in effect on the Effective Date, to the extent that such reinsurance relates to the Specialty Program Business of such Participating Company.

“Management Fees” shall mean the management fees payable by TICNY and TNIC to CPIC pursuant to Article XIV.

“Net Liability” shall mean the loss and loss adjustment expense liability remaining after the application of Existing Reinsurance and, with respect to CPIC, Pool Reinsurance, in each case to the extent collectible; provided , however , that “Net Liability” shall not include liability with respect to losses and loss adjustment expenses incurred prior to the Effective Date.

“Net Loss Ratio” shall mean, for any period of time, the ratio of Net Losses plus loss adjustment expenses incurred during such period to Net Premium Earned for such period.

“Net Losses” shall mean, for any period of time, any and all amounts that a Participating Company is required to pay to or on behalf of insureds for insurance claims made under its Policies, after the application of any applicable reinsurance but not including loss adjustment expenses.

“Net Premium Earned” shall mean, for any period of time, the earned portion of premiums written by a Participating Company after payment for reinsurance, if any.

“Net Written Premium” shall mean direct premium written on the Policies covered by this Agreement plus additions, less refunds and return premium for cancellations and reductions (but not dividends) and less premium paid or payable for reinsurance that inures to the benefit of the Participating Companies.

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“Participating Companies” shall mean TICNY, TNIC and CPIC.

“Policies” shall mean all policies, certificates, binders, contracts and agreements of insurance covering Specialty Program Business issued or renewed on or after the Effective Date by or on behalf of TICNY, TNIC or CPIC, as the case may be, all of which shall be subject to this Pooling Agreement.

“Pool Reinsurance” shall mean property catastrophe and excess of loss reinsurance ceded by CPIC to an insurer that is not a Participating Company that inures to the benefit of the Specialty Program Business Pool.

“Pooling Percentages” shall be those percentages set forth on Schedule A attached, as amended from time to time.

“Program Business” shall mean narrowly defined classes of business that are underwritten on an individual policy basis by Program Underwriting Agents on behalf of insurance companies.

“Program Underwriting Agent” means an insurance intermediary that aggregates business from retail and general agents and manages business on behalf of insurance companies, including functions such as risk selection and underwriting, premium collection, policy form design and client service.

“Specialty Program Business” shall mean (i) all Program Business other than Traditional Program Business; and (ii) Traditional Program Business that Tower elects not to manage and that CPIC elects to manage.

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“Specialty Program Business Pool” shall mean Specialty Program Business written by or on behalf of the Participating Companies or assumed by a Participating Company (including such business assumed by TICNY from its affiliates), that is pooled and allocated to each of the Participating Companies based upon their Pooling Percentage as set forth in this Pooling Agreement.

“Traditional Program Business” shall mean blocks of Program Business in excess of $5 million in gross written premium that Tower has historically underwritten, consisting of non-auto related personal lines and the following commercial lines of business: retail stores and wholesale trades, commercial and residential real estate, restaurants,  grocery stores, office and service industries,  and artisan contractors.

ARTICLE II        Cessions to Specialty Program Business Pool

TICNY and TNIC shall automatically and obligatorily cede to CPIC as reinsurance, and CPIC shall be obligated to accept as assumed reinsurance, one hundred percent (100%) of the Net Liabilities with respect to Policies issued or assumed by TICNY and TNIC, to be combined with the Net Liabilities of CPIC under Policies issued or assumed by CPIC, provided, however, that the total combined gross written premium share of TICNY and TNIC after pooling shall not exceed $25 million for the twelve (12) month period ending March 31, 2007, subject to a growth factor of 25% per each twelve (12) month period thereafter.

ARTICLE III      Participation in Specialty Program Business Pool

CPIC shall establish the Specialty Program Business Pool, which shall consist of the Net Liability under all Specialty Program Business written or assumed by CPIC and Tower

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(including business assumed by CPIC pursuant to this Pooling Agreement). CPIC shall automatically and obligatorily cede to TICNY and TNIC, and retain for CPIC’s own account, the applicable Pooling Percentages of such Net Liability and TICNY and TNIC shall automatically and obligatorily accept such cessions. TICNY and TNIC shall determine how the Tower Pooling Percentage will be allocated between each of them. Such Pooling Percentages shall be applied to all Specialty Program Business written by the Participating Companies. Any change in the Pooling Percentages shall be made only by a written amendment to this Pooling Agreement signed by the parties hereto or as otherwise set forth in Article XVI of this Pooling Agreement. The Participating Companies acknowledge that, following the acceptance or retention of a percentage of the Specialty Program Business Pool by a Participating Company, such pooled business shall be subject to such reinsurance as may be entered into by such Participating Company on or after the Effective Date that is for the benefit of such Participating Company as to its participation in the Specialty Program Business Pool and does not inure to the benefit of the Specialty Program Business Pool.

ARTICLE IV       Reinsurance

CPIC, as pool manager, shall negotiate, obtain and maintain such Pool Reinsurance as it deems appropriate with respect to the liabilities of the Specialty Program Business Pool, which reinsurance shall inure to the benefit of the Participating Companies according to their respective Pooling Percentages. CPIC shall purchase property and casualty excess of loss reinsurance and property catastrophe excess of loss reinsurance from third party reinsurers to protect the net exposure of the Participating Companies. The property catastrophe excess of loss reinsurance purchased by CPIC may provide for up to approximately 10% of the combined surplus of Tower

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and CPIC to be retained by the pool prior to reinsurance by third party reinsurance companies (“Pooled Retention”). Any of the Participating Companies also shall have the right, in its discretion, to require CPIC to increase the Pooled Retention by an additional amount of up to 10% of the surplus of CastlePoint Reinsurance Company (“CPRe”) provided that CPIC purchases reinsurance for such additional Pooled Retention from CPRe.

ARTICLE V        Losses and Loss Adjustment Expenses

A.            All loss settlements made by CPIC with regards to the Specialty Program Business, whether under strict policy conditions or by way of compromise, shall be unconditionally binding upon TICNY and TNIC.

B.            Each Participating Company shall be liable for its proportionate share of loss adjustment expenses incurred under or in connection with the Policies and shall be credited with its proportionate share of any recoveries of such expense.

C.            If a Participating Company pays or is held liable to pay any punitive, exemplary, compensatory, or consequential damages (hereinafter called “Extra Contractual Obligations”) because of alleged or actual negligence on its part in handling a claim under a Policy, one hundred percent (100%) of such Extra Contractual Obligations (to the extent permitted by law) shall be added to the Net Liability, if any, of such Participating Company under the Policy involved, and the sum thereof shall be subject to this Pooling Agreement.

D.            If a Participating Company pays or is held liable to pay in connection with any loss, amounts in excess of the limit of its original Policy, such loss in excess of that limit having been incurred because of its failure to settle within the Policy limit or by reason of alleged or actual

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negligence in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against the original insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action (hereinafter called an “Excess of Policy Limits Loss”), one hundred percent (100%) of such Excess of Policy Limits Loss (to the extent permitted by law) shall be added to the Net Liability, if any, of such Participating Company under the Policy involved, and the sum thereof shall be subject to this Pooling Agreement.

ARTICLE VI       Salvage and Subrogation

Each of the Participating Companies shall be credited with its proportionate share of salvage and subrogation on account of losses under the Policies.

ARTICLE VII     Original Conditions Apply

All reinsurance under this Pooling Agreement shall be subject to the same rates, terms, conditions and waivers, and to the same modifications and alterations as the respective Policies. Each of the Participating Companies shall be credited with the proportion equal to its Pooling Percentage of the original premiums received under the Policies issued on or after the Effective Date, but after deduction of premiums, if any, ceded under Existing Reinsurance and Pool Reinsurance.

ARTICLE VIII   Ceding Commission

Each of the Participating Companies shall be charged with a ceding commission in an amount equal to such Participating Company’s Pooling Percentage of actual commissions paid to agents or brokers, premium taxes, guarantee fund assessments, fees and assessments for boards, bureaus and associations, fees and assessments for industry and residual markets, and other similar expenses incurred by the Participating Companies on all premiums ceded hereunder but

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after deduction of ceding commissions or expense reimbursement amounts recovered under Existing Reinsurance and Pool Reinsurance.

ARTICLE IX      Remittances and Reports

A.            As soon as practicable consistent with its standard financial reporting practices, but no later than thirty (30) days after the end of each calendar month, CPIC shall submit a pooling report to TICNY and TNIC setting forth the following information as regards the Specialty Program Business Pool:

1.             Net Written Premium received during the month;

2.             Net Premium Earned received during the month

3.             Ceding commission thereon;

4.             Losses and loss adjustment expenses paid during the month;

5.             Salvage and subrogation recoveries received;

6.             Recoverables under inuring reinsurance; and

7.             Management Fees due.

B.            The balance shown to be due a Participating Company shall be remitted within fifteen (15) days after the issuance of the reports by CPIC on a collected basis; provided that CPIC may retain, as manager, a reserve out of amounts otherwise due TICNY and TNIC for the paym