AMENDED AND RESTATED TAX SHARING AGREEMENT

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Exhibit 10.7

AMENDED AND RESTATED TAX SHARING AGREEMENT
(AS OF DECEMBER 19, 2006)

        This Amended and Restated Tax Sharing Agreement (the "Agreement") is made as of this 19 ^th day of December 2006 by and among Zenith National Insurance Corp.("Zenith National") and its subsidiaries, Zenith Insurance Company, ZNAT Insurance Company, Zenith Development Corp., Zenith of Nevada, Inc., Zenith Insurance Management Services, Inc. and 1390 Main Street, LLC (the "Existing Subsidiaries").

        WHEREAS, Zenith National is the common parent of an affiliated group of corporations, as defined in section 1504 (a) of the Internal Revenue Code of 1986, as amended (the "Code"), of which the Existing Subsidiaries are members;

        WHEREAS, Zenith National, on behalf of its affiliated group, has filed for previous taxable years consolidated federal income tax returns in accordance with section 1501 of the Code and is required to file consolidated federal income tax returns for subsequent taxable years;

        WHEREAS, Zenith National and the Existing Subsidiaries had entered into an Amended and Restated Tax Sharing Agreement as of January 1, 1991, which has been subsequently amended from time to time (as so amended, the "Existing Agreement"), and which provides for the allocation of the consolidated federal income tax among the parties and certain related matters;

        WHEREAS, Zenith National, on behalf of its affiliated group or any sub-group of the affiliated group has filed, or may elect to file in the future, combined or consolidated State Income Tax Returns (as hereinafter defined) with those states that require or allow such combined or consolidated returns;

        WHEREAS, the parties now wish to provide for the allocation among them of consolidated or combined state income tax liability and certain related matters; and

        WHEREAS, Zenith National and the Existing Subsidiaries now desire to amend and restate the Existing Agreement to consolidate the documents that constitute the Existing Agreement into a single document and also to provide for the allocation among them of consolidated or combined state income tax liability.

        NOW, THEREFORE, in consideration of the foregoing premises and of the mutual covenants and agreements contained herein, the parties agree that the Existing Agreement is hereby amended and restated in its entirety, as follows:

1.

DEFINITIONS.

        For purposes of this Agreement, the terms set forth below shall be defined as follows:

(a)

"Federal Tax Group" shall mean Parent (as hereinafter defined), the Existing Subsidiaries, and all other corporations (whether now existing or hereafter formed or acquired) that are required to join with Parent in filing a consolidated federal income tax return.

(b)

"Federal Tax Group Liability" shall mean the consolidated federal income tax liability of the Federal Tax Group reported on the Federal Tax Group's consolidated federal income tax return filed for the taxable year.

(c)

"Hypothetical Basis." Whenever, in this Agreement, a computation is to be made on a Hypothetical Basis, it shall be made on a pro forma basis, as if the Subsidiary filed a separate federal income tax return or State Income Tax Return, as applicable, for each taxable period, based upon any assumptions stated in the respective provision.

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(d)

"Member" shall mean any entity that is included in the Federal Tax Group or a State Tax Group, as applicable, or any successor to such entity.

(e)

"Parent" shall mean (i) Zenith National, (ii) any successor common parent corporation described in Treas. Reg. §1.1502-75 (d)(2)(i) or (ii), or (iii) any corporation as to which Parent (or successor corporation described in clause (ii) hereof) is the "predecessor" within the meaning of Treas. Reg. §1.1502-1(f)(1), if such corporation acquires Zenith National (or a successor corporation described in clause (ii) hereof) in a "reverse acquisition" within the meaning of Treas. Reg. §1.1502-75(d)(3).

(f)

"Separate Federal Tax Benefit" of a Subsidiary shall mean the amount by which the Federal Tax Group Liability was reduced as a result of a tax credit or of a Separate Federal Taxable Loss or the carryforward or carryback of a Separate Federal Taxable Loss attributable to such Subsidiary. The amount of reduction of the Federal Tax Group Liability on the Federal Tax Group's consolidated return attributable to a Subsidiary shall be computed by calculating the difference between (i) the Federal Tax Group Liability and (ii) the hypothetical Federal Tax Group Liability computed by excluding the items of income, deduction, loss and credit attributable to the Subsidiary in question. The ordering and allocation of the use of credits, net operating losses and capital losses of Subsidiaries will be determined under the Code, the regulations thereunder and generally accepted procedures of tax accounting. Notwithstanding the foregoing, the computation provided in clause (ii) above will be made based only on the items included for purposes of making the computation provided in clause (i) above; no additional losses or credits of other Subsidiaries are to be considered in making the computation provided in clause (ii).

(g)

"Separate Federal Tax Liability" of a Subsidiary shall mean an amount equal to any tax computed as a flat tax at the highest marginal rate, without exemptions, under each respective tax provision (including, without limitation, that imposed under Sections 11, 55 and 1201 (a) of the Code) with respect to the Separate Federal Taxable Income of such Subsidiary, reduced by current credits, if any, against tax, allowable in respect of such Separate Federal Taxable Income, without giving effect to any otherwise allowable carryover or carryback of a Separate Federal Taxable Loss or credits (other than SRLY losses or credits) from any other taxable year of such Subsidiary, all as computed on a Hypothetical Basis.

(h)

"Separate Federal Taxable Income" of a Subsidiary shall mean the amount of taxable income of the Subsidiary for any period for which the Subsidiary has positive taxable income (including, but not limited to, alternative minimum taxable income), computed on a Hypothetical Basis pursuant to the method of federal income tax accounting employed by each such Subsidiary.

(i)

"Separate Federal Taxable Loss" of the Subsidiary shall mean the amount of any net operating loss or net capital loss of the Subsidiary for any period pursuant to section 172 and section 1211 of the Code, respectively, computed using the principles applicable to a determination of Separate Federal Taxable Income.

(j)

"Separate State Tax Benefit" of a Subsidiary shall mean the amount by which the State Tax Group Liability was reduced as a result of a tax credit or of a Separate State Taxable Loss or the carryforward or carryback of a Separate State Taxable Loss attributable to such Subsidiary. The amount of reduction of the State Tax Group Liability on the State Tax Group's consolidated return attributable to a Subsidiary shall be computed by calculating the difference between (i) the State Tax Group Liability and (ii) the hypothetical State Tax Group Liability computed by excluding the items of income, deduction, loss and credit attributable to the Subsidiary in question. The ordering and

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allocation of the use of credits, net operating losses and capital losses of Subsidiaries will be determined under applicable state law and generally accepted procedures of tax accounting. Notwithstanding the foregoing, the computation provided in clause (ii) above will be made based only on the items included for purposes of making the computation provided in clause (i) above; no additional losses or credits of other Subsidiaries are to be considered in making the computation provided in clause (ii).

(k)

"Separate State Tax Liability" of a Subsidiary shall mean an amount equal to any tax computed as a flat tax at the highest marginal rate, without exemptions, under each respective tax provision with respect to the Separate State Taxable Income of such Subsidiary, reduced by current credits, if any, against tax, allowable in respect of such Separate State Taxable Income, without giving effect to any otherwise allowable carryover or carryback of a Separate State Taxable Loss or credits (other than SRLY losses or credits) from any other taxable year of such Subsidiary, all as computed on a Hypothetical Basis.

(l)

"Separate State Taxable Income" of a Subsidiary shall mean the amount of taxable income of the Subsidiary for any period for which the Subsidiary has positive taxable income (including, but not limited to, alternative minimum taxable income), computed on a Hypothetical Basis pursuant to the method of applicable income tax accounting employed by each such Subsidiary.

(m)

"Separate State Taxable Loss" of a Subsidiary shall mean the amount of any net operating loss or net capital loss of the Subsidiary for any period pursuant to applicable state tax provisions, computed using the principles applicable to a determination of Separate State Taxable Income.

(n)

"State Income Tax Return" shall mean any income tax, franchise tax or excise tax return based on the net income of the taxpayer.

(o)

"State Tax Group" shall mean, as applicable, the Federal Tax Group or any other combination of Parent and one or more Subsidiary that join in filing a combined or consolidated state return for any state.

(p)

"State Tax Group Liability" shall mean the consolidated state income tax liability of the State Tax Group reported on a State Tax Group's consolidated State Income Tax Return filed for the taxable year.

(q)

"Subsidiary" shall mean a corporation or a limited liability company, other than Parent, and which is a Member of the Federal Tax Group or the State Tax Group, as applicable.

2.

FILING OF CONSOLIDATED RETURNS.

(a)

Parent shall, on a timely basis, file or cause to be filed, consolidated federal income tax returns and estimated tax returns for the Federal Tax Group for each taxable year during the term of this Agreement and shall pay in full any tax shown as due thereon. Each Member shall execute and file such consents, elections, and other documentation as may be required or appropriate for the proper filing of such returns. Each Member shall also maintain such books and records and provide such information as Parent may request in connection with the matters contemplated by this Agreement. The cost of preparing such tax returns and estimated tax returns shall be borne by each Member in the manner set forth in the Cost Allocation Agreement, dated December 31, 1990, as may be amended from time to time, entered into by certain parties that are Members of the Federal Tax Group.

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(b)

Parent shall have the right, in its sole discretion, to (i) make any elections which are employed in the filing of such returns, including any elections denominated as such in the Code and choice of methods of accounting and depreciation; (ii) determine the manner in which such returns shall be prepared and filed, including without limitation, the manner in which any item of income, gain, loss, deduction or credit shall be reported; (iii) contest, compromise or settle any adjustment or deficiency proposed or asserted as a result of any audit of any such returns; (iv) file, prosecute, compromise or settle any claim for refund; and (v) determine whether any refunds to which the Federal Tax Group may be entitled shall be paid by way of refund or credit against the federal income tax liability of the Federal Tax Group.

(c)

Parent shall have the right, in its sole discretion, to elect to file combined or consolidated State Income Tax Returns with states that allow or require such combined or consolidated State Income Tax Returns for a State Tax Group(s). In such event, Parent shall pay in full any tax shown as due on such returns or estimates. Each Member shall execute and file such consents, elections, and other documentation as may be required or appropriate for the proper filing of such returns. Each Member shall also maintain such books and records and provide such information as Parent may request in connection with the matters contemplated by this Agreement. Parent shall have the right, in its sole discretion, to (i) make any elections which are employed in the filing of such returns, including any elections denominated as such in applicable provisions and choice of methods of accounting and depreciation; (ii) determine the manner in which such returns shall be prepared and filed, including without limitation, the manner in which any item of income, gain, loss, deduction or credit shall be reported; (iii) contest, compromise or settle any adjustment or deficiency proposed or asserted as a result of any audit of any such returns; (iv) file, prosecute, compromise or settle any claim for refund; and (v) determine whether any refunds to which the State Tax Group may be entitled shall be paid by way of refund or credit against the state income tax liability of the State Tax Group. The cost of preparing such tax returns and estimated tax returns shall be borne by each Member in the manner set forth in the Cost Allocation Agreement, dated December 31, 1990, as may be amended from time to time, entered into by certain parties that are Members of the State Tax Group.

3A.

FEDERAL TAX GROUP PAYMENTS.

        For each taxable year of the Federal Tax Group with respect to which a consolidated federal income tax return is filed, the Members of the Federal Tax Group shall make payments to Parent in the following manner:

(a)

Each Member shall pay to Parent the amount of such Member's Separate Federal Tax Liability no earlier than ten (10) days prior to the filing date of the Federal Tax Group's consolidated federal income tax return (taking into account of any extensions thereof) and no later than thirty (30) days after such filing date.

(b)

At the option of Parent, each Member shall pay to Parent, no earlier than ten (10) days before the date the Federal Tax Group makes a consolidated estimated federal tax payment (including any payment due at the time any extension of time for filing the consolidated federal tax return is obtained), an amount, as determined by Parent in a manner consistent with paragraph l (g), equal to the portion of such Member's Separate Federal Tax Liability that would be due were such Member