EXHIBIT 10.38


               ASSIGNMENT AND ASSUMPTION OF LIABILITIES AGREEMENT

         THIS ASSIGNMENT AND ASSUMPTION OF LIABILITIES AGREEMENT (this
"Assignment and Assumption of Liabilities Agreement") is made as of this date of
July 1, 2003 by and between RSA Surplus Lines Insurance Services, Inc., a
corporation organized and existing under the laws of the State of Delaware ("RSA
SLISI") and Royal Indemnity Company, a Delaware insurance company ("RIC"). All
capitalized terms used but not defined herein shall have the meaning ascribed to
them in that certain Stock Purchase Agreement, dated as of July 1, 2003 (the
"RSA SLISI Stock Purchase Agreement"), by and between Royal Group, Inc., a
Delaware corporation ("Royal Group") and Alleghany Insurance Holdings LLC, a
Delaware limited liability company ("AIHL").

         WHEREAS, pursuant to the RSA SLISI Stock Purchase Agreement, Royal
Group and AIHL agreed that Royal Group shall cause RIC and RSA SLISI to enter
into this Assignment and Assumption of Liabilities Agreement, pursuant to which
RSA SLISI shall assign all of the assets of RSA SLISI to RIC as of the Closing
Date, other than certain excluded assets, and RIC shall assume all of the
liabilities and obligations of RSA SLISI as of the Closing Date;

         WHEREAS, in connection with the transactions contemplated by the RSA
SLISI Stock Purchase Agreement, among other things, RSA SLISI has agreed to
execute this Assignment and Assumption of Liabilities Agreement and to assign
all of the Assigned Assets (as such term is defined below) as partial
consideration for the contemplated transactions; and

         WHEREAS, in connection with the transactions contemplated by the RSA
SLISI Stock Purchase Agreement, among other things, RIC has agreed to execute
this Assignment and Assumption of Liabilities Agreement and to pay, perform and
discharge all of the Assumed Liabilities (as such term is defined below) as
partial consideration for the contemplated transactions.

         NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged:

1.       Assignment of Assets. Subject to the terms and conditions of this
Assignment and Assumption of Liabilities Agreement, RSA SLISI hereby agrees to
assign, transfer, convey and deliver any and all right, title and interest in
the assets and property of RSA SLISI, as of the Closing Date, except (i) its
corporate charter, (ii) the Permit, (iii) the minimum amount of assets, if any,
required by the California Department of Insurance to



maintain the Permit or such additional amount as permitted in the RSA SLISI
Stock Purchase Agreement, and (iv) the Producer Agreements (the "Assigned
Assets"), and RIC hereby agrees to the assignment, transfer, conveyance and
delivery of the Assigned Assets;

2.       Assumption of Liabilities. Subject to the terms and conditions of this
Assignment and Assumption of Liabilities Agreement, RIC hereby agrees to assume,
pay, perform and discharge all debts, obligations and liabilities, contracts and
obligations of every kind, character or description of RSA SLISI, whether known
or unknown, accrued, absolute, contingent or otherwise existing prior to the
Closing Date (collectively, the "Assumed Liabilities").

3.       Indemnification. Without limitation of the indemnification obligations
of RGI and affiliates of RGI under the Acquisition Agreement and the Ancillary
Agreements (as defined in the Acquisition Agreement), RIC hereby agrees to
indemnify and hold RSA SLISI harmless from and against any and all obligations,
costs, expenses, interests or overdue charges, fees, claims, damages, judgments,
penalties, deficiencies, taxes or liabilities of whatever kind or nature imposed
on, sustained or incurred by RSA SLISI, to the extent they arise out of or
relate to the Assumed Liabilities, including, without limitation, attorneys',
accountants' and other investigatory fees and out-of-pocket expenses, actually
expended or incurred by RSA SLISI (which costs shall not include any expenses
associated with salaries or overhead related to employees of RSA SLISI).

4.       Further Assurances. Upon request from RSA SLISI from time to time, RIC
shall execute and deliver all documents and do all other reasonable acts that
may be reasonably necessary to carry out and effectuate the intent and purpose
of this Assignment and Assumption of Liabilities Agreement. Upon request from
RIC from time to time, RSA SLISI shall execute and deliver all documents and do
all other reasonable acts that may be reasonably necessary to carry out and
effectuate the intent and purposes of this Assignment and Assumption of
Liabilities Agreement.

5.       Power of Attorney. RSA SLISI on behalf of itself and its successors,
hereby irrevocably appoints RIC and its designated officers and directors as the
true and lawful attorney of RSA SLISI to handle, satisfy and/or dispute the
Assumed Liabilities as well as to execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered, such assurances or documents, and to
promptly perform, or cause to be performed, such further acts or deeds, which,
in the reasonable discretion of said attorney may be necessary, desirable or
expedient for the purpose of transferring to RIC the Assumed Liabilities. Such
power of attorney, being coupled with an interest, shall not be revoked by the
dissolution of RSA SLISI and may be exercised in the name and on behalf of RIC.

6.       Governing Law. This Assignment and Assumption of Liabilities Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.

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7.       Specific Performance. The parties recognize and agree that if for any
reason any of the provisions of this Assignment and Assumption of Liabilities
Agreement are not performed in accordance with their specific terms or are
otherwise breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each party
agrees that, in addition to any other available remedies, each other party shall
be entitled to an injunction restraining any violation or threatened violation
of any of the provisions of this Assignment and Assumption of Liabilities
Agreement without the necessity of posting a bond or other form of security
pending the outcome of any arbitration. In the event that any action should be
brought in equity to enforce any of the provisions of this Assignment and
Assumption of Liabilities Agreement, no party will allege, and each party hereby
waives the defense, that there is an adequate remedy at law.

8.       Descriptive Headings. The descriptive article and section headings
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Assignment and
Assumption of Liabilities Agreement.

                            [SIGNATURE PAGE FOLLOWS]

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         IN WITNESS WHEREOF, each of the parties hereto has caused this
instrument to be duly executed in its name by an authorized representative as of
the date set forth above.

                                    ROYAL INDEMNITY COMPANY

                                    By: /s/ Stephen M. Mulready
                                        ----------------------------
                                        Name:  Stephen M. Mulready
                                        Title: President and Chief
                                               Executive Officer

                                    RSA SURPLUS LINES INSURANCE
                                    SERVICES, INC.

                                    By: /s/ James A. Dixon
                                        -----------------------------
                                        Name:  James A. Dixon
                                        Title: Chairman