GUARANTEE AGREEMENT

                                                                  EXECUTION COPY

                    PREFERRED SECURITIES GUARANTEE AGREEMENT

                           JAMES RIVER CAPITAL TRUST I

                            Dated as of May 26, 2004



                                Table of Contents



                                                                                           Page
                                                                                           ----
                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION
                                                                                         
SECTION 1.1   Definitions and Interpretation.................................................1

                                   ARTICLE II
                       LIST OF HOLDERS; EVENTS OF DEFAULT

SECTION 2.1   Lists of Holders of Securities.................................................4
SECTION 2.2   Events of Default; Waiver......................................................5
SECTION 2.3   Event of Default; Notice.......................................................5

                                   ARTICLE III
            POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE

SECTION 3.1   Powers and Duties of the Preferred Guarantee Trustee...........................5
SECTION 3.2   Certain Rights of Preferred Guarantee Trustee..................................7
SECTION 3.3   Not Responsible for Recitals or Issuance of Preferred Securities Guarantee.....9

                                   ARTICLE IV
                           PREFERRED GUARANTEE TRUSTEE

SECTION 4.1   Preferred Guarantee Trustee; Eligibility.......................................9
SECTION 4.2   Appointment, Removal and Resignation of Preferred Guarantee Trustee...........10

                                    ARTICLE V
                                    GUARANTEE

SECTION 5.1   Guarantee.....................................................................10
SECTION 5.2   Waiver of Notice and Demand...................................................11
SECTION 5.3   Obligations Not Affected......................................................11
SECTION 5.4   Enforcement of Guarantee; Rights of Holders...................................12
SECTION 5.5   Guarantee of Payment..........................................................12
SECTION 5.6   Subrogation...................................................................12
SECTION 5.7   Independent Obligations.......................................................13

                                   ARTICLE VI
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.1   Limitation of Transactions....................................................13
SECTION 6.2   Ranking.......................................................................14



                                        i




                                                                                         
                                   ARTICLE VII
                                   TERMINATION

SECTION 7.1   Termination...................................................................14

                                  ARTICLE VIII
                                 INDEMNIFICATION

SECTION 8.1   Exculpation...................................................................14
SECTION 8.2   Indemnification...............................................................15

                                   ARTICLE IX
                                  MISCELLANEOUS

SECTION 9.1   Successors and Assigns........................................................15
SECTION 9.2   Amendments....................................................................15
SECTION 9.3   Notices.......................................................................15
SECTION 9.4   Benefit.......................................................................16
SECTION 9.5   Governing Law.................................................................16
SECTION 9.6   Submission to Jurisdiction....................................................16
SECTION 9.7   Genders .............................................ERROR! BOOKMARK NOT DEFINED.
SECTION 9.8   Counterparts..................................................................17



                                       ii



                    PREFERRED SECURITIES GUARANTEE AGREEMENT

     This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated as
of May 26, 2004, is executed and delivered by James River Group, Inc., a
Delaware corporation (together with its successors, the "Guarantor"), and
Wilmington Trust Company, a Delaware banking corporation, as trustee (the
"Preferred Guarantee Trustee"), for the benefit of the Holders (as defined
herein) of James River Capital Trust I, a Delaware statutory trust (the
"Issuer").

     WHEREAS, pursuant to an Amended and Restated Declaration of Trust (as may
be from time to time amended, the "Declaration"), dated as of May 26, 2004,
among the trustees of the Issuer named therein, the Guarantor, as sponsor, and
the holders from time to time of undivided beneficial interests in the assets of
the Issuer, the Issuer is issuing on the Closing Date Seven Thousand (7,000)
preferred securities, having an aggregate liquidation amount of $7,000,000
designated as the ICONS Preferred Securities (the "Preferred Securities"); and

     WHEREAS, as an incentive for the Holders (as defined herein) to purchase
the Preferred Securities, the Guarantor desires irrevocably and unconditionally
to agree, to the extent set forth in this Preferred Securities Guarantee, to pay
to the Holders the Guarantee Payments (as defined herein) and to make certain
other payments on the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the purchase by each Holder, which
purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor
executes and delivers this Preferred Securities Guarantee for the benefit of the
Holders.

                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION

     SECTION 1.1 Definitions and Interpretation

     In this Preferred Securities Guarantee, unless the context otherwise
requires:

     (a) capitalized terms used in this Preferred Securities Guarantee but not
defined in the preamble above have the respective meanings assigned to them in
this Section 1.1;

     (b) any capitalized term not defined herein shall have the respective
meaning assigned to it in the Declaration in effect as of the date hereof;

     (c) a term defined anywhere in this Preferred Securities Guarantee has the
same meaning throughout;

     (d) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;

     (e) all references in this Preferred Securities Guarantee to Articles and
Sections are to Articles and Sections of this Preferred Securities Guarantee,
unless otherwise specified; and



     (f) a reference to the singular includes the plural and vice versa.

     "Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding with power to vote, 10% or
more of the outstanding Voting Securities (as defined in the Indenture) or other
ownership interests of the specified Person, (b) any Person 10% or more of whose
outstanding Voting Securities or other ownership interests are directly or
indirectly owned, controlled or held with power to vote by the specified Person,
(c) any Person directly or indirectly controlling, controlled by, or under
common control with the specified Person, (d) a partnership in which the
specified Person is a general partner, (e) any officer or director of the
specified Person, and (f) if the specified Person is an individual, any entity
of which the specified Person is an officer, director or general partner.

     "Authorized Officer" of a Person means any executive officer, president,
vice-president, assistant vice-president, treasurer, assistant treasurer,
secretary, assistant secretary or other officer of such Person generally
authorized to bind such Person.

     "Business Day" means any day other than Saturday, Sunday or any other day
on which commercial banking institutions in The City of New York or Wilmington,
Delaware are permitted or required by any applicable law, regulation or
executive order to close.

     "Closing Date" means the Closing Date as defined in the Purchase Agreement.

     "Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.

     "Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001.

     "Covered Person" means any Holder or beneficial owner of Preferred
Securities.

     "Debentures" means the ICONSSM Floating Rate Junior Subordinated Debentures
due 2034 issued by the Guarantor to the Issuer.

     "Declaration" has the meaning set forth in the preamble.

     "Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Preferred Securities Guarantee.

     "Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by the Issuer: (i) any accrued unpaid Distributions (as defined in the
Declaration) that are required to be paid on such Preferred Securities, to the
extent the Issuer shall have funds available therefor, (ii) the redemption
price, including all accrued and unpaid Distributions to the date of redemption
and applicable premium, if any (the "Redemption Price"), to the extent the
Issuer has funds available therefor, with respect to any Preferred Securities
called for redemption by the Issuer, and (iii) upon dissolution of the Issuer
(other than in connection with the distribution of Debentures to the


                                        2



Holders or the redemption of all of the Preferred Securities as provided in the
Declaration), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid Distributions on the Preferred Securities to the date of
payment, to the extent the Issuer shall have funds available therefor, and (b)
the amount of assets of the Issuer remaining available for distribution to
Holders in liquidation of the Issuer (in either case, the "Liquidation
Distribution").

     "Holder" means any holder, as registered on the books and records of the
Issuer, of any Preferred Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor, but only to the extent
that the Issuer has actual knowledge of such ownership.

     "Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate
of the Preferred Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents of
the Preferred Guarantee Trustee.

     "Indenture" means the Indenture dated as of May 26, 2004, between the
Guarantor and Wilmington Trust Company, as trustee, and any indenture
supplemental thereto pursuant to which the Debentures are to be issued by the
Guarantor to the Issuer.

     "List of Holders" has the meaning set forth in Section 2.1.

     "Majority in Liquidation Amount of Securities" means, except as provided in
the terms of the Preferred Securities set forth in Annex I to the Declaration or
by the Trust Indenture Act, Holder(s) of outstanding Preferred Securities voting
together as a single class, excluding the Trust, the Guarantor and any Affiliate
of the Trust or the Guarantor, who are the record owners of more than 50% of the
aggregate liquidation amount (including the liquidation amount that would be
paid on redemption, liquidation or otherwise plus accumulated and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Preferred Securities.

     "Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Preferred Securities Guarantee shall include:

     (a) a statement that each Authorized Officer signing the Officers'
Certificate has read the covenant or condition and the definition relating
thereto;

     (b) a brief statement of the nature and scope of the examination or
investigation undertaken by each Authorized Officer in rendering the Officers'
Certificate;

     (c) a statement that each such Authorized Officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable such
Authorized Officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and


                                        3



     (d) a statement as to whether, in the opinion of each such Authorized
Officer, such condition or covenant has been complied with.

     "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

     "Preferred Guarantee Trustee" means the Person identified as "Preferred
Guarantee Trustee" in the first paragraph hereof, and shall include its
successors and assigns as Preferred Guarantee Trustee hereunder.

     "Preferred Securities Guarantee" has the meaning set forth in the first
paragraph hereof.

     "Purchase Agreement" means the Placement and Purchase Agreement dated as of
May 24, 2004 among the Trust, the Sponsor, Morgan Stanley & Co. Incorporated,
Cochran Caronia Securities LLC and ICONS, Ltd.

     "Resignation Request" has the meaning set forth in Section 4.2(c).

     "Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee, including any vice president, any assistant vice president,
any assistant secretary, any assistant treasurer, any financial services officer
or other officer or agent of the Corporate Trust Office of the Preferred
Guarantee Trustee customarily performing functions similar to those performed by
any of the above designated officers or agents and also means, with respect to a
particular corporate trust matter, any other officer or agent to whom such
matter is referred because of that officer's or agent's knowledge of and
familiarity with the particular subject.

     "Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.

     "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.

                                   ARTICLE II
                       LIST OF HOLDERS; EVENTS OF DEFAULT

     SECTION 2.1 Lists of Holders of Securities

     The Guarantor shall provide the Preferred Guarantee Trustee with a list, in
such form as the Preferred Guarantee Trustee may reasonably require, of the
names and addresses of the Holders (a "List of Holders") as of such date, (i)
within ten Business Days after January 1 and June 30 of each year and (ii) at
any other time within 30 days of receipt by the Guarantor of a written request
for a List of Holders. Such list shall be as of a date no more than 14 days
before such List of Holders is given to the Preferred Guarantee Trustee. The
Guarantor shall not be obligated to provide such List of Holders if at any time
the List of Holders does not differ from the most recent List of Holders given
to the Preferred Guarantee Trustee by the Guarantor. The


                                        4



Preferred Guarantee Trustee may destroy any List of Holders previously given to
it on receipt of a new List of Holders.

     SECTION 2.2 Events of Default; Waiver

     (a) The Holders of a Majority in Liquidation Amount of Preferred Securities
may, by vote, on behalf of all of the Holders waive any past Event of Default
and its consequences. Upon such waiver, any such Event of Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Preferred Securities Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.

     (b) Notwithstanding the provisions of subsection (a) of this Section 2.2,
the right of any Holder of Preferred Securities to receive payment of the
Guarantee Payments in accordance with this Preferred Securities Guarantee, or to
institute suit for the enforcement of any such payment, shall not be impaired
without the consent of each such Holder.

     SECTION 2.3 Event of Default; Notice

     (a) The Preferred Guarantee Trustee shall, within 30 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders, notices of all Events of Default actually known to a
Responsible Officer of the Preferred Guarantee Trustee, unless such defaults
have been cured before the giving of such notice, provided, that, the Preferred
Guarantee Trustee shall be protected in withholding such notice if and so long
as a Responsible Officer in good faith determines that the withholding of such
notice is in the interests of the Holders of the Preferred Securities.

     (b) The Preferred Guarantee Trustee shall not be deemed to have actual
knowledge of any Event of Default unless the Preferred Guarantee Trustee shall
have received written notice, or of which a Responsible Officer charged with the
administration of this Preferred Securities Guarantee shall have obtained actual
knowledge.

                                   ARTICLE III
                     POWERS, DUTIES AND RIGHTS OF PREFERRED
                                GUARANTEE TRUSTEE

     SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee

     (a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee in trust for the benefit of the Holders, and the Preferred
Guarantee Trustee shall not transfer its right, title and interest in this
Preferred Securities Guarantee to any Person except a Holder exercising such
Holder's rights pursuant to Section 5.4(d) or to a Successor Preferred Guarantee
Trustee on acceptance by such Successor Preferred Guarantee Trustee of its
appointment to act as Successor Preferred Guarantee Trustee. The right, title
and interest of the Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee, and such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Preferred Guarantee
Trustee.


                                        5



     (b) If an Event of Default actually known to a Responsible Officer has
occurred and is continuing, the Preferred Guarantee Trustee shall enforce this
Preferred Securities Guarantee for the benefit of the Holders.

     (c) This Preferred Securities Guarantee and all moneys received by the
Preferred Guarantee Trustee hereunder in respect of the Guarantee Payments will
not be subject to any right, charge, security interest, lien or claim of any
kind in favor of, or for the benefit of, the Preferred Guarantee Trustee or its
agents or their creditors.

     (d) The Preferred Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.2) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Preferred Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of such
person's affairs.

     (e) No provision of this Preferred Securities Guarantee shall be construed
to relieve the Preferred Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:

          (i) prior to the occurrence of any Event of Default and after the
     curing or waiving of all such Events of Default that may have occurred:

               (A) the duties and obligations of the Preferred Guarantee Trustee
          shall be determined solely by the express provisions of this Preferred
          Securities Guarantee,