Exhibit 10.16

              [State of New York Insurance Department Letterhead]




                                           May 5, 2003

Mr. Peter Ziesing, President
The Insurance Corporation of New York
One Canterbury Green
Stamford, CT 06901-2032

      RE:   Insurance Corporation of New York - Letter of Understanding

Dear Mr. Ziesing

      Based on our review of the Company's filed annual statement as of December
31, 2002, the operating results of the Company's parent, Trenwick America
Reinsurance Company, and the Company's recent communications with this
Department, we feel it is necessary to formalize a reporting process and
establish guidelines for the continued activities of the Company. Accordingly,
attached is a list of requirements for communicating with the Department to
commence immediately upon receipt of this memorandum.

      In you have any questions or wish to discuss the matter, please call me at
your convenience.

                                          Sincerely,


                                          Larry Levine
                                          Assistant Chief Examiner
                                          Property Bureau


Bcc:  Messrs. Presser, Levine, Chang, Ganley, Ms. Llera, Reading/File


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1.    The Insurance Corporation of New York shall not make any withdrawal of
      monies from its bank accounts, disbursement or payment outside the
      ordinary course of business in amounts exceeding 3% of its then aggregate
      cash and investments without prior approval by the Department.

2.    The Insurance Corporation of New York shall not incur any debt, obligation
      or liability for borrowed money not related directly to the ordinary
      course of business without prior approval by the Department.

3.    The Insurance Corporation of New York shall file statutory financial
      statements (balance sheet and income statement) on a monthly basis (except
      for quarter ending periods of March, June, and September for which The
      Insurance Corporation of New York shall continue to file regular quarterly
      statements) no later than 45 days following the month being reported upon.

4.    The Insurance Corporation of New York shall not settle any inter-company
      balances or pay any dividends, ordinary or extraordinary, without the
      approval of the Department.

5.    The Insurance Corporation of New York shall not enter into any new
      material reinsurance agreement nor modify in any material respect any
      existing material reinsurance agreement without prior approval by the
      Department; provided, however, The Insurance Corporation of New York may
      continue to renew existing reinsurance arrangements.

6.    The Insurance Corporation of New York shall not add any individual who is
      not currently a senior executive officer of The Insurance Corporation of
      New York, or one of its affiliates, to the board of directors of The
      Insurance Corporation of New York without first notifying the Department.
      If the Department objects to the appointment of any individual, we will
      notify the Company within 15 days.

7.    The Insurance Corporation of New York shall not change the terms of any
      written plans for remuneration, consulting, deferred compensation or bonus
      plans for directors, officers and employees of The Insurance Corporation
      of New York without first obtaining the approval of the Department. The
      Insurance Corporation of New York shall also advise the Department of any
      such changes made since March 31, 2003.

8.    The Insurance Corporation of New York shall not enter into any new
      agreement nor revise any existing agreement for any form of current or
      future remuneration or other compensation, including severance
      agreements (other than severance agreements documenting terminations
      under existing plans, policies and agreements) for services rendered to
      The Insurance Corporation of New York by employees of The Insurance
      Corporation of New York, without the prior approval of the Department.
      The Insurance Corporation of New York shall also advise the


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      Department of any such new agreements entered into or revisions to
      existing agreements made since March 31, 2003.

9.    Other than security interest granted in connection with repurchase
      agreements required in the ordinary course of business, The Insurance
      Corporation of New York shall not pledge nor assign any of its assets to
      secure indebtedness for borrowed money without prior approval of the
      Department.

10.   The Insurance Corporation of New York shall provide to the Department any
      additional reports that the Department reasonably determines are necessary
      to ascertain the financial condition of The Insurance Corporation of New
      York.

11.   The Department reserves the right to amend or supplement this agreement,
      in good faith, and its sole discretion, as deemed necessary.

12.   This agreement shall remain in full force and effect until a) the
      Department provides written notice to The Insurance Corporation of New
      York that is released from the obligations required herein, or b) the
      agreement is superceded by a Department Administrative Order or a Supreme
      Court Order.

      Any questions related to this agreement and all filings required by this
agreement should be directed to Larry Levine, Assistant Chief Examiner, Property
Bureau, New York State Insurance Department, New York, NY 10004.