participating Company to submit such additional facts, documents or other evidence as the Administrator in its discretion deems necessary or advisable in making its review. The Claimant shall be given the opportunity to review pertinent documents or materials upon submission of a written request to the Administrator, provided the Administrator finds the requested documents or materials are pertinent to the appeal.

     On the basis of its review, the Administrator shall make an independent determination of the Claimant’s eligibility for benefits under the Plan. The decision of the Administrator on any claim for benefits shall be final and conclusive upon all parties thereto.

     In the event the Administrator denies an appeal, in whole or in part, the Administrator shall give written notice of the decision to the Claimant, which notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reasons for such denial and which shall make specific reference to the pertinent Plan provisions on which the Administrator’s decision was based.

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     (c) Compliance with Regulations.It is intended that the claims procedure of this Plan be administered in accordance with the claims procedure regulations of the Department of Labor set forth in 29 CFR § 2560.503-1.

ARTICLE VII —MISCELLANEOUS

        7.1 Funding. Nothing contained in this Plan and no action taken pursuant to this Plan will create or be construed to create or require a funded arrangement or any kind of fiduciary duty between the Participating Company and/or the Administrator and a Participant. Benefits payable under this Plan shall be paid directly from the general assets of each Participating Company. The Participating Company shall not be obligated to set aside, earmark or escrow any funds or other assets to satisfy its obligations under this Plan. The Participating Company’s obligation hereunder will be an unfunded and unsecured promise to make payments in the future. A Participant and his/her Spouse shall not have any property interest, claim or legal or equitable right in or to any specific assets of the Participating Company other than the unsecured right to receive payments from the Participating Company as provided herein. To the extent any person acquires a right hereunder, such right(s) will be no greater than those of a general, unsecured creditor of the Participating Company.

        7.2 Amendment or Termination.

     (a) The Board of Directors reserves the right to alter, amend or terminate the Plan, or any part thereof, through the adoption of a written resolution; provided, however, that no such action by the Board of Directors shall reduce a Participant’s Past Service Retirement Benefit accrued as of the time thereof and no such amendment or termination may occur as a result of a Change of Control, within two years after a Change of Control, or as part of any plan to effect a Change of Control. Each amendment shall be set forth in a written instrument.

     (b) If the Plan is terminated, a determination shall be made of each Participant’s Past Service Retirement Benefit as of the Plan termination date. The amount of a Participant’s benefit or benefits shall be payable to the Participant at the time it would have been payable under Article IV hereof if the Plan had not been terminated. If a Participant dies after termination of the Plan, but prior to his/her Termination of Employment, his/her surviving Spouse shall receive a distribution of his/her death benefit, determined in accordance with Article V hereof, but based on the Participant’s Past Service Retirement Benefit as of the Plan termination date.

        7.3 Status of Employment. Neither the establishment or maintenance of the Plan, nor any action of the Plan Sponsor or any Participating Company or the Administrator shall be held or construed to confer upon any individual any right to be continued as an Employee nor, upon dismissal, any right or interest in any assets of the Plan Sponsor or a Participating Company nor to affect any Participant’s right to terminate his/her employment at any time.

        7.4 Payments to Minors and Incompetents. If a Participant or surviving Spouse entitled to receive any benefits hereunder is a minor or is deemed by the Administrator or is adjudged to be legally incapable of giving a valid receipt and discharge for such benefits, they will be paid to the duly appointed guardian of such minor or incompetent or to such other legally appointed person as the Administrator may designate. Such payment shall, to the extent made, be deemed a complete discharge of any liability for such payment under the Plan.

        7.5 Inalienability of Benefits.

     (a) Benefits payable under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, whether voluntary or involuntary. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits under the Plan shall be void. The Participating Company shall not in

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any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits under the Plan.

     (b) Notwithstanding Section 7.5(a), if a Participant is indebted to the Participating Company at any time when payments are to be made by the Participating Company to the Participant under the provisions of the Plan, the Participating Company shall have the right to reduce the amount of payment to be made to the Participant (or the Participant’s surviving Spouse) to the extent of such indebtedness. Any election by the Participating Company not to reduce such payment shall not constitute a waiver of its claim for such indebtedness.

        7.6 Governing Law. Except to the extent preempted by federal law, the Plan shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania.

        7.7 Severability. In case any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal and invalid provisions had never been set forth.

        7.8 Required Information to Administrator. Each Participant will furnish to the Administrator such information as the Administrator considers necessary or desirable for purposes of administering the Plan, and the provisions of the Plan respecting any payments thereunder are conditional upon the Participant’s furnishing promptly such true, full and complete information as the Administrator may request. The Administrator, in its sole discretion, may request a Participant to submit proof of his/her age. The Administrator will, if such proof of age is not submitted when requested, use as conclusive evidence thereof such information as is deemed by it to be reliable, regardless of the lack of proof. Any notice or information which, according to the terms of the Plan or the rules of the Administrator, must be filed with the Administrator, shall be deemed so filed if addressed and either delivered in person or mailed to and received by the Administrator at the following address:

Plan Administrator
PMA Capital Corporation
1735 Market Street, 27th Floor
Philadelphia, PA 19103

Failure on the part of the Participant or Spouse to comply with any such request within a reasonable period of time shall be sufficient grounds for delay in the payment of benefits under the Plan until such information or proof is received by the Administrator.

        7.9 Income and Payroll Tax Withholding. To the extent required by the laws in effect at the time payments are made under this Plan, the Plan Sponsor or other Participating Company shall withhold from such deferred compensation payments any taxes required to be withheld for federal, state or local tax purposes.

        7.10 Application of Plan. The Plan, as set forth herein, shall apply to any Participant terminating employment on or after the Effective Date.

        7.11 No Effect on Other Benefits. No amount credited under this Plan shall be deemed part of the total compensation for the purpose of computing benefits to which a Participant may be entitled under any pension plan or other supplemental compensation arrangement, unless such plan or arrangement specifically provides to the contrary. The amounts payable to the Participant hereunder will be in addition to any benefits paid or payable to the Participant under any other pension, disability, annuity or retirement plan or policy whatsoever. Nothing herein contained will in any manner modify, impair or affect any existing or future rights of the Participant to participate in any other employee benefits plan or receive benefits in accordance with such plan or to participate in any current or future pension plan of a Participating Company or any supplemental arrangement which constitutes a part of the Participating Company’s regular compensation structure.

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        7.12 Inurement. The Plan shall be binding upon, and shall inure to, the benefit of the Participating Company and its successors and assigns, and the Participant and the Participant’s Spouse, beneficiaries, successors, heirs, executors and administrators.

        7.13 Notice. Any notices or elections required or permitted to be given or made under this Plan will be sufficient if in writing and if sent by first class, postage paid mail to the Participant’s last known address as shown on the Participating Company’s personnel records or to the principal office of the Participating Company, as the case may be. The date of such mailing shall be deemed the date of notice, consent or demand. Either party may change the address to which notice is to be sent by giving notice of the change of address in the manner aforesaid.

        7.14 Captions. The captions contained in and the table of contents prefixed to the Plan are inserted only as a matter of convenience and for ease of reference in no way define, limit, enlarge or describe the scope or intent of this Plan or in any way affect the Plan or the construction of any provision thereof.

        7.15 Acceleration of Payments. Notwithstanding any other provision of the Plan, if the Administrator determines, based on a change in the tax or revenue laws of the United States of America, a published ruling or similar announcement issued by the Internal Revenue Service, a regulation issued by the Secretary of the Treasury or his/her delegate, a decision by a court of competent jurisdiction involving a Participant, or a closing agreement involving a Participant made under Section 7121 of the Code that is approved by the Commissioner, that such Participant or Spouse has recognized or will recognize income for federal income tax purposes with respect to benefits that are or will be payable to the Participant under the Plan before they otherwise would be paid to the Participant or the Spouse (as applicable), upon the request of the Participant or Spouse, the Administrator shall immediately make distribution to the Participant or Spouse of the amount so taxable.

        7.16 Reporting and Disclosure Requirements. In order to comply with the requirements of Title I of ERISA, the Administrator shall:

     (a) File a statement with the Secretary of Labor that includes the name and address of the employer, the employer identification number assigned by the Internal Revenue Service, a declaration that the employer maintains the Plan primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and a statement of the number of such plans and the number of employees in each; and

     (b) Provide plan documents, if any, to the Secretary of Labor upon request as required by Section 104(a)(1) of ERISA. It is intended that this provision comply with the requirements of DOL Reg. ss. 2520.104-23.

        This method of compliance is available to the Plan only so long as the Plan is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees and for which benefits are paid as needed solely from the general assets of the employer or are provided exclusively through insurance contracts or policies, the premiums for which are paid directly by the employer from its general assets, issued by an insurance company or similar organization which is qualified to do business in any State, or both.

        7.17 Gender and Number. Whenever any words are used herein in any specific gender, they shall be construed as though they were used in any other applicable gender. The singular form, whenever used herein, shall mean or include the plural form where applicable and vice versa.

ARTICLE VIII —ADOPTION BY AFFILIATED EMPLOYERS

        8.1 Adoption of Plan. The following rules shall apply with respect to the adoption of the Plan:

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     (a) Adoption by Affiliated Employers. The terms of this Plan may be adopted by any Affiliated Employer, provided:

     (1) The Board of Directors consents to such adoption by an appropriate written resolution;

     (2) The board of directors of the Affiliated Employer adopts this Plan by an appropriate written resolution which identifies the Eligible Executives;

     (3) The Affiliated Employer executes a Plan Adoption Agreement in the form attached hereto as Plan Exhibit A, applicable to the Eligible Executives of such Affiliated Employer. The Affiliated Employer may elect in such Adoption Agreement to have special provisions apply with respect to the Eligible Executives of the Affiliated Employer which differ from the provisions of the Plan applicable to other Eligible Executives; and

     (4) The Affiliated Employer executes such other documents as may be required to make such Affiliated Employer a party to the Plan as a Participating Company.

     (b) Effect of Adoption. An Affiliated Employer that adopts the Plan is thereafter a Participating Company with respect to its Eligible Executives.

        8.2 Withdrawal from Plan. Any Participating Company may at any time withdraw from the Plan upon giving the Board of Directors at least 30 days prior written notice of its intention to withdraw.

        8.3 Application of Withdrawal Provisions. The withdrawal provisions contained in Section 8.2 shall be applicable only if the withdrawing Participating Company continues to cover its Participants under a plan similar to this Plan. Otherwise the termination provisions of the Plan shall apply.

        8.4 Plan Sponsor Appointed Agent of Participating Companies. As a condition precedent to the adoption of the Plan, each participating Affiliated Employer appoints the Board of Directors as its agent to exercise on its behalf all of the power and authority conferred upon the Plan Sponsor by the Plan, including, without limitation, the power to amend or to terminate the Plan.

        TO RECORD the adoption of this Plan, the Plan Sponsor on behalf of itself and each other Participating Company has caused this document to be executed by its duly authorized officers as of the 7th day of March, 2001.

ATTEST:	PMA CAPITAL CORPORATION
[SEAL]
/s/ Robert L. Pratter	By: /s/ Francis W. McDonnell
Robert L. Pratter, Secretary	Francis W. McDonnell, Senior Vice President,
	Treasurer & Chief Financial Officer

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APPENDIX A —LIST OF PARTICIPATING COMPANIES

(a)    PMA Capital Corporation

(b)    Pennsylvania Manufacturers’Association Insurance Company

(c)    PMA Capital Insurance Company (formerly PMA Reinsurance Corporation)

(d)    Caliber One Indemnity Company

(e)    Caliber One Management Company, Inc.

(f)    PMA Management Corp.

(g)    PMA Re Management Company

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PLAN EXHIBIT A —PLAN ADOPTION AGREEMENT

[Insert Name of Adopting Affiliated Employer]

PMA CAPITAL CORPORATION EXECUTIVE MANAGEMENT PENSION PLAN

[NOTE: Plan Exhibit A is not to be completed or executed. If an Affiliated Employer adopts the Plan, a separate instrument following the form of this Plan Exhibit A shall be completed and filed with the Administrator.]

By executing this Adoption Agreement, [ NAME OF ADOPTING AFFILIATED EMPLOYER], on this ______ day of __________, 20___ hereby adopts the PMA CAPITAL CORPORATION EXECUTIVE MANAGEMENT PENSION PLAN (“Plan”), the terms of which Plan are incorporated herein by reference, and by adopting said Plan hereby becomes a Participating Company in said Plan effective __________, 20___.

        1. The Effective Date of the Plan hereby created or continued is __________, 20__.

        2. The Board of Directors of PMA CAPITAL CORPORATION consented to the adoption of the Plan by the Affiliated Employer named herein on __________, 20__.

        3. The Board of Directors of [NAME OF ADOPTING AFFILIATED EMPLOYER] adopted the Plan on __________, 20__.

Attest:	Name of Participating Company
[SEAL]
	By
Secretary	President
Attest:	ADOPTION CONSENTED TO BY: PMA CAPITAL CORPORATION
[SEAL]
	By
Secretary	President

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EX-12

EXHIBIT 12

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)

	For the three months ended   March 31,
	2001			2000
EARNINGS
Pre-tax income (loss)	$	(2,549	)	$	6,739
Fixed charges		2,499			3,334
Total	$	(50	)	$	10,073
FIXED CHARGES
Interest expense and amortization of debt discount
and premium on all indebtedness	$	2,195		$	3,075
Interest portion of rental expenses		304			259
Total fixed charges	$	2,499		$	3,334
Ratio of earnings to fixed charges		(a)			3.0x

(a) Earnings were insufficient to cover fixed charges by $2.5 million in 2001.