GUARANTEE

                                    GUARANTEE

         GUARANTEE (as amended, supplemented or otherwise modified from time to
time, this "Guarantee"), dated as of June 30, 2003, by Great American Insurance
Company, an Ohio Corporation (together with its successors, the "Guarantor"), in
favor of JAMES RIVER GROUP, INC., a Delaware corporation (together with its
successors and assigns, the "Beneficiary").

         WHEREAS, concurrently with the execution and delivery of this
Guarantee, the Beneficiary and American Empire Surplus Lines Insurance Company,
a Delaware corporation and a wholly-owned subsidiary of the Guarantor ("AESLIC")
are entering into a Stock Purchase Agreement, dated as of the date hereof (the
"Stock Purchase Agreement"), pursuant to which, among other things, Beneficiary
is acquiring 100% of the capital sock of Fidelity Excess and Surplus Insurance
Company, a wholly-owned subsidiary of AESLIC ("Fidelity");

         WHEREAS, Fidelity and AESLIC are parties to a certain Reinsurance
Agreement, dated as of January 1, 2002 (as amended, the "Reinsurance
Agreement"), pursuant to which, among other things, AESLIC is responsible for
all obligations and liabilities under the "Reassured's Business", as defined in
the Reinsurance Agreement;

         WHEREAS, Fidelity, AESLIC and The Provident Bank are parties to a
certain Trust Account Agreement, dated as of March 12, 2003 (as amended, the
"Trust Account Agreement" and, together with the Reinsurance Agreement and the
Stock Purchase Agreement, the "Transaction Agreements"), pursuant to which,
among other things, a Trust Account was established and is maintained in
connection with the Reinsurance Agreement; and

         WHEREAS, it is a condition to the closing of the transactions
contemplated by the Stock Purchase Agreement that the Guarantor shall have
executed and delivered this Guarantee in favor of the Beneficiary as additional
security for the obligations of AESLIC and Fidelity and their respective
successors, assigns and sub-contractees (each, a "Party" and together, the
"Parties"), under the Transaction Agreements to which a Party is or becomes a
party.

         NOW, THEREFORE, the parties hereto agree as follows:

         1. Guarantee. The Guarantor irrevocably, absolutely and unconditionally
guarantees the prompt payment and performance by the Parties of all of the
Parties' obligations under the Transaction Agreements, including, without
limitation, all indemnification obligations and payments of AESLIC under the
Stock Purchase Agreement, the Reinsurance Agreement and the Trust Agreement (all
of such obligations being hereinafter referred to as the "Obligations"). The
Obligations shall be enforceable against the Guarantor without the necessity for
any suit or proceedings on the Beneficiary's part of any kind or nature
whatsoever against any Party, and without the necessity of any notice to
Guarantor of non-payment, non-performance or non-



observance or any notice of acceptance of this Guaranty or any other notice or
demand to which the Guarantor might otherwise be entitled, all of which the
Guarantor hereby expressly waives; and the Guarantor hereby expressly agrees
that the validity of the Guaranty and the obligations of the Guarantor hereunder
shall in no way be terminated, affected or impaired by reason of the assertion
or the failure to assert by the Beneficiary against any Party, of any of the
rights or remedies of the Beneficiary pursuant to the provisions of any
Transaction Agreement.

         2. Obligations of Guarantor Unconditional.

         (a) The Guarantor hereby guarantees that the Obligations will be paid
and/or performed strictly in accordance with the terms of the Transaction
Agreements regardless of any law now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Beneficiary with respect
thereto. The Obligations of the Guarantor hereunder shall be absolute and
unconditional irrespective of: (i) the validity, regularity or enforceability of
the Transaction Agreements; (ii) any alteration, amendment, modification,
release, termination or cancellation of any Transaction Agreement; (iii) any
waiver of, or consent to any departure from, any of the provisions of the
Transaction Agreements; (iv) any release of any party primarily or secondarily
liable for the Obligations, (v) any alteration, amendment, modification,
release, termination or cancellation of, or waiver of, or consent to any
departure from, any other indemnity given in connection with any Transaction
Agreement; (vi) any delay in enforcing the Obligations; (vii) the insolvency,
bankruptcy or reorganization of any Party; or (viii) any other circumstance
which might otherwise constitute a defense (legal, equitable or otherwise)
available to, or a discharge of, the Guarantor and any Party with respect to any
or all of the Obligations.

         (b) This Guarantee (i) is a guarantee of payment and not of collection,
(ii) is a continuing guarantee and shall remain in full force and effect until
the indefeasible payment and/or performance in full of all of the Obligations,
and (iii) notwithstanding clause (ii) above, shall continue to be effective or
shall be reinstated, as the case may be, if at any time any payment of any of
the Obligations (to the extent payable in money) is rescinded or must otherwise
be returned by the Beneficiary to any Party or the Guarantor or to any
guarantor, trustee, receiver or other representative of either of them, upon the
insolvency, bankruptcy or reorganization of any Party or the Guarantor or
otherwise, all as though such payment had not been made. The date on which this
Guarantee ceases to be effective is hereafter referred to as the "Guarantee
Termination Date."

         3. Collateral. The Guarantor hereby waives (i) any right to cause the
Beneficiary to proceed against any Trust Asset (as defined in the Trust Account
Agreement) deposited into the Trust Account (as defined in the Trust Account
Agreement) (the "Trust Collateral") for the satisfaction of the Obligations
before proceeding against the Guarantor; and (ii) any requirement that the
Beneficiary exhaust any right or take any action against any Party or any other
person or the Trust Collateral as a precondition to the Beneficiary's right to
enforce this Guarantee in accordance with its terms.

         4. Subrogation; Subordination. The Guarantor shall not exercise any
rights of subrogation hereunder, by any payment made by it hereunder or
otherwise, until after the 


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Guarantee Termination Date. If any amount shall be paid to the Guarantor on
account of such subrogation rights on or prior to the Guarantee Termination
Date, such amount shall be held in trust for the benefit of the Beneficiary,
shall be segregated from the other funds of the Guarantor and shall forthwith be
paid over to the Beneficiary to be applied in whole or in