NYMAGIC INC
10-K, 2000-03-31
SURETY INSURANCE
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                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10K

 (Mark One)

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
       ACT OF 1934

       For the fiscal year ended December 31, 1999

                                       OR

[ ]    TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
       EXCHANGE ACT OF 1934

       For the transition period from                   to
                                      ----------------      ----------------


                         Commission file number 1-11238.

                                  NYMAGIC, INC.

             (Exact name of registrant as specified in its charter)

           New York                                              13-3534162
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

330 Madison Avenue, New York, NY                                   10017
(Address of principal executive offices)                        (Zip Code)

       Registrant's telephone number, including area code: (212) 551-0600
                                                           --------------
           Securities registered pursuant to Section 12(b) of the Act:

     Title of each class:             Name of each exchange on which registered:
Common Stock, $1.00 par value                   New York Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:

                                      None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X   No
                                      ---    ---

Indicate by check mark if disclosure of delinquent  filers  pursuant to Rule 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
registrant, as of March 1, 2000, was approximately $48,740,688.

The number of shares  outstanding of each of the registrant's  classes of common
stock,  as of March 1, 2000,  was 9,422,952  shares of common  stock,  $1.00 par
value.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions  of the  Company's  Proxy  Statement  for the 2000  Annual  Meeting  of
Shareholders are incorporated by reference in Part III.


                                       1
<PAGE>

                                     Part I

ITEM 1.  BUSINESS.

General
- -------

         NYMAGIC, INC., a New York corporation (the "Company" or "NYMAGIC"),  is
a holding  company  which owns and operates the following  insurance  companies,
risk bearing entities and insurance underwriters and managers:

         Insurance Companies and Lloyd's Corporate Capital Vehicle:
         ---------------------------------------------------------

         New York Marine And  General  Insurance  Company - ("New York  Marine")
         Gotham Insurance Company - ("Gotham")
         MMO UK, Ltd.
         MMO EU, Ltd.

         Insurance Underwriters and Managers:
         -----------------------------------

         Mutual Marine Office, Inc. - ("MMO")
         Pacific Mutual Marine Office, Inc. - ("PMMO")
         Mutual Marine Office of the Midwest, Inc. - ("Midwest")
         MMO Underwriting Agency, Ltd.


         New York Marine and Gotham each maintains an A.M. Best insurance rating
of A.

         The Company  specializes in underwriting  ocean marine,  inland marine,
aviation and other liability  insurance  through insurance pools managed by MMO,
PMMO, and Midwest (collectively referred to as "MMO and affiliates") since 1964.
In addition to managing the insurance  pools,  the Company  participates  in the
risks  underwritten  for the pools  through  New York  Marine  and  Gotham.  All
premiums,  losses and expenses are  pro-rated  among pool members in  accordance
with their pool participation percentages.

         On December  31,  1997,  the  Company  acquired  ownership  of Highgate
Managing  Agencies,  Ltd.  which  subsequently  was renamed to MMO  Underwriting
Agency,  Ltd. MMO  Underwriting  Agency Ltd. is a Lloyd's  managing agency which
commenced underwriting in 1998 for the Company's wholly owned subsidiary MMO UK,
Ltd. which is a Lloyd's  corporate capital vehicle providing 100% of the capital
for Syndicate 1265 (collectively  referred to as "Syndicate 1265"). In 1997, The
Company formed MMO EU, Ltd. as a holding Company for MMO UK, Ltd.

         This report contains certain forward-looking  statements concerning the
Company's operations,  economic performance and financial condition,  including,
in  particular  the  likelihood  of the  Company's  success  in  developing  and
expanding its business.  These statements are based upon a number of assumptions
and estimates  which are  inherently  subject to significant  uncertainties  and
contingencies,  many of which are beyond the control of the Company, and reflect
future business decisions which are subject to change. Some of these assumptions
inevitably will not materialize,  and unanticipated events will occur which will
affect the Company's results.

         Such  statements  are made  under  the safe  harbor  provisions  of the
Private Securities  Litigation Reform Act of 1995. These statements may include,
but are not limited to, projections of premium revenue, investment income, other
revenue,  losses,  expenses,  earnings, cash flows, plans for future operations,
common  stockholders'  equity,  investments,  capital  plans,  dividends,  plans
relating to  products or  services,  adequacy  of  Asbestos/Pollution  reserves,
collectability of receivables from Equitas and estimates  concerning the effects
of litigation or other disputes,  as well as assumptions of any of the foregoing
and  are  generally  expressed  with  words  such  as  "believes,"  "estimates,"
"expects,"  "anticipates,"  "plans,"  "projects,"  "forecasts,"  "goals," "could
have," "may have" and similar expressions.

The Pools
- ---------

         MMO, located in New York,  PMMO,  located in San Francisco and Midwest,
located in Chicago (the "Manager" or the "Managers"), manage the insurance pools
in which the Company participates.


                                       2
<PAGE>


         The Manager accepts, on behalf of the pools, insurance risks brought to
the pools by brokers and others. All premiums,  losses and expenses are prorated
among the pool members in accordance with their percentage participations in the
pools. Pursuant to the pool management agreements,  the pool members have agreed
not to accept  ocean  marine  insurance  (other than ocean  marine  reinsurance)
unless  received  through the Manager and have  authorized the Manager to accept
risks on behalf of the pool members and to effect all transactions in connection
with such risks,  including  the issuance of policies and  endorsements  and the
adjustment of claims.  As compensation for its services,  the Manager receives a
fee of 5.5% of gross premiums  written by the pools and a contingent  commission
of 10% on net underwriting profits, subject to adjustment.

         Inception to date underwriting results for various reinsurance treaties
are used to calculate reinsurance  contingent  commissions on an earned basis in
the period in which the related  profit  commission  is billed.  Adjustments  to
commissions,   resulting  from  revisions  in  coverage,  retroactive  or  audit
adjustments,  are recorded in the period when realized. Subject to review by the
reinsurers,   the  Managers   determine  the  profitability  of  all  contingent
commission agreements placed with various reinsurance companies.

         The Company's  participation in the business underwritten for the pools
by the Manager has  increased  over the years and,  since  January 1, 1997,  the
Company has had a 100%  participation  in all lines of business  produced by the
pools.

         Two  former  pool  members,  Utica  Mutual  Insurance  Company  ("Utica
Mutual") and Arkwright Mutual Insurance Company ("Arkwright")  withdrew from the
pools and retained liability for their effective pool participation for all loss
reserves,  including  IBNR  (incurred  but not  reported)  and unearned  premium
reserves,  incurred on policies  effective  prior to their  withdrawal  from the
pools.

         The  Company  is not aware of any  uncertainties  with  respect  to any
possible defaults by either Arkwright or Utica Mutual with respect to their pool
obligations  which  might  impact  liquidity  or  results of  operations  of the
Company.

         Assets and liabilities resulting from the insurance pools are allocated
to the members of the insurance pools based upon the pro-rata  participation  of
each member in each pool which is set forth in the management  agreement entered
into by and between the pool participants and the Managers.

Investment Policy
- -----------------

         The Company  follows an investment  policy which is reviewed  quarterly
and revised periodically.

         The  investment  policy for New York Marine as of December 31, 1999 was
as follows:

         1.       LIQUID FUNDS - MINIMUM  7-1/2% OF INVESTABLE  FUNDS.  In cash,
                  certificates  of deposit,  prime  bankers  acceptances,  prime
                  commercial  paper,  tax-exempts  rated  Aa3/AA-  or  MIG  2 or
                  better,  tax-exempts  rated  Aa3 or AA-  by  one  service  and
                  unrated by the other,  not to exceed  $5,000,000  par value in
                  any one  institution;  obligations of the U.S.  Government and
                  its agencies due in one year or less;  tax-exempt notes with a
                  split  A1/AA- or Aa3/A+  rating not to exceed  $500,000 in any
                  one institution.


                                       3
<PAGE>


         2.       BOND FUNDS

                  A)       Tax-exempt  securities  and  obligations  of  private
                           corporations  rated  A3/A- or better by each  service
                           which  provides  a rating,  not to exceed  $5,000,000
                           maturity value per issuing entity;  maturities not to
                           exceed December 31 of the 20th year from the purchase
                           date, to include:

                           1)       Pollution  -  control  bonds  guaranteed  by
                                    industrial   corporations   rated  A3/A-  or
                                    better.

                           2)       Pre-refunded bonds.

                           3)       Housing   issues   sponsored   by  the  U.S.
                                    Government  and  its  agencies   secured  by
                                    underlying    mortgage    securities    with
                                    maturities  not in  excess  of 30 years  and
                                    average  maturities  not  in  excess  of  20
                                    years.

                  B)       Preferred  stocks with sinking funds,  rated A3/A- or
                           better,  limited to $500,000 par value per issuer for
                           new   issues;   to   $500,000   purchase   price  for
                           outstanding issues.

                  C)       Obligations of the U.S. Government and its agencies.

         3.       EQUITY FUNDS

                  A)       Equities  (including  convertible  securities)  - Not
                           more  than  25%  of   policyholders'   surplus,   and
                           investment in any one  institution not to exceed five
                           percent (5%) of policyholders' surplus at the time of
                           purchase  as  last  reported  to the New  York  State
                           Insurance Department.

                  B)       Subsidiaries  -  New  York  Marine's  investments  in
                           subsidiary    companies   are   excluded   from   the
                           requirements  of the  New  York  Marine's  Investment
                           Program.

          The investment  policy of Gotham is similar to that of New York Marine
except  that  Gotham  is  limited  to  $2,000,000  maturity  value  for its bond
investments and $1,000,000 for short-term investments in any one institution for
liquid funds.

          The investments of the Company's subsidiaries must also conform to the
requirements contained in the New York State Insurance Law and Regulations.

          The Company's  investments are monitored by management and the Finance
Committee of the Board of Directors. New York Marine's fixed income portfolio is
managed by J.P. Morgan Investment Management,  Inc. ("JPMIM"). New York Marine's
equity  portfolio is managed,  in part, by JPMIM and, in part, by Groupama Asset
Management.  Gotham  has its fixed  income  portfolio  managed  by JPMIM and its
equity  portfolio  managed  by  Rorer  Asset  Management.   The  Company's  U.K.
operations   investments  are  managed  by  Aberdeen  Asset  Managers  Ltd.  See
"Subsidiaries".

          As of December 31, 1999,  the Company's  fixed  maturities  and equity
securities were invested as follows:

                                     New York Marine   Gotham   Syndicate 1265
                                     ---------------   ------   --------------
                                                   (In thousands)

         Bonds Rated A- or better       $221,611      $69,023      $6,659
            Equities                    $ 52,729      $18,953         -0-


         Segments
         --------

          The Company conducts its business operations and evaluates its overall
performance through three main segments: domestic insurance companies,  domestic
insurance agencies and Syndicate 1265.


                                       4
<PAGE>


          The domestic  insurance  companies  segment,  which  includes New York
Marine and Gotham,  underwrite  insurance  business by accepting risks generally
through insurance brokers.  The domestic insurance  companies engage in business
in all 50 states as well as accept business risks in such world-wide  regions as
Europe, Asia, and Latin America. See "Regulation."

          The domestic insurance agencies segment,  which includes MMO, PMMO and
Midwest,  underwrite  all the  business for the  domestic  insurance  companies.
Revenues  from this segment  include  contingent  commissions  from  reinsurance
transactions and intercompany  management  commissions which are eliminated on a
consolidated basis. Expenses include general and administrative expenses.

          Syndicate 1265 segment includes the Company's Lloyd's of London agency
and insurance  operations.  Syndicate  1265  underwrites  insurance  business by
accepting risks generally  through  insurance  brokers under worldwide  licenses
provided by Lloyd's.

          Business  obtained  through  the  domestic  insurance   companies  and
agencies  segments  includes the  underwriting  of ocean marine,  inland marine,
aircraft and non-marine  liability  lines of insurance.  Ocean marine  insurance
covers a broad  range of  classes,  including  marine  hull,  primary and excess
marine   liabilities,   drilling  rig,  marine  cargo,  war  risks  and  assumed
reinsurance.  Inland marine insurance includes, among other things,  differences
in  condition  ("DIC"),   excess  property  packages,   miscellaneous   property
insurance, inland cargo shipments and assumed reinsurance.  DIC insurance covers
those perils not included with a fire and extended  coverage  policy,  including
burglary,  collapse, flood, volcano and earthquake.  Aircraft insurance includes
hull and engine  insurance,  liability  insurance as well as products  liability
insurance. Non-marine liability insurance includes, among other things, umbrella
(excess casualty) insurance, and excess and surplus line risks written primarily
through Gotham.

          Business  obtained through Syndicate 1265 includes the underwriting of
ocean marine  insurance which includes  coverage for hull,  cargo,  energy,  war
risks, marine liability, and marine excess of loss risks.

          The  following  tables  set forth  the  pools'  gross and net  written
premiums including business from Syndicate 1265. Insurance premiums written on a
calendar year basis may be attributable to various policy years. Therefore,  the
Company's  gross and net written  premiums cannot be obtained by multiplying the
amounts below by the Company's percentage  participation in each year since some
of the calendar year premiums written may arise from policies  incepting in 1996
and prior when the Company had a different  participation in the pools. However,
the tables below,  which set forth calendar year  premiums,  do reflect the size
and mix of business produced by the Managers for the years so indicated.

<TABLE>
<CAPTION>

Gross Premiums Written by
    Line of Business                                                          Year Ended December 31,
- -------------------------                                                          -----------------------

                                                         1999                      1998                      1997
                                                         ----                      ----                      ----
                                                                              (In thousands)
<S>                                                 <C>                 <C>   <C>                 <C>   <C>                 <C>
Ocean marine  (a) ...............................   $  71,018           60%   $  78,768           60%   $  72,995           59%
Inland marine ...................................         739           --        1,321            1%       1,117            1%
Aircraft ........................................      44,571           38%      36,594           28%      45,853           37%
Other liability .................................       2,084            2%       3,176            2%       3,897            3%
Other ...........................................           6           --       12,337            9%         207           --
                                                    ---------    ---------    ---------    ---------    ---------    ---------
Total ...........................................   $ 118,418          100%   $ 132,196          100%   $ 124,069          100%

Net Premiums Written by
    Line of Business                                                          Year Ended December 31,
- -----------------------                                                       -----------------------

                                                         1999                      1998                      1997
                                                         ----                      ----                      ----
                                                                              (In thousands)
Ocean marine  (b) ...............................   $  49,176           87%   $  58,800           82%   $  49,666           79%
Inland marine ...................................         255           --         (355)          --         (217)          --
Aircraft ........................................       5,114            9%         (55)          --        9,568           15%
Other liability .................................       2,046            4%       2,977            4%       3,864            6%
Other ...........................................         (25)          --       10,587           14%         207           --
                                                    ---------    ---------    ---------    ---------    ---------    ---------
Total ...........................................   $  56,566          100%   $  71,954          100%   $  63,088          100%
</TABLE>


(a)  Includes gross premiums  written from Syndicate 1265 of $23,273 and $17,817
     for 1999 and 1998, respectively.

(b)  Includes net premiums  written from  Syndicate  1265 of $17,365 and $16,832
     for 1999 and 1998, respectively.


                                       5
<PAGE>


Reinsurance Ceded
- -----------------

         A  reinsurance  transaction  takes  place  when  an  insurance  company
transfers (cedes) a portion or all of its exposure on insurance written by it to
another insurer.  The reinsurer  assumes the exposure in return for a portion or
all of the premium.  The ceding of  reinsurance  does not legally  discharge the
insurer from its primary liability for the full amount of the policies,  and the
ceding company is required to pay the loss if the assuming company fails to meet
its obligations under the reinsurance agreement. The Company, through the pools,
cedes the greater part of its reinsurance through annual reinsurance  agreements
(treaties) with other insurance  companies.  These treaties,  which are drawn by
lines or classes of insurance, allow the Company to automatically reinsure risks
without having to cede insurance on a risk by risk (facultative) basis, although
facultative reinsurance is utilized on occasion.

         Generally,  the Managers place reinsurance with companies which have an
A.M. Best rating of A- or greater or which have sufficient  financial  strength,
in management's opinion, to warrant being used for reinsurance protections.  The
Managers  also  examine  financial  statements  of  reinsurers  and review  such
statements  for  profitability,  reasonable  leverage and adequate  surplus.  In
addition, the Company, through the pools, withholds funds and may obtain letters
of credit  under  reinsurance  treaties.  The Company  continues  to monitor the
financial  status of all  reinsurers on an annual  basis,  as well as the timely
receipt of cash, to assess the ability of reinsurers to pay reinsurance claims.

          The Company,  through the pools,  attempts to limit its exposure  from
losses on any one occurrence  through the use of various  excess of loss,  quota
share and  facultative  reinsurance  arrangements  and to  minimize  the risk of
default by a reinsurer by reinsuring risks with many different  reinsurers.  The
Company utilizes many separate  reinsurance treaties each year with a range of 8
to 20 reinsurers  participating on each treaty.  Many reinsurers  participate on
multiple  treaties.  The Company  utilizes quota share  reinsurance  treaties in
which  the  reinsurers  participate  on a set  proportional  basis  in both  the
premiums  and  losses.  Additionally,   the  Company  utilizes  excess  of  loss
reinsurance treaties in which the reinsurers, in exchange for a minimum premium,
subject to upward  adjustment  based upon premium volume,  agree to pay for that
part of each loss in excess of an agreed upon amount. The Company's retention of
exposure,  net of these  treaties,  varies  between  its  different  classes  of
business  and from year to year,  depending  on several  factors  including  the
pricing  environment  on both the  direct  and ceded  book of  business  and the
availability of reinsurance.  In general,  reinsurance is obtained for each line
of business when  necessary to reduce the Company's  exposure to a maximum of $2
million  for any one  insured on any one  occurrence.  The Company can and does,
from time to time,  carry a maximum exposure in excess of $2 million for any one
insured  on any one  occurrence.  Such  instances,  when they  occur,  generally
reflect a business  decision  regarding  the cost of further  reductions  in the
Company's  exposure  and/or  the  availability  of  reinsurance.  In  2000,  the
Company's  net  retention  in its  aviation  line of  business  may,  in certain
instances,  increase to $3 million  per  occurrence.  The  Company is  currently
evaluating  and  negotiating  reinsurance  proposals  to lower the  aviation net
retention. However, no assurance can be given as to the ultimate outcome of such
negotiations.

         The Company  attempts to limit its exposure from  catastrophes  through
the purchase of general excess of loss  reinsurance  which provides  coverage in
the event that multiple  insureds incur losses arising from the same occurrence.
These coverages require the Company to pay a minimum premium,  subject to upward
adjustment based upon premium volume. The treaties,  which extend in general for
a twelve month  period,  obligate the  reinsurers  to pay for the portion of the
Company's aggregate losses (net of specific  reinsurance) which fall within each
treaty's layer or exposure. The Company's retention on any one occurrence, after
it obtains the benefit of its excess of loss  reinsurance,  has not  exceeded $2
million  during the past three  years.  In the event of a loss,  the Company may
incur  additional   reinstatement   premium  charges  for  its  excess  of  loss
reinsurance, to the extent that such treaties incur a portion of the loss and in
an amount not greater than the original cost of the reinsurance. Every effort is
made to purchase sufficient  reinsurance coverage to protect the Company against
the cumulative  impact of several losses arising from a single  occurrence,  but
there is no guarantee that such limits will prove sufficient.


                                       6
<PAGE>


         The  Company   reinsures  risks  with  several   domestic  and  foreign
reinsurers as well as syndicates  including Lloyd's of London  ("Lloyd's").  The
Company's  consolidated  domestic insurance companies' largest reinsurers,  on a
statutory  basis as of December  31,  1999,  were  Arkwright,  Lloyd's and Utica
Mutual,  with  aggregate net  recoverables  of $42 million,  $23 million and $16
million, respectively. The 1999 A.M. Best ratings for Arkwright and Utica Mutual
are each A. Lloyd's maintains a trust fund which was established for the benefit
of all United States ceding companies. For the three most recent years for which
Lloyd's has reported  results,  1996, 1995 and 1994,  Lloyd's reported gains for
each of those years. The Company has not experienced  difficulties in collecting
amounts due from  Lloyd's  and the timing of cash  receipts  has not  materially
affected the Company's liquidity. However, given the uncertainty surrounding the
sufficiency  of assets in Equitas to meet its ultimate  obligations,  there is a
reasonable  possibility  that the Company's  collection  efforts relating to its
Lloyd's  recoverables might be adversely affected in the future. At December 31,
1999, the Company's net exposure to reinsurers,  other than  Arkwright,  Lloyd's
and Utica Mutual, was approximately $153 million,  including amounts recoverable
for paid losses,  outstanding losses,  IBNR and unearned premium reserves.  This
amount  is  recoverable   collectively  from  approximately  830  reinsurers  or
syndicates,  no single one of which was liable to the Company  for an  unsecured
amount in excess of approximately $5.8 million.

Reserves
- --------

         The applicable  insurance laws under which the Company operates require
that  reserves  be  maintained  for the  payment of losses  and loss  adjustment
expenses  with  respect to both  reported  and IBNR claims  under its  insurance
policies.  IBNR claims are those losses,  based upon  historical  experience and
other relevant data,  that the Company  estimates will be reported or ultimately
develop on risks undertaken by the Company. Case loss reserves are determined by
evaluating reported claims on the basis of the type of loss involved,  knowledge
of the circumstances  surrounding the claim, and the policy provisions  relating
to the type of loss.  IBNR  claims  are  estimated  on the basis of  statistical
information  with  respect to the probable  number and nature of claims  arising
from occurrences which have not yet been reported. The establishment of reserves
acts to reduce  income  while the downward  adjustment  or reduction of reserves
increases income.


                                       7
<PAGE>


         The loss  settlement  period on insurance  claims may be many years and
during  this  period it often  becomes  necessary  to  adjust  the  estimate  of
liability  on a claim either  upward or  downward.  Among the classes of marine,
aviation and non-marine liability insurance written by the Company are liability
classes which  historically  have had long lead times  between  occurrence of an
insurable event, reporting of the claim to the Company and final settlement.  In
such  cases,  the Company is forced to estimate  reserves  over long  periods of
time, with the possibility of several  adjustments.  Other classes of insurance,
such as property and claims-made non-marine liability classes, historically have
had shorter lead times between  occurrence of an insurable  event,  reporting of
the claim to the Company and final settlement. The reserves with respect to such
classes are less likely to be readjusted.

         The Company,  from time to time, has increased its participation in the
pools.  The effect of each such increase is  prospective  in nature and does not
affect the loss  reserves  herein set forth for the years prior to the effective
date of any such change in participation percentage.

         The insurance pools  participated in the issuance of umbrella  casualty
insurance  for various  Fortune 1000  companies in the period from 1978 to 1983.
Depending on the accident  year,  the  insurance  pools'  maximum  retention per
occurrence  ranged from  $250,000 to  $500,000.  The  Company's  effective  pool
participation  on such risks varied from 11% in 1978 to 30% in 1983. At December
31, 1999 and 1998, the Company's  gross,  ceded and net loss and loss adjustment
expense  reserves for  Asbestos/Pollution  policies  amounted to $27.8  million,
$18.1  million  and $9.7  million,  and $24.3  million,  $15.3  million and $9.0
million,  respectively.  As of December 31, 1999, the Company had  approximately
355  policies  which  had at least  one  claim  relating  to  Asbestos/Pollution
exposures.    The   Company   believes   that   the   uncertainty    surrounding
Asbestos/Pollution  exposures,  including  issues as to  insureds'  liabilities,
ascertainment of loss date, definitions of occurrence, scope of coverage, policy
limits and application and interpretation of policy terms, including exclusions,
all affect the estimation of ultimate losses.  Under such  circumstances,  it is
difficult to determine the ultimate loss for Asbestos/Pollution  related claims.
Given the  uncertainty  in this area,  losses  from  Asbestos/Pollution  related
claims may develop adversely.  However, the Company believes that, in aggregate,
the net unpaid loss and loss  adjustment  expense  reserves  as of December  31,
1999,  allow for an adequate  provision and that the ultimate  resolution of the
Asbestos/Pollution  claims  will not have a  material  impact  on the  Company's
financial position.

         The following  table sets forth  NYMAGIC's net case reserve  experience
for Asbestos/Pollution policies for each of the past three years:

<TABLE>
<CAPTION>

                                                                   1999       1998       1997
                                                                 -------    -------    -------
                                                                         (In thousands)
Asbestos

<S>                                                              <C>        <C>        <C>
Case reserves at beginning of period .........................   $   802    $ 1,067    $ 1,103
Incurred loss and loss adjustment expenses ...................       986        (27)        52
Payments .....................................................      (194)      (238)       (88)
                                                                 -------    -------    -------
Case reserves at end of period ...............................   $ 1,594    $   802    $ 1,067
                                                                 =======    =======    =======


                                                                   1999       1998       1997
                                                                 -------    -------    -------

                                                                         (In thousands)
Pollution

Case reserves at beginning of period .........................   $ 1,155    $ 1,417    $ 2,323
Incurred loss and loss adjustment expenses ...................       503        351       (486)
Payments .....................................................      (615)      (613)      (420)
                                                                 -------    -------    -------
Case reserves at end of period ...............................   $ 1,043    $ 1,155    $ 1,417
                                                                 =======    =======    =======
</TABLE>


                                        8
<PAGE>


         The following  table sets forth  NYMAGIC's net loss and loss adjustment
expense  experience for  Asbestos/Pollution  policies for each of the past three
years:

<TABLE>
<CAPTION>

                                                                   1999        1998        1997
                                                                 --------    --------    --------
                                                                          (In thousands)

Asbestos/Pollution

<S>                                                              <C>         <C>         <C>
Unpaid loss and loss adjustment expenses
 (Including IBNR) at beginning of period .....................   $  9,017    $  9,029    $  8,500
Incurred loss and loss adjustment expenses ...................      1,489         839       1,037
Payments .....................................................       (809)       (851)       (508)
                                                                 --------    --------    --------
Unpaid loss and loss adjustment expenses
 (Including IBNR) at end of period ...........................   $  9,697    $  9,017    $  9,029
                                                                 ========    ========    ========
</TABLE>

         The  loss  and  loss  adjustment  payments  related  to  the  Company's
Asbestos/Pollution exposures have not been material in relation to the Company's
total loss and loss adjustment expense payments as shown in the table below:

<TABLE>
<CAPTION>

                                                                   1999        1998       1997
                                                                 --------    --------   --------
                                                                         (In thousands)

<S>                                                              <C>         <C>         <C>
Total loss and loss adjustment expense
 payments for the year ended December 31, ....................   $ 53,379    $ 58,983    $ 55,483
Asbestos/Pollution loss and loss adjustment expense
 payments for the year ended December 31, ....................        809         851         508
</TABLE>



         The insurance pools have written primary insurance relating to products
liability  since 1985.  The insurance  pools' maximum loss per risk is generally
limited to $1,000,000 and the Company's participation percentage ranges from 59%
to 100% based upon  policy  year.  The  Company  believes  that,  based upon the
maximum amount per risk and the Company's  conservative  reserving posture,  the
reserves currently  established are adequate to cover the ultimate resolution of
all product liability claims.

         The following table shows changes in reserves in subsequent  years from
the prior loss estimates  based upon experience as of the end of each succeeding
year. The estimate is increased or decreased as more  information  becomes known
about the frequency and severity of losses for  individual  years.  A redundancy
means the original estimate of the Company's  consolidated  liability was higher
than the current  estimate;  a  deficiency  means that the  current  estimate is
higher than the original estimate.

         The first line of the table  presents,  for each of the last ten years,
the estimated  liability for net unpaid losses and loss  adjustment  expenses at
the end of the year,  including  IBNR  losses.  The first  section  of the table
shows,  by year,  the  cumulative  amounts  of net  losses  and loss  adjustment
expenses paid as of the end of each succeeding  year,  expressed as a percentage
of the estimated liability for such amounts.

         The second  section sets forth the  re-estimates  in later years of net
incurred losses, including net payments, as a percentage of the estimate for the
years  indicated.  The net cumulative  redundancy  represents as of December 31,
1999,  the  aggregate  change  in  the  estimates  over  all  prior  years.  The
redundancies have been reflected in income over the periods shown.




                                       9
<PAGE>



<TABLE>
<CAPTION>

                                                                     Year Ended December 31,
                            --------------------------------------------------------------------------------------------------------
                            1989      1990      1991      1992      1993      1994      1995      1996      1997      1998      1999
                            ----      ----      ----      ----      ----      ----      ----      ----      ----      ----      ----
                                                                     (Dollars in thousands)

<S>                      <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Estimated Liability
for Net Unpaid Losses
and Loss Adjustment
Expenses                 138,920   156,533   170,744   203,735   208,366   212,377   229,916   227,370   222,335   213,589   196,865



Cumulative Amount of
Net Liability Paid
As a Percentage of
Estimate Through:

      1  Year Later          17%       18%       19%       20%       22%       20%       20%       17%       19%       20%
      2  Years Later         32%       36%       37%       37%       37%       34%       32%       30%       32%
      3  Years Later         46%       49%       52%       48%       49%       44%       42%       42%
      4  Years Later         57%       62%       61%       58%       57%       53%       51%
      5  Years Later         66%       69%       69%       64%       64%       62%
      6  Years Later         72%       75%       74%       70%       71%
      7  Years Later         75%       78%       78%       76%
      8  Years Later         77%       81%       84%
      9  Years Later         79%       85%
     10  Years Later         82%


Net Liability Reestimated
including Cumulative
Net Paid Losses and
Loss Adjustment Expenses
As a Percentage of
Estimate As of:

      1  Year Later          96%      100%       99%       99%       99%       97%       94%       90%       91%       94%
      2  Years Later         98%      100%       99%       97%       96%       95%       87%       87%       87%
      3  Years Later         96%       98%       99%       95%       95%       91%       86%       85%
      4  Years Later         94%       98%       97%       95%       93%       91%       86%
      5  Years Later         91%       96%       98%       94%       94%       92%
      6  Years Later         90%       96%       96%       95%       95%
      7  Years Later         91%       95%       97%       96%
      8  Years Later         90%       97%       99%
      9  Years Later         92%       98%
     10  Years Later         93%


Net Cumulative Redundancy  9,082     2,766     2,316     8,396    10,424    16,383    32,327    33,657    28,257    12,183





Gross Unpaid Losses and Loss Adjustment Expenses                 407,321  $435,072  $417,795  $411,837  $388,402  $401,584  $425,469
Reinsurance Recoverable on Unpaid Losses and Loss                198,955   222,695   187,879   184,467   166,067   187,995   228,604
  Adjustment Expenses
Reserve Re-estimated Gross                                       382,155   404,954   392,348   366,149   393,044   426,369
Reserve Re-estimated Reinsurance Recoverable                     188,331   212,722   193,401   160,653   190,175   224,963
Gross Cumulative Redundancy (Deficiency)                          25,166    30,118    25,447    45,688    -4,643   -24,785
</TABLE>


                                       10
<PAGE>


         The Company  makes no specific  provision  for  inflation in connection
with  reserve  estimates,   but  does  each  year  consider  the  adjustment  of
outstanding  case reserves and current  inflationary  indices in determining the
adequacy of the overall  loss  reserve.  The Company  monitors  historical  loss
payments to determine the sufficiency of this provision.

         The  following  table  provides a  reconciliation  of the  consolidated
liability  for losses and loss  adjustment  expenses at the beginning and end of
1999, 1998 and 1997:

<TABLE>
<CAPTION>

                                                                 Year ended December 31,

                                                                1999       1998       1997
                                                             --------   --------   --------
                                                                     (In thousands)
<S>                                                          <C>        <C>        <C>
Net liability for losses and loss adjustment
  expenses at beginning of year ..........................   $213,589   $222,335   $227,370
                                                             --------   --------   --------
Provision for losses and loss adjustment
  expenses occurring in current year .....................     48,838     69,703     72,322
Decrease in estimated losses and loss
  adjustment expenses for claims occurring
  in prior years (1) .....................................    (12,183)   (19,466)   (21,874)
Deferred income-loss portfolio
  assumption(2) ..........................................        198        275        320
                                                             --------   --------   --------
Total losses and loss adjustment expenses
  incurred ...............................................     36,853     50,512     50,768
                                                             --------   --------   --------
Less:
Losses and loss adjustment expense payments
  for claims occurring during:
      current year .......................................     11,517     17,407     17,029
      prior years ........................................     41,862     41,576     38,454
                                                             --------   --------   --------
                                                               53,379     58,983     55,483
Plus:
Deferred income-loss portfolio assumption(2) .............       (198)      (275)      (320)
                                                             --------   --------   --------
Net liability for losses and loss adjustment
  expenses at year end ...................................    196,865    213,589    222,335
                                                             --------   --------   --------
Ceded unpaid losses and loss adjustment
  expenses ...............................................    228,604    187,995    166,067
                                                             --------   --------   --------
Gross unpaid losses and loss adjustment
  expenses at year end ...................................   $425,469   $401,584   $388,402
                                                             ========   ========   ========
</TABLE>

         (1) The  adjustment to the  consolidated  liability for losses and loss
adjustment  expenses for losses occurring in prior years reflects the net effect
of the  resolution  of losses for other than full reserve  value and  subsequent
readjustments  of loss values.  The decrease in estimated losses is attributable
to the ocean  marine and  aviation  lines of business  as a result of  favorable
payout trends due , in part, to lower retention levels per loss.

         (2) Deferred income-loss portfolio assumption represents the difference
between  cash  received  and  unpaid  loss  reserves  assumed as a result of the
assumption  of net pool  obligations  from two  former  pool  members  which was
initially  capitalized  and is being  amortized  over the  payout  period of the
related losses.

         The principal differences between the consolidated liability for unpaid
losses and loss  adjustment  expenses as reported in the Annual  Statement filed
with  state  insurance  departments  in  accordance  with  statutory  accounting
principles and the liability based on generally accepted  accounting  principles
shown in the above tables is due to the assumption of loss reserves arising from
former  participants  in the MMO insurance  pools,  the  Company's  reserves for
Syndicate 1265,  reserves for uncollectible  reinsurance and unpaid  unallocated
loss  adjustment  expenses  based  upon  management  commissions  payable to the
Managers which are eliminated on a consolidated  basis.  The loss reserves shown
in the above  tables  reflect in each year salvage and  subrogation  accruals of
approximately  1% to 6%. The estimated  accrual for salvage and  subrogation  is
based on the line of business and historical  salvage and  subrogation  recovery
data. In neither statutory nor generally accepted accounting principles are loss
and loss adjustment expense reserves discounted.


                                       11
<PAGE>


         The following table sets forth the  reconciliation  of the consolidated
net  liability  for  losses  and loss  adjustment  expenses  based on  statutory
accounting  principles  for  the  domestic  insurance  companies  and  based  on
generally accepted accounting principles as of December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                                      Year ended December 31,
                                                                                      -----------------------
                                                                                       1999       1998       1997
                                                                                   --------   --------   --------
                                                                                           (In thousands)
<S>                                                                                <C>        <C>        <C>
Liability for losses and loss adjustment expenses
  reported based on statutory accounting principles ............................   $170,664   $193,680   $217,016
Liability for losses and loss adjustment expenses assumed
  from two former pool members .................................................      4,911      4,529      4,469
 (excludes $3,684, $4,636 and $5,580 at  December 31, 1999,
  1998 and 1997, accounted for in the  statutory liability for
   losses and loss adjustment expenses)
Syndicate 1265 .................................................................     18,401     13,504         --
Other, net .....................................................................      2,889      1,876        850
                                                                                   --------   --------   --------
Net liability for losses and loss adjustment expenses reported
  based on generally accepted accounting principles ............................    196,865    213,589    222,335
Ceded liability for unpaid losses and loss adjustment expenses .................    228,604    187,995    166,067
                                                                                   --------   --------   --------
Gross liability for unpaid losses and loss adjustment expenses .................   $425,469   $401,584   $388,402
                                                                                   ========   ========   ========
</TABLE>


Regulation
- ----------

         The Company is regulated by the  insurance  regulatory  agencies of the
states in which it is authorized to do business.  New York Marine is licensed to
engage in the insurance business in all states.

         Gotham is permitted to write  excess and surplus  lines  insurance on a
non-admitted basis in all of the states except Arkansas, Massachusetts,  Nevada,
New  Jersey,  New  Hampshire  and  Vermont.  Gotham is licensed to engage in the
insurance  business in the state of New York and, as such,  cannot  write excess
and surplus business in that state.

         Many  aspects  of the  Company's  insurance  business  are  subject  to
regulation.  For example,  minimum  capitalization  must be maintained;  certain
forms of policies must be approved before they may be offered;  reserves must be
established in relation to the amounts of premiums  earned and losses  incurred;
and, in some cases, schedules of premium rates must be approved.

         The  domestic  insurance  company   subsidiaries  also  file  statutory
financial  statements  with each state in the format  requested  by the National
Association  of  Insurance   Commissioners  (the  "NAIC").   The  NAIC  provides
accounting  guidelines  for  companies to report and provides  minimum  solvency
standards for all companies in the form of risk-based capital requirements.  The
Company  believes that the surplus of each of the  insurance  companies is above
the minimum amount required by the NAIC.

         The NAIC's project to codify  statutory  accounting  principles,  which
will ultimately change currently prescribed statutory accounting principles, was
approved  by the NAIC in March  1998.  The  approval  included a  provision  for
commissioner  discretion in  determining  appropriate  statutory  accounting for
insurers  in their  state.  The NAIC  indicated  that  codification  will become
effective on January 1, 2001. The Company is examining how  implementation  will
affect its statutory financial statements.

         New York Marine and Gotham are subject to  examination by the Insurance
Department  of the State of New  York.  The  insurance  companies'  most  recent
examination was for the year ended December 31, 1995.  There were no significant
adjustments which resulted from that examination.


                                       12
<PAGE>


         Syndicate 1265 operates in a highly  regulated  environment  within the
overall Lloyd's market. Lloyd's maintains regulatory departments that review the
management  and operation of all agencies and syndicates to ensure that business
is conducted in accordance  with Lloyd's  standards.  Syndicates are required to
maintain  trust  funds for  insurance  transactions  with strict  guidelines  on
withdrawals  from  such  funds.  Annual  solvency  tests are  conducted  whereby
syndicates must maintain minimum capital  requirements in accordance with ratios
prescribed by Lloyd's.

         The following  table shows,  for the periods  indicated,  the Company's
consolidated  domestic  insurance  companies'  statutory  ratios of net premiums
written (gross premiums less premiums ceded) to policyholders' surplus:

<TABLE>
<CAPTION>

                                                            Year Ended December 31,
                                          --------------------------------------------------------
                                              1999        1998        1997        1996        1995
                                          --------    --------    --------    --------    --------
                                                           (Dollars in thousands)

<S>                                       <C>         <C>         <C>         <C>         <C>
Net premiums written .................    $ 38,741    $ 45,333    $ 62,221    $ 90,513    $ 97,817
Policyholders' surplus ...............     200,899     196,745     181,844     160,929     148,785
                                          --------    --------    --------    --------    --------
Ratio ................................    .19 to 1    .23 to 1    .34 to 1    .56 to 1    .66 to 1
</TABLE>


          While there are no statutory  requirements  applicable  to the Company
which establish permissible premium to surplus ratios, guidelines established by
the National Association of Insurance  Commissioners  provide that the statutory
net  premiums  written to surplus  ratio  should be no greater  than 3 to 1. The
Company is well within those guidelines. Syndicate 1265 maintained a capacity to
write  approximately a U.S.  dollar  equivalent of $32.2 million of net premiums
written in 1999.

          Policyholders'   surplus  is  not  a  substitute   for  the  Company's
shareholders'  equity computed in accordance with Generally Accepted  Accounting
Principles (GAAP). It excludes the effect on shareholders' equity from dividends
declared,  accumulated other comprehensive income, common stock, treasury stock,
additional  paid-in capital and the effect of consolidating all Non-Domestic and
Non-Insurance  subsidiaries.  The definition of  policyholders'  surplus used by
NYMAGIC may differ from  definitions  of  policyholders'  surplus  used by other
public holding companies of property and casualty insurers.

          Net premiums  written  (gross  premiums less premiums  ceded) is not a
substitute for the Company's net premiums  written  computed in accordance  with
GAAP.  It  excludes  the effect on net  premiums  written of  consolidating  all
Non-Domestic  subsidiaries.  The  definition  of net  premiums  written  used by
NYMAGIC may differ from definitions of net premiums written used by other public
holding companies of property and casualty insurers.

         Statutory  ratios of net premiums written (gross premiums less premiums
ceded) to  policyholders'  surplus is not  promulgated  under GAAP.  It includes
statutory gross, net and ceded premiums written and  policyholders'  surplus for
the domestic  insurance  companies only. The definition of net premiums  written
(gross premiums less premiums ceded) to  policyholders'  surplus used by NYMAGIC
may differ  from  definitions  of net  premiums  written  (gross  premiums  less
premiums ceded) to policyholders' surplus used by other public holding companies
of property and casualty insurers.

          The domestic insurance company subsidiaries are limited under New York
law in the  amount of  dividends  they can pay to the parent  company,  NYMAGIC,
without prior approval of the Insurance Department of the State of New York.

          NYMAGIC's   principal   source  of  income  is   dividends   from  its
subsidiaries,  which  is used  for  payment  of  operating  expenses,  including
interest  expense,  loan  repayments  and  payment  of  dividends  to  NYMAGIC's
shareholders. The maximum amount of dividends that may be paid to NYMAGIC by the
domestic  insurance  company  subsidiaries  is  limited  to the lesser of 10% of
statutory  surplus or 100% of net investment  income,  as defined under New York
insurance  law. The maximum amount which could be paid to the Company out of the
domestic  insurance  companies'  surplus  was  approximately  $19,630,000  as of
December  31,  1999.  Dividends  can be paid from  Syndicate  1265 to the extent
solvency  margins are maintained and after the closing of a calendar year, which
occurs three years following each calendar year.

          Insurance  companies are being  regulated more strictly by the various
states in recent years.  Many states have also  increased  regulation of surplus
lines insurance thereby requiring stricter standards for authorization.  Several
states have  established  guaranty funds which serve to provide the assured with
payments  due under  policies  issued by  insurance  companies  that have become
insolvent.  Insurance  companies  that are  authorized  to write in  states  are
assessed a fee,  normally  based on direct  writings in a particular  state,  to
cover any payments drawn from insolvency  funds.  New York Marine and Gotham are
subject to such assessments in the various states.

Subsidiaries
- ------------

         NYMAGIC's largest insurance company subsidiary is New York Marine which
was formed in 1972. NYMAGIC was formed in 1989 to serve as a holding company for
the subsidiary insurance  companies.  NYMAGIC's other domestic insurance company
subsidiary,  Gotham,  was  organized  in 1986 as a means of  expanding  into the
excess and surplus lines marketplace.  New York Marine and Gotham entered into a
Reinsurance  Agreement,  effective  January 1, 1987, under terms of which Gotham
will cede 100% of its gross direct writings to New York Marine and assume 15% of
New York Marine's total retained business,  beginning with the 1987 policy year.
Accordingly,  for  policy  year  1987  and  subsequent,   Gotham's  underwriting
statistics  are similar to New York  Marine's.  As of December 31, 1999, 75% and
25%  of  Gotham's  common  stock  is  owned  by New  York  Marine  and  NYMAGIC,
respectively.

         Gotham  does not assume or cede  business  to or from  other  insurance
companies.  As of December 31, 1999, New York Marine had aggregate  recoverables
due from  Gotham  of  approximately  $28  million  or 14% of New  York  Marine's
statutory surplus. Gotham had aggregate recoverables due from New York Marine as
of December 31, 1999, of approximately $21 million or 34% of Gotham's  statutory
surplus.

         New York  Marine's  and  Gotham's  combined  net income on a GAAP basis
represented  substantially all of the consolidated net income of the Company for
each of the years ended December 31, 1999, 1998 and 1997.


                                       13
<PAGE>


         MMO was acquired in 1991 and was formed in 1964 to underwrite a book of
ocean marine  insurance.  MMO's  activities  expanded  over the years and it now
underwrites a book of ocean marine, inland marine,  aviation and other liability
insurance.

         On December  31,  1997,  the  Company  acquired  ownership  of Highgate
Managing  Agencies,  Ltd. and subsequently  changed its name to MMO Underwriting
Agency,  Ltd. MMO  Underwriting  Agency Ltd. is a Lloyd's  managing agency which
commenced underwriting in 1998 for the Company's wholly owned subsidiary MMO UK,
Ltd. which is a Lloyd's  corporate capital vehicle providing 100% of the capital
for Syndicate 1265.

         Midwest  was  acquired in 1991 and was formed in 1978 to  underwrite  a
varied book of business located in the Midwest region.

         PMMO was acquired in 1991 and was formed in 1975 to underwrite a varied
book of business in the West Coast region.

Competition
- -----------

         The insurance  industry is highly  competitive and the companies,  both
domestic and foreign,  against which the Company  competes are often larger with
greater capital  resources than the Company and the pools. The principal methods
of  competition  are  pricing and  responsiveness  to the  individual  insured's
coverage  requirements.  The  competitive  nature  of the  business  intensified
through  1999  as  rates  softened  in the  aviation  and  ocean  marine  lines.
Competition  remains  intense  as a result of excess  capacity  in the  casualty
market.

         The  Company  believes  it  can  successfully   compete  against  other
companies in the insurance market due to its philosophy of underwriting  quality
insurance,  its  reputation as a conservative  well-capitalized  insurer and its
willingness to forego unprofitable business.

Employees
- ---------

         The Company currently employs approximately 108 persons, of whom 24 are
insurance underwriters.

ITEM 2.  PROPERTIES.

         The Company does not own, directly or indirectly,  any real estate. The
Company leases office space for day to day operations in the following cities:

                New York         -      37,000 square feet
                Chicago          -       3,500 square feet
                San Francisco    -       4,050 square feet
                London           -       1,450 square feet

         The Company's principal executive offices are approximately  37,000 sq.
ft. in size and are  located  in New York  City.  The  lease  for the  Company's
principal  executive  offices expires December 30, 2003. The minimum annual rent
under the lease is $1,184,000  from 2000 until the expiration of the lease.  The
lease  included  an  initial  cash  payment  by the  lessor  to the  Company  of
$1,853,000  of which the benefit was  deferred and is being  amortized  over the
lease term.

ITEM 3.  LEGAL PROCEEDINGS.

         The Company is not currently  involved in any legal  proceedings  other
than litigation all of which,  collectively,  is not expected to have a material
adverse effect on the business,  financial condition or results of operations of
the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         The Company  did not submit any  matters to a vote of security  holders
during the fourth quarter of 1999.


                                       14
<PAGE>


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.

         The Company's  common stock trades on the New York Stock Exchange (NYSE
Symbol: NYM). The following table sets forth high and low closing prices for the
periods indicated as reported on the New York Stock Exchange Composite Tape.



                                           1999                      1998
                                         --------                  --------

                                    High          Low          High         Low
                                    ----          ---          ----         ---

First Quarter ...........       $   20.63    $   13.00    $   30.06    $   24.38

Second Quarter ..........           17.50        12.19        34.25        27.00

Third Quarter ...........           16.00        13.00        28.63        21.75

Fourth Quarter ..........           15.00        12.75        25.25        19.75


         As of March 1, 2000,  there were 89  shareholders  of record.  However,
management  believes there are in excess of 2,500 beneficial owners of NYMAGIC's
common stock.

Dividend Policy
- ---------------

         A cash  dividend of ten (10) cents per share was  declared  and paid to
shareholders of record in March,  June,  September,  and December 1999 and 1998.
For a description  of  restrictions  on the ability of the  Company's  insurance
subsidiaries  to  transfer  funds to the Company in the form of  dividends,  see
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations - Liquidity and Capital Resources" and "Business- Regulation."

ITEM 6. SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>

OPERATING DATA                                          Year Ended December 31,
                                      --------------------------------------------------------
                                          1999        1998        1997        1996        1995
                                      --------    --------    --------    --------    --------
                                               (In thousands, except per share amounts)
Revenues:

<S>                                   <C>         <C>         <C>         <C>         <C>
Net premiums earned ..............    $ 56,155    $ 76,023    $ 87,537    $ 97,036    $103,461
Net investment income ............      18,642      20,803      21,325      21,270      21,659
Commission income ................       1,956         591       1,439       1,981       3,438
Realized investment gains, net....      12,504       8,615      10,425       4,589       4,111
Other income .....................         237         396         293         690         661
                                      --------    --------    --------    --------    --------

Total revenues ...................    $ 89,494    $106,428    $121,019    $125,566    $133,330
                                      --------    --------    --------    --------    --------
</TABLE>


                                       15
<PAGE>


Selected Financial Data (continued)

<TABLE>
<CAPTION>

                                                                             Year Ended December 31,
                                                          ----------------------------------------------------------
                                                               1999        1998         1997        1996        1995
                                                          ---------   ---------    ---------   ---------   ---------
                                                                    (In thousands, except per share amounts)
Expenses:
<S>                                                       <C>         <C>          <C>         <C>         <C>
Losses and loss adjustment
  expenses incurred ...................................   $  36,853   $  50,512    $  50,768   $  59,359   $  69,716
Policy acquisition expenses ...........................      11,077      10,107       16,583      18,828      21,017
General and administrative
  expenses ............................................      19,327      21,531       16,763      16,168      16,236
Interest expense ......................................       1,058       1,374        1,450       1,035         438
                                                          ---------   ---------    ---------   ---------   ---------

Total expenses ........................................   $  68,315   $  83,524    $  85,564   $  95,390   $ 107,407
                                                          ---------   ---------    ---------   ---------   ---------


Income before income taxes ............................      21,179      22,904       35,455      30,176      25,923
                                                          ---------   ---------    ---------   ---------   ---------
Income taxes
  Current......................................               3,189       5,250        8,962       7,495       5,393
  Deferred ............................................       1,577        (869)         125          56         410
                                                          ---------   ---------    ---------   ---------   ---------
Total income taxes ....................................       4,766       4,381        9,087       7,551       5,803
                                                          ---------   ---------    ---------   ---------   ---------

Net income ............................................   $  16,413   $  18,523    $  26,368   $  22,625   $  20,120
                                                          =========   =========    =========   =========   =========

BASIC EARNINGS PER SHARE(1):

Weighted average shares
  outstanding .........................................       9,687       9,679        9,849      10,499      11,299
Basic earnings per share ..............................   $    1.69   $    1.91    $    2.68   $    2.15   $    1.78
                                                          =========   =========    =========   =========   =========

DILUTED EARNINGS PER SHARE(1):

Weighted average shares

  outstanding .........................................       9,687       9,705        9,872      10,524      11,341
Diluted earnings per share ............................   $    1.69   $    1.91    $    2.67   $    2.15   $    1.77
                                                          =========   =========    =========   =========   =========

Dividends declared per share ..........................   $     .40   $     .40    $     .40   $     .40   $     .40
                                                          =========   =========    =========   =========   =========

BALANCE SHEET DATA:

                                                                                  December 31,
                                                          ----------------------------------------------------------
                                                              1999        1998         1997        1996        1995
                                                          ---------   ---------    ---------   ---------   ---------
                                                                                 (In thousands)
Total investments .....................................   $ 396,710   $ 443,022    $ 438,591   $ 409,209   $ 403,306
Total assets ..........................................     764,304     730,320      707,903     714,949     722,250
Unpaid losses and loss
  adjustment  expenses ................................     425,469     401,584      388,402     411,837     417,795
Notes payable .........................................      12,458      17,458       22,458      20,438      12,727
Total shareholders' equity ............................   $ 231,142   $ 228,180    $ 206,519   $ 188,852   $ 182,717
</TABLE>


         For a description of factors that materially  affect the  comparability
of the information  reflected in the Selected  Financial Data, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

(1)  Earnings per share data prior to 1997 have been restated as required  under
     Statement of Financial Accounting Standards No. 128, "Earnings Per Share."


                                       16
<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

         Results of Operations
         ---------------------

         The  Company's  results of  operations  are derived from its three main
segments which include the domestic insurance  companies,  the domestic agencies
and Syndicate 1265. The Company's  domestic insurance  companies  participate in
pools of insurance covering ocean marine, inland marine, aircraft and non-marine
liability  insurance  managed by MMO and affiliates.  Effective January 1, 1997,
the  Company's  participation  in the pools  increased to 100%.  Syndicate  1265
underwrites  a book of ocean marine  insurance.  The  following  represents  the
Company's  net  premiums  written and net  premiums  earned for each of the past
three years.

<TABLE>
<CAPTION>

NYMAGIC Net Premiums Written
    by Line of Business                                                Year Ended December 31,
    -------------------                       ---------------------------------------------------------------------
                                                         1999                   1998                   1997
                                                       --------               --------               --------
                                                                           (In thousands)
<S>                                           <C>          <C>         <C>         <C>         <C>        <C>
Ocean marine (a) ..........................   $ 48,564           87%   $ 59,231          81%   $ 48,658         78%
Inland marine .............................        153           --        (350)         --         146         --
Aircraft ..................................      5,319            9%         82          --       9,354         15%
Other liability ...........................      2,064            4%      2,969           4%      3,856          6%
Other .....................................          6           --      10,796          15%        207          1%
                                              --------     --------    --------    --------    --------   --------
Total .....................................   $ 56,106          100%   $ 72,728         100%   $ 62,221        100%
                                              ========     ========    ========    ========    ========   ========

NYMAGIC Net Premiums Earned
    by Line of Business                                                Year Ended December 31,
    -------------------                       ---------------------------------------------------------------------
                                                         1999                   1998                   1997
                                                       --------               --------               --------
                                                                           (In thousands)
Ocean marine (b) ..........................   $ 48,159           86%   $ 60,219          79%   $ 49,984         57%
Inland marine .............................        182         --          (393)       --           443          1%
Aircraft ..................................      5,310            9%      2,005           3%     32,566         37%
Other liability ...........................      2,529            5%      3,393           4%      4,328          5%
Other .....................................        (25)        --        10,799          14%        216       --
                                              --------     --------    --------    --------    --------   --------
Total .....................................   $ 56,155          100%   $ 76,023         100%   $ 87,537        100%
                                              ========     ========    ========    ========    ========   ========
</TABLE>


(a)  Includes net premiums  written from  Syndicate  1265 of $17,365 and $16,832
     for 1999 and 1998, respectively.

(b)  Includes net premiums earned from Syndicate 1265 of $13,614 and $14,832 for
     1999 and 1998, respectively.



         Unlike many types of property and  casualty  insurance,  ocean  marine,
inland  marine,  aviation  and other  liability  premium  rates are not strictly
regulated  by  governmental  authorities.  Consequently,  the Company is able to
adjust premium rates quickly in response to competition, varying degrees of risk
and other  factors.  In  addition,  the Company,  by virtue of its  underwriting
flexibility,  is able to  emphasize  specific  lines of  business in response to
advantageous  premium  rates  and  the  anticipation  of  positive  underwriting
results.

         The Company's general and administrative  expenses consist primarily of
compensation   expense,   employee   benefits  and  rental  expense  for  office
facilities.  The  Company's  policy  acquisition  costs  include both  brokerage
commissions  and premium  taxes which are  primarily  based on a  percentage  of
premiums  written.  Such costs have generally changed in proportion with changes
in premium volume.  Losses and loss adjustment  expenses  incurred in connection
with insurance  claims in any  particular  year depend upon a variety of factors
including the rate of inflation,  accident or claim frequency, the occurrence of
natural catastrophes and the number of policies written.


                                       17
<PAGE>


         The Company estimates  reserves each year based upon, and in conformity
with, the factors discussed under  "Business-Reserves".  Changes in estimates of
reserves  are  reflected  in  operating  results in the year in which the change
occurs.

1999 as Compared to 1998
- ------------------------

          Net income for the year ended  December 31, 1999,  was  $16,413,000 or
$1.69 per diluted  share  compared  with the year ended  December 31, 1998,  net
income of  $18,523,000  or $1.91 per  diluted  share.  Operating  income,  which
excludes the effects of realized  investment  gains after taxes, was $8,286,000,
or $.86 per share, for the year ended December 31, 1999, versus $12,924,000,  or
$1.33 per share, for the prior year.

         For the  year  ended  December  31,  1999,  net  premiums  earned  were
$56,155,000  as compared with  $76,023,000  for 1998.  The 1998 amount  included
approximately $24.7 million relating to two transactions  involving  assumptions
of ocean marine and casualty  business.  Excluding  these  one-time  items,  net
premiums earned for the year ended December 31, 1999 would have increased 9%.

         Ocean marine net  premiums  earned  increased in 1999 by 5%,  excluding
one-time  items,  and is  largely  attributable  to  business  derived  from the
Syndicate  1265 segment.  Approximately  $13.6  million in net premiums  earned,
mostly ocean marine hull, was produced by Syndicate 1265 in 1999, its first full
year of operations,  when compared to $700,000,  excluding  one-time  items,  in
1998. Net premiums  earned from the domestic  insurance  companies  segment were
down  24% as  competition  generally  remained  intense  in 1999  and  adversely
affected ocean marine premium rates as well as premium renewals. The outlook for
2000  indicates that pricing  pressures will remain as the over capacity  within
this  market  still  exists.  Syndicate  1265 will also  continue  to write at a
cautious pace.

          Aviation gross premium  written grew 22% in 1999 to $44.6 million as a
result of rate increases  obtained in 1999 on accounts with poor loss records as
well as increases in overall line size per account. As the underwriting  climate
for gross premiums has remained soft for several years in the aviation line, the
Company  maintained an adequate  level of reinsurance to protect its exposure to
any one loss. As a result, after excess of loss and quota share reinsurance, the
Company's  net writings  amounted to $5.3 million in 1999.  The Company  expects
premiums  to  increase  in 2000 due in part to the trend in premium  rates which
occurred in the latter half of 1999.

          The other  liability  line decreased 26% in 1999,  excluding  one-time
items,  when compared to 1998 due to the effects of competitive  pricing as well
as a decline in premium  production.  The Company expects the casualty market to
remain competitive in 2000 with premiums likely to decline further.

          Losses and loss  adjustment  expenses  incurred as a percentage of net
premiums  earned were 65.6% for the year ended December 31, 1999, as compared to
56.6%,  excluding  one time items,  for the same  period of the prior year.  The
domestic insurance subsidiaries recorded higher loss ratios in the aviation line
of business  in 1999 due to  increases  in both the  frequency  and  severity of
losses. In addition, the Company's ocean marine line recorded higher loss ratios
in  1999,  primarily  attributable  to the  loss  experience  produced  from our
Syndicate 1265 segment.  Syndicate 1265  experienced a relatively high frequency
of marine hull claims in 1999.

         Commission  and  other  income  increased  substantially  in 1999  when
compared to 1998 and reflected  larger profit  commissions on the reinsurance of
our ocean marine and aviation lines from our domestic insurance agency segment.

         Interest  expense  decreased to $1,058,000  for the year ended December
31, 1999 from  $1,373,000 for the prior year primarily as a result of a decrease
in loan principal outstanding.

         Net investment income for the year ended December 31, 1999 decreased by
10% from the level of net investment  income  achieved in 1998.  Contributing to
the decline  were lower  overall  investment  yields and a reduction in invested
assets  brought  about by the  payments  of a large  number of losses on a gross
basis in the aviation and umbrella lines of business.

         Policy acquisition  expenses as a percentage of net premiums earned for
the year ended December 31, 1999 were 19.7% as compared with 13.3% for the prior
year.  The  increase  in the ratio is due in large part to the two  transactions
involving assumptions of premiums in 1998. Absent such business, the ratio would
have been approximately 19.7% for the year ended December 31 1998.


                                       18
<PAGE>


         General and  administrative  expenses  decreased  by 10.2% in 1999 from
1998. The prior year's amounts included certain non-recurring  expenses incurred
in  connection  with the  assumption  of premiums and the formation of Syndicate
1265. In addition,  larger expenses were recorded for two employee benefit plans
in 1998 within the domestic insurance agencies.

         Realized  investment  gains of $12,504,000  for the year ended December
31, 1999 result in large part from the sale of appreciated equity securities. In
addition,  sales  resulted from  monitoring  the Company's  overall  exposure to
equity securities to be in accordance with its investment guidelines.

         Total  investments  decreased  to $396.7  million at December  31, 1999
primarily due to reductions in unrealized  gains on  investments  as a result of
rising  interest  rates  and  reductions  in the  investment  portfolio  to fund
payments  of aviation  and  umbrella  losses on a gross  basis.  These  payments
contributed  to cash  flow  used in  operations  in 1999 of $33.6  million.  The
Company  maintains an adequate level of reinsurance to prevent any one loss from
significantly  affecting net income.  However,  timing  differences  between the
payment  of gross  losses by the  Company  and cash  collections  received  from
reinsurers may adversely impact cash flow in any one period.

         Reinsurance  receivables  increased  by 28%  to  $255.8  million  as of
December 31, 1999. Increases in gross severity losses in the aviation,  umbrella
and ocean marine lines,  of which  substantial  amounts were ceded under various
reinsurance agreements, accounted for the increase.

         Accumulated other  comprehensive  income decreased to $9.9 million from
$19.4  million in 1998 and  principally  reflects  the adverse  impact of higher
interest  rates  in 1999 on the  Company's  market  value  of its  fixed  income
portfolio.

1998 as Compared to 1997
- ------------------------

         Net income  decreased to $18.5 million for the year ended  December 31,
1998,  from  $26.4  million  for the  prior  year.  Diluted  earnings  per share
decreased to $1.91 in 1998 as compared to $2.67 in 1997. Operating income, which
excludes realized  investment gains, was $12.9 million in 1998 compared to $19.6
million in 1997.  Operating  earnings per share on a diluted  basis was $1.33 in
1998 compared with $1.98 in 1997.

         The Company's net premiums earned decreased to $76.0 million in 1998 as
compared  to $87.5  million  in 1997.  Premiums  earned in 1998  reflected  very
competitive  markets across all lines of business,  premiums from Syndicate 1265
and the effects of two transactions involving the assumption of premiums.

         Ocean marine earned premiums increased by 20% in 1998 compared to 1997.
The  increase  resulted  from a  reinsurance  transaction  involving  a one-time
assumption  of  approximately  $14.2  million of  premiums  that  emanated  from
Syndicate 1265, which commenced  operations in 1998.  Syndicate 1265 contributed
an additional  $3.6 million in gross direct ocean marine  writings in 1998.  The
domestic  insurance  companies  reported a 9%  decrease  in earned  premiums  as
competition remained intense and adversely affected premium rates.

         Collectively,  other  liability  and other  premiums  earned were $14.0
million in 1998 compared to $4.3 million in 1997. The increase resulted from the
second  reinsurance  transaction in 1998 that included a one-time  assumption of
approximately  $10.5 million of miscellaneous  casualty net premiums.  Excluding
the  effect  of  this   transaction,   premiums   earned  would  have  decreased
approximately  22% in 1998  primarily  as a result of the soft  casualty  market
which led to a decline in premium production.

         The  aviation  line of business  was most  affected by the  competitive
market,  with gross  writings  down by 20%,  and  coupled  with the  purchase of
additional reinsurance protection resulted in premiums earned decreasing to $2.0
million in 1998  compared  with  $32.6  million  in 1997.  Obtaining  additional
reinsurance  protection is consistent with the Company's  strategy of minimizing
risk and  preserving  capital as the  underwriting  climate  for gross  premiums
remained  soft in 1998. In addition,  large  aviation  gross losses  resulted in
additional  reinsurance  reinstatement  costs of approximately $3.7 million that
further contributed to the decline in premiums.

         Inland marine gross premium  writings  increased 15% to $1.3 million in
1998 due in large  part to  writing  policies  that are  ancillary  to its ocean
marine  risks.  Earned  premiums  were  negative  due to  reinsurance  costs for
catastrophe  protection,  reinstatement costs, and quota share reinsurance which
collectively amounted to approximately $1.6 million.


                                       19
<PAGE>


         Losses and loss  adjustment  expenses  incurred as a percentage  of net
premiums  earned were 66.4% for the year ended  December 31, 1998 as compared to
58.0% for the prior year.

         The ocean marine loss ratio for Syndicate 1265's assumption of premiums
in 1998 was  approximately 94% and had the effect of increasing the overall loss
ratio  significantly.  Absent such  business,  the ocean marine loss ratio would
have been  approximately 54% as compared to 57% for the prior year. The domestic
insurance companies recorded favorable net loss experience in the Company's core
ocean marine line largely due to lower retention levels per loss.

         The other  liability loss ratio  increased to 96% from 91% in 1997. The
assumption  of  miscellaneous  net  casualty  premiums in 1998 was  subsequently
commuted in the fourth  quarter of 1998 at a loss ratio of 77%.  Excluding  this
business, the loss ratio would have been approximately 152%. Adverse development
from prior year losses contributed to the increase.

         An  improvement  in the  frequency  of losses  and  favorable  net loss
development contributed to a lower loss ratio in the aviation line in 1998.

         Policy acquisition costs as a percentage of net premiums earned for the
year ended  December  31, 1998 were 13.3% as  compared  with 18.9% for the prior
year.  The  reduction in the ratio is due to the two  transactions  involving an
assumption of premiums in 1998. Excluding the effect of such business, the ratio
would have been approximately  19.7% for 1998. This ratio approximates the ocean
marine line of business ratio as those premiums represent a larger percentage of
total premiums in 1998 than in 1997.

         Net  investment  income in 1998  decreased by 2% to $20.8  million from
$21.3  million  in 1997 as a result of a  decrease  in  investment  yield in the
Company's fixed maturity portfolio caused by additional  purchases of tax-exempt
securities and lower overall interest rates. Although investment yield was lower
in 1998,  Syndicate 1265's  operations  contributed to a larger average invested
asset base in 1998.

         Commission  income in 1998 was $591,448 as compared to  $1,438,606  for
1997.  The prior  year  included  larger  profit  commissions  from  reinsurance
transactions in the aviation and ocean marine lines of business.

         General and administrative expenses increased by 28% in 1998 over 1997.
The increase  included  operating  expenses from Syndicate 1265.  Also,  certain
one-time  expenses were incurred in connection  with the  assumption of premiums
and the  formation  of  Syndicate  1265.  Lastly,  contributing  to the  overall
increase were expenses associated with two employee benefit plans adopted by the
Board of Directors in 1998.

         Interest  expense  decreased 5% for the year ended December  31,1998 to
$1.4  million  primarily  as a result of a decrease  in average  loan  principal
outstanding.

         The Company  was able to realize  investment  gains of $8.6  million in
1998 mainly as a result of the sale of appreciated equity securities in 1998.

         The  Company's  effective  tax rate for 1998 was 19.1% as  compared  to
25.6%  for  1997.  Taxable  income  was  greater  in 1997 as a result  of larger
underwriting  profits  and  realized  investment  gains.  The  decrease  in  the
effective  rate was also due to increased  tax-exempt  income as a percentage of
pre-tax income in 1998.

Liquidity and Capital Resources
- -------------------------------

         The Company  monitors cash and short-term  investments in order to have
an adequate  level of funds  available  to satisfy  claims and  expenses as they
become due. As of December 31, 1999, the Company's assets included approximately
$28.8 million in cash and  short-term  investments.  The primary  sources of the
Company's  liquidity are funds  generated  from insurance  premiums,  investment
income and maturing or liquidating investments.

         Historically,  cash flows provided by operating activities were used in
investing and financing  activities.  In 1997 cash inflows  increased as premium
rates were higher in the ocean marine and aviation  lines.  Cash flows were used
in operating  activities in 1999 and 1998 as further  declines in premium rates,
increases in ceded reinsurance premium costs


                                       20
<PAGE>


and  increases in gross  severity  claims  negatively  affected  cash flows from
operations.  The  Company's  maturing book of casualty  business also  adversely
affected cash flows.

         Investing  and financing  activities  occurred as a result of utilizing
the  Company's   revolving  credit  agreement  and  unsecured  credit  facility.
Additional  borrowings of  approximately  $5,000,000 and $9,520,000 were made in
1998 and 1997,  respectively,  to assist in the  payment of gross  losses of the
Company and to repurchase  the  Company's  Common  Stock.  Repayments  under the
Company's existing loan were made at $1,250,000 per quarter through December 31,
1999 and borrowings  under the unsecured credit facility were fully repaid after
collecting recoverables due from reinsurers on such losses.

         In 1998, the Company  entered into an interest rate swap agreement (the
"agreement")  with a bank for purposes of hedging its interest  rate risk on its
existing bank loan.  The  agreement  requires the Company to pay interest to the
bank  at a rate  of  6.50%  on  the  original  notional  amount  outstanding  of
$22,500,000,  which is subsequently adjusted quarterly by notional reductions of
$1,250,000.  The bank is  required  to pay the  Company,  on the  same  notional
amounts  outstanding,  an  amount  equal to the  three  month US  Dollar  London
Interbank  Offered Rate plus .65% which is reset on a quarterly basis.  Interest
expense recorded under the agreement was $91,462 in 1999 and $44,719 in 1998.

         The  Company  adheres  to  investment  guidelines  set by  the  Finance
Committee  of  the  Board  of   Directors.   The   investment   guidelines   are
conservatively  designed to provide the Company with adequate capital growth and
sufficient liquidity to meet existing obligations. Such guidelines consider many
factors including anticipated tax position and regulatory requirements.

         The Company  maintains a large  position in  investments  of bonds from
various  states  and  municipalities.  Such  securities  receive  favorable  tax
treatment  under  existing  tax  laws.  The  investment  position  is  monitored
regularly,  and as a result,  the Company has  reduced  its  investment  in such
securities after consideration of the alternative minimum tax.

         Under the Common Stock  Repurchase Plan, the Company may purchase up to
$55,000,000 of the Company's  issued and  outstanding  shares of common stock on
the open market. As of December 31, 1999, the Company had repurchased a total of
2,124,082 shares of common stock at a total cost of approximately $38,560,659 at
market prices ranging from $13.69 to $28.81 per share.

         NYMAGIC's principal source of cash flow is dividends from its insurance
company  subsidiaries  which  is  used  to fund  operating  expenses,  including
interest expense, loan repayments and payment of dividends to shareholders.  The
Company's domestic insurance company  subsidiaries are limited by statute in the
amount of dividends  that may be declared or paid during a year.  The limitation
restricts  dividends  paid or  declared  to the  lower of 10% of  policyholders'
surplus or 100% of net  investment  income as defined  under New York  insurance
law. The limitations on dividends from the insurance  company  subsidiaries  are
not  expected to have an impact on the  Company's  ability to meet  current cash
obligations  or  materially  limit  the  current  payment  of  dividends  to the
Company's shareholders.  Dividends can be paid from Syndicate 1265 to the extent
solvency  margins are maintained and after the closing of a calendar year, which
occurs three years following each calendar year.

Other matters
- -------------

         In 1999,  Vincent  T.  Papa,  a former  President  and Chief  Executive
Officer of the Company, filed suit in the New York Supreme Court seeking damages
from the Company based upon alleged  breaches by the Company of its  obligations
under an employment  agreement with Mr. Papa. The Company intends  vigorously to
defend itself against such claims and believes it has no further  obligations to
Mr. Papa.

Effect of recent accounting pronouncements
- ------------------------------------------

         Statement of Financial  Accounting  Standards No. 133,  "Accounting for
Derivative  Instruments and Hedging Activities",  ("SFAS 133") was issued by the
Financial  Accounting  Standards  Board ("FASB") in June 1998. SFAS 133 requires
derivatives to be recorded on the balance sheet at fair value.  Derivatives  not
considered as hedges must be recorded at fair value with adjustments recorded in
the income  statement.  For derivatives that qualify as a hedge,  changes in the
fair value of the derivative are offset against changes in the fair value of the
hedged assets or liabilities  and are  recognized in the income  statement or in
other  comprehensive  income  depending on the nature of the hedge.  SFAS 133 is
effective for years beginning after June 15, 1999.


                                       21
<PAGE>


         Statement of Financial  Accounting  Standards No. 137,  "Accounting for
Derivative Instruments and Hedging  Activities-Deferral of the Effective Date of
FASB Statement No. 133",  ("SFAS 137") was issued by the FASB in June 1999. SFAS
137 defers the effective date of SFAS 133 to fiscal years  beginning  after June
15, 2000.

         The Company uses derivatives, in the form of an interest rate swap, for
hedging  purposes as part of its interest rate  management.  The Company has not
yet determined the effect of SFAS 133 on its financial statements.

         The Company  adopted AICPA  Statement of Position 97-3,  "Accounting by
Insurance and other Enterprises for Insurance-Related Assessments," ("SOP 97-3")
effective  January 1, 1999.  This  statement  provides  guidance  for  reporting
guaranty fund and other insurance related assessments.  The adoption of SOP 97-3
did not have a  material  impact  on the  Company's  results  of  operations  or
financial condition.

         The Company adopted AICPA  Statement of Position 98-1,  "Accounting for
the Costs of Computer  Software  Developed or Obtained for Internal  Use," ("SOP
98-1") effective  January 1, 1999. SOP 98-1 provides  standards for capitalizing
certain  internal  costs  incurred  to develop  software  used  internally.  The
adoption of SOP 98-1 did not have a material impact on the Company's  results of
operations or financial condition.

Inflation
- ---------

         Periods of inflation  have  prompted the pools,  and  consequently  the
Company,  to react  quickly to actual or  potential  imbalances  between  costs,
including  claim  expenses,  and  premium  rates.  These  imbalances  have  been
corrected mainly through improved underwriting  controls,  responsive management
information systems and frequent review of premium rates and loss experience.

         Inflation also affects the final  settlement  costs of claims which may
not be paid for  several  years.  The longer a claim  takes to settle,  the more
significant  the impact of  inflation  on final  settlement  costs.  The Company
periodically reviews outstanding claims and adjusts reserves for the pools based
on a number of factors, including inflation.

ITEM  7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Market risk  includes the potential for future losses due to reasonably
possible changes in the fair value of financial instruments which relates mainly
to  the  Company's  investment  portfolio.   Those  risks  associated  with  the
investment  portfolio  include the  effects of  exposure  to adverse  changes in
interest rates, credit quality, equity prices and foreign exchange rates.

         The largest  market risk to the Company  relates to interest rate risk.
Interest  rate risk  includes the changes in the fair value of fixed  maturities
based upon changes in interest  rates.  This risk is considered  when developing
benchmarks for evaluating the Company's portfolio. Such benchmarks also consider
the overall  duration of the Company's  loss  reserves.  Through the matching of
cash flows from future  maturing  investments and the ultimate payout pattern of
loss reserves,  the Company believes it can minimize the effect of interest rate
risk.

         The following tabular presentation  outlines the expected cash flows of
fixed  maturities  available  for sale for each of the next  five  years and the
aggregate  cash flows  expected for the remaining  years  thereafter  based upon
maturity dates. Fixed maturities include taxable and tax-exempt  securities with
applicable  weighted  average  interest  rates.  Taxables also include  mortgage
backed  securities  that have  prepayment  features  which may cause actual cash
flows to differ from those based on maturity date.

<TABLE>
<CAPTION>

                                          Future cash flows of expected principal amounts
                                          -----------------------------------------------
                                                       (Dollars in millions)
                                                                                    Total    Total
                                                                          There-  Amortized  Fair
Fixed maturities                  2000    2001    2002    2003    2004    after      Cost    Value
- ----------------                  ----    ----    ----    ----    ----    ------     ----    -----

<S>                               <C>     <C>     <C>     <C>     <C>     <C>       <C>       <C>
Tax-exempt ...................    $ 11    $ 10    $ 13    $ 27    $ 13    $ 80      $154      $153
         Average interest rate     6.5%    5.8%    5.6%    5.9%    5.6%    6.3%       --        --

Taxables .....................     --       28       2       7      40      70       147       144
         Average interest rate     --      6.4%    5.6%    5.6%    6.5%    7.2%       --        --
                                  ----    ----    ----    ----    ----    ----      ----      ----

Total ........................    $ 11    $ 38    $ 15    $ 34    $ 53    $150      $301      $297

</TABLE>


                                       22
<PAGE>


         Credit  quality  risk  includes  the risk of default by issuers of debt
securities.  The Company's investment guidelines are conservatively designed and
prevent the investment in securities below an A rating. Overall, the Company has
maintained  fixed  maturities  with an average credit quality rating of AA as of
December 31, 1999. The Company's exposure to credit risk is considered minimal.

         Foreign currency risk includes  exposure to changes in foreign exchange
rates  on  the  market  value  and  interest   income  of  foreign   denominated
investments.  Syndicate 1265 operations  maintain  investments in British Pounds
Sterling with a US equivalent of $1.0 million to the extent  business is derived
from  transactions in such currency.  The investment of cash flows from business
written in Pounds  Sterling in securities of the same foreign  currency,  should
ultimately  mitigate the risk associated with changes in foreign  exchange rates
with respect to British Pounds Sterling.

         Equity risk includes the potential  loss from changes in the fair value
of equity securities.  The Company's equity securities are traded on major stock
exchanges and are highly liquid.  The investment in such  securities are limited
by the Company's  investment  guidelines to 25% of statutory surplus in order to
minimize the impact of large changes in the stock market on its surplus.

         The Company  monitors market risks on a regular basis through  meetings
with  investment  advisors,  examining  the  existing  portfolio  and  reviewing
potential  changes in investment  guidelines.  The overall effect of which is to
allow  management to make informed  decisions  concerning the impact that market
risks have on the portfolio.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The consolidated financial statements required in response to this item
are included as part of Item 14(a) of this report.

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.


                  None.


                                       23
<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The  information  required by this Item is  incorporated  by  reference
herein  from  NYMAGIC's   Proxy   Statement  for  the  2000  Annual  Meeting  of
Shareholders.

ITEM 11.  EXECUTIVE COMPENSATION.

         The  information  required by this Item is  incorporated  by  reference
herein  from  NYMAGIC's   Proxy   Statement  for  the  2000  Annual  Meeting  of
Shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
         BENEFICIAL OWNERS AND MANAGEMENT.

         The  information  required by this Item is  incorporated  by  reference
herein  from  NYMAGIC's   Proxy   Statement  for  the  2000  Annual  Meeting  of
Shareholders.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The  information  required by this Item is  incorporated  by  reference
herein  from  NYMAGIC's   Proxy   Statement  for  the  2000  Annual  Meeting  of
Shareholders.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

         (a)      1.       Financial Statements
                           --------------------

                           The  list  of  financial  statements  appears  in the
                           accompanying index on page 29.

                  2.       Financial Statement Schedules
                           -----------------------------

                           The list of financial  statement schedules appears in
                           the accompanying index on page 29.

                  3.       Exhibits
                           --------


                  3.1.     Charter. (Incorporated by reference to Exhibit 3-1 to
the Registrant's Registration Statement No. 33-27665.)

                  3.3.     Amended and Restated By-laws.

                  4.0.     Specimen      Certificate     of     common     stock
(Incorporated    by   reference   to Exhibit 4 to the  Registrant's Registration
Statement No. 33-27665.)

         10.2. Restated Management Agreement dated as of January 1, 1986, by and
among Mutual  Marine  Office,  Inc. and  Arkwright-Boston  Manufacturers  Mutual
Insurance  Company,  Utica Mutual  Insurance  Company,  Lumber Mutual  Insurance
Company,  the Registrant and  Pennsylvania  National Mutual  Casualty  Insurance
Company  (Incorporated by reference to Exhibit 10.2 of the  Registrant's  Annual
Report Form 1O-K for the fiscal year ended  December 31, 1986  (Commission  File
No. 1-11238).)

         10.2.2.  Amendment  to  Restated  Management  Agreement,  dated  as  of
December 30, 1988,  and among Mutual Marine  Office,  Inc. and Arkwright  Mutual
Insurance  Company,  Utica Mutual  Insurance  Company,  Lumber Mutual  Insurance
Company,  the Registrant and  Pennsylvania  National Mutual  Casualty  Insurance
Company.  (Incorporated  by reference  to Exhibit  10.2.2.  of the  Registrant's
Report on Form 8-K dated January 6, 1989 (Commission File No. 1-11238).)

         10.2.3.  Amendment  to  Restated  Management  Agreement,  dated  as  of
December 31, 1990,  and among Mutual Marine  Office,  Inc. and Arkwright  Mutual
Insurance Company, Utica Mutual Insurance Company, the Registrant


                                       24
<PAGE>


and Pennsylvania  National Mutual Casualty Insurance  Company.  (Incorporated by
reference to Exhibit 10.2.3. of the Registrant's  Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (Commission File No. 1-11238).)

         10.4. Restated Management Agreement dated as of January 1, 1986, by and
among Mutual  Inland  Marine  Office,  Inc. and  Arkwright-Boston  Manufacturers
Mutual  Insurance  Company,  Utica  Mutual  Insurance  Company,   Lumber  Mutual
Insurance  Company,  the Registrant and  Pennsylvania  National  Mutual Casualty
Insurance Company (Incorporated by reference to Exhibit 10.4 of the Registrant's
Annual Report Form 10-K for the fiscal year ended December 31, 1986  (Commission
File No. 1-11238).)

         10.4.2.  Amendment  to  Restated  Management  Agreement,  dated  as  of
December 30, 1988,  and among Mutual  Inland Marine  Office,  Inc. and Arkwright
Mutual  Insurance  Company,  Utica  Mutual  Insurance  Company,   Lumber  Mutual
Insurance  Company,  the Registrant and  Pennsylvania  National  Mutual Casualty
Insurance   Company   (Incorporated  by  reference  to  Exhibit  10.4.2  of  the
Registrant's  Report on Form 8-K,  dated  January 6, 1989  (Commission  File No.
1-11238).)

         10.4.3.  Amendment  to  Restated  Management  Agreement,  dated  as  of
December 31, 1990, by and among Mutual Inland Marine Office,  Inc. and Arkwright
Mutual Insurance  Company,  Utica Mutual Insurance  Company,  the Registrant and
Pennsylvania  National  Mutual  Casualty  Insurance  Company.  (Incorporated  by
reference to Exhibit 10.4.3. of the Registrant's  Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (Commission File No. 1-11238).)

         10.6. Restated Management Agreement dated as of January 1, 1986, by and
among  Mutual   Marine  Office  of  the  Midwest,   Inc.  and   Arkwright-Boston
Manufacturers Mutual Insurance Company,  Utica Mutual Insurance Company,  Lumber
Mutual  Insurance  Company,  the Registrant  and  Pennsylvania  National  Mutual
Casualty  Insurance  Company.  (Incorporated by reference to Exhibit 10.6 of the
Registrant's  Annual Report on Form 10-K for the fiscal year ended  December 31,
1986 (Commission File No. 1-11238).)

         10.6.2. Amendment to Restated Management Agreement dated as of December
30, 1988, by and among Mutual  Marine Office of the Midwest,  Inc. and Arkwright
Mutual  Insurance  Company,  Utica  Mutual  Insurance  Company,   Lumber  Mutual
Insurance  Company,  the Registrant and  Pennsylvania  National  Mutual Casualty
Insurance  Company.   (Incorporated  by  reference  to  Exhibit  10.6.2  of  the
Registrant's  Report on Form 8-K,  dated  January 6, 1989  (Commission  File No.
1-11238).)

         10.6.3. Amendment to Restated Management Agreement dated as of December
31, 1990, by and among Mutual  Marine Office of the Midwest,  Inc. and Arkwright
Mutual Insurance  Company,  Utica Mutual Insurance  Company,  the Registrant and
Pennsylvania  National  Mutual  Casualty  Insurance  Company.  (Incorporated  by
reference to Exhibit 10.6.3. of the Registrant's  Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (Commission File No. 1-11238).)

         10.8. Restated Management Agreement dated as of January 1, 1986, by and
among Pacific  Mutual Marine  Office,  Inc. and  Arkwright-Boston  Manufacturers
Mutual  Insurance  Company,   Lumber  Mutual  Insurance  Company,  Utica  Mutual
Insurance  Company,  the Registrant and  Pennsylvania  National  Mutual Casualty
Insurance   Company.   (Incorporated   by  reference  to  Exhibit  10.8  of  the
Registrant's  Annual Report on Form 10-K for the fiscal year ended  December 31,
1986 (Commission File No. 1-11238).)

         10.8.2. Amendment to Restated Management Agreement dated as of December
30, 1988, by and among Pacific Mutual Marine Office,  Inc. and Arkwright  Mutual
Insurance  Company,  Lumber Mutual  Insurance  Company,  Utica Mutual  Insurance
Company,  the Registrant and  Pennsylvania  National Mutual  Casualty  Insurance
Company. (Incorporated by reference to Exhibit 10.8.2 of the Registrant's Report
on Form 8-K, dated January 6, 1989 (Commission File No. 1-11238).)

         10.8.3. Amendment to Restated Management Agreement dated as of December
31, 1990, by and among Pacific Mutual Marine Office,  Inc. and Arkwright  Mutual
Insurance  Company,   Utica  Mutual  Insurance   Company,   the  Registrant  and
Pennsylvania  National  Mutual  Casualty  Insurance  Company.  (Incorporated  by
reference to Exhibit 10.8.3. of the Registrant's  Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (Commission File No. 1-11238).)

         10.9 1991 Option Plan  (Incorporated  by reference to the  Registrant's
Proxy Statement for its 1991 Annual Meeting of Shareholders (Commission File No.
1-11238).)

         10.10 Form of Indemnification Agreement.


                                       25
<PAGE>


         10.11 1999 NYMAGIC, INC. Phantom Stock Plan.

         21. Subsidiaries of the Registrant.

         23. Consent of KPMG LLP.

         27. Financial Data Schedule.

         (b)      Reports on Form 8-K
                  -------------------

                  None.


                                       26
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                               NYMAGIC, INC.
                                               (Registrant)



                                               By: /s/ ROBERT W. BAILEY
                                                  -----------------------------
                                                  Robert W. Bailey
                                                  Chief Executive Officer


                                               Date: March 30, 2000
                                                     -----------------



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  Report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the date indicated.


Name                             Title                     Date
- ----                             -----                     ----

/s/ JOHN R. ANDERSON             Director                  March 30, 2000
- -------------------------
John R. Anderson


/s/ ROBERT W. BAILEY             Director, Chief           March 30, 2000
- -------------------------        Executive Officer
Robert W. Bailey                 and Chairman


/s/ JONATHAN S. BANNETT          Director                  March 30, 2000
- -------------------------
Jonathan S. Bannett


/s/ JOHN N. BLACKMAN, JR.        Director                  March 30, 2000
- -------------------------
John N. Blackman, Jr.


/s/ MARK W. BLACKMAN             Director                  March 30, 2000
- -------------------------
Mark W. Blackman


/s/ JEAN H. GOULDING             Director                  March 30, 2000
- -------------------------
Jean H. Goulding







                                       27
<PAGE>



Name                             Title                     Date
- ----                             -----                     ----

/s/ JOHN KEAN, JR.               Director                  March 30, 2000
- -------------------------
John Kean, Jr.


/s/ COSTA N. KENSINGTON          Director                  March 30, 2000
- -------------------------
Costa N. Kensington


/s/ CHARLES A. MITCHELL          Director                  March 30, 2000
- -------------------------
Charles A. Mitchell


/s/ WILLIAM R. SCARBROUGH        Director                  March 30, 2000
- -------------------------
William R. Scarbrough


/s/ WILLIAM A. THORNE            Director                  March 30, 2000
- -------------------------
William A. Thorne


/s/ BENNETT H. TOLLEFSON         Director                  March 30, 2000
- -------------------------
Bennett H. Tollefson


/s/ LOUISE B. TOLLEFSON          Director                  March 30, 2000
- -------------------------
Louise B. Tollefson


/s/ EDWARD J. WAITE III          Director                  March 30, 2000
- -------------------------
Edward J. Waite III


/s/ GLENN R. YANOFF              Director                  March 30, 2000
- -------------------------
Glenn R. Yanoff


/s/ THOMAS J. IACOPELLI          Principal Accounting      March 30, 2000
- -------------------------        Officer and Chief
Thomas J. Iacopelli              Financial Officer




                                       28
<PAGE>






                                  NYMAGIC, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     Independent Auditors' Report.......................................     30

     Consolidated Balance Sheets........................................     31

     Consolidated Statements of Income..................................     32

     Consolidated Statements of Shareholders' Equity....................     33

     Consolidated Statements of Cash Flows..............................     34

     Notes to Consolidated Financial Statements.........................     35

     Financial Statement Schedule II....................................     53

     Financial Statement Schedule V.....................................     55

     Financial Statement Schedule VI....................................     56





                                       29
<PAGE>






                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

The Board of Directors and Shareholders
NYMAGIC, INC.:

     We have audited the  accompanying  consolidated  balance sheets of NYMAGIC,
INC.  and  subsidiaries  as of  December  31,  1999 and  1998,  and the  related
consolidated statements of income,  shareholders' equity and cash flows for each
of the years in the  three-year  period ended  December 31, 1999.  In connection
with our audits of the consolidated  financial statements,  we have also audited
the financial  statement  schedules as listed in the accompanying  index.  These
consolidated  financial  statements  and financial  statement  schedules are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these  consolidated  financial  statements  and  financial  statement
schedules based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
NYMAGIC,  INC.  and  subsidiaries  as of  December  31,  1999 and 1998,  and the
consolidated  results of their  operations  and their cash flows for each of the
years in the  three-year  period  ended  December  31, 1999 in  conformity  with
generally  accepted  accounting  principles.  Also, in our opinion,  the related
financial  statement  schedules,  when  considered  in  relation  to  the  basic
consolidated  financial  statements  taken as a whole,  present  fairly,  in all
material respects, the information set forth therein.


                            /s/ KPMG LLP
                            KPMG LLP
New York, New York
February 15, 2000


                                       30
<PAGE>


<TABLE>
<CAPTION>

                                  NYMAGIC, INC
                           CONSOLIDATED BALANCE SHEETS

                                                                                         December 31,
                                                                               ------------------------------
                                                                                    1999             1998
                                                                               -------------    -------------

                                     ASSETS
<S>                                                                            <C>              <C>
Investments:
Fixed maturities available for sale at fair value
   (amortized cost $300,687,622 and $342,583,525) ...........................  $ 297,293,353    $ 353,403,303
Equity securities at fair value
   (cost $52,922,679 and $54,368,172) .......................................     71,681,895       73,418,473
Short-term investments ......................................................     27,734,786       16,200,606
                                                                               -------------    -------------
    Total investments........................................................    396,710,034      443,022,382
                                                                               -------------    -------------
Cash.........................................................................      1,016,945        1,583,390
Accrued investment income ...................................................      5,195,227        6,189,866
Premiums and other receivables, net .........................................     56,003,308       41,422,913
Reinsurance receivables .....................................................    255,761,760      199,730,802
Deferred policy acquisition costs..........................................        4,850,587        4,277,430
Prepaid reinsurance premiums.............................................         28,597,355       19,393,546
Deferred income taxes .......................................................      9,311,335        5,811,741
Property, improvements & equipment, net .....................................      1,792,876        2,341,021
Other assets ................................................................      5,064,631        6,547,403
                                                                               -------------    -------------
    Total assets ............................................................  $ 764,304,058    $ 730,320,494
                                                                               =============    =============

                                   LIABILITIES

Unpaid losses and loss adjustment expenses ..................................  $ 425,469,125    $ 401,584,146
Reserve for unearned premiums................................................     56,033,281       46,878,550
Ceded reinsurance payable ...................................................     29,445,275       23,795,992
Notes payable ...............................................................     12,458,413       17,458,413
Other liabilities ...........................................................      8,787,820       11,454,977
Dividends payable ...........................................................        967,785          968,549
                                                                               -------------    -------------
    Total liabilities........................................................    533,161,699      502,140,627
                                                                               -------------    -------------

                              SHAREHOLDERS' EQUITY

Common stock.................................................................     15,017,892       15,017,892
Paid-in capital .............................................................     27,935,907       28,029,410
Accumulated other comprehensive income ......................................      9,931,438       19,436,591
Retained earnings............................................................    220,736,910      208,198,204
                                                                               -------------    -------------
                                                                                 273,622,147      270,682,097
Treasury stock, at cost, 5,340,040 and 5,332,400 shares .....................    (42,479,788)     (42,502,230)
                                                                               -------------    -------------
    Total shareholders' equity ..............................................    231,142,359      228,179,867
                                                                               -------------    -------------

    Total liabilities and shareholders' equity ..............................  $ 764,304,058    $ 730,320,494
                                                                               =============    =============
</TABLE>





         The  accompanying  notes  are an  integral  part of these  consolidated
financial statements.




                                       31
<PAGE>



<TABLE>
<CAPTION>

                                  NYMAGIC, INC.
                        CONSOLIDATED STATEMENTS OF INCOME

                                                                   Year ended December 31,
                                                            -------------------------------------
                                                            1999            1998             1997
                                                            ----            ----             ----
  Revenue:
<S>                                                    <C>             <C>              <C>
    Net premiums earned ..........................     $  56,155,156   $  76,022,663    $  87,536,906
    Commission income ............................         1,956,276         591,448        1,438,606
    Net investment income ........................        18,641,619      20,803,433       21,325,065
    Realized investment gains,net ................        12,503,731       8,615,058       10,425,133
    Other income .................................           237,701         395,560          292,918
                                                       -------------   -------------    -------------
      Total revenues .............................        89,494,483     106,428,162      121,018,628
                                                       -------------   -------------    -------------

  Expenses:
    Losses and loss adjustment expenses incurred..        36,853,012      50,512,063       50,768,248
    Policy acquisition expenses ..................        11,077,382      10,107,327       16,582,623
    General and administrative expenses ..........        19,326,472      21,531,287       16,763,699
    Interest expense .............................         1,057,993       1,373,408        1,449,770
                                                       -------------   -------------    -------------
      Total expenses .............................        68,314,859      83,524,085       85,564,340
                                                       -------------   -------------    -------------

  Income before income taxes .....................        21,179,624      22,904,077       35,454,288
                                                       -------------   -------------    -------------
    Income tax provision:
    Current ......................................         3,189,162       5,250,123        8,962,799

    Deferred .....................................         1,577,201        (869,462)         123,749
                                                       -------------   -------------    -------------
      Total income taxes .........................         4,766,363       4,380,661        9,086,548
                                                       -------------   -------------    -------------

    Net income ...................................     $  16,413,261   $  18,523,416    $  26,367,740
                                                       =============    =============   =============


  Weighted average number of shares of
    common stock outstanding-basic ...............         9,687,466       9,678,802        9,848,959
                                                       =============   =============    =============

  Basic earnings per share .......................     $        1.69   $        1.91    $        2.68
                                                       =============   =============    =============

  Weighted average number of shares of
    common stock outstanding-diluted .............         9,687,466       9,705,433        9,871,586
                                                       =============   =============    =============

  Diluted earnings per share .....................     $        1.69   $        1.91    $        2.67
                                                       =============   =============    =============
</TABLE>



             The accompanying  notes are an integral part of these  consolidated
financial statements.


                                       32
<PAGE>


<TABLE>
<CAPTION>
                                  NYMAGIC, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                                                                   Year ended December 31,
                                                                      -----------------------------------------------
                                                                           1999             1998             1997
                                                                      -------------    -------------    -------------
Retained earnings:
<S>                                                                   <C>              <C>              <C>
    Balance, beginning of year ....................................   $ 208,198,204    $ 193,547,346    $ 171,089,462
    Net income ....................................................      16,413,261       18,523,416       26,367,740
    Dividends declared ............................................      (3,874,555)      (3,872,558)      (3,909,856)
                                                                      -------------    -------------    -------------
         Balance, end of year......................................     220,736,910      208,198,204      193,547,346
                                                                      =============    =============    =============

Accumulated other comprehensive income:

    Balance, beginning of year ....................................      19,436,591       12,931,785        8,150,910
    Unrealized (loss) gain on securities,
          net of reclassification adjustment ......................      (9,428,336)       6,489,767        4,774,875
    Foreign currency translation adjustments ......................         (76,817)          15,039            6,000
                                                                      -------------    -------------    -------------
    Other comprehensive income (loss) .............................      (9,505,153)       6,504,806        4,780,875
                                                                      -------------    -------------    -------------
         Balance, end of year .....................................       9,931,438       19,436,591       12,931,785
                                                                      =============    =============    =============

Common stock:
    Balance, beginning of year ....................................      15,017,892       14,991,992       14,911,992
    Shares issued .................................................            --             25,900           80,000
                                                                      -------------    -------------    -------------
         Balance, end of year .....................................      15,017,892       15,017,892       14,991,992
                                                                      =============    =============    =============

Paid-in capital:
    Balance, beginning of year.....................................      28,029,410       27,529,877       26,258,259
    Shares issued and other .......................................         (93,503)         499,533        1,271,618
                                                                      -------------    -------------    -------------
         Balance, end of year .....................................      27,935,907       28,029,410       27,529,877
                                                                      =============    =============    =============

Treasury stock, at cost:
    Balance, beginning of year ....................................     (42,502,230)     (42,481,657)     (31,558,897)
    Net repurchase of common stock ................................          22,442          (20,573)     (10,922,760)
                                                                      -------------    -------------    -------------
         Balance, end of year......................................     (42,479,788)     (42,502,230)     (42,481,657)
                                                                      =============    =============    =============

Total Shareholders' Equity ........................................   $ 231,142,359    $ 228,179,867    $ 206,519,343
                                                                      =============    =============    =============

Comprehensive income:
    Net income ....................................................      16,413,261       18,523,416       26,367,740
    Other comprehensive income (loss) .............................      (9,505,153)       6,504,806        4,780,875
                                                                      -------------    -------------    -------------
         Comprehensive income......................................       6,908,108    $  25,028,222    $  31,148,615
                                                                      =============    =============    =============


                                                                                     Number of Shares
                                                                                     ----------------
Common stock, par value $1 each:

    Issued, beginning of year .....................................      15,017,892       14,991,992       14,911,992
    Shares Issued .................................................            --             25,900           80,000
                                                                      -------------    -------------    -------------
         Issued, end of year.......................................      15,017,892       15,017,892       14,991,992
                                                                      =============    =============    =============

Common stock, authorized shares,
    par value $1 each .............................................      30,000,000       30,000,000       30,000,000
                                                                      =============    =============    =============

Common stock, shares outstanding ..................................       9,677,852        9,685,492        9,660,306
                                                                      =============    =============    =============

Dividends declared per share.......................................   $         .40    $         .40    $         .40
                                                                      =============    =============    =============
</TABLE>


         The  accompanying  notes  are an  integral  part of these  consolidated
financial statements.


                                       33
<PAGE>


                                  NYMAGIC, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                                --------------------------------------
                                                                1999             1998             1997
                                                                ----             ----             ----

     Cash flows from operating activities:

<S>                                                        <C>              <C>              <C>
     Net income ......................................     $  16,413,261    $  18,523,416    $  26,367,740
                                                           -------------    -------------    -------------
     Adjustments to reconcile net income to
       net cash (used in) provided by operating
       activities:
       Provision for deferred taxes ..................         1,577,201         (869,462)         123,749
       Realized investment gains .....................       (12,503,731)      (8,615,058)     (10,425,133)
       Net bond amortization .........................         2,136,408        2,220,565        1,895,355
       Depreciation and other, net ...................           699,107          733,950          582,126
     Changes in:
       Premiums and other receivables ................       (14,580,395)        (787,749)      22,404,229
       Reinsurance receivables .......................       (56,030,958)     (24,072,850)      22,330,121
       Ceded reinsurance payable .....................         5,649,283       (3,511,137)       7,553,186
       Accrued investment income .....................           994,639          132,504         (362,173)
       Deferred policy acquisition costs .............          (573,157)       1,290,058        5,336,753
       Prepaid reinsurance premiums ..................        (9,203,809)       5,021,074      (13,852,407)
       Other assets ..................................         1,482,772       (1,677,794)      (1,523,783)
       Unpaid losses and loss adjustment expenses ....        23,884,979       13,182,598      (23,435,433)
       Reserve for unearned premiums .................         9,154,731       (8,309,731)     (11,463,652)
       Foreign currency translation adjustments ......           (76,817)          15,039            6,000
       Other liabilities .............................        (2,667,157)       4,392,882          660,632
                                                           -------------    -------------    -------------
           Total adjustments .........................       (50,056,904)     (20,855,111)        (170,430)
                                                           -------------    -------------    -------------
     Net cash (used in) provided by operating
      activities .....................................       (33,643,643)      (2,331,695)      26,197,310
                                                           -------------    -------------    -------------

     Cash flows from investing activities:

       Fixed maturities acquired .....................      (105,025,752)     (77,604,001)    (205,891,607)
       Equity securities acquired ....................       (60,300,853)     (51,440,490)     (50,578,073)
       Net (purchase) sale of short-term investments..       (11,540,504)       1,890,059          178,516
       Fixed maturities matured ......................        26,005,874       34,682,127       25,059,072
       Fixed maturities sold .........................       118,911,079       51,905,388      167,867,245
       Equity securities sold ........................        74,124,696       52,514,190       49,858,725
       Acquisition of property & equipment, net ......          (150,962)        (709,318)        (840,692)
                                                           -------------    -------------    -------------
     Net cash provided by (used in) investing
      activities .....................................        42,023,578       11,237,955      (14,346,814)
                                                           -------------    -------------    -------------

     Cash flows from financing activities:

       Proceeds from stock issuance and other ........           (93,503)         525,433        1,351,618
       Cash dividends paid to stockholders ...........        (3,875,319)      (3,870,040)      (3,958,130)
       Net repurchase of common stock ................            22,442          (20,573)     (10,922,760)
       Proceeds from borrowings ......................              --          5,000,000        9,520,000
       Loan principal payments .......................        (5,000,000)     (10,000,000)      (7,500,000)
                                                           -------------    -------------    -------------
       Net cash used in financing activities .........        (8,946,380)      (8,365,180)     (11,509,272)
                                                           -------------    -------------    -------------

       Net (decrease) increase in cash ...............          (566,445)         541,080          341,224
         Cash at beginning of year ...................         1,583,390        1,042,310          701,086
                                                           -------------    -------------    -------------
         Cash at end of year .........................     $   1,016,945    $   1,583,390    $   1,042,310
                                                           =============    =============    =============
</TABLE>



         The  accompanying  notes  are an  integral  part of these  consolidated
financial statements.


                                       34
<PAGE>


                                  NYMAGIC, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         Nature of Operations
         --------------------

         NYMAGIC,  through its subsidiaries,  specializes in underwriting  ocean
marine, inland marine,  aviation and other liability insurance through insurance
pools  managed by Mutual  Marine  Office,  Inc.("MMO"),  Pacific  Mutual  Marine
Office, Inc. ("PMMO"), and Mutual Marine Office of the Midwest, Inc.("Midwest").
MMO, located in New York, PMMO located in San Francisco, and Midwest, located in
Chicago,   manage  the  insurance   pools  in  which  the  Company's   insurance
subsidiaries,  New York Marine And General Insurance Company ("New York Marine")
and Gotham Insurance Company ("Gotham"),  participate.  All premiums, losses and
expenses  are  prorated  among  pool  members  in  accordance  with  their  pool
participation  percentages.  Effective January 1, 1997, the Company increased to
100% its participation in the business produced by the pools.

         On  December  31,  1997,  the  Company  acquired  100% of the  stock of
Highgate Managing Agency, a Lloyd's of London  underwriting  agent for a nominal
amount and  renamed  the Company  MMO  Underwriting  Agency Ltd ("MMO UA").  The
acquisition was accounted for under the purchase method of accounting.  In 1997,
the Company formed MMO EU Ltd, a holding  company,  and MMO UK LTD, a Lloyd's of
London corporate vehicle for Lloyd's Syndicate #1265. The assets and liabilities
and results of operations of MMO EU, MMO UK and MMO UA (collectively referred to
as "Syndicate 1265") are included in the consolidated financial statements.

         Basis of Reporting
         ------------------

         The consolidated  financial  statements have been prepared on the basis
of generally  accepted  accounting  principles  which differ in certain material
respects  from  the  accounting  principles  prescribed  or  permitted  by state
insurance  regulatory  authorities  for the  Company's  two  domestic  insurance
subsidiaries.  The  principal  differences  recorded  under  generally  accepted
accounting  principles are deferred policy  acquisition  costs, an allowance for
doubtful accounts,  deferred income taxes and fixed maturities held for sale are
carried at fair value.

         The  preparation of financial  statements  requires  management to make
estimates that affect the reported amounts of assets, liabilities,  revenues and
expenses. Actual amounts could differ from those amounts previously estimated.

         Consolidation
         -------------

         The  consolidated  financial  statements  include  the  accounts of the
Company,  two insurance  subsidiaries,  New York Marine and Gotham, three agency
subsidiaries  hereinafter  collectively referred to as ("MMO") and the Company's
UK  operations.  Gotham is owned 25% by the Company and 75% by New York  Marine.
All other  subsidiaries are wholly owned by NYMAGIC.  All intercompany  accounts
and transactions have been eliminated in consolidation.

         Investments
         -----------

         Fixed  maturities  held for sale are  carried at fair value and include
those bonds where the Company's intent to carry such investments to maturity may
be  affected  in future  periods  by  changes  in market  interest  rates or tax
position.  Equity securities (common stocks and non-redeemable preferred stocks)
are  carried at fair  value.  Short-term  investments  are carried at cost which
approximates  fair  value.  Fair  value  is  based  upon  quotes  obtained  from
independent sources.

         Realized  investment  gains  and  losses  (determined  on the  basis of
specific  identified  cost)  also  include  any  declines  in  value  which  are
considered to be other than temporary.  Unrealized  appreciation or depreciation
of  investments,   net  of  related  deferred  income  taxes,  is  reflected  in
accumulated other comprehensive income in shareholders' equity.


                                       35
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         Derivatives
         -----------

         In 1998,  an interest  rate  agreement was entered into for purposes of
hedging interest rate risk on the Company's existing note payable. Cash flows as
a result of the hedge are recorded as adjustments to interest expense.

         Premium and policy acquisition cost recognition
         -----------------------------------------------

         Premiums  and  policy  acquisition  costs are  reflected  in income and
expense on a monthly pro rata basis over the terms of the  respective  policies.
Accordingly,  unearned  premium  reserves  are  established  for the  portion of
premiums  written  applicable to unexpired  policies in force,  and  acquisition
costs,  consisting  mainly  of net  brokerage  commissions,  and  premium  taxes
relating to these unearned premiums are deferred to the extent recoverable.  The
Company has provided an  allowance  for  uncollectible  premium  receivables  of
$450,000  and  $650,000 as of  December  31,  1999 and 1998,  respectively.  The
determination  of  acquisition  costs to be deferred  considers  historical  and
current loss and loss adjustment expense experience. Consideration is also given
to  anticipated  investment  income in measuring the carrying  value of deferred
policy acquisition costs.

         Revenue recognition
         -------------------

         Management  commission  income on policies written by the MMO insurance
pools is recognized  primarily as of the effective date of the policies  issued.
Adjustments to the policies,  resulting principally from changes in coverage and
audit adjustments, are recorded in the period reported.

         Contingent  profit  commission  revenue  derived  from the  reinsurance
transactions  of the  insurance  pools is  recognized  when such amount  becomes
billable to the respective reinsurers.

         Reinsurance
         -----------

         The Company's insurance subsidiaries participate in various reinsurance
agreements on both an assumed and ceded basis  through the MMO insurance  pools.
The Company uses various types of reinsurance including  quota-share,  excess of
loss  and  facultative  agreements  to  spread  the risk of loss  among  several
reinsurers  and to limit its  exposure  from losses on any one  occurrence.  Any
recoverable  due from  reinsurers is recorded in the period in which the related
gross liability is established.

         The  Company  accounts  for all  reinsurance  recoverables  and prepaid
reinsurance premiums as assets.

         Depreciation
         ------------

         Property,  equipment and leasehold  improvements are depreciated  using
both straight line and accelerated methods over their estimated useful lives.

         Income Taxes
         ------------

         The  Company  and its  subsidiaries  file a  consolidated  Federal  tax
return.  The Company  provides  deferred  income taxes on temporary  differences
between the financial  reporting basis and the tax basis of the Company's assets
and  liabilities  based upon  enacted  tax rates.  The effect of a change in tax
rates is recognized in income in the period of change.

         Fair Values of Financial Instruments
         ------------------------------------

         The fair value of the Company's fixed maturity investments is disclosed
in  Note  2.  The  Company's  other  financial  instruments  include  short-term
receivables,  notes  payable  and  other  payables  which  are  recorded  at the
underlying transaction value and approximate fair value.


                                       36
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         Goodwill
         --------

         The excess of purchase price over the fair value of net assets acquired
is amortized to income on a straight line basis over five years.

         Foreign currency translation
         ----------------------------

         The assets and liabilities of the Company's UK operations,  recorded in
Pounds  Sterling,  are translated to U.S. dollars at exchange rates in effect at
the balance sheet date and the resulting adjustments are recorded in accumulated
other comprehensive  income in shareholders'  equity.  Revenues and expenses are
translated to U.S. dollars using the average exchange rates for the year.

         Incurred losses
         ---------------

         Unpaid  losses  are  based on  individual  case  estimates  for  losses
reported.  A provision is also included,  based on past  experience,  for losses
incurred  but not  reported,  salvage and  subrogation  recoveries  and for loss
adjustment  expenses.  The method of making such estimates and for  establishing
the  resulting  reserves  is  continually  reviewed  and updated and any changes
resulting therefrom are reflected in operating results currently.

         Basic and diluted earnings per share
         ------------------------------------

         Basic EPS is calculated by dividing net income by the weighted  average
number of common shares  outstanding  during the year. Diluted EPS is calculated
by  dividing  net  income  by the  weighted  average  number  of  common  shares
outstanding  during the year and the  dilutive  effect of assumed  stock  option
exercises.  See  Note  12 for a  reconciliation  of the  shares  outstanding  in
determining basic and diluted EPS.

         Reclassification
         ----------------

         Certain  accounts in the prior year's  financial  statements  have been
reclassified to conform to the 1999 presentation.

         Effects of recent accounting pronouncements
         -------------------------------------------

         Statement of Financial  Accounting  Standards No. 133,  "Accounting for
Derivative  Instruments and Hedging  Activities" ("SFAS 133"), was issued by the
Financial  Accounting  Standards  Board ("FASB") in June 1998. SFAS 133 requires
derivatives to be recorded on the balance sheet at fair value.  Derivatives  not
considered as hedges must be recorded at fair value with adjustments recorded in
the income  statement.  For derivatives that qualify as a hedge,  changes in the
fair value of the derivative are offset against changes in the fair value of the
hedged assets or liabilities  and are  recognized in the income  statement or in
other  comprehensive  income  depending on the nature of the hedge.  SFAS 133 is
effective for years beginning after June 15, 1999.

         Statement of Financial  Accounting  Standards No. 137,  "Accounting for
Derivative Instruments and Hedging  Activities-Deferral of the Effective Date of
FASB Statement No. 133",  ("SFAS 137") was issued by the FASB in June 1999. SFAS
137 defers the effective date of SFAS 133 to fiscal years  beginning  after June
15, 2000.

         The Company uses derivatives, in the form of an interest rate swap, for
hedging  purposes as part of its interest rate  management.  The Company has not
yet determined the effect of SFAS 133 on its financial statements.

         The Company  adopted AICPA  Statement of Position 97-3,  "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments," ("SOP 97-3")
effective  January 1, 1999.  This  statement  provides  guidance  for  reporting
guaranty fund and other insurance related assessments.  The adoption of SOP 97-3
did not have a  material  impact  on the  Company's  results  of  operations  or
financial condition.


                                       37
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         The Company adopted AICPA  Statement of Position 98-1,  "Accounting for
the Costs of Computer  Software  Developed or Obtained for Internal  Use," ("SOP
98-1") effective  January 1, 1999. SOP 98-1 provides  standards for capitalizing
certain  internal  costs  incurred  to develop  software  used  internally.  The
adoption of SOP 98-1 did not have a material impact on the Company's  results of
operations or financial condition.

(2)      INVESTMENTS:

         A summary of investment components at December 31, 1999 consists of the
following:

<TABLE>
<CAPTION>

                                                                                               Amount at which
                                                                                     Fair       shown in the
Type of Investment                                                    Cost           Value      balance sheet
- ------------------                                                    ----           -----      -------------

<S>                                                               <C>            <C>            <C>
Fixed maturities available for sale:
  Bonds:
    United States Government and
         government agencies and authorities ..................   $ 88,757,727   $ 86,969,559   $ 86,969,559
    States, municipalities and
         political subdivisions ...............................    153,794,424    153,409,400    153,409,400
    Public utilities ..........................................     12,401,385     12,363,000     12,363,000
    All other corporate bonds .................................     45,734,086     44,551,394     44,551,394
                                                                  ------------   ------------   ------------
    Total fixed maturities
         available for sale ...................................    300,687,622    297,293,353    297,293,353
                                                                  ------------   ------------   ------------
Equity securities:
  Common stocks:
  Public utilities ............................................      1,577,810      2,585,152      2,585,152
  Banks, trusts and insurance companies .......................      4,692,428      4,618,997      4,618,997
  Industrial, miscellaneous and all other .....................     46,652,441     64,477,746     64,477,746
                                                                  ------------   ------------   ------------
    Total equity securities ...................................     52,922,679     71,681,895     71,681,895
                                                                  ------------   ------------   ------------
Short term investments ........................................     27,734,786     27,734,786     27,734,786
                                                                  ------------   ------------   ------------
    Total investments .........................................   $381,345,087   $396,710,034   $396,710,034
                                                                  ============   ============   ============
</TABLE>


         Unrealized   depreciation  or   appreciation  of  investments   (before
applicable income taxes) at December 31, 1999 and 1998 included gross unrealized
gains on equity  securities of $20,331,826 and  $19,915,191,  respectively;  and
gross  unrealized  losses on  equity  securities  of  $1,572,610  and  $864,890,
respectively;  and gross unrealized gains on fixed maturities available for sale
of $957,805 and  $10,841,711  at December 31, 1999 and 1998,  respectively;  and
gross unrealized losses on fixed maturities available for sale of $4,352,074 and
$21,933 as of December 31, 1999 and 1998, respectively.

         Included in  investments at December 31, 1999 are bonds on deposit with
various  regulatory  authorities  as  required  by  law  with a  fair  value  of
$8,752,500.

         There were no non-income  producing fixed maturity investments for each
of the years ended December 31, 1999, 1998 and 1997.

         All  mortgage  backed  securities  as of December 31, 1999 and 1998 are
obligations of various U.S.  Government  agencies and consist of GNMA,  FHLMC or
FNMA pass through securities. These securities are readily marketable.


                                       38
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         The gross unrealized gains and losses on debt securities as of December
31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>

                                                                                    1999
                                                      ----------------------------------------------------------------
                                                                           Gross         Gross
                                                       Amortized         Unrealized    Unrealized            Fair
                                                          Cost              Gains         Losses             Value
                                                      -----------       ------------  ---------------   --------------

<S>                                                  <C>                <C>           <C>               <C>
Fixed maturities available for sale:

U.S. Treasury securities and
  obligations of U.S. government
  corporations and agencies...................       $  88,757,727      $    17,501   $  (1,805,669)    $ 86,969,559

Obligations of states and
  political subdivisions......................         153,794,424          854,048      (1,239,072)     153,409,400

Corporate securities .........................          58,135,471           86,256      (1,307,333)      56,914,394
                                                     -------------      -----------    ------------     ------------

         Totals ..............................       $ 300,687,622      $   957,805   $  (4,352,074)    $297,293,353
                                                     =============      ===========   ==============    ============


                                                                                    1998
                                                      ----------------------------------------------------------------
                                                                           Gross         Gross
                                                       Amortized         Unrealized    Unrealized            Fair
                                                          Cost              Gains         Losses             Value
                                                      -----------       ------------  ---------------   --------------

Fixed maturities available for sale:

U.S. Treasury securities and
  obligations of U.S. government
  corporations and agencies...................       $  55,934,951      $ 1,521,904   $      (4,953)    $ 57,451,902

Obligations of states and
  political subdivisions......................         252,371,231        8,054,549         (16,980)     260,408,800

Corporate securities .........................          34,277,343        1,265,258             --        35,542,601
                                                     -------------      -----------    ------------     ------------

         Totals ..............................       $ 342,583,525      $10,841,711   $     (21,933)    $353,403,303
                                                     =============      ===========   ==============    ============
</TABLE>


                                       39
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         The  amortized  cost and fair value of debt  securities at December 31,
1999, by contractual maturity,  are shown below. Expected maturities will differ
from  contractual  maturities  because  borrowers  may have the right to call or
prepay obligations with or without call or prepayment penalties.

                                                 Fixed maturities available
                                                          for sale
                                                -----------------------------
                                                  Amortized          Fair
                                                     Cost            Value
                                                -----------------------------


Due in one year or less.....................    $ 11,107,583    $ 11,222,752

Due after one year
through five years .........................     136,083,543     135,165,742

Due after five years
through ten years ..........................      53,294,395      52,372,127

Due after ten years ........................      54,984,653      54,175,654
                                                ------------    ------------
                                                 255,470,174     252,936,275

Mortgage backed securities .................      45,217,448      44,357,078
                                                ------------    ------------

Totals......................................    $300,687,622    $297,293,353
                                                ============    ============


         The  investment  portfolio has exposure to market risks which  includes
the effect of adverse changes in interest rates,  credit quality,  equity prices
and foreign  exchange  rates on the  portfolio.  Interest rate risk includes the
changes in the fair value of fixed  maturities  based upon  changes in  interest
rates.  Credit  quality  risk  includes  the risk of  default by issuers of debt
securities.  Foreign  currency  risk  includes  exposure  to  changes in foreign
exchange  rates on the market value and interest  income of foreign  denominated
investments.  Equity risk includes the  potential  loss from changes in the fair
value of equity securities.


                                       40
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         Proceeds from sales of investments in debt securities during 1999, 1998
and 1997 were $118,911,079,  $51,905,388 and $167,867,245,  respectively.  Gross
gains of $929,242,  $1,105,100 and  $1,365,460 and gross losses of $ 797,483,  $
14,246  and $  868,944  were  realized  on those  sales in 1999,  1998 and 1997,
respectively.

         Realized  gains  (losses)  and   unrealized   investment   appreciation
(depreciation)  on fixed  maturities  and equity  securities for the years ended
December 31, 1999, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>

                                                                                           Year ended December 31,
                                                                              ----------------------------------------------
                                                                                   1999            1998             1997
                                                                              ----------------------------------------------

<S>                                                                           <C>             <C>               <C>
     Realized gains (losses) on sale
     of investments
       Fixed maturities...................................................    $   131,759     $   1,090,854     $    496,516
       Equity securities..................................................     12,378,350         7,516,080       10,044,741
       Short-term investments ............................................         (6,378)            8,124         (116,124)
                                                                              ------------     ------------     ------------
       Realized investments gains ........................................      12,503,731        8,615,058       10,425,133
       Less: applicable income taxes .....................................      (4,376,306)      (3,015,270)      (3,648,797)
                                                                              ------------     ------------     ------------
     Net realized investment gains .......................................    $  8,127,425     $  5,599,788     $  6,776,336
                                                                              ============     ============     ============

     Change in unrealized investment appreciation (depreciation)
      of securities:

       Fixed maturities ..................................................    $(14,214,047)    $  2,266,766     $  4,200,177
       Equity securities..................................................        (291,085)       7,717,489        3,145,784
                                                                              ------------     ------------     ------------
       Unrealized investment gains (losses) ..............................     (14,505,132)       9,984,255        7,345,961
       Less:  applicable deferred income taxes ...........................       5,076,796       (3,494,488)      (2,571,086)
                                                                              ------------     ------------     ------------
       Net unrealized investment gains (losses) ..........................    $ (9,428,336)    $  6,489,767     $  4,774,875
                                                                              ============     ============     ============
</TABLE>


         Net investment  income from each major category of investments  for the
years indicated is as follows:

<TABLE>
<CAPTION>

                                                                                          Year ended December 31,
                                                                              ----------------------------------------------
                                                                                  1999             1998             1997
                                                                              ----------------------------------------------

<S>                                                                            <C>             <C>              <C>
     Fixed maturities.....................................................     $17,686,462     $ 18,740,628     $ 20,192,031
     Short-term investments ..............................................         994,215        2,021,670        1,089,128
     Equity securities....................................................         815,161          846,610          814,341
                                                                              ------------     ------------     ------------
         Total investment income .........................................      19,495,838       21,608,908       22,095,500
     Investment expenses .................................................        (854,219)        (805,475)        (770,435)
                                                                              ------------     ------------     ------------
         Net investment income ...........................................    $ 18,641,619     $ 20,803,433     $ 21,325,065
                                                                              ============     ============     ============
</TABLE>





                                       41
<PAGE>




                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

(3)      FIDUCIARY FUNDS:

         The  Company's   insurance  agency   subsidiaries   maintain   separate
underwriting accounts which record all the underlying insurance  transactions of
the insurance  pools which they manage.  These  transactions  primarily  include
collecting  premiums  from  the  insured,   collecting  paid  recoverables  from
reinsurers,  paying claims as losses become payable, paying reinsurance premiums
to reinsurers and remitting net account balances to member  insurance  companies
in the pools which MMO manages.  Unremitted  amounts to members of the insurance
pools are held in a fiduciary  capacity and interest income earned on such funds
inure to the  benefit  of the  members  of the  insurance  pools  based on their
pro-rata participation in the pools.

         A summary of the pools'  underwriting  accounts as of December 31, 1999
and 1998 is as follows:

                                                             December 31,
                                                    ----------------------------
                                                        1999             1998
                                                    -----------      -----------

         Cash and short-term investments ....       $   556,542      $ 5,264,642
         Premiums receivable ................        40,151,568       36,384,613
         Reinsurance and other recoverables..        51,698,589       27,525,077
                                                    -----------      -----------

         Total Assets .......................       $92,406,699      $69,174,332
                                                    ===========      ===========

         Due to insurance pool members ......        51,454,673       29,705,029
         Reinsurance payable ................        29,718,908       26,500,070
         Funds withheld from reinsurers .....         8,174,400        6,447,912
         Other liabilities ..................         3,058,718        6,521,321
                                                    -----------      -----------

         Total Liabilities ..................       $92,406,699      $69,174,332
                                                    ===========      ===========

         A portion of the pools' underwriting  accounts above have been included
in the Company's  insurance  subsidiaries  operations  based upon their pro-rata
participation in the MMO insurance pools.

(4)      INSURANCE OPERATIONS:

         Reinsurance Transactions
         ------------------------

         Approximately 53%, 45% and 50% of the Company's insurance subsidiaries'
direct and assumed gross premiums written for the years ended December 31, 1999,
1998 and  1997,  respectively,  have been  reinsured  by the  pools  with  other
companies on both a treaty and a facultative basis.

         In the event that all or any of the pool  companies  might be unable to
meet their obligations to the pools, the remaining companies would be liable for
such  defaulted  amounts on a pro rata pool  participation  basis.  A contingent
liability also exists with respect to reinsurance  ceded since such transactions
generally  do  not  relieve  the  Company  of  its  primary  obligation  to  the
policyholder  and  such  reinsurance  ceded  would  become  a  liability  of the
Company's insurance subsidiaries in the event that any reinsurer might be unable
to meet the obligations assumed under the reinsurance agreements. All reinsurers
must meet certain minimum standards of financial condition as established by the
pools.  The Company's  largest  reinsurers at December 31, 1999,  were Arkwright
Mutual Insurance Company ("Arkwright"),  Lloyd's of London ("Lloyd's") and Utica
Mutual Insurance  Company ("Utica Mutual"),  with aggregate  recoverables of $42
million, $23 million and $16 million,  respectively.  The 1999 A.M. Best ratings
for Arkwright and Utica Mutual are each A. Lloyd's  maintains a trust fund which
was  established  for the benefit of all United  States  ceding  companies.  The
Company has not  experienced  difficulty in collecting  amounts due from Lloyd's
and the settlement of recoverables  due the Company has not materially  impacted
its liquidity. However,


                                       42
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

given the  uncertainty  surrounding the sufficiency of assets in Equitas to meet
its ultimate obligations,  there is a reasonable  possibility that the Company's
collection  efforts  relating to its  Lloyd's  recoverables  might be  adversely
affected  in the  future.  The  Company's  exposure  to  reinsurers,  other than
Arkwright,   Lloyd's  and  Utica   Mutual   include   reinsurance   recoverables
collectively from approximately 830 reinsurers or syndicates, and as of December
31,  1999,  no single one was liable to the Company for an  unsecured  amount in
excess of approximately $5.8 million.

         Funds withheld and letters of credit obtained under various reinsurance
treaties  amounted  to  approximately  $116  million as of  December  31,  1999.
Reinsurance  receivables  as of December 31, 1999 and 1998 included an allowance
for  uncollectible   reinsurance  recoverables  of  $7,871,000  and  $6,823,000,
respectively.

         In 1998, the Company entered into a reinsurance  transaction  involving
the  assumption of  approximately  $14.2  million in ocean marine  premiums that
emanated from the Company's  Syndicate 1265. In addition,  a second  reinsurance
transaction   involving  the  assumption  of  approximately   $10.5  million  in
miscellaneous  casualty  net  premiums  was  written by the  Company's  domestic
insurance  company  subsidiary in 1998. The second  transaction was subsequently
commuted resulting in total payments of approximately $7.5 million.

         Reinsurance  ceded and assumed  relating to  premiums  written  were as
follows:

<TABLE>
<CAPTION>

                               Gross            Ceded              Assumed                         Percentage
                              (direct)          to other          from other                       of assumed
    Year Ended                 amount          companies          companies        Net amount        to net
    ----------              ------------       ---------          ---------        ----------      ----------
<S>                         <C>                <C>                <C>              <C>                  <C>
    December 31, 1999       $82,065,506        $62,303,230        $36,343,802      $56,106,078          65%
    December 31, 1998        85,489,133         59,408,755         46,647,604       72,727,982          64%
    December 31, 1997        89,396,181         61,728,408         34,553,074       62,220,847          56%
</TABLE>

         Reinsurance  ceded and  assumed  relating  to  premiums  earned were as
follows:

<TABLE>
<CAPTION>

                               Gross            Ceded              Assumed                         Percentage
                              (direct)         to other           from other                       of assumed
    Year Ended                 amount          companies          companies        Net amount        to net
    ----------              -----------        ---------          ---------        ----------      ----------
<S>                         <C>                <C>                <C>              <C>                  <C>
    December 31, 1999       $75,856,987        $53,099,421        $33,397,590      $56,155,156          59%
    December 31, 1998        93,908,920         64,431,374         46,545,117       76,022,663          61%
    December 31, 1997        97,920,323         47,875,999         37,492,582       87,536,906          43%
</TABLE>

         Losses  and  loss  adjustment   expenses  incurred  are  net  of  ceded
reinsurance  recoveries of  $129,021,415,  $83,487,279,  and $26,912,355 for the
years ended December 31, 1999, 1998, and 1997, respectively.

         Unpaid Losses
         -------------

         Unpaid  losses  are  based on  individual  case  estimates  for  losses
reported  and include a provision  for losses  incurred but not reported and for
loss adjustment  expenses.  The following table provides a reconciliation of the
consolidated  liability for losses and loss adjustment expenses at the beginning
and end of 1999, 1998 and 1997:


                                       43
<PAGE>



                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

<TABLE>
<CAPTION>

                                                                                  Year ended December 31,
                                                                             --------------------------------
                                                                               1999        1998        1997
                                                                               ----        ----        ----
                                                                                      (in thousands)
<S>                                                                          <C>         <C>         <C>
Net liability for losses and loss adjustment
  expenses at beginning of year .........................................    $213,589    $222,335    $227,370
                                                                             --------    --------    --------
Provision for losses and loss adjustment
 expenses occurring in current year .....................................      48,838      69,703      72,322
Decrease in estimated losses and loss
  adjustment expenses for claims occurring
  in prior years (1).....................................................     (12,183)    (19,466)    (21,874)
Deferred income-loss portfolio
  assumption(2) .........................................................         198         275         320
                                                                             --------    --------    --------
Total losses and loss adjustment expenses incurred ......................      36,853      50,512      50,768
                                                                             --------    --------    --------
Less:
Losses and loss adjustment expense payments for claims occurring during:
      current year.......................................................      11,517      17,407      17,029
      prior years........................................................      41,862      41,576      38,454
                                                                             --------    --------    --------
                                                                               53,379      58,983      55,483
Add:
Deferred income-loss portfolio assumption (2) ...........................        (198)       (275)       (320)
                                                                             --------    --------    --------
Net liability for losses and loss adjustment
  expenses at year end ..................................................     196,865     213,589     222,335
                                                                             --------    --------    --------
Ceded unpaid loss and loss adjustment
 expenses................................................................     228,604     187,995     166,067
                                                                             --------    --------    --------
Gross unpaid losses and loss adjustment
  expenses at year end ..................................................    $425,469    $401,584    $388,402
                                                                             ========    ========    ========
</TABLE>


         (1) The  adjustment to the  consolidated  liability for losses and loss
         adjustment  expenses for losses  occurring in prior years  reflects the
         net effect of the  resolution  of losses  for other  than full  reserve
         value and  subsequent  readjustments  of loss  values.  The decrease in
         estimated losses is attributable to the ocean marine and aviation lines
         of business as a result of favorable payout trends in part due to lower
         retention levels per loss.

         (2) Deferred income-loss portfolio assumption represents the difference
         between cash received and unpaid loss  reserves  assumed as a result of
         the assumption of net pool  obligations  from two former members of the
         pools which was initially  capitalized  and is being amortized over the
         payout period of the related losses.

         The insurance pools  participated in the issuance of umbrella  casualty
insurance  for various  Fortune 1000  companies in the period from 1978 to 1983.
Depending on the accident  year,  the  insurance  pools'  maximum  retention per
occurrence  ranged from  $250,000 to  $500,000.  The  Company's  effective  pool
participation  on such risks varied from 11% in 1978 to 30% in 1983. At December
31, 1999 and 1998, the Company's  gross,  ceded and net loss and loss adjustment
expense  reserves for  Asbestos/Pollution  policies  amounted to $27.8  million,
$18.1  million  and $9.7  million,  and $24.3  million,  $15.3  million and $9.0
million,  respectively. Net paid losses resulting from Asbestos/Pollution losses
during  1999,  1998  and 1997  amounted  to  $809,000,  $851,000  and  $508,000,
respectively.  As of  December  31,  1999,  the Company  had  approximately  355
policies which had at least one claim relating to Asbestos/Pollution  exposures.
Unpaid  losses and loss  adjustment  expenses are  recorded for reported  claims
regarding  Asbestos/Pollution  exposures,   including  the  cost  of  litigation
expenses,  when sufficient information is present to indicate the involvement of
a specific  insurance  policy  and the  Company  can  reasonably  estimate  this
liability.    The   Company   believes   that   the   uncertainty    surrounding
Asbestos/Pollution  exposures,  including  issues as to  insureds'  liabilities,
ascertainment of loss date, definitions of occurrence, scope of coverage, policy
limits and application and interpretation of policy terms, including exclusions,
all affect the estimation of ultimate losses.  Under such  circumstances,  it is
difficult to determine the ultimate loss for Asbestos/Pollution  related claims.
Given the  uncertainty  in this area,  losses  from  Asbestos/Pollution  related
claims may develop adversely.  However, the Company believes that, in aggregate,
the net unpaid loss and loss  adjustment  expense  reserves  as of December  31,
1999,  allow for an adequate  provision and that the ultimate  resolution of the
Asbestos/Pollution  claims  will not have a  material  impact  on the  Company's
financial position.



                                       44
<PAGE>




                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         Salvage and Subrogation
         -----------------------

         Estimates  of salvage  and  subrogation  recoveries  on paid and unpaid
losses  have  been  recorded  as a  reduction  of  unpaid  losses  amounting  to
$5,884,591 and $6,354,281 at December 31, 1999 and 1998, respectively.

         Deferred Policy Acquisition Costs
         ---------------------------------

         Deferrable   acquisition   costs   amortized  to  income   amounted  to
$11,077,382,  $10,107,327 and $16,582,623 for the years ended December 31, 1999,
1998 and 1997, respectively.

(5)      PROPERTY, IMPROVEMENTS AND EQUIPMENT, NET:

         Property,  improvements  and  equipment,  at December 31, 1999 and 1998
include the following.

<TABLE>
<CAPTION>

                                                                          1999                 1998
                                                                     ------------          -----------

<S>                                                                  <C>                   <C>
         Office furniture and equipment........................      $  1,499,397          $  1,492,011
         Computer equipment....................................         2,313,591             2,174,561
         Leasehold improvements................................         2,351,498             2,433,141
                                                                     ------------          ------------
                                                                        6,164,486             6,099,713

         Less:  accumulated depreciation and amortization......        (4,371,610)           (3,758,692)
                                                                     ------------           -----------

                Property, improvements and equipment, net......      $  1,792,876          $  2,341,021
                                                                     ============           ===========
</TABLE>

         Depreciation  and  amortization  and other expenses for the years ended
         December 31,  1999,  1998 and 1997  amounted to $699,107,  $733,950 and
         $582,126, respectively.

(6)      INCOME TAXES:

         The  components of deferred tax assets and  liabilities  as of December
31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>

                                                                                December 31,
                                                                     -----------------------------------
                                                                          1999                  1998
                                                                     -------------         -------------

<S>                                                                  <C>                   <C>
         Deferred Tax Assets:

         Loss reserve discounting..............................      $  10,561,268         $  13,128,970
         Unearned premiums.....................................          1,920,515             1,923,950
         Equity securities write-down..........................            820,578               764,692
         Income tax carryforwards..............................          2,667,328             1,175,845
         Deferred rent liability...............................            333,874               374,215
         Bad debt reserve......................................          2,912,486             2,615,459
         Other.................................................            490,508               272,841
                                                                     -------------         -------------
         Deferred tax assets...................................         19,706,557            20,255,972
                                                                     -------------         -------------

         Less: Valuation allowance.............................          2,191,576             1,187,445
                                                                     -------------         -------------

         Total deferred tax assets.............................         17,514,981            19,068,527
                                                                     -------------         -------------
</TABLE>




                                       45
<PAGE>



                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued


<TABLE>
<CAPTION>

                                                                                 December 31,
                                                                          ------------------------
                                                                             1999          1998
                                                                          ------------------------

<S>                                                                        <C>           <C>
        Deferred Tax Liabilities:

Deferred policy acquisition costs.....................................     1,697,705     1,497,101
Unrealized appreciation of investments ...............................     5,377,732    10,454,527
Deferred income-loss portfolio assumption ............................        74,753       144,167
Discount on accrued salvage and subrogation ..........................       311,200       348,111
Other ................................................................       742,256       812,880
                                                                          -----------   -----------
Total deferred tax liabilities .......................................     8,203,646    13,256,786
                                                                          -----------   -----------
Net deferred tax assets ..............................................    $9,311,335   $ 5,811,741
                                                                          ===========   ===========
</TABLE>

         The last year for which the  income  tax  carryforwards  can be carried
forward against future tax liabilities is the year 2019.

         The Company's  valuation allowance account with respect to the deferred
tax asset is related to income tax  carryforwards  and the change in the account
is as follows:

<TABLE>
<CAPTION>

                                                  1999          1998          1997
                                               --------------------------------------

<S>                                            <C>           <C>           <C>
Balance, beginning of year .................   $1,187,445    $     --      $  516,716
Change in valuation allowance ..............    1,004,131     1,187,445      (516,716)
                                               ----------    ----------    ----------
Balance, end of year ......................    $2,191,576    $1,187,445    $     --
                                               ==========    ==========    ==========
</TABLE>


         The  Company  believes  that the  total  deferred  tax asset net of the
recorded  valuation  allowance  account as of December 31, 1999 will more likely
than not be fully realized.

         Income tax provisions  differ from the amounts computed by applying the
Federal statutory rate to income before income taxes as follows:

<TABLE>
<CAPTION>

                                                                        Year ended December 31,
                                                                        -----------------------
                                                                       1999      1998      1997
                                                                       ----      ----      ----

<S>                                                                    <C>       <C>        <C>
Income taxes at the Federal statutory rate ......................      35.0%     35.0%      35.0%
Tax exempt interest .............................................     (20.8)    (21.7)     (12.5)
Valuation allowance .............................................       4.7       5.2       (1.5)
State taxes .....................................................      (2.4)     (3.9)      (0.5)
Net bond amortization............................................       3.4       3.3        1.9
Investment income proration .....................................       2.8       2.9        1.7
Other, net ......................................................      (0.2)     (1.7)       1.5
                                                                       ----      ----       ----
Income tax provisions ...........................................      22.5%     19.1%      25.6%
                                                                       ====      ====       ====
</TABLE>


         Federal  income tax payments  amounted to  $3,694,794,  $5,328,181  and
$9,335,632 for the years ended December 31, 1999, 1998 and 1997, respectively.

         Federal  income tax  payable at  December  31,  1999  included in other
liabilities  amounted to $409,939.  Federal income taxes recoverable at December
31, 1998 included in other assets amounted to $181,667.


                                       46
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

(7)      STATUTORY INCOME AND SURPLUS:

         The Company's domestic insurance subsidiaries are limited, based on the
lesser of 10% of statutory  basis surplus or 100% of net investment  income,  as
defined under New York  Insurance Law, in the amount of dividends they could pay
without regulatory approval. The maximum amount which may be paid to the holding
company out of December 31, 1999 surplus is approximately $19,630,000.

         Consolidated  statutory net income,  surplus and dividends  declared by
the Company's  domestic  insurance  subsidiaries were as follows for the periods
indicated:

<TABLE>
<CAPTION>

                                       Consolidated              Consolidated              Dividends
                                        Statutory                 Statutory                 Declared
         Year Ended                     Net Income                 Surplus                 To Parent
         ----------                     ----------                 -------                 ---------
<S>                                 <C>                      <C>                         <C>
         December 31, 1999          $    25,476,000          $   200,899,000             $ 19,175,000
         December 31, 1998               30,223,000              196,745,000               18,367,000
         December 31, 1997               36,758,000              181,844,000               17,850,262
</TABLE>


(8)      EMPLOYEE RETIREMENT PLANS:

         The  Company   maintains  two  retirement  plans  for  the  benefit  of
employees.  Both plans provide for 100% vesting upon  completion of two years of
service.  The Money Purchase Plan provides for a contribution equal to 7-1/2% of
an employee's cash  compensation,  including  bonuses,  for each year of service
during which the employee has completed 1000 hours of service and is employed on
the last day of the plan year.  The Profit  Sharing  Plan does not  require  any
specific  contribution but any contribution  made is subject to the restrictions
set  forth  above  for  the  Money  Purchase  Plan.  Contributions  and  related
administrative  expenses for the years ended  December  31, 1999,  1998 and 1997
amounted to $600,346, $1,017,551, and $978,997, respectively.

(9)      DEBT:

          The Company  maintains a credit  agreement  with a bank.  The interest
rate on the loan is fixed, at the Company's  option,  for a period of one to six
months.  The  Company  has  elected  to pay  interest  at an  effective  rate of
approximately  6.275%  on the  outstanding  principal  balance  of the  loan  at
December  31, 1999 of  $12,458,413.  The  interest  rate was equal to the bank's
Adjusted  London  Interbank  Offered  Rate  at the  time  of the  interest  rate
adjustment  period,  plus .65 of 1%. Principal  repayments are paid quarterly in
equal  installments  of $1,250,000 and end on June 30, 2002. The Company has the
option to prepay amounts in excess of the required repayments.  At the Company's
option,  the interest rate may be based on either the higher of the bank's prime
rate or the  applicable  Federal  Funds  Rate,  plus  1/2 of 1%,  or the  bank's
adjusted certificate of deposit rate, plus .775 of 1%.

         The bank loan agreement  requires the Company to maintain a minimum net
worth of  $125,000,000  plus 50% of net  profits  earned  during  each year on a
cumulative basis. In addition,  other significant  covenants include limitations
on total indebtedness,  investment  purchases,  pledging and sales of assets and
requires the Company's  insurance  subsidiaries to maintain a certain  statutory
surplus,  gross and net premiums written to surplus ratios and total liabilities
to surplus ratio. The Company was in compliance with all financial  covenants as
stipulated  in the bank loan  agreement  as of  December  31,  1999.  The credit
agreement  also  provides  for a  facility  fee of .15 of 1% on the  outstanding
balance of the loan.


                                       47
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         Interest paid amounted to $1,057,993, $1,347,653 and $1,464,240 for the
years ended December 31, 1999, 1998 and 1997, respectively.

         In 1998, the Company  entered into an interest rate swap agreement (the
"agreement")  with a bank for purposes of hedging its interest  rate risk on its
existing bank loan.  The  agreement  requires the Company to pay interest to the
bank  at a rate  of  6.50%  on  the  original  notional  amount  outstanding  of
$22,500,000,  which is subsequently adjusted quarterly by notional reductions of
$1,250,000.  The bank is  required  to pay the  Company,  on the  same  notional
amounts  outstanding,  an  amount  equal to the  three  month US  Dollar  London
Interbank  Offered Rate plus .65% which is reset on a quarterly basis.  Interest
expense recorded under the agreement was $91,462 in 1999 and $44,719 in 1998.

(10)     COMMITMENTS:

         The Company  maintains various operating leases to occupy office space.
The lease terms expire on various dates through April, 2004.

         The aggregate  minimum annual rental  payments under various  operating
leases for office facilities as of December 31, 1999 are as follows:

                                                               Amount
                                                               ------

         2000.........................................     $  1,351,030

         2001.........................................        1,351,030

         2002.........................................        1,351,030

         2003.........................................        1,351,030

         Thereafter...................................            2,723
                                                           ------------

         Total........................................     $  5,406,843
                                                           ============

         The operating  leases also include  provisions for additional  payments
based on certain  annual  cost  increases.  Rent  expenses  for the years  ended
December  31,  1999,  1998 and  1997  amounted  to  $1,285,950,  $1,131,951  and
$1,049,119, respectively.

         In 1999,  Vincent  T.  Papa,  a former  President  and Chief  Executive
Officer of the Company, filed suit in the New York Supreme Court seeking damages
from the Company based upon alleged  breaches by the Company of its  obligations
under an employment  agreement with Mr. Papa. The Company intends  vigorously to
defend itself against such claims and believes it has no further  obligations to
Mr. Papa.

     The Company is not  involved in any other  litigation  which would  require
disclosure  in the financial  statements or would have a material  impact on the
Company's financial statements.

         In  connection  with the formation of MMO UK LTD, in 1997, as corporate
capital for Syndicate 1265, the Company  obtained an unsecured  letter of credit
from a bank in pounds  sterling  with a US dollar  equivalent  of  approximately
$22.4 million as of December 31, 1999.




                                       48
<PAGE>




                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

(11)     COMPREHENSIVE INCOME:

         The Company's comparative comprehensive income is as follows:

<TABLE>
<CAPTION>

                                                                   Year ended December 31,
                                                            -----------------------------------
                                                            1999            1998           1997
                                                            ----            ----           ----

<S>                                                     <C>           <C>            <C>
Net Income .........................................    $16,413,261   $  18,523,416  $  26,367,740

Unrealized holding gains (losses) on securities,
    net of deferred tax benefit (expense) of
     $700,490, $(6,509,758), and $(6,219,883) ......     (1,300,911)     12,089,555     11,551,211

Less: reclassification adjustment for gains realized
    in net income, net of  tax expense of
    $(4,376,306), $(3,015,270), and $(3,648,797) ...      8,127,425       5,599,788      6,776,336
Foreign currency translation .......................        (76,817)         15,039          6,000
                                                        -----------     -----------    -----------

Comprehensive income ...............................    $ 6,908,108     $25,028,222    $31,148,615
                                                        ===========     ===========    ===========
</TABLE>

         The Company  recorded  unrealized  holding gains on securities,  net of
deferred  taxes, of $9,987,216 and $19,415,552 as of December 31, 1999 and 1998,
respectively.  The Company recorded foreign currency translation  adjustments of
$(55,778) and $21,039 as of December 31, 1999 and 1998, respectively.

(12)     COMMON STOCK REPURCHASE PLAN AND SHAREHOLDERS' EQUITY:

         The Company has a common stock  repurchase  plan which  authorizes  the
repurchase of up to $55,000,000,  at prevailing  market prices, of the Company's
issued and outstanding shares of common stock on the open market. As of December
31, 1999,  the Company had  repurchased  a total of  2,124,082  shares of common
stock under this plan at a total cost of  $38,560,659  at market prices  ranging
from $13.69 to $28.81 per share.

         In connection  with the  acquisition  of MMO in 1991,  the Company also
acquired  3,215,958 shares of its own common stock held by MMO and recorded such
shares as treasury stock at MMO's original cost of $3,919,129.

         A  reconciliation  of basic and diluted EPS for each of the  year ended
December 31, 1999, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>

                                                      (In thousands except for per share amounts)
                                         1999                            1998                            1997
                              ---------------------------    ----------------------------    -----------------------------
                                       Weighted                         Weighted                       Weighted
                                        Average                         Average                         Average
                                Net      Shares     Per      Net         Shares     Per      Net         Shares     Per
                              Income  Outstanding   Share    Income   Outstanding   Share    Income   Outstanding   Share
                              ------  -----------   -----    ------   -----------   -----    ------   -----------   -----

<S>                          <C>          <C>       <C>      <C>         <C>        <C>      <C>         <C>       <C>
Basic EPS: ..............    $16,413      9,687     $1.69    $18,523     9,679      $1.91    $26,368     9,849     $ 2.68

Effect of
Dilutive Securities:

Stock Options ...........       --        --           --       --          26         --         --        23       (.01)
                             -------    -------     ------   -------   --------     -----    -------     -----     -------

Diluted EPS .............    $16,413      9,687     $1.69    $18,523     9,705      $1.91    $26,368     9,872     $ 2.67
                             =======    =======     ======   =======   ========     =====    =======     =====     =======
</TABLE>


                                       49
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

(13)     STOCK PLANS:

         The Company has a stock option plan, which was approved by shareholders
in 1991,  and  provides  a means  whereby  the  Company,  through  the  grant of
non-qualified  stock options to key officers,  may attract and retain persons of
ability as officers to exert their best  efforts on behalf of the  Company.  The
plan  authorizes the issuance of options to purchase up to 500,000 shares of the
Company's  common  stock at not less than 95 percent of the fair market value at
the date of grant.  Options are exercisable  over a period as determined in each
option agreement and expire at a maximum term of ten years.

         A summary of activity  under the stock  option plan for the years ended
December 31, 1999, 1998, and 1997 follows:

<TABLE>
<CAPTION>

                                         1999                        1998                     1997
                               -------------------------------------------------------------------------------
                                Number        Option         Number       Option       Number       Option
Shares Under                      of           Price           of          Price         of          Price
  Option                        Shares       Per Share       Shares      Per Share     Shares      Per Share
  ------                       --------      ---------       ------      ---------     ------      ---------

<S>                             <C>        <C>    <C>       <C>        <C>    <C>      <C>       <C>    <C>
Outstanding,
beginning of year ..........    228,200    $15.56-$22.92    243,100    $13.78-$22.92   373,200   $13.78-$22.92

Granted ....................    140,000    $12.05-$15.00     30,000    $       20.25      --        --    --

Exercised ..................       --        --    --       (25,900)   $13.78-$15.79   (80,000)  $13.78-$15.79

Forfeited ..................   (112,700)   $15.56-$22.92    (19,000)   $15.56-$15.79   (50,100)  $15.56-$22.92
                               --------                     -------                    -------

Outstanding,
end of year ................    255,500    $12.05-$20.25    228,200    $15.56-$22.92   243,100   $13.78-$22.92
                               ========                     =======                    =======

Exercisable,
end of year ................    138,000    $15.56-$20.25    115,367    $15.56-$22.92    95,356   $13.78-$22.92
                               ========                     =======                    =======
</TABLE>


         The Company has elected to measure  compensation  expense for  employee
stock options under APB No. 25 as permitted by SFAS 123,  "Accounting  for Stock
Based Compensation." Under SFAS 123, the Company is required to disclose the pro
forma  effects  on net  income of  applying  a fair  value  method of  measuring
compensation expense.

         The pro forma effect on the years ended  December  31,  1999,  1998 and
1997 is as follows:

<TABLE>
<CAPTION>

                                            1999                  1998                  1997
                                        -----------           -----------           -----------
<S>                                     <C>                   <C>                   <C>
     Net income - as reported           $16,413,261           $18,523,416           $26,367,740

     Net income - pro forma             $16,280,784           $18,414,657           $26,261,229

     Diluted EPS - as reported                $1.69                 $1.91                 $2.67

     Diluted EPS - pro forma                  $1.68                 $1.90                 $2.66
</TABLE>


         In  determining  the pro forma effect on net income,  the fair value of
options  granted in 1999,  1998,  1996 and 1995 was  estimated at the grant date
using the Black-Scholes option-pricing model with the following weighted average
assumptions in 1999, 1998, 1996 and 1995, respectively;  dividend yield of 3.0%,
1.9%,  2.2% and 2.4%;  expected  volatility of 25%,  28%, 25% and 28%;  expected
lives of 5 years for each year and a risk-free  interest  rate of 6.48%,  4.56%,
6.00% and 5.38%. There were no options granted in 1997.

         The full impact of calculating  compensation  expense for stock options
under SFAS 123 is not  reflected in the pro forma net income  amounts  presented
above because options granted prior to January 1, 1995 are not considered in the
determination of the compensation expense.


                                       50
<PAGE>


                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

         In 1999, the Company  established the NYMAGIC,  Inc. Phantom Stock Plan
(the  "Plan"),  the  purpose  of the  Plan is to  build  and  retain  a  capable
experienced  long-term  management team and key personnel to promote the success
of the Company. Each share of phantom stock granted under the Plan constitutes a
right to receive in cash the  appreciation in the fair market value of one share
of the Company's  stock,  as determined on the date of exercise of such share of
phantom stock over the measurement value of such phantom stock. In 1999, 100,000
shares of phantom  stock were  granted to  employees  with a  five-year  vesting
schedule. The Company recorded an expense of $263,750 in 1999 under this plan.

(14)     SEGMENT INFORMATION:

         The Company's  subsidiaries  include two domestic insurance  companies,
three domestic agency  subsidiaries,  and Syndicate 1265. The Company  considers
these operating companies as appropriate segments for purposes of evaluating the
Company's overall performance. The Company evaluates revenues and income or loss
by these segments.  Revenues include premiums earned,  commissions  income,  and
investment income.  Net income or loss includes total revenues,  less the sum of
losses incurred, policy acquisition costs, other expenses, and income taxes.

         The prior year's segment disclosure has been restated to conform to the
current year's presentation as a result of management's reassessment of its main
business segments.

         The financial information by segment is as follows:

<TABLE>
<CAPTION>

                                                                                       1999        1998        1997
                                                                                     --------------------------------
                                                                                             (in thousands)
     Revenues, excluding net investment income and realized gains:

<S>                                                                                  <C>         <C>         <C>
         Domestic Insurance Companies ............................................   $ 42,603    $ 61,392    $ 87,826
         Domestic Insurance Agencies .............................................      9,076       8,649      10,879
         Syndicate 1265 ..........................................................     14,446      15,262        --
         Other (includes corporate operations and consolidating adjustments) .....     (7,776)     (8,293)     (9,437)
                                                                                     --------    --------    --------
                    Total ........................................................   $ 58,349    $ 77,010    $ 89,268
                                                                                     ========    ========    ========

     Net investment income:
         Domestic Insurance Companies ............................................   $ 17,904    $ 19,695    $ 21,304
         Domestic Insurance Agencies .............................................       --          --          --
         Syndicate 1265 ..........................................................        721       1,108        --
         Other (includes corporate operations and consolidating adjustments) .....         17        --            21
                                                                                     --------    --------    --------
                    Total ........................................................   $ 18,642    $ 20,803    $ 21,325
                                                                                     ========    ========    ========

     Realized gains (losses) on investments:

         Domestic Insurance Companies ............................................   $ 12,589    $  8,615    $ 10,425
         Domestic Insurance Agencies .............................................       --          --          --
         Syndicate 1265 ..........................................................        (85)       --          --
         Other (includes corporate operations and consolidating adjustments) .....       --          --          --
                                                                                     --------    --------    --------
                    Total ........................................................   $ 12,504    $  8,615    $ 10,425
                                                                                     ========    ========    ========

     Income (loss) before tax expense:

         Domestic Insurance Companies ............................................   $ 30,412    $ 35,965    $ 39,481
         Domestic Insurance Agencies .............................................     (4,959)     (8,066)     (1,851)
         Syndicate 1265 ..........................................................     (1,119)        132        --
         Other (includes corporate operations and consolidating adjustments) .....     (3,154)     (5,127)     (2,176)
                                                                                     --------    --------    --------
                    Total ........................................................   $ 21,180    $ 22,904    $ 35,454
                                                                                     ========    ========    ========
</TABLE>



                                       51
<PAGE>




<TABLE>
<CAPTION>

                                  NYMAGIC, INC.
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued



                                                                                        1999         1998         1997
                                                                                     ------------------------------------
                                                                                                (in thousands)

Income tax expense (benefit):
<S>                                                                                  <C>          <C>          <C>
    Domestic Insurance Companies .................................................   $   7,155    $   8,769    $  10,440
    Domestic Insurance Agencies ..................................................      (1,706)      (2,787)        (599)
    Syndicate 1265 ...............................................................        (116)          60         --
    Other (includes corporate operations and consolidating adjustments) ..........        (567)      (1,661)        (754)
                                                                                     ---------    ---------    ---------
               Total .............................................................   $   4,766    $   4,381    $   9,087
                                                                                     =========    =========    =========

Net income (loss):
    Domestic Insurance Companies .................................................   $  23,257    $  27,196    $  29,041
    Domestic Insurance Agencies ..................................................      (3,253)      (5,279)      (1,251)
    Syndicate 1265 ...............................................................      (1,003)          72         --
    Other (includes corporate operations and consolidating adjustments) ..........      (2,588)      (3,466)      (1,422)
                                                                                     ---------    ---------    ---------
               Total .............................................................   $  16,413    $  18,523    $  26,368
                                                                                     =========    =========    =========

Identifiable assets:
    Domestic Insurance Companies .................................................   $ 724,923    $ 702,927    $ 694,224
    Domestic Insurance Agencies ..................................................       1,576        1,495        3,507
    Syndicate 1265 ...............................................................      32,404       22,144        4,227
    Other (includes corporate operations and consolidating adjustments) ..........       5,401        3,754        5,945
                                                                                     ---------    ---------    ---------
               Total .............................................................   $ 764,304    $ 730,320    $ 707,903
                                                                                     =========    =========    =========
</TABLE>


     The  Company's  gross  written   premiums  cover  risks  in  the  following
geographic locations:

<TABLE>
<CAPTION>

                                                                                         1999        1998        1997
                                                                                     ---------------------------------
                                                                                               (in thousands)

<S>                                                                                  <C>          <C>          <C>
                United States ....................................................   $  72,881    $  93,460    $  80,896
                Europe ...........................................................      20,146       18,480       18,339
                Asia .............................................................      15,302       11,948       12,860
                Latin America ....................................................       2,798        2,970        4,028
                Other ............................................................       7,282        5,279        7,826
                                                                                     ---------    ---------    ---------
                        Total Gross Written Premiums .............................   $ 118,409    $ 132,137    $ 123,949
                                                                                     =========    =========    =========
</TABLE>



(15)     Related Party Transactions:

         The Company made payments of $212,259 in 1999 to the firm of Kensington
& Ressler  L.L.C.  for legal  services.  Costa  Kensington,  a  director  of the
Company, is a partner in the firm of Kensington & Ressler L.L.C.


                                       52
<PAGE>


                          FINANCIAL STATEMENT SCHEDULES
            SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                  NYMAGIC, INC.
                                 Balance Sheets
                                (Parent Company)

<TABLE>
<CAPTION>

                                                                            December 31,
                                                                  ------------------------------
                                                                        1999            1998
                                                                  ------------------------------

Assets:

<S>                                                               <C>              <C>
Cash...........................................................   $      55,745    $      47,116
Short term investments ........................................       7,767,122             --
Investment in subsidiaries ....................................     219,744,413      229,680,280
Due from subsidiaries and MMO insurance pools .................      15,203,952       14,664,300
Other assets...................................................       2,456,387        2,471,346
                                                                  -------------    -------------
         Total assets..........................................   $ 245,227,619    $ 246,863,042
                                                                  =============    =============

Liabilities:

Notes payable..................................................   $  12,458,413    $  17,458,413
Dividends payable .............................................         967,785          968,549
Other liabilities .............................................         659,062          256,213
                                                                  -------------    -------------
    Total Liabilities..........................................      14,085,260       18,683,175
                                                                  -------------    -------------

Shareholders' equity:

Common stock ..................................................      15,017,892       15,017,892
Paid in capital................................................      27,935,907       28,029,410
Accumulated other comprehensive income ........................       9,931,438       19,436,591
Retained earnings .............................................     220,736,910      208,198,204
Treasury stock.................................................     (42,479,788)     (42,502,230)
                                                                  -------------    -------------
         Total shareholders' equity ...........................     231,142,359      228,179,867
                                                                  -------------    -------------
         Total liabilities and shareholders' equity ...........   $ 245,227,619    $ 246,863,042
                                                                  =============    =============
</TABLE>


<TABLE>
<CAPTION>

                              Statements of Income
                                (Parent Company)

                                                                             Year Ended December 31,
                                                                  --------------------------------------------
                                                                       1999           1998            1997
                                                                  ------------    ------------    ------------

Revenues:

<S>                                                                <C>            <C>             <C>
Cash dividends from subsidiary.................................    $19,175,000    $ 18,367,000    $ 17,850,262
Net investment income .........................................         17,122          74,122          21,070
                                                                  ------------    ------------    ------------
                                                                    19,192,122      18,441,122      17,871,332
                                                                  ------------    ------------    ------------
Expenses:

Operating expenses.............................................      2,799,957       5,200,857       2,197,039
Income tax benefit.............................................       (451,810)     (1,661,488)       (754,480)
                                                                  ------------    ------------    ------------
                                                                     2,348,147       3,539,369       1,442,559
                                                                  ------------    ------------    ------------

Income before equity income ...................................     16,843,975      14,901,753      16,428,773
Equity in undistributed earnings
(loss) of subsidiaries ........................................       (430,714)      3,621,663       9,938,967
                                                                  ------------    ------------    ------------

Net income ....................................................   $ 16,413,261    $ 18,523,416    $ 26,367,740
                                                                  ============    ============    ============
</TABLE>


                                       53
<PAGE>


            SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                  NYMAGIC, INC.
                            Statements of Cash Flows
                                (Parent Company)

<TABLE>
<CAPTION>

                                                                                        Year Ended December 31,
                                                                            --------------------------------------------
                                                                                1999            1998            1997
                                                                            ------------    ------------    ------------

     Cash flows from operating activities:
<S>                                                                         <C>             <C>             <C>
     Net income .........................................................   $ 16,413,261    $ 18,523,416    $ 26,367,740
                                                                            ------------    ------------    ------------

     Adjustments to reconcile net income
         to cash provided by operating activities:
         Equity in undistributed earnings of
              subsidiaries ..............................................        430,714      (3,621,663)     (9,938,967)
         Decrease (increase) in other assets ............................         14,959         192,184        (834,339)
         (Increase) decrease in due from subsidiaries ...................       (539,652)    (11,997,928)       (439,365)
         (Decrease) increase in other liabilities .......................        402,849         100,592          19,219
                                                                            ------------    ------------    ------------

     Net cash provided by operating activities ..........................     16,722,131       3,196,601      15,174,288
                                                                            ------------    ------------    ------------

     Cash flows from investing activities:

         Short term investments acquired ................................     (7,767,122)     (2,870,000)    (13,800,000)
         Short term investments matured .................................           --         8,870,000      12,800,000
         Investment in subsidiaries .....................................           --          (989,821)     (2,476,500)
                                                                            ------------    ------------    ------------
         Net cash provided by (used in) investing
              activities ................................................     (7,767,122)      5,010,179      (3,476,500)
                                                                            ------------    ------------    ------------

     Cash flows from financing activities:

         Proceeds from stock issued and other ...........................        (93,503)        525,433       1,351,618
         Cash dividends paid to stockholders ............................     (3,875,319)     (3,870,040)     (3,958,130)
         Net repurchase of common stock .................................         22,442         (20,573)    (10,922,760)
         Proceeds from borrowings .......................................           --         5,000,000       9,520,000
         Loan principal payments.........................................     (5,000,000)    (10,000,000)     (7,500,000)
                                                                            ------------    ------------    ------------
         Net cash used in financing activities ..........................     (8,946,380)     (8,365,180)    (11,509,272)
                                                                            ------------    ------------    ------------

     Net increase (decrease) in cash ....................................          8,629        (158,400)        188,516

     Cash at beginning of period ........................................         47,116         205,516          17,000
                                                                            ------------    ------------    ------------

     Cash at end of period...............................................   $     55,745    $     47,116    $    205,516
                                                                            ============    ============    ============
</TABLE>



           The condensed  financial  information of NYMAGIC,  INC. for the years
ended December 31, 1999,  1998 and 1997 should be read in  conjunction  with the
consolidated  financial  statements of NYMAGIC,  INC. and subsidiaries and notes
thereto.




                                       54
<PAGE>




                                  NYMAGIC, INC.
                  SCHEDULE V-VALUATION AND QUALIFYING ACCOUNTS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

     COLUMN A                      COLUMN B          COLUMN C          COLUMN D         COLUMN E
- --------------------------------------------------------------------------------------------------

     DESCRIPTION                   Balance at                                           Balance
                                   beginning                                            close of
                                   of period         Additions         Deductions       period
- --------------------------------------------------------------------------------------------------


<S>                                <C>               <C>               <C>              <C>
     December 31, 1999:
     Allowance for
        doubtful accounts......    $7,472,739        $2,158,060        $(1,309,411)     $8,321,388

     December 31, 1998:
     Allowance for
       doubtful accounts.......    $6,485,000        $1,456,160        $  (468,421)     $7,472,739
</TABLE>


                                       55
<PAGE>


                                  NYMAGIC, INC.
  SCHEDULE VI - SUPPLEMENTAL INFORMATION CONCERNING PROPERTY/CASUALTY INSURANCE
                                   OPERATIONS.
                                 (In Thousands)

<TABLE>
<CAPTION>

                                                                                  CLAIMS AND CLAIMS  AMORTIZATION
                                                                                  EXPENSES INCURRED       OF        PAID
               DEFERRED     RESERVE FOR                                              RELATED TO        DEFERRED    CLAIMS
AFFILIATION     POLICY     UNPAID CLAIMS          UNEARNED   NET        NET       -----------------     POLICY      AND
   WITH      ACQUISITION    AND CLAIMS            PREMIUM   EARNED   INVESTMENT   CURRENT     PRIOR  ACQUISITION   CLAIMS  PREMIUMS
REGISTRANT      COSTS        EXPENSES   DISCOUNT  RESERVE  PREMIUMS    INCOME     YEAR        YEAR      COSTS     EXPENSES WRITTEN
- -----------------------------------------------------------------------------------------------------------------------------------

<S>                   <C>     <C>                 <C>      <C>       <C>         <C>      <C>         <C>         <C>      <C>
DECEMBER 31, 1999     $4,851  $425,469      --    $56,033  $56,155   $ 18,624    $48,838  $(12,183)   $11,077     $53,379  $56,106
CONSOLIDATED
SUBSIDIARIES

DECEMBER 31, 1998      4,277   401,584      --     46,879   76,023     20,729     69,703   (19,466)    10,107      58,983   72,728
CONSOLIDATED
SUBSIDIARIES

DECEMBER 31, 1997      5,567   388,402      --     55,188   87,537     21,304     72,322   (21,874)    16,583      55,483   62,221
CONSOLIDATED
SUBSIDIARIES
</TABLE>


                                       56


<PAGE>


                                 EXHIBIT INDEX

3.1.      Charter. (Incorporated by reference to Exhibit 3-1 to the Registrant's
          Registration Statement No. 33-27665.)

3.3.      Amended and Restated By-laws.

4.0.      Specimen  Certificate  of common stock  (Incorporated  by reference to
          Exhibit 4 to the Registrant's Registration Statement No. 33-27665.)

10.2.     Restated  Management  Agreement  dated as of January  1, 1986,  by and
          among Mutual Marine Office,  Inc. and  Arkwright-Boston  Manufacturers
          Mutual  Insurance  Company,  Utica Mutual  Insurance  Company,  Lumber
          Mutual Insurance  Company,  the Registrant and  Pennsylvania  National
          Mutual  Casualty  Insurance  Company  (Incorporated  by  reference  to
          Exhibit  10.2 of the  Registrant's  Annual  Report  Form  1O-K for the
          fiscal year ended December 31, 1986 (Commission File No. 1-11238).)

10.2.2.   Amendment to Restated Management  Agreement,  dated as of December 30,
          1988,  and among  Mutual  Marine  Office,  Inc. and  Arkwright  Mutual
          Insurance  Company,  Utica Mutual  Insurance  Company,  Lumber  Mutual
          Insurance  Company,  the Registrant and  Pennsylvania  National Mutual
          Casualty  Insurance  Company.  (Incorporated  by  reference to Exhibit
          10.2.2.  of the Registrant's  Report on Form 8-K dated January 6, 1989
          (Commission File No. 1-11238).)

10.2.3.   Amendment to Restated Management  Agreement,  dated as of December 31,
          1990,  and among  Mutual  Marine  Office,  Inc. and  Arkwright  Mutual
          Insurance Company,  Utica Mutual Insurance Company, the Registrant and
          Pennsylvania National Mutual Casualty Insurance Company. (Incorporated
          by reference to Exhibit 10.2.3.  of the Registrant's  Annual Report on
          Form 10-K for the fiscal year ended December 31, 1992 (Commission File
          No. 1-11238).)

10.4.     Restated  Management  Agreement  dated as of January  1, 1986,  by and
          among  Mutual  Inland  Marine   Office,   Inc.  and   Arkwright-Boston
          Manufacturers   Mutual  Insurance  Company,   Utica  Mutual  Insurance
          Company,   Lumber  Mutual  Insurance   Company,   the  Registrant  and
          Pennsylvania  National Mutual Casualty Insurance Company (Incorporated
          by reference to Exhibit 10.4 of the  Registrant's  Annual  Report Form
          10-K for the fiscal year ended December 31, 1986  (Commission File No.
          1-11238).)

10.4.2.   Amendment to Restated Management  Agreement,  dated as of December 30,
          1988, and among Mutual Inland Marine Office, Inc. and Arkwright Mutual
          Insurance  Company,  Utica Mutual  Insurance  Company,  Lumber  Mutual
          Insurance  Company,  the Registrant and  Pennsylvania  National Mutual
          Casualty  Insurance  Company  (Incorporated  by  reference  to Exhibit
          10.4.2 of the  Registrant's  Report on Form 8-K, dated January 6, 1989
          (Commission File No. 1-11238).)

10.4.3.   Amendment to Restated Management  Agreement,  dated as of December 31,
          1990,  by and among Mutual Inland  Marine  Office,  Inc. and Arkwright
          Mutual  Insurance  Company,   Utica  Mutual  Insurance  Company,   the
          Registrant  and  Pennsylvania   National  Mutual  Casualty   Insurance
          Company.   (Incorporated  by  reference  to  Exhibit  10.4.3.  of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1992 (Commission File No. 1-11238).)

10.6.     Restated  Management  Agreement  dated as of January  1, 1986,  by and
          among Mutual Marine Office of the Midwest,  Inc. and  Arkwright-Boston
          Manufacturers   Mutual  Insurance  Company,   Utica  Mutual  Insurance
          Company,   Lumber  Mutual  Insurance   Company,   the  Registrant  and
          Pennsylvania National Mutual Casualty Insurance Company. (Incorporated
          by reference to Exhibit 10.6 of the Registrant's Annual Report on Form
          10-K for the fiscal year ended December 31, 1986  (Commission File No.
          1-11238).)

10.6.2.   Amendment to Restated  Management  Agreement  dated as of December 30,
          1988,  by and among  Mutual  Marine  Office of the  Midwest,  Inc. and
          Arkwright Mutual Insurance  Company,  Utica Mutual Insurance  Company,
          Lumber Mutual  Insurance  Company,  the  Registrant  and  Pennsylvania
          National Mutual Casualty Insurance Company. (Incorporated by reference
          to  Exhibit  10.6.2 of the  Registrant's  Report  on Form  8-K,  dated
          January 6, 1989 (Commission File No. 1-11238).)

10.6.3.   Amendment to Restated  Management  Agreement  dated as of December 31,
          1990,  by and among  Mutual  Marine  Office of the  Midwest,  Inc. and
          Arkwright Mutual Insurance  Company,  Utica Mutual Insurance  Company,
          the Registrant and  Pennsylvania  National Mutual  Casualty  Insurance
          Company.   (Incorporated  by  reference  to  Exhibit  10.6.3.  of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1992 (Commission File No. 1-11238).)

10.8.     Restated  Management  Agreement  dated as of January  1, 1986,  by and
          among  Pacific  Mutual  Marine  Office,   Inc.  and   Arkwright-Boston
          Manufacturers  Mutual  Insurance  Company,   Lumber  Mutual  Insurance
          Company,   Utica  Mutual   Insurance   Company,   the  Registrant  and
          Pennsylvania National Mutual Casualty Insurance Company. (Incorporated
          by reference to Exhibit 10.8 of the Registrant's Annual Report on Form
          10-K for the fiscal year ended December 31, 1986  (Commission File No.
          1-11238).)

10.8.2.   Amendment to Restated  Management  Agreement  dated as of December 30,
          1988, by and among Pacific  Mutual Marine  Office,  Inc. and Arkwright
          Mutual  Insurance  Company,  Lumber Mutual  Insurance  Company,  Utica
          Mutual Insurance  Company,  the Registrant and  Pennsylvania  National
          Mutual  Casualty  Insurance  Company.  (Incorporated  by  reference to
          Exhibit 10.8.2 of the  Registrant's  Report on Form 8-K, dated January
          6, 1989 (Commission File No. 1-11238).)

10.8.3.   Amendment to Restated  Management  Agreement  dated as of December 31,
          1990, by and among Pacific  Mutual Marine  Office,  Inc. and Arkwright
          Mutual  Insurance  Company,   Utica  Mutual  Insurance  Company,   the
          Registrant  and  Pennsylvania   National  Mutual  Casualty   Insurance
          Company.   (Incorporated  by  reference  to  Exhibit  10.8.3.  of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1992 (Commission File No. 1-11238).)

10.9      1991 Option Plan  (Incorporated  by reference the  Registrant's  Proxy
          Statement for its 1991 Annual Meeting of Shareholders (Commission File
          No. 1-11238).)

10.10     Form of Indemnification Agreement.



10.11     1999 NYMAGIC, INC. Phantom Stock Plan.

21.       Subsidiaries of the Registrant.

23.       Consent of KPMG LLP.

27.       Financial Data Schedule.





                          AMENDED AND RESTATED BY-LAWS
                                       OF
                                  NYMAGIC, INC.
                            (A New York Corporation)


                                    ARTICLE I

                                  SHAREHOLDERS
                                  ------------


     1.  CERTIFICATES REPRESENTING SHARES.

         (a) Every holder of stock in the Corporation  shall be entitled to have
a certificate  signed by, or in the name of, the  Corporation by the Chairman of
the Board of Directors,  if any, or by the President or a Vice-President  and by
the  Treasurer  or an  Assistant  Treasurer  or the  Secretary  or an  Assistant
Secretary  of the  Corporation  representing  the number of shares owned by such
person in the  Corporation,  and such certificate may be sealed with the seal of
the Corporation or a facsimile thereof.  If such certificate is countersigned by
a transfer  agent other than the  Corporation  or its employee or by a registrar
other than the  Corporation  or its employee,  any signature on the  certificate
other than that of such transfer agent or such registrar may be a facsimile.  In
case any officer, transfer agent, or registrar who has signed or whose facsimile
signature  has been  placed  upon a  certificate  shall  have  ceased to be such
officer,  transfer agent or registrar before such certificate is issued,  it may
be issued by the  Corporation  with the same  effect as if such person were such
officer, transfer agent or registrar at the date of issue.

         (b) Whenever the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock,  and  whenever the
Corporation  shall  issue any  shares of its stock as  partly  paid  stock,  the
certificates  representing  shares  of any such  class or  series or of any such
partly paid stock shall set forth thereon the  statements  prescribed by the New
York Business  Corporation Law. Any restrictions on the transfer or registration
of  transfer  of any  shares  of stock of any  class  or  series  shall be noted
conspicuously on the certificate representing such shares.

         (c) The  Corporation  may issue a new  certificate of stock of the same
tenor and for the same number of shares in place of any certificate  theretofore
issued by it alleged to have been lost, stolen, destroyed, or mutilated, and the
Board of  Directors  may require  the owner of any lost,  stolen,  destroyed  or
mutilated  certificate,  or  such  person's  legal  representative,  to  make an
affidavit  or  affirmation  setting  forth  such  facts as to the  loss,  theft,
destruction or mutilation as it deems  necessary,  and to give the Corporation a
bond sufficient to indemnify the Corporation  against any claim that may be made
against it on account of the alleged loss,  theft,  destruction or mutilation of
any such certificate or the issuance of any such new certificate.

     2.  FRACTIONAL  SHARE  INTERESTS.  The  Corporation  may,  but shall not be
required to, issue fractions of a share.


<PAGE>


     3.  SHARE  TRANSFERS.  Upon  compliance  with  provisions  restricting  the
transfer or registration  of transfer of shares of stock,  if any,  transfers or
registration  of  transfer of shares of stock of the  Corporation  shall be made
only on the stock ledger of the Corporation by the registered holder thereof, or
by such  person's  attorney  thereunto  authorized  by  power of  attorney  duly
executed and filed with the Secretary or Assistant  Secretary of the Corporation
or with a  transfer  agent  or a  registrar,  if any,  and on  surrender  of the
certificate or certificates  for such shares of stock properly  endorsed and the
payment of all taxes due thereon.

     4.  RECORD  DATE FOR  SHAREHOLDERS.  For the  purpose  of  determining  the
shareholders  entitled to notice of or to vote at any meeting of shareholders or
any adjournment  thereof,  or to express consent to or dissent from any proposal
without a meeting,  or for the purpose of determining  shareholders  entitled to
receive  payment of any  dividend or the  allotment  of any  rights,  or for the
purpose of any other action,  the Board of Directors may fix, in advance, a date
as the record date for any such  determination of shareholders.  Such date shall
not be more than sixty (60) nor less than ten (10) days  before the date of such
meeting,  nor more than fifty (50) days prior to any other action.  If no record
date is fixed, the record date for the determination of shareholders entitled to
notice  of or to vote at a  meeting  of  shareholders  shall be at the  close of
business on the day next  preceding the day on which notice is given,  or, if no
notice is given,  the day on which the  meeting  is held.  If no record  date is
fixed,  the record date for determining  shareholders for any purpose other than
that  specified in the preceding  sentence  shall be at the close of business on
the day on which the  resolution of the Board of Directors  relating  thereto is
adopted. When a determination of shareholders of record entitled to notice of or
to vote at any  meeting  of  shareholders  has  been  made as  provided  in this
section,  such  determination  shall apply to any  adjournment  of the  meeting,
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

     5.  MEANING OF  CERTAIN  TERMS.  As used  herein in respect of the right to
notice of a meeting of  shareholders  or a waiver  thereof or to  participate or
vote  thereat or to  consent or dissent in writing in lieu of a meeting,  as the
case may be,  the term  "share"  or  "shares"  or "share of stock" or "shares of
stock" or  "shareholder"  or  "shareholders"  refers to an outstanding  share or
shares of stock and to a holder or  holders of record of  outstanding  shares of
stock when the  Corporation  is  authorized to issue only one class of shares of
stock.  Said  reference  is also  intended to include any  outstanding  share or
shares of stock and any  holder or holders  of record of  outstanding  shares of
stock of any class  upon  which or upon whom the  Certificate  of  Incorporation
confers  such rights  where there are two or more classes or series of shares of
stock or upon which or upon whom the New York Business  Corporation  Law confers
such rights  notwithstanding  that the Certificate of Incorporation  may provide
for more than one  class or series of shares of stock,  one or more of which are
limited or denied such rights thereunder.

     6. SHAREHOLDER MEETINGS.

         (a) PLACE.  Annual  meetings and special  meetings shall be held at the
offices  of the  Corporation  in the State of New York or at such  other  place,
within or without the State of New York,  as the Board of  Directors  may,  from
time to time, fix as provided herein.

         (b) ANNUAL  MEETING.  The annual meeting shall be held on such date and
at the time fixed,  from time to time, by the Board of Directors for the purpose
of electing directors and for the


                                      -2-
<PAGE>


transaction of such other business as may be brought before the meeting.  Annual
meetings may be called by the Board of Directors or by the  Executive  Committee
of the Board of Directors or by any officer instructed by the Board of Directors
to call the meeting.

         (c) SPECIAL  MEETINGS.  Special  meetings of the  shareholders  for any
purpose  or  purposes,   unless  otherwise  proscribed  by  statute  or  by  the
Certificate of Incorporation,  may be called by the Chairman, the Vice Chairman,
the Chief Executive Officer, or the President of the Company and shall be called
by the Chairman,  the Vice Chairman, the Chief Executive Officer, the President,
the  Secretary  or any  Assistant  Secretary  of the Company upon the request in
writing of three  directors or of the holders of record of at least twenty (20%)
percent of the shares of stock of the  Corporation,  issued and  outstanding and
entitled to vote as of the date of such request.  Such special  meeting shall be
held at such time and at such place  within or without  the State of New York as
may be fixed by the Chairman of the Board or the Vice Chairman of the Board,  in
the case of meetings called by the Chairman of the Board or the Vice Chairman of
the  Board,  or by Chief  Executive  Officer  or the  President,  in the case of
meetings called by Chief Executive Officer or the President. Any special meeting
called at the request of either three directors or of the shareholders  pursuant
hereto shall be held at the principal  office of the  Corporation  not less than
forty-five (45) days from the receipt of such request. Any request for a special
meeting of  shareholders  shall state the  purpose or  purposes of the  proposed
meeting,  and such  purpose or purposes  shall be set forth in the notice of the
special  meeting,  and at any such  special  meeting  only such  business may be
transacted  which is related to the purpose or purposes  set forth in the notice
of the special meeting.

         (d) NOTICE OR WAIVER OF NOTICE.  Notice of any meeting of  shareholders
may be written  or  electronic.  All  notices  of all  meetings  shall be given,
stating  the place,  date and hour of the meeting  and,  unless it is the annual
meeting,  indicating  that the notice is being issued by or at the  direction of
the person or persons calling the meeting. The notice of an annual meeting shall
state that the  meeting  is called for the  election  of  Directors  and for the
transaction of other  business  which may properly come before the meeting,  and
shall (if any other  action  which could be taken at a special  meeting is to be
taken at such annual meeting) state such other action or actions as are known at
the time of such notice.  The notice of a special meeting shall in all instances
state the purpose or purposes for which the special meeting is called and at any
such special  meeting only such business may be  transacted  which is related to
the purpose or purposes set forth in the notice of the special  meeting.  Except
as otherwise  provided by the New York Business  Corporation  Law, a copy of the
notice of any meeting shall be given, personally, electronically or by mail, not
less than ten (10) days nor more than  sixty  (60) days  before  the date of the
meeting,  unless  the lapse of the  prescribed  period of time  shall  have been
waived,  and  directed to each  shareholder  entitled to vote at such meeting at
such  person's  address  as it appears on the  records  of the  Corporation.  If
mailed,  such notice shall be deemed given when  deposited in the United  States
mail,  with  postage  thereon  prepaid,  directed  to  the  shareholder  at  the
shareholder's  address as it appears on the record of  shareholders,  or, if the
shareholder  shall have filed with the  Secretary or Assistant  Secretary of the
Corporation  a request that notices to the  shareholder  be mailed to some other
address,   then  directed  to  him  at  such  other   address.   If  transmitted
electronically,  such  notice  shall  be  deemed  given  when  directed  to  the
shareholder's  electronic  mail  address as supplied by the  shareholder  to the
Secretary or Assistant  Secretary of the  Corporation  or as otherwise  directed
pursuant to the  shareholder's  authorization or  instructions.  If a meeting is
adjourned  to  another  time,  not more than  forty-five  (45) days  after  such
meeting,  and/or to another place,  and if an announcement of the adjourned time
and place is made


                                      -3-
<PAGE>


at the  meeting,  it shall not be  necessary  to give  notice  of the  adjourned
meeting  unless the Board of Directors,  after  adjournment,  fixes a new record
date for the  adjourned  meeting.  Notice of a meeting  need not be given to any
shareholder  who submits a waiver of notice whether before or after the meeting.
Waiver of notice may be written or  electronic.  If written,  the waiver must be
executed by the shareholder or the shareholder's  authorized officer,  director,
employee or agent by signing  such waiver or causing his or her  signature to be
affixed to such waiver by any reasonable means,  including,  but not limited to,
facsimile signature.  If electronic,  the transmission of the waiver must either
set forth or be  submitted  with  information  from which it can  reasonably  be
determined  that  the  transmission  was  authorized  by  the  shareholder.  The
attendance  of any  shareholder  at a  meeting,  in person or by proxy,  without
protesting  prior to the  conclusion  of the  meeting the lack of notice of such
meeting,  shall constitute a waiver of notice by such  shareholder.  Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the shareholders need be specified in any written waiver of notice.

         (e)  SHAREHOLDER  LIST.  A list of  shareholders  as of the record date
shall be  produced  at any  meeting  of  shareholders  upon the  request  of any
shareholder made either prior to or at the meeting.  If the right to vote at any
meeting is challenged,  the inspectors of election, or person presiding thereat,
shall require such list of  shareholders to be produced as evidence of the right
of the persons  challenged to vote at such  meeting,  and all persons who appear
from such list to be  shareholders  entitled  to vote  thereat  may vote at such
meeting. Such list shall be produced (or available by means of a visual display)
at the time and place of the meeting;  shall be subject to the inspection of any
shareholder for reasonable periods during the meeting;  and shall be prima facie
evidence of the identity of the shareholders entitled to examine such list or to
vote at such meeting.

         (f) CONDUCT OF MEETING. Unless otherwise designated by the shareholders
as hereinafter provided,  meetings of the shareholders shall be presided over by
one of the  following  officers in the order of  priority  as  follows:  (1) the
Chairman of the Board,  if any, (2) the Vice Chairman of the Board,  if any, (3)
the Chief Executive Officer, if any, (4) the President, (5) a Vice President, or
(6) if none of the  foregoing is in office and present and acting,  by an Acting
Chairman  for the  meeting  chosen  by a  majority  of the  Board of  Directors.
Notwithstanding  the  foregoing  order of  priority,  the holders of record of a
majority of the shares  authorized  to vote may, at least  fourteen (14) days in
advance of the  shareholders  meeting,  designate  in writing  addressed  to the
Chairman or Vice Chairman of the Board of the Corporation, an Acting Chairman to
preside at such meeting.  The Secretary of the  Corporation or, in such person's
absence, an Assistant Secretary, shall act as secretary of every meeting, but if
neither the Secretary nor an Assistant Secretary is present the chairman for the
meeting shall appoint a secretary of the meeting.

         (g) PROXY  REPRESENTATION.  Every  shareholder  may  authorize  another
person or persons to act for such shareholder by proxy in all matters in which a
shareholder  is  entitled  to  participate,  whether  by  waiving  notice of any
meeting,  voting or participating at a meeting, or expressing consent or dissent
without a meeting. No proxy shall be valid after the expiration of eleven months
from its date unless such proxy  expressly  provides for a longer period.  Every
proxy shall be revocable at the pleasure of the shareholder executing it, except
as otherwise provided in the New York Business  Corporation Law. The presence at
any meeting of any shareholder who has given a proxy shall not revoke such proxy
unless the  shareholder  shall file written notice of such  revocation  with the
Secretary  or  Assistant  Secretary  of the meeting  prior to the voting of such
proxy.


                                      -4-
<PAGE>


         (h) INSPECTORS OF ELECTION.  Unless otherwise appointed by the Board of
Directors in advance,  the transfer agent for the Corporation  shall provide one
or more  inspectors  to act at any  meeting or any  adjournment  thereof,  or to
tabulate  any written  consents of  shareholders  without a meeting,  and make a
written report thereof. The Board of Directors may designate one or more persons
as  alternate  inspectors  to  replace  any  inspector  who  fail to act.  If no
inspector or alternate has been appointed,  or if such persons are unable to act
or fails to perform the duties required at a meeting of shareholders, the person
presiding  at the meeting  may,  and on the request of  shareholders  holding at
least twenty (20%) percent of the shares  authorized to vote thereat shall, make
such  appointment.  Each  inspector,  before  entering upon the discharge of his
duties,  shall  take  and sign an oath  faithfully  to  execute  the  duties  of
inspector at such meeting with strict  impartiality and according to the best of
his ability.  The inspectors shall determine,  among other things: the number of
shares of stock  outstanding  and the voting power of each,  the shares of stock
represented  at the  meeting,  the  existence  of a quorum and the  validity and
effect of proxies. The inspectors shall also receive votes, ballots or consents,
hear and determine all challenges and questions  arising in connection  with the
right to vote, count and tabulate all votes, ballots or consents,  determine the
result,  and do such other acts as are proper to conduct  the  election  or vote
with  fairness to all  shareholders.  On request of the person  presiding at the
meeting,  the  inspector (or  inspectors)  shall make a report in writing of any
challenge, question or matter determined by such person or persons and execute a
certificate of any fact so found.

         (i) QUORUM.  Except as the New York Business  Corporation  Law or these
By-Laws may  otherwise  provide,  the  holders of a majority of the  outstanding
shares of stock  entitled  to vote  shall  constitute  a quorum at a meeting  of
shareholders for the transaction of any business.  The shareholders  present may
adjourn  the  meeting  despite  the  absence of a quorum.  When a quorum is once
present to organize a meeting, it is not broken by the subsequent  withdrawal of
any shareholders.

         (j) VOTING.  Each shareholder  shall be entitled to one vote, in person
or by proxy, for each share of stock held by such  shareholder  entitled to vote
in  accordance  with the terms of the  Certificate  of  Incorporation  and these
By-Laws.  In the  election  of  Directors,  a  plurality  of the votes  cast and
entitled to vote on the election of Directors  shall elect such  Directors.  Any
other action shall be  authorized by the  affirmative  vote of a majority of the
shares cast in favor of or against such action,  except where the Certificate of
Incorporation  or the New York Business  Corporation  Law prescribes a different
percentage of votes and/or a different exercise of voting power.

         (k) SHAREHOLDER  PROPOSALS.  At an annual meeting of the  shareholders,
only such business shall be conducted as shall have been properly brought before
the Meeting.  To be properly  brought before an annual meeting  business must be
(a) specified in the notice of meeting (or any  supplement  thereto) given by or
at the  direction of the Board of  Directors,  (b)  otherwise  properly  brought
before  the  meeting by or at the  direction  of the Board of  Directors  or the
Chairman or Acting Chairman of such meeting,  or (c) otherwise  properly brought
before the meeting by a shareholder.  For business to be properly brought before
an annual meeting by a shareholder,  the  shareholder  must have complied in all
respects  with the rules and  regulations  of the United States  Securities  and
Exchange Commission applicable thereto.


                                      -5-
<PAGE>


                                   ARTICLE II

                               BOARD OF DIRECTORS
                               ------------------

     1.  FUNCTIONS AND  DEFINITION. The business and affairs of the  Corporation
shall be  managed by or under the  direction  of the Board of  Directors  of the
Corporation.  The use of the phrase  "whole  Board"  herein  refers to the total
number of Directors which the Corporation  would have from time to time if there
were no vacancies.

     2.  QUALIFICATIONS  AND NUMBER.  Each Director  shall be at least  eighteen
years of age.  A  Director  need not be a  shareholder,  a citizen of the United
States, or a resident of the State of New York. The number of directors shall be
not less than nine (9) nor more than nineteen (19). The exact number thereof may
be  established  by the  shareholders  at each annual  meeting,  or at a special
meeting  called for such  purpose,  or by the  directors at any regular  meeting
thereof, or any special meeting thereof called for such purpose.  Subject to the
provisions of the Certificate of  Incorporation,  the number of Directors may be
increased  or  decreased  by  action  of the  shareholders  or of the  Board  of
Directors;  provided,  that any action of the Board of  Directors to effect such
increase or decrease  shall  require the vote of a majority of the entire  Board
then in office.  No decrease in the number of Directors shall have the effect of
shortening the term of any incumbent Director.

     3.  ELECTION AND TERM.

         (a) BOARD OF DIRECTORS. The Board of Directors shall be those directors
in office as of the date of the adoption of these Amended and Restated  By-Laws.
Subject to the  provisions  of section 3(b) below,  directors  shall hold office
until the first  annual  meeting of  shareholders  after the date of adoption of
these Amended and Restated  By-Laws and until their successors have been elected
and qualified or until their resignation or removal.  Thereafter,  directors who
are elected at an annual meeting of shareholders,  and directors who are elected
in the interim to fill vacancies and newly created Directorships, shall, subject
to the  provisions  of section  3(b) below,  hold  office  until the next annual
meeting of  shareholders  after their election and until their  successors  have
been elected and qualified or until their resignation or removal.

         (b) TERMS IF BOARD IS CLASSIFIED.  If the Certificate of  Incorporation
provides that the  directors be divided into either two,  three or four classes,
all classes shall be as nearly equal in number as possible.  The terms of office
of the directors  initially  classified  shall be as follows:  that of the first
class shall expire at the next annual meeting of shareholders,  the second class
at the second succeeding  annual meeting,  the third class, if any, at the third
succeeding  annual  meeting,  and  the  fourth  class,  if  any,  at the  fourth
succeeding   annual   meeting.   At  each  annual  meeting  after  such  initial
classification,  directors  to replace  those whose terms  expire at such annual
meeting  shall be elected to hold  office  until the  second  succeeding  annual
meeting if there are two classes,  the third succeeding  annual meeting if there
are three  classes,  or the fourth  succeeding  annual meeting if there are four
classes.

         (c) CHANGES IN CLASSIFIED  BOARD.  If directors are  classified and the
number of directors is thereafter changed:


                                      -6-
<PAGE>


                  (1)  Any  newly  created  directorships  or  any  decrease  in
         directorships  shall be so apportioned among the classes as to make all
         classes as nearly equal in number as possible.

                  (2) When the number of directors is increased by the board and
         any newly created directorships are filled by the Board, there shall be
         no  classification  of the additional  directors  until the next annual
         meeting of shareholders.

     4.  RESIGNATION  AND REMOVAL OF  DIRECTORS.  Any Director may resign at any
time  upon  written  notice  to the  Corporation.  Any or all of the  Directors,
notwithstanding  any  classification,  may be  removed,  either  with or without
cause,  by a vote  of  two-thirds  of the  Directors  present  at a duly  called
meeting,  a quorum being  present,  or by a vote of the  shareholders  holding a
majority of the stock,  at any special meeting called for such purpose or at any
annual  meeting,  or, if permitted by the  Certificate  of  Incorporation,  such
action  may be taken  without a meeting on written  consent,  setting  forth the
action so taken,  signed by the holders of  outstanding  shares  having not less
than the minimum number of votes specified in the  Certificate of  Incorporation
(including less than all  outstanding  shares)  sufficient for corporate  action
that would be  necessary  to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.

     5. NEWLY CREATED  DIRECTORSHIPS AND VACANCIES.  Newly created directorships
resulting from an increase in the number of Directors and vacancies occurring in
the Board of Directors for any reason,  except the removal of Directors  without
cause,  may be  filled  by  majority  vote of the  Board.  If the  number of the
Directors then in office is less than a quorum, such newly created directorships
and  vacancies  may be filled by vote of a  majority  of the  Directors  then in
office.  Notwithstanding  the foregoing,  such newly created  directorships  and
vacancies may be filled by a vote of the shareholders  holding a majority of the
stock,  at an annual meeting or at any special  meeting called for such purpose,
or, if permitted by the Certificate of  Incorporation,  such action may be taken
without a meeting on written consent,  setting forth the action so taken, signed
by the holders of outstanding  shares having not less than the minimum number of
votes  specified in the  Certificate of  Incorporation  (including less than all
outstanding  shares)  sufficient for corporate action that would be necessary to
authorize or take such action at a meeting at which all shares  entitled to vote
thereon were present and voted. Vacancies occurring in the Board of Directors by
reason of the removal of  Directors  without  cause may be filled by vote of the
directors,  by vote of the shareholders,  or, if permitted by the Certificate of
Incorporation,  such action may be taken  without a meeting on written  consent,
setting forth the action so taken,  signed by the holders of outstanding  shares
having not less than the minimum number of votes specified in the Certificate of
Incorporation  (including  less  than all  outstanding  shares)  sufficient  for
corporate  action that would be  necessary to authorize or take such action at a
meeting at which all shares  entitled to vote thereon were present and voted.  A
director elected to fill a vacancy,  unless elected by the  shareholders,  shall
hold office  until the next  meeting of  shareholders  at which the  election of
directors is in the regular order of business,  and until his successor has been
elected and qualified, regardless of whether or not the Board is classified.

     6. MEETINGS.

         (a)  TIME.  Regular  meetings  shall be held at such  time as the Board
shall fix. Special meetings may be called upon notice.


                                      -7-
<PAGE>


         (b) PLACE.  Meetings,  both regular and special,  shall be held at such
place within or without the State of New York as shall be fixed by the Board.

         (c) FIRST MEETING. The first meeting of each newly elected Board may be
held  immediately  after or within thirty (30) days after each annual meeting of
the  shareholders,  and no notice of such meeting shall be necessary to call the
meeting,  provided a quorum shall be present. In the event such first meeting is
not so held immediately after the annual meeting of the shareholders,  it may be
held at such  time  and  place  as shall be  specified  in the  notice  given as
provided  for special  meetings of the Board of  Directors,  or at such time and
place as shall be fixed by the consent in writing of all of the Directors.

         (d)  NOTICE OR  ACTUAL  OR  CONSTRUCTIVE  WAIVER.  No  notice  shall be
required  for  regular  meetings  for which the time and place have been  fixed.
Special  meetings  may be called by or at the  direction of the Chairman or Vice
Chairman of the Board, the Chief Executive  Officer or the President,  or by any
four (4) Directors.  Written, oral,  electronic,  or any other mode of notice of
the time and place  shall be given for  special  meetings  at least two (2) days
prior to the meeting; notice may be given by telephone of telefax (in which case
it  is  effective  when  given)  or by  mail  (in  which  case  it is  effective
forty-eight (48) hours after mailing by prepaid first class mail). The notice of
any meeting  need not specify  the purpose of the  meeting.  Notice of a meeting
need not be given to any director who submits a signed waiver of notice  whether
before or after the  meeting,  or who attends the  meeting  without  protesting,
prior thereto or at its commencement, the lack of notice to him.

         (f) QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies  prevents such  majority,  whereupon a
majority of the  Directors in office shall  constitute a quorum,  provided  that
such majority shall  constitute at least  one-third  (1/3) of the whole Board. A
majority  of the  Directors  present,  whether or not a quorum is  present,  may
adjourn any meeting to another time and place.  Notice of any  adjournment  of a
meeting of the Board to another  time or place  shall be given to the  Directors
who were not present at the time of the  adjournment in the manner  specified in
Section 6(d) and,  unless such time and place are  announced at the meeting,  to
the  other  directors.  Except  as  herein  otherwise  provided,  and  except as
otherwise  provided by the New York  Business  Corporation  Law,  the act of the
Board  shall be the act by vote of a  majority  of the  Directors  present  at a
meeting, a quorum being present.  The quorum and voting provisions herein stated
shall  not be  construed  as  conflicting  with any  provisions  of the New York
Business  Corporation  Law and these By-Laws which govern a meeting of Directors
held to fill vacancies and newly created directorships.

         (g)  PARTICIPATION  BY  TELEPHONE  CONFERENCE  CALL.  Any  director may
participate in a meeting of the Board or of any Committee  thereof by means of a
conference telephone or similar  communications  equipment by means of which all
directors   participating   in  the  meeting  can  hear  each  other,  and  such
participation in a meeting of the Board or Committee shall  constitute  presence
in person at such meeting.

         (h)  WRITTEN  CONSENT.  Any action  required or  permitted  to be taken
pursuant to authorization  voted at a meeting of the Board of Directors,  or any
Committee  thereof,  may be taken  without a meeting if, prior or  subsequent to
such  action,  all members of the Board or such  Committee,  as the case may be,
consent thereto in writing and such written consents, together with


                                      -8-
<PAGE>


a copy of documents  and other  materials  provided to the Board or Committee in
connection therewith, are filed with the minutes of the proceedings of the Board
or Committee.

         (i) CHAIRMAN OF THE MEETING.  The Chairman of the Board,  if any and if
present and acting, shall preside at all meetings.  Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.

         (j) DIRECTOR'S COUNSEL.  Any director shall be entitled,  upon at least
24 hours  notice to the  Chairman or Vice  Chairman of the Board in advance of a
Board of Director's meeting, to have, at such director's expense,  legal counsel
advise such  director on his or her duties as a director  present at any meeting
of  the  Board  of  Directors;   provided,  however,  that  notwithstanding  the
foregoing,  the Board of Directors  may by a  two-thirds  (2/3) vote exclude all
legal counsel (including legal counsel for the Corporation) from such meeting.

     7.  COMMITTEES.

         (a)  APPOINTMENT.  At each annual meeting the Board of Directors shall,
by resolution passed by a majority of the whole Board,  designate from among its
members an Executive  Committee,  an Audit  Committee,  a Finance  Committee,  a
Nominating  Committee,  and a Stock Option and Compensation  Committee,  each of
which shall have three or more members.  The Board of Directors may from time to
time,  by  resolution  passed by a majority of the whole Board,  designate  from
among its members such other  committees,  which shall have one or more members,
such   committees   to  serve  for  such   periods  and  with  such  duties  and
responsibilities  as set forth in such  resolution.  Any such Committee,  to the
extent provided in the resolution of the Board,  shall have and may exercise the
powers of the Board of Directors in the  management  of the business and affairs
of the  Corporation,  except any authority the delegation of which is prohibited
by Section 712 of the New York Business  Corporation  Law.  Each such  Committee
shall serve at the pleasure of the Board of Directors,  and the Board may at any
time,  by  vote of a  majority  thereof,  fill  any  vacancies  in,  change  the
membership  of, or dissolve any  Committee.  The Board may designate one or more
Directors as alternate  members of any Committee,  who may replace any absent or
disqualified member at any meeting of the Committee. When a regular or alternate
member of any Committee ceases to be a director he shall  automatically cease to
be such regular or alternate member of such Committee.

         (b)  CHAIRMAN.  The Board of Directors may designate one of the members
of each  Committee  to be the Chairman of such  Committee.  The Chairman of each
Committee shall preside at all meetings of such  Committee.  The Chairman of the
Executive  Committee shall perform such other duties as may be designated by the
Board of Directors.

         (c)  MEETINGS.   Each  Committee  shall  meet  at  the  office  of  the
Corporation at such times as they shall by resolution  appoint,  and may meet at
any other time or place on the call of the Chairman.

         (d) NOTICE OF MEETING. No notice shall be required for regular meetings
for which the time and place have been fixed. Written,  electronic,  oral or any
other mode of notice of the time and


                                      -9-
<PAGE>


place  shall be given  for  special  meetings  at least one (1) day prior to the
meeting;  notice  may be given by  telephone  or  telefax  (in which  case it is
effective when given) or by mail (in which case it is effective forty-eight (48)
hours after mailing by prepaid first class mail). The notice of any meeting need
not specify the purpose of the meeting. Notice of a meeting need not be given to
any director who submits a signed waiver of notice  whether  before or after the
meeting, or who attends the meeting without protesting,  prior thereto or at its
commencement, the lack of notice to him.

         (e) QUORUM AND ACTION.  A majority of each Committee shall constitute a
quorum at any  meeting.  The act of a  majority  of a  Committee  present at any
meeting at which there is a quorum shall be the act of such Committee.

         (f) COMMITTEE  MINUTES.  Each Committee  shall cause to be kept regular
minutes of its proceedings,  which may be transcribed in the regular minute book
of the Corporation,  and all such proceedings  shall be reported to the Board of
Directors at its next  succeeding  meeting,  and shall be subject to revision or
alteration  by the  Board,  provided  that no rights of third  persons  shall be
affected by such revision or alteration.

         (f)  RULES.  Each  Committee  may,  from time to time,  subject  to the
approval of the Board of  Directors,  adopt rules for the calling and conduct of
its meetings,  and other matters  relating to its procedures and the exercise of
its powers not in conflict  with the By-Laws of the  Corporation  or the actions
taken by the Board of Directors.

     8.  EXECUTIVE COMMITTEE. The Executive Committee shall, between meetings of
the Board, have and may exercise all the powers of the Board of Directors in the
management of the business and affairs of the Corporation,  except any authority
the  delegation  of which is  prohibited by Section 712 of the New York Business
Corporation  Law;  provided that all action by the Executive  Committee shall be
reported to the Board of Directors.

     9.  AUDIT  COMMITTEE.  The  Audit  Committee  shall  review  the  financial
statements  of the  Corporation  and the  adequacy  of the  systems of  internal
accounting  controls  and  procedures;  meet  with  the  Corporation's  internal
auditors,  if any, and with its independent  public  accountants to review their
report on the examination of the Corporation's  accounts,  their comments on the
internal  controls and auditing  procedures  of the  Corporation  and the action
taken by management with regard to such comments;  meet with outside or internal
financial and legal  personnel in connection  with the  Committee  reviews;  and
recommend   annually  to  the  Board  of  Directors  the   appointment   of  the
Corporation's  independent  public  accountants.  The  meetings  with  auditing,
financial and legal personnel may be with or without management  representatives
being present.  The Audit  Committee shall also perform such other duties as may
be assigned to it from time to time by the Board of Directors.

     10. FINANCE COMMITTEE. The Finance Committee shall meet at least quarterly,
with or without  outside  investment  counsel in  attendance;  review and ratify
investment  transactions for the quarter; review the schedule of funds available
for investment and determine  appropriate  investment thereof in accordance with
the Investment Program guidelines; investigate investment opportunities;  report
their  findings  and  recommendations  and propose  resolutions  to the Board of
Directors for  consideration;  and recommend  annually to the Board of Directors
the appointment of the


                                      -10-
<PAGE>


Corporation's  investment counsel. The Finance Committee shall also perform such
other  duties  as may be  assigned  to it from  time to  time  by the  Board  of
Directors.

     11. NOMINATING COMMITTEE.  The Nominating Committee shall recommend a slate
of qualified  candidates for the director positions whose terms are to expire or
are  vacant.  The  Nominating  Committee  shall  report  to the  Board the name,
business  address and residence  address of each  candidate,  (ii) the principal
occupation  or  employment  of each  candidate,  (iii)  the  number of shares of
capital stock of the Corporation which are beneficially owned by each candidate,
(iv) the employment history of such candidate over the preceding five (5) years,
and (v) such other  information  concerning  each candidate as would be required
under the rules of the United States  Securities  and Exchange  Commission to be
set forth in a proxy  statement  soliciting  proxies  for the  election  of such
nominee as director.  Any director may recommend other  candidates for available
director  positions,   provided  that  the  foregoing   information  about  such
candidates  is provided.  At the  conclusion  of  recommendations,  the Board of
Directors shall approve a slate of candidates for such director positions.

     12. STOCK  OPTION  AND  COMPENSATION   COMMITTEE.   The  Stock  Option  and
Compensation Committee shall meet at least quarterly,  with or without the Chief
Executive Officer in attendance;  review  compensation levels for all employees,
including  utilizing  national  and  regional  surveys  for  the  insurance  and
insurance brokerage industries; review and ratify the Corporation's compensation
policies and practices for executives and non-executives  alike; review proposed
increases,  bonuses,  stock option awards or repricing of stock options pursuant
to the Corporation's  Stock Option Plans, and determine  appropriate  increases,
bonuses,  stock option awards or repricing of stock  options in accordance  with
the Corporation's  Stock Option Plans; report their findings and recommendations
and  propose  resolutions  to the  Board of  Directors  for  consideration;  and
recommend  annually  to the  Board of  Directors  the  compensation  levels  for
executives.  The Stock Option and Compensation Committee shall also perform such
other  duties  as may be  assigned  to it from  time to  time  by the  Board  of
Directors.

     13. DIRECTORS'  COMPENSATION.  Directors,  other than  salaried officers or
employees  of  the  Corporation  or of any  affiliated  company,  shall  receive
compensation  for their  services as  directors  in such form and amounts and at
such times as may be prescribed from time to time by the Board of Directors. All
directors  shall be  reimbursed  for  their  reasonable  expenses,  if any,  for
attendance at each regular or special meeting of the Board of Directors. Members
of  any  committee  of  the   Corporation   shall  be  allowed  such  additional
compensation  as may be fixed by the Board of Directors  and  reimbursement  for
reasonable expenses.


                                   ARTICLE III

                                    OFFICERS
                                    --------

     1.  OFFICERS. The Board of Directors may elect or appoint a Chairman of the
Board of Directors,  Vice-Chairman,  a Chief Executive Officer, a President, one
or more Vice Presidents  (which may be denominated  with additional  descriptive
titles), a Secretary,  one or more Assistant  Secretaries,  a Treasurer,  one or
more  Assistant  Treasurers  and such other  officers as it may  determine.  Any
number of offices may be held by the same person.


                                      -11-
<PAGE>


     2.  TERM OF OFFICE; REMOVAL. Unless otherwise provided in the resolution of
election or appointment, each officer shall hold office until the meeting of the
Board of Directors  following the next annual meeting of shareholders  and until
such  officer's  successor  has been elected and  qualified or until the earlier
resignation  or removal of such officer.  The Board of Directors may at any time
remove any officer for cause or without  cause,  and the election of a successor
to any  officer  shall be  deemed a removal  of such  officer  unless  otherwise
provided  in the  resolution  electing  such new  officer.  If the office of any
officer of the Corporation  shall become vacant for any reason,  the Board, by a
majority vote of those present at any meeting at which a quorum is present,  may
choose a successor or successors who shall hold office for the unexpired term in
respect of which such vacancy occurred.

     3.  AUTHORITY  AND DUTIES.  All  officers,  as between  themselves  and the
Corporation, shall have such authority and perform such duties in the management
of the Corporation as may be provided in these By-Laws, or, to the extent not so
provided,  by the New York Business  Corporation Law or by any resolution of the
Board of Directors.

     4.  THE  CHAIRMAN OF THE BOARD. Chairman of the Board shall  perform  those
duties  assigned to him by the Board of  Directors  and may, but is not required
to, be an employee of the  Corporation,  and may, but is not required to, be the
Chief  Executive  Officer.  The  Chairman  of the Board shall be a member of the
Executive  Committee.  The Chairman of the Board,  if present and acting,  shall
preside at all  meetings of the Board of  Directors,  including  meetings of the
Executive  Committee;  otherwise,  the Chief Executive Officer or President,  if
present,  shall preside, or if the Chief Executive Officer or President does not
so preside,  any other Director chosen by the Board shall preside.  The Chairman
of the Board shall have such  powers and perform  such duties as may be assigned
to him from time to time by the Board of Directors.

     5.  VICE  CHAIRMAN OF THE BOARD.  The vice chairman of the board shall have
such powers  and  perform  such  duties  as  may be
assigned to him from time to time by the Board of Directors.

     6.  THE CHIEF EXECUTIVE  OFFICER. The Chief Executive  Officer shall be the
chief executive  officer of Corporation,  and, in the absence of the Chairman of
the Board,  may (if a director and so  designated  by the Board)  preside at all
meetings of the Board of Directors.  The Chief Executive  Officer shall exercise
the powers and  perform the duties  usual to the chief  executive  officer  and,
subject to the control of the Board of Directors,  shall have general management
and control of the affairs and business of the Corporation; he shall appoint and
discharge  employees and agents of the Corporation  (other than officers elected
by the Board of Directors) and fix their  compensation  (in accordance  with the
guidelines  established  by the  Board  or the  Stock  Option  and  Compensation
Committee);  and he shall see that all  orders and  resolutions  of the Board of
Directors are carried into effect.  The Chief  Executive  Officer shall have the
power  to  execute  bonds,   mortgages  and  other  contracts,   agreements  and
instruments  of a  contractual  nature  pertaining to matters which arise in the
normal  conduct and ordinary  course of business of the  Corporation.  The Chief
Executive  Officer shall also  generally  have the powers and perform the duties
which  appertain  to the office,  and shall do and perform  such other duties as
from time to time may be assigned to him by the Board of Directors.


                                      -12-
<PAGE>


     7.  THE PRESIDENT. The President shall, in the absence of a Chief Executive
Officer,  be the chief executive officer of Corporation,  and, in the absence of
the Chairman of the Board and the Chief  Executive  Officer,  may (if a Director
and so  designated  by the  Board)  preside  at all  meetings  of the  Board  of
Directors.  The President shall exercise the powers and perform the duties usual
to the  office  of  President,  and,  subject  to the  control  of the  Board of
Directors,  in the  absence of a Chief  Executive  Officer,  shall have  general
management and control of the affairs and business of the Corporation;  he shall
appoint  and  discharge  employees  and agents of the  Corporation  (other  than
officers  elected  by the Board of  Directors)  and fix their  compensation  (in
accordance with the guidelines  established by the Board or the Stock Option and
Compensation Committee); and he shall see that all orders and resolutions of the
Board of Directors are carried into effect.  The President  shall have the power
to execute bonds, mortgages and other contracts, agreements and instruments of a
contractual  nature  pertaining to matters which arise in the normal conduct and
ordinary  course of  business  of the  Corporation.  The  President  shall  also
generally  have the powers and perform the duties which  appertain to the office
and shall do and perform  such other duties as from time to time may be assigned
to him by the Board of Directors.

     8.  VICE  PRESIDENTS.  If chosen, the Vice Presidents in the order of their
seniority, shall, in the absence or disability of the President, exercise all of
the powers  and duties of the  President.  Such Vice  Presidents  shall have the
power to execute bonds,  notes,  mortgages and other  contracts,  agreements and
other  instruments of a contractual  nature pertaining to matters which arise in
the normal conduct and ordinary course of business and shall do and perform such
other  duties  incident  to the  office  of Vice  President  and as the Board of
Directors,  the  Chairman  of the  Board,  the Chief  Executive  Officer  or the
President shall direct.

     9.  The Secretary. The Secretary shall attend all sessions of the Board and
all  meetings  of the  shareholders  and  record  all votes and the  minutes  of
proceedings  in a book to be kept for that purpose and shall perform like duties
for the  Committees  when  requested.  The Secretary  shall give, or cause to be
given,  notice of all meetings of the shareholders and of the Board of Directors
and shall  perform all the duties  incident to the office of Secretary  and such
other duties as may be prescribed by the Board of Directors. The Secretary shall
affix the corporate seal to any instrument requiring it, and when so affixed, it
shall be attested by the signature of the Secretary or an Assistant Secretary or
the  Treasurer  or an  Assistant  Treasurer  who may  affix the seal to any such
instrument  in the event of the  absence or  disability  of the  Secretary.  The
Secretary  shall have and be the  custodian  of the stock  records and all other
books,  records and papers of the  Corporation  (other than financial) and shall
see that all books,  reports,  statements,  certificates and other documents and
records required by law are properly kept and filed.

     10. THE  TREASURER.  The  Treasurer  shall have the care and custody of the
corporate funds, and other valuable  effects,  including  securities,  and shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the Corporation and, in general, shall perform all the duties incident to the
office of  Treasurer  and such other duties as may from time to time be assigned
to him by the Chief  Executive  Officer,  the  President or the Board.  He shall
deposit all moneys and other  valuable  effects in the name and to the credit of
the  Corporation  in such  depositories  as may be  designated  by the  Board of
Directors.  The Treasurer  shall disburse the funds of the Corporation as may be
ordered by the Board, taking proper vouchers for such  disbursements,  and shall
render to the Chief  Executive  Officer,  the  President and  directors,  at the
regular meetings of the Board, or


                                      -13-
<PAGE>


whenever they may require it, an account of all transactions as Treasurer and of
the  financial  condition  of the  Corporation.  If  required  by the  Board  of
Directors,  the  Treasurer  shall give the  Corporation a bond for such term, in
such sum and with such surety or sureties as shall be  satisfactory to the Board
for  the  faithful  performance  of the  duties  of  such  office  and  for  the
restoration to the  Corporation,  in case of such person's  death,  resignation,
retirement or removal from office,  of all books,  papers,  vouchers,  money and
other  property  of  whatever  kind in such  person's  possession  or under such
person's control belonging to the Corporation.

     11. ASSISTANT SECRETARY OR ASSISTANT TREASURER.  Any Assistant Secretary or
Assistant  Treasurer,  if one or more  have been  appointed,  shall  assist  the
Secretary  or the  Treasurer,  as the case  may be,  in the  performance  of his
duties,  shall be vested  with all the powers and be required to perform all the
duties of the Secretary or Treasurer, respectively, in his absence or refusal to
act. He shall also exercise such powers and perform such duties as may be may be
conferred  or required by the Chief  Executive  Officer,  the  President  or the
Board.

     12. ADDITIONAL  OFFICERS.  The Board  may elect or appoint such  additional
officers,  including,  but not limited to, a Chief  Operating  Officer,  a Chief
Financial  Officer,  Controller,  or  otherwise  as it  may  deem  necessary  or
advisable, and may delegate the power to appoint such additional officers to any
committee or principal officer.  Such additional officers shall have such powers
and  duties and shall hold  office  for such terms as may be  determined  by the
Board or such committee or officer.  The other officers of the Corporation shall
perform  such duties as shall be assigned to them from time to time by the Board
of Directors, the Chief Executive Officer or the President.

     12. COMPENSATION. The compensation of the officers of the Corporation shall
be fixed from time to time in the manner prescribed by the Board of Directors or
by the Stock Option and Compensation Committee.


                                   ARTICLE IV

                                  MISCELLANEOUS
                                  -------------

     1.  SEAL.  The seal of the  Corporation shall be in the form  approved from
time to time by the Board of Directors.

     2.  CORPORATE  BOOKS.  The books of the  Corporation  may be kept within or
without the State of New York, at such place or places as the Board of Directors
may, from time to time, determine.

     3.  FISCAL  YEAR.  The fiscal year of the  Corporation  shall be fixed, and
shall be subject to change, by the Board of Directors.

     4.  SIGNATURES.  All  checks,  drafts,  notes,  bonds,  mortgages  or other
obligations of the  corporation  and other  instruments  shall be signed by such
officer or officers acting under authority  granted by a resolution of the Board
of Directors or as the Board of Directors may from time to time  designate or as
otherwise permitted by these Amended and Restated By-Laws.


                                      -14-
<PAGE>


     5.  STOCK  OF OTHER  CORPORATIONS. The Board  of Directors  shall have  the
right to  authorize any officer  or other person on behalf of the Corporation to
attend, act and vote at meetings of  the  stockholders  of  any  corporation  in
which the  Corporation  shall hold stock,  to  exercise  thereat any and all the
rights and powers incident to the ownership of such stock and to execute waivers
of notice of  such meetings and  calls therefor;  and authority may  be given to
exercise the same either on one or more designated  occasions,  or  generally on
all occasions until revoked by the Board. In the event that the Board shall fail
to give such authority, such  authority  may be exercised by the Chairman of the
Board,  the  Chief  Executive  Officer or the President in  person  or by  proxy
appointed by him on behalf of the Corporation.

     6.  DIVIDENDS. The Board of Directors may declare and pay dividends upon
the outstanding shares of the  Corporation  from time to time and to such extent
as they deem advisable, in the manner and upon the terms and conditions provided
by the New  York Business Corporation Law  and the Certificate of Incorporation.

     7.  GENDER.  The use of masculine gender  herein shall include the feminine
gender where the context so requires.


                                    ARTICLE V

                                 INDEMNIFICATION
                                 ---------------

     1.  INDEMNIFICATION   OF   DIRECTORS  OR  OFFICERS.  The  Corporation  will
indemnify  to the fullest extent then  permissible  under the  New York Business
Corporation Law and the Insurance Law of New York each person who shall serve at
any time as director or officer of the Corporation.

     2.  INDEMNIFICATION OF DIRECTORS.  Subject to the applicable  provisions of
the New York Business Corporation Law:

         (a) GENERAL. The Corporation (i) may indemnify a director or a director
and officer of the Corporation  ("Indemnitee") made, or threatened to be made, a
party to an action,  suit or proceeding by or in the right of the Corporation to
procure a judgment in its favor, and (ii) shall indemnify an Indemnitee made, or
threatened  to be made,  a party to an  action,  suit or  proceeding  including,
without limitation,  one by or in the right of any other corporation of any type
or kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other  enterprise,  which such Indemnitee served in any capacity
at the request of the  Corporation,  to procure a judgment in its favor,  (other
than an action,  suit or proceeding  referred to in clause (i)),  whether civil,
criminal,  administrative or  investigative,  by reason of the fact that he, his
testator  or  intestate,  was a  director  or a  director  and  officer  of  the
Corporation,  or served  such other  corporation,  partnership,  joint  venture,
trust,  employee  benefit  plan or other  enterprise  in any  capacity,  against
judgments, fines, amounts paid in settlement and reasonable expenses,  including
attorneys' fees,  actually and necessarily  incurred as a result of such action,
suit or proceeding, or any appeal therein, provided that the Indemnitee acted in
good faith, for a purpose which he reasonably believed to be in, or, in the case
of service for any other corporation or any partnership,  joint venture,  trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the Corporation and, in criminal actions and  proceedings,  in addition,  had no
reasonable cause to believe that his conduct was unlawful; and


                                      -15-
<PAGE>


further  provided  that the  Corporation  shall not be required to  indemnify an
Indemnitee  with  respect to any action,  suit or  proceeding  commenced by such
Indemnitee, or any counterclaim,  cross-claim,  or third-party claim asserted by
the Indemnitee against the Corporation.

         (b)  ENTITLEMENT  TO  INDEMNIFICATION.   An  Indemnitee  who  has  been
successful,  on the merits or  otherwise,  in the defense of a civil,  criminal,
administrative  or  investigative  action,  suit or  proceeding of the character
described in this Article V, Section 2, shall be entitled to  indemnification as
authorized  in this  Article  V,  Section  2.  An  Indemnitee  who has not  been
successful,  on the merits or  otherwise,  in the defense of a civil,  criminal,
administrative  or  investigative  action,  suit or  proceeding of the character
described  in this  Article V,  Section 2, shall  nevertheless  be  entitled  to
indemnification as authorized in this Article V, Section 2, unless a judgment or
other final  adjudication  adverse to such Indemnitee  establishes that his acts
were (i)  committed  in bad faith or were the  result of active  and  deliberate
dishonesty and were material to the cause of action so adjudicated, or (ii) that
he personally  gained in fact a financial  profit or other advantage to which he
was not legally entitled.

         (c) NO  PRESUMPTION.  The  termination  of any  such  civil,  criminal,
administrative  or  investigative   action,  suit  or  proceeding  by  judgment,
settlement,  conviction or upon a plea of nolo  contendere,  or its  equivalent,
shall not in itself create a  presumption  that any such director or officer did
not act in good faith, for a purpose which he reasonably  believed to be in, or,
in the case of  service  for any other  corporation  or any  partnership,  joint
venture,  trust, employee benefit plan or other enterprise,  not opposed to, the
best interests of the  Corporation  or that he had  reasonable  cause to believe
that his conduct was unlawful.

         (d) EMPLOYEE  BENEFIT PLANS. For the purpose of this Article V, Section
2, a  corporation  shall be deemed to have  requested an  Indemnitee to serve an
employee  benefit plan where the performance by such Indemnitee of his duties to
the Corporation also imposes duties on, or otherwise  involves services by, such
Indemnitee to the plan or  participants  or  beneficiaries  of the plan.  Excise
taxes  assessed  on an  Indemnitee  with  respect to an  employee  benefit  plan
pursuant  to  applicable  law shall be  considered  fines for  purposes  of this
Article V, Section 2. Action taken or omitted by an  Indemnitee  with respect to
an employee  benefit plan in the performance of such  Indemnitee's  duties for a
purpose  reasonably  believed by such  Indemnitee  to be in the  interest of the
participants  and  beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Corporation.

         (e) ADVANCEMENT OF EXPENSES.  Expenses (including,  without limitation,
attorney's fees and expenses) actually and necessarily incurred by an Indemnitee
in defending an actual or  threatened  action,  suit or  proceeding  may, at the
discretion of the Board of Directors,  be paid by the  Corporation in advance of
the  final  disposition  of  such  action  or  proceeding  upon  receipt  of  an
undertaking  by or on behalf of such  Indemnitee to repay such amount as, and to
the  extent,   the  Indemnitee  is  ultimately  found  not  to  be  entitled  to
indemnification  or the  expenses  so  advanced  by the  Corporation  exceed the
indemnification to which he is entitled.


                                      -16-
<PAGE>


                                   ARTICLE VI

                                   AMENDMENTS
                                   ----------

         All  by-laws  of the  Corporation  shall be subject  to  alteration  or
repeal,  and new by-laws may be made,  by the unanimous  written  consent of all
Directors, by the affirmative vote of a majority of the Board of Directors given
at any  regular  meeting  or at a special  meeting  of the  Board of  Directors,
(provided  notice of the  proposed  alteration  or repeal or of the proposed new
by-laws be included in the notice of such special  meeting),  by the affirmative
vote of  holders  of  record  of a  majority  of the  outstanding  stock  of the
Corporation,  given at an annual  meeting or at any  special  meeting  (provided
notice of the  proposed  alteration  or repeal or of the proposed new by-laws be
included  in the  notice  of such  special  meeting),  or, if  permitted  by the
Certificate  of  Incorporation,  such  action may be taken  without a meeting on
written  consent,  setting  forth the action so taken,  signed by the holders of
outstanding shares having not less than the minimum number of votes specified in
the Certificate of  Incorporation  (including less than all outstanding  shares)
sufficient  for  corporate  action that would be  necessary to authorize or take
such  action at a meeting  at which all shares  entitled  to vote  thereon  were
present and voted.  By-laws made or altered by the Board of  Directors  shall be
subject to alteration or repeal by the shareholders.


                                      -17-


                            INDEMNIFICATION AGREEMENT

     This  Indemnification  Agreement (this "Agreement"),  dated as of April 29,
1999 by and among NYMAGIC,  Inc., a New York  corporation with an address at 330
Madison  Avenue,  New York,  New York  10017  (the  "Company"),  and each of the
persons  identified on Schedule 1 to this Agreement  (each an  "Indemnitee"  and
collectively the "Indemnitees").

                                    Recitals

     A. The New York  Business  Corporation  Law, as amended (as so amended from
time to time,  the "BCL"),  permits the Company to indemnify  the  directors and
officers of the Company.

     B. The By-laws of the Company (the "By-laws") provide that the Company will
indemnify to the fullest extent then  permissible  under the BCL each person who
shall serve at any time as a director or officer of the Company.

     C. The  Indemnitees  serve or have served as directors of the Company or as
directors and officers of the Company and in such capacity or capacities perform
or have performed a valuable service for the Company.

     D. The Board of Directors of the Company has approved and adopted corporate
resolutions  pursuant  to Section 721 of the BCL (the  "Corporate  Resolutions")
providing that the Company will  indemnify the  Indemnitees as set forth in this
Agreement.

     E. The  Company  has  entered  into  this  Agreement  and has  assumed  the
obligations imposed on the Company hereby in order to more specifically  provide
for  the   indemnification   contemplated  by  the  By-laws  and  the  Corporate
Resolutions  to each  of the  Indemnitees  for  his  service  as a  director  or
executive  officer of the Company  and/or to induce each of the  Indemnitees  to
serve or to continue to serve as a director of the Company or as a director  and
officer of the Company.

     Accordingly, the Company and each Indemnitee agrees as follows:

     1. Authorization for Indemnification of Indemnitees.

     (a) General.  The Company shall  indemnify each  Indemnitee  whenever he is
made,  or  threatened  to be made,  a party to an  action,  suit or  proceeding,
including, without limitation, one by or in the right of the Company or by or in
the right of any other corporation of any type or kind,  domestic or foreign, or
any  partnership,   joint  venture,   trust,  employee  benefit  plan  or  other
enterprise,  which such Indemnitee  served in any capacity at the request of the
Company,  to  procure  a  judgment  in  its  favor,  whether  civil,   criminal,
administrative or investigative,  by reason of the fact that he, his testator or
intestate,  was a  director  or  officer of the  Company,  or served  such other
corporation,  partnership,  joint venture, trust, employee benefit plan or other
enterprise in any


<PAGE>


capacity,  against judgments,  fines,  amounts paid in settlement and reasonable
expenses,  including  attorneys'  fees,  actually and necessarily  incurred as a
result of such action, suit or proceeding,  or any appeal therein,  provided the
Indemnitee  acted, in good faith, for a purpose which he reasonably  believed to
be in, or, in the case of service for any other  corporation or any partnership,
joint venture, trust, employee benefit plan or other enterprise, not opposed to,
the best interests of the Company and, in criminal actions and  proceedings,  in
addition,  had no  reasonable  cause to believe  that his conduct was  unlawful.
Nothing  contained in this Agreement shall affect any rights to  indemnification
which any Indemnitee may otherwise be entitled to by law or otherwise.

     (b)  No  Presumption.   The  termination  of  any  such  civil,   criminal,
administrative  or  investigative   action,  suit  or  proceeding  by  judgment,
settlement,  conviction or upon a plea of nolo  contendere,  or its  equivalent,
shall not in itself create a  presumption  that any  Indemnitee  did not act, in
good faith, for a purpose which he reasonably believed to be in, or, in the case
of service for any other corporation or any partnership,  joint venture,  trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the Company  and,  in criminal  actions and  proceedings,  in  addition,  had no
reasonable cause to believe that his conduct was unlawful.

     (c) Benefit Plan Matters. For purposes of this Agreement, the Company shall
be deemed to have  requested  an  Indemnitee  to serve an employee  benefit plan
where the  performance  by such  Indemnitee  of his duties to the  Company  also
imposes duties on, or otherwise involves services by, the Indemnitee to the plan
or  participants  or  beneficiaries  of the plan.  Excise  taxes  assessed on an
Indemnitee  with respect to an employee  benefit plan pursuant to applicable law
shall be  considered  fines for  purposes  of this  Agreement.  Action  taken or
omitted  by an  Indemnitee  with  respect  to an  employee  benefit  plan in the
performance of such Indemnitee's duties for a purpose reasonably believed by the
Indemnitee to be in the interests of such  participants and beneficiaries of the
plan  shall be  deemed  to be for a  purpose  which is not  opposed  to the best
interests of the Company.

     (d) Entitlement to Indemnification.  An Indemnitee who has been successful,
on the merits or otherwise, in the defense of a civil, criminal,  administrative
or investigative  action, suit or proceeding for which indemnification is sought
under this Agreement shall be entitled to indemnification as herein provided. An
Indemnitee  who has not been  successful,  on the  merits or  otherwise,  in the
defense of such a civil, criminal,  administrative or investigative action, suit
or proceeding shall nevertheless be entitled to indemnification  hereunder,  and
such  indemnification  is hereby  authorized,  unless a judgment  or other final
adjudication adverse to such Indemnitee establishes that his acts were committed
in bad faith or were the result of active  and  deliberate  dishonesty  and were
material to the cause of action so adjudicated  or that he personally  gained in
fact a financial profit or other advantage to which he was not legally entitled.

     (e)  Advancement  of Expenses.  Expenses  (including,  without  limitation,
attorneys' fees and expenses  actually and necessarily  incurred in defending an
actual or threatened action,  suit or proceeding shall be paid by the Company in
advance of the final  disposition  of such action,  suit or proceeding as herein
provided.


                                       2
<PAGE>




     2. Additional Indemnification.  It is the intention of the Company that the
Indemnitees  be  indemnified  hereunder  to the  greatest  extent  permitted  or
authorized  under  applicable  law.  If and to the  extent  that  (a) the BCL is
amended hereafter to require or permit  indemnification,  expense advancement or
exculpation that is or may be more favorable to the Indemnitees than the maximum
permissible  indemnification,  expense advancement and exculpation now permitted
thereunder and provided in this Agreement,  or (b) the Company reincorporates in
or merges, consolidates or combines into or with any other corporation or entity
by virtue of which  transaction  the Company is not the surviving,  resulting or
acquiring  corporation and the surviving,  resulting or acquiring corporation is
incorporated in a different  jurisdiction which at such time requires or permits
indemnification,  expense  advancement  or  exculpation  that  is or may be more
favorable  to the  Indemnitees  than the  maximum  permissible  indemnification,
expense  advancement and exculpation now permitted under the BCL and provided in
this  Agreement,  then  pursuant  to this  Agreement  the  Indemnitees  shall be
entitled to, and this Agreement shall be deemed to be amended to provide for the
Indemnitees'  contractual entitlement to,  indemnification,  expense advancement
and  exculpation  to the maximum  extent that may be permitted or required under
such  applicable  law at the  time of any  initial  or  subsequent  request  for
indemnity  hereunder,  whether or not the  Company  has  adopted  any Charter or
By-law  provisions  adopting,  effecting or implementing any provisions  thereof
which are permissive and not mandatory in nature. Nothing contained herein shall
be deemed to detract from, diminish, impair, limit or adversely affect any right
which the Indemnitees may have under this Agreement,  and to the extent that any
terms,   conditions  or  provisions  of  this  Agreement   (including,   without
limitation,  those in Section 1 hereof) are more  favorable  to the  Indemnitees
than the maximum  indemnification,  expense  advancement  and  exculpation  then
permitted or required under such applicable law, then such terms, conditions and
provisions of this Agreement  shall be preserved and  integrated  with such more
favorable  terms from  then-applicable  law and shall  continue  to apply to the
Indemnitees'  rights by  virtue of this  Agreement.  The same  expansion  of the
Indemnitees' rights and deemed inclusion herein and integration  herewith of any
terms,  conditions or provisions more favorable to the  Indemnitees  shall occur
upon  and  with  respect  to  any  amendment  of  the  provisions   relating  to
indemnification,   expense   advancement   and   exculpation  in  the  Company's
Certificate of Incorporation (the "Charter") or By-laws and any provision by the
Company to any other  officer or director of the Company of any other  different
form of indemnification contract or agreement.

     3. Establishment of Escrow; Procedures.

     (a) Establishment of Segregated Escrow Account. In order to provide for the
prompt  payment of expenses  and  indemnifiable  amounts  payable by the Company
under this  Agreement,  the Company shall establish and maintain for a period of
not less than three years from the date hereof, a segregated escrow account (the
"Escrow  Account") in The Bank of New York (the  "Escrow  Agent") in the initial
amount of $750,000  (such amount,  together with interest  thereon,  the "Escrow
Funds").  The  fees  and  expenses  of the  Escrow  Agent  shall be borne by the
Company. The Escrow Funds shall be used for no purpose other than advancement of
expenses and payment of indemnifiable  amounts hereunder and any amount required
to be repaid by the Indemnitees as herein


                                       3
<PAGE>


provided shall be considered  Escrow Funds to the extent  originally paid out of
the Escrow Account and shall be promptly  redeposited in the Escrow Account. The
obligation of the Company to establish  the Escrow  Account and to make payments
of Escrow Funds as herein provided shall be in addition to and not in limitation
of any other  obligation  of or on behalf of the Company or any third party with
respect to the payment of indemnifiable  amounts,  including without limitation,
payment of claims  under any policy of insurance  maintained  by the Company for
the benefit of its directors and officers, and the indemnification obligation of
the Company shall not be limited to the amount of the Escrow Funds.

     (b) Indemnification  Procedures. For purposes of requesting indemnification
under Section 1(d) hereof,  an Indemnitee shall submit to the Escrow Agent, with
a  copy  to  the  Company,  a  sworn  statement  of  claim  for  indemnification
substantially in the form of Exhibit A hereto (the "Indemnification  Statement")
to the effect that he is entitled to indemnification hereunder. The Escrow Agent
(or, in the event that all of the Escrow  Funds have been  previously  paid out,
the Company) shall pay all amounts due to such Indemnitee promptly following the
submission of an Indemnification  Statement unless, in the case of an Indemnitee
who has not been successful,  on the merits or otherwise,  in the defense of the
action, suit or proceeding underlying the Indemnification  Statement, a judgment
or other final  adjudication  adverse to such Indemnitee  establishes that he is
not entitled to be indemnified by the Company under this Agreement or otherwise.

     (c)  Expense  Advancement  Procedures.   For  purposes  of  requesting  the
advancement of expenses  pursuant to Section 1(e) hereof, an Indemnitee shall be
required  to submit to the Escrow  Agent,  with a copy to the  Company,  a sworn
statement of request for  advancement of expenses  substantially  in the form of
Exhibit B hereto (the "Undertaking"), to the effect that (i) he has actually and
necessarily incurred expenses (including,  without limitation,  attorneys' fees)
in defending an action or threatened action, suit or proceeding to which he is a
party or is  threatened  to be made a party by reason of the fact that he was or
is a director  or officer of the Company  and (ii) he  undertakes  to repay such
amount  if it shall  be  determined  ultimately  that he is not  entitled  to be
indemnified.  The Escrow  Agent (or,  in the event that all of the Escrow  Funds
have been  previously  paid out,  the Company)  shall  promptly pay the expenses
described in the  Undertaking.  No security shall be required in connection with
any Undertaking, and any Undertaking shall be accepted without reference to such
Indemnitee's ability to make repayment.

     (d) Selection of Counsel. In the event the Company shall be obligated under
this  Section 4 to pay any amount in respect of any action,  suit or  proceeding
against any  Indemnitee,  the Company shall be entitled to assume the defense of
such  proceeding,  with counsel  reasonably  acceptable  to and approved by such
Indemnitee,  upon the  delivery  to the  Indemnitee  of  written  notice  of the
Company's  election to do so. It is understood and agreed that counsel  selected
by the Company's insurer shall be acceptable to the Indemnitees.  After delivery
of such notice, approval of such counsel by the Indemnitees and the retention of
such counsel by the Company,  the Company will not be liable to the  Indemnitees
under this Agreement for any fees of separate counsel  subsequently  incurred by
the Indemnitees with respect to the same action, suit or proceeding;


                                       4
<PAGE>


provided,  however,  that if (i) the employment of counsel by any Indemnitee has
been  previously  authorized by the Company,  (ii) counsel for any Indemnitee or
Indemnitees with the same interests shall have reasonably concluded, and advised
the  Company  in  writing  of such  counsel's  conclusion,  that  there may be a
conflict of interest  between the Company and such  Indemnitee or Indemnitees in
the conduct of any such defense,  or (iii) the Company shall not, in fact,  have
employed counsel to assume the defense of such proceeding,  then such Indemnitee
or  Indemnitees  may select and employ  their own  counsel to direct the defense
thereof and the fees and expenses of such counsel  shall be paid by the Company;
provided,  however,  that Company shall be liable to the Indemnitees  under this
Agreement for the fees of only one separate counsel incurred by Indemnitees with
the  same   interests   with  respect  to  such  action,   suit  or  proceeding.
Notwithstanding  any  assumption  of the  defense  of any such  action,  suit or
proceeding  and  employment  of counsel with  respect  thereto by the Company in
accordance with the foregoing,  the  Indemnitees  shall have the right to employ
their own separate counsel to participate in any such action, suit or proceeding
at the Indemnitees'  expense.  The Company shall not settle any action,  suit or
proceeding  without the prior written consent of any Indemnitee  unless, as part
of such settlement,  such Indemnitee  receives a full and unconditional  release
reasonably  satisfactory  to the  Indemnitee.  No  Indemnitee  shall  settle any
action,  suit or  proceeding  without the prior  written  consent of the Company
unless,   as  part  of  such  settlement,   the  Company  receives  a  full  and
unconditional release reasonably satisfactory to the Company.

     4.  Corporate  Approval.   The  Company  represents  and  warrants  to  the
Indemnitees that: (i) the Company has all requisite power and authority to enter
into  this  Agreement  and to  perform  its  obligations  hereunder;  (ii)  this
Agreement and the performance of all of the Company's obligations hereunder have
been approved by all corporate  action required on the part of the Company under
the  Charter,  the  By-laws  or  applicable  law or  contract;  and  (iii)  this
Agreement,  when  executed,  will  constitute  the  valid  and  legally  binding
obligation of the Company,  enforceable  against the Company in accordance  with
its terms, subject to any applicable bankruptcy law and equitable limitations.

     5. Fees and Expenses of  Enforcement.  It is the intent of the Company that
the  Indemnitees  not be  required  to incur the  expenses  associated  with the
enforcement  of their rights under this  Agreement by  litigation or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Indemnitees hereunder.  Accordingly,  if
it should  reasonably  appear to the Indemnitees  that the Company has failed to
comply with any of its obligations under this Agreement or in the event that the
Company or any other person takes any action to declare this  Agreement  void or
unenforceable,  or institutes any action, suit or proceeding designed (or having
the effect of being  designed) to deny, or to recover from, the  Indemnitees the
benefits  intended  to be  provided to the  Indemnitees  hereunder,  the Company
irrevocably  authorizes the  Indemnitees  from time to time to retain counsel of
his choice,  at the expense of the Company,  to  represent  the  Indemnitees  in
connection  with the  initiation  or defense of any  litigation  or other  legal
action, whether by or against the Company or any director, officer,  stockholder
or other person affiliated with the Company, in any jurisdiction.  Regardless of
the outcome thereof, the Company shall pay and be solely responsible for any and
all expenses,


                                       5
<PAGE>


including,  without  limitation,  attorney's  fees and  expenses,  actually  and
reasonably  incurred by the Indemnitees (i) as a result of the Company's failure
to perform  this  Agreement or any  provision  hereof or (ii) as a result of the
Company  or any  person  contesting  the  validity  or  enforceability  of  this
Agreement or any provision hereof as aforesaid.

     6.  Reorganizations.  In the event that the Company  shall be a constituent
corporation   (including  any   constituent  of  a  constituent)  in  a  merger,
reorganization,  consolidation, combination or similar transaction, the Company,
if it shall not be the surviving,  resulting or acquiring  corporation  therein,
shall  require as a condition  thereto the  surviving,  resulting  or  acquiring
corporation  to  expressly  assume  and  adopt  this  Agreement  and to agree to
indemnify the Indemnitees to the full extent provided in this Agreement.

     7. Nonexclusivity, Survival and Subrogation.

     (a) Nonexclusivity. The right to indemnification provided by this Agreement
shall not be  exclusive  of any other  rights  to which the  Indemnitees  may be
entitled under the Charter, the By-laws,  the BCL, any other statute,  insurance
policy, agreement, vote of shareholders or of directors or otherwise.

     (b) Survival.  The  provisions of this  Agreement  shall survive the death,
disability,  or incapacity of any of the  Indemnitees or the  termination of any
Indemnitee's service as an director or officer of the Company and shall inure to
the  benefit  of,  and  be   enforceable   by,  heirs,   executors,   guardians,
administrators or assigns of each Indemnitee.

     (c)  Subrogation.  In the event of any  payment by the  Company  under this
Agreement,  the Company shall be subrogated to the extent  thereof to all rights
of recovery  previously vested in the Indemnitees,  who shall cooperate with the
Company,  at the Company's expense, in executing all such instruments and taking
all such  other  actions as shall be  reasonably  necessary  for the  Company to
enforce such right or as the Company may reasonably request.

     8.  Governing  Law.  This  Agreement  shall be governed by and construed in
accordance with the laws of the State of New York,  without giving effect to the
principles of conflict of laws thereof.

     9. Miscellaneous.

     (a) This Agreement contains the entire agreement of the parties relating to
the subject matter hereof.

     (b) Any  provision of this  Agreement may be amended or waived only if such
amendment or waiver is in writing and signed,  in the case of an  amendment,  by
the parties  hereto or, in the case of a waiver,  by the party  against whom the
waiver is to be effective.  No failure or delay by any party in  exercising  any
right, power or privilege hereunder shall operate as a waiver


                                       6
<PAGE>


hereof nor shall any single or partial  exercise  thereof  preclude any other or
future exercise thereof or the exercise of any other right, power or privilege.

     (c) If any provision of this Agreement or the  application of any provision
hereof to any person or circumstance is held invalid, unenforceable or otherwise
illegal,  the remainder of this Agreement and the  application of such provision
to other persons or  circumstances  shall not be affected,  and the provision so
held to be invalid,  unenforceable or otherwise illegal shall be reformed to the
extent  (and only to the extent)  necessary  to make it  enforceable,  valid and
legal.

     (d)  Nothing  contained  in this  Agreement  is  intended  to create in the
Indemnitees  any separate or  independent  right to continued  employment by, or
service with, the Company.

     (e)  This  Agreement  may  be  executed  in  counterparts,   but  all  such
counterparts taken together shall constitute one and the same Agreement.

     (f) The descriptive headings of this Agreement are inserted for convenience
only  and do not  constitute  a part of  this  Agreement.  The  use of the  word
"including" in this Agreement shall be by way of example rather than limitation.
The use of the word "or" in this Agreement is intended to be conjunctive  rather
than disjunctive.


                                       7
<PAGE>


     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.

                                           NYMAGIC, INC.


                                           By:___________________
                                              Name:
                                              Title:



                  [SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]




<PAGE>


     The undersigned, desiring to become a party to that certain Indemnification
Agreement  dated as of April 29, 1999,  among NYMAGIC,  INC. (the "Company") and
the persons identified therein as Indemnitees (the "Agreement"), by execution of
this  Counterpart  Signature Page hereby agrees to and accepts the terms of such
Agreement and hereby authorizes the Company to attach this Counterpart Signature
Page to the Agreement.

                                        INDEMNITEE:


                                        -----------------------
                                        Print Name:






            [COUNTERPART SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]


<PAGE>


                                                                      EXHIBIT A

                            Indemnification Statement

STATE OF                            )
                                    ) ss.
COUNTY OF                           )

     I,___________________  , being  first  duly  sworn,  do depose and state as
follows:

     1.  This   Indemnification   Statement   is   submitted   pursuant  to  the
Indemnification  Agreement,  dated as of April 29, 1999, among NYMAGIC,  Inc., a
New York corporation (the "Company"),  certain other persons and the undersigned
and the related Escrow Agreement dated June 4, 1999, between the Company and The
Bank of New York, as Escrow Agent.

     2. I am requesting  indemnification  against expenses  (including,  without
limitation,  attorneys' fees and expenses), costs, judgments, damages, fines and
amounts paid in settlement, all of which (collectively, "Liabilities") have been
actually  and  necessarily  incurred  by me in  connection  with  an  actual  or
threatened  action,  suit or  proceeding  to  which  I was or am a  party  or am
threatened  to be made a party by reason of the fact that I am or was a director
or officer of the Company.

     3.  With  respect  to all  matters  related  to any  such  action,  suit or
proceeding,  I am entitled to be indemnified as herein contemplated  pursuant to
the aforesaid Indemnification Agreement or otherwise.

     4.  Without  limiting  any  other  rights  which I have or may  have,  I am
requesting  indemnification  against  Liabilities  which have  arisen out of the
following matter:

                                          ---------------------------------
                                          Name of Indemnitee

Subscribed  and sworn to before me, a Notary  Public in and for said  County and
State, this _____ day of _____________, 199 /200_.

[Seal]

My commission expires the ______ day of _____________, 19    .


<PAGE>


                                                                      EXHIBIT B

                                   Undertaking

STATE OF                            )
                                    )ss.
COUNTY OF                           )

     I,  __________________,  being  first  duly  sworn,  do depose and state as
follows:

     1. This Undertaking is submitted pursuant to the Indemnification Agreement,
dated as of April 29, 1999,  among NYMAGIC,  Inc., a New York  corporation  (the
"Company"),  certain other persons and the  undersigned  and the related  Escrow
Agreement  dated June 4, 1999,  between the Company and The Bank of New York, as
Escrow Agent.

     2. I am requesting  advancement  of certain  expenses  (including,  without
limitation,  attorneys' fees and expenses) which I have actually and necessarily
incurred in defending an actual or  threatened  action,  suit or  proceeding  to
which I am or was a party or am  threatened  to be made a party by reason of the
fact that I was or am a director or officer of the Company.

     3. I hereby  undertake  to repay this  advancement  of expenses if it shall
ultimately be determined that I am not entitled to be indemnified by the Company
under the aforesaid Indemnification Agreement or otherwise.

     4. The  expenses  for which  advance is  requested  are,  in  general,  all
expenses related to the following matter:




                                            ---------------------------------
                                            Name of Indemnitee

Subscribed  and sworn to before me, a Notary  Public in and for said  County and
State, this _____ day of ______________, 199_ /200_.

[Seal]


My commission expires the ____ day of ________, 199_/200_.


<PAGE>


                                                                    Schedule 1

                                  NYMAGIC, INC

                       Names and Addresses of Indemnitees


Thomas J. Condon            [ADDRESSES OMITTED]


Jean H. Goulding


John Kean, Jr.





William R. Scarbrough


Michael Shaffet


Richard T. Soper


William Thorne


Sergio B. Tobia


Louise B. Tollefson





Charles Mitchell


James A. Lambert


John N. Blackman


Mark W. Blackman





                                  NYMAGIC, INC.

                               PHANTOM STOCK PLAN

     Section 1. Establishment of Plan; Definitions.

     1.1  Establishment  of  Plan.   NYMAGIC,   Inc.,  a  New  York  corporation
("Employer") hereby establishes the NYMAGIC Inc. Phantom Stock Plan (the "Plan")
effective as of January 1, 1999.

     1.2  Definitions.  For purposes of this Plan, the following  terms have the
following meanings:

          "1934 Act" means the Securities  Exchange Act of 1934.  (References to
     specific  provisions  of law  shall be  deemed  to  include  references  to
     amendments  or  supplements  thereto  or  subsequent  provisions  of law of
     similar import.)

          "Cause"  means:  (a) the willful and  material  neglect of duties by a
     Participant, (b) a Participant's conviction of, or plea of no contest to, a
     felony, (c) a Participant's commission of theft (other than an isolated act
     or acts  relating to objects of nominal  value) or common law fraud against
     the Company or its customers,  or (d) any other wrongful act committed by a
     Participant  that  has  a  material  adverse  effect  on  the  business  or
     reputation of the Company.  For the purposes of the previous  sentence,  no
     act or failure to act on the  Participant's  part shall be deemed "willful"
     unless done,  or omitted to be done, by the  Participant  not in good faith
     and without reasonable belief that the Participant's action or omission was
     in the best interest of the Company.

          "Change of  Control"  means,  with  respect to the  Employer,  any (i)
     issuance,  sale,  assignment,  transfer  or  other  disposition  of  equity
     interests,  (ii) exercise or conversion of equity  interests which entitles
     the  registered  owner  thereof to vote in an election of  Directors of the
     Employer ("Voting Stock"), or (iii) issuance, sale, assignment, transfer or
     other  disposition  of  any  other  security,  right,  option,  warrant  or
     agreement, convertible or exercisable into equity interests or Voting Stock
     (collectively  "Voting  Securities"),  or any  series of such  transactions
     described in Clause (i),  (ii),  and/or  (iii),  which,  in the  aggregate,
     results in a Person (or a group of Persons under Rule 13d promulgated under
     the 1934 Act other than Employer or any of its affiliates  being the record
     owner or  "beneficial  owner" (as such term is defined for purposes of Rule
     13d-3  promulgated  under the 1934 Act) of Voting  Securities and/or Voting
     Stock  entitled to elect (in the  aggregate,  without regard to limitations
     imposed by staggered  Directorships)  more than fifty  percent (50%) of the
     Directors of the Employer or of the  surviving  entity in a merger  between
     the Employer and such surviving  entity, or such other Person (or group) in
     fact elects or appoints a majority of the Directors of the Employer or such
     surviving  entity.  Notwithstanding  the  foregoing,  and for  avoidance of
     doubt, no Change of control shall be deemed to have occurred solely by


                                       1
<PAGE>


     reason  of any of John  N.  Blackman,  Jr.,  Mark W.  Blackman,  Louise  B.
     Tollefson and their respective  heirs,  executors and assigns and any trust
     formed  by any of them  for the  purpose  of  estate  and/or  tax  planning
     (including the Louise B. Tollefson  Florida  Intangible Tax Trust) (each, a
     "Blackman Shareholder") being considered the beneficial owner of any Voting
     Stock or Voting  Securities  held by any  other  Blackman  Shareholder  for
     purposes of Rule 13d-3 under the 1934 Act.

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Date of  Grant"  means the  effective  date of the grant of shares of
     Phantom Stock by the Committee.

          "Employer" means NYMAGIC, Inc. and its subsidiaries.

          "Employer Stock" means the $1.00 par value common stock of Employer.

          "Fair Market Value" means the mean of the high and low prices at which
     shares of Employer  Stock are reported to have traded on the relevant  date
     in all markets on which  trading in the Employer  Stock is reported,  or if
     there is no reported sale of the Employer  Stock on the relevant  date, the
     mean of the highest reported bid price and lowest reported asked priced for
     the Employer Stock on the relevant date,  provided that in the event that a
     share of  Phantom  Stock is  being  exercised  after  the  occurrence  of a
     Triggering  Event,  the Fair Market Value shall be, if the Triggering Event
     resulted  from  a  Sale  of  Stock  or a  Sale  of  Assets,  the  aggregate
     consideration  paid in connection with such transaction (less the aggregate
     amount payable under this Plan to  Participants),  divided by the number of
     then  outstanding  shares of Employer Stock adjusted as necessary for other
     classes of Employer Stock that may be outstanding on a fully diluted basis,
     but treating shares of Phantom Stock as not being outstanding. For purposes
     of measuring the Fair Market Value in connection  with a Triggering  Event,
     the date as of which Fair  Market  Value shall be  determined  shall be the
     effective date of the transaction giving rise to the Triggering Event.

          "Measurement Value" means, in respect of a share of Phantom stock, the
     value established by the Committee pursuant to Section 5.3.

          "Participants" has the meaning set forth in Section 4 below.

          "Person"  means and includes a natural  person,  corporation,  limited
     partnership,  general partnership,  joint stock company,  business trust or
     other organization or entity, whether or not a legal entity.

          "Phantom  Stock" means the rights to payment from Employer  granted to
     Participants pursuant to the terms of the Plan. Quantities of Phantom stock
     are expressed in "shares" corresponding to shares of Employer Stock.


                                       2

<PAGE>


          "Sale of Assets" means the sale,  transfer or the  disposition  by the
     Employer of all or substantially all of its assets.

          "Sale of Stock" means, with respect to Employer, the sale, transfer or
     disposition for value by the equity owners to an  unaffiliated  third party
     of an amount of equity  interests  such that,  after giving  effect to such
     sale,   transfer  or  other  disposition,   a  change  of  Control  results
     (regardless of the form of the transaction, including without limitation, a
     cash-out merger or a merger, recapitalization or consolidation).

          "Triggering  Event"  means  the first to occur of a Sale of Stock or a
     Sale of Assets.

     Section 2. Purpose of Plan.  The purpose of the Plan is to build and retain
a  capable,  experienced  long-term  management  team  and to  retain  the  best
personnel of the Employer and its subsidiaries by providing incentive and reward
to a limited  group of key  executives,  management  employees  and personnel to
promote the success of the Employer and its stockholders.  Employer expects that
it will benefit from the added flexible  incentive which these persons will have
in the  welfare of the  Employer as a result of their  benefits  under this Plan
being  determined by reference to the  appreciation in the value of the Employer
Stock.

     Section 3. Administration of the Plan.

     3.1  Committee.  The Plan shall be  administered  by those members  (herein
referred to as the "Committee") of the Stock Option and  Compensation  committee
of the Board of  Directors  of the  Employer  who  qualify as (a)  "Non-Employee
Directors,"  as that term is defined  in  subparagraph  (b)(3)(i)  of Rule 16b-3
promulgated under 1934 Act, and (b) "outside  directors,"  within the meaning of
Section 162(m) of the Code.

     3.2  Authority  of  Committee.  The  Committee  shall  have full  power and
authority,  subject  to  the  provisions  of the  Plan:  (a)  to  designate  the
individuals who may participate in the Plan, (b) to determine the terms of their
participation in the Plan, (c) to determine the terms,  timing and conditions of
the granting of shares of Phantom  Stock under the Plan,  (d) to  interpret  and
construe the provisions of the Plan, (e) to supervise the  administration of the
Plan, (f) to promulgate, amend and rescind rules and regulations relating to the
Plan, (g) to take all actions in connection  with or relating to or interpreting
the Plan as the committee deems to be necessary or  appropriate.  All decisions,
interpretations  and  designations  of the  Committee  shall be  conclusive  and
binding on all persons.  No members of the Committee shall be liable for any act
or omission in connection with the administration of the Plan unless it resulted
from the Committee member's willful misconduct.

     Section 4. Eligibility.  Key employees of the Employer,  including officers
(each such individual participating in the Plan, a "Participant" and
collectively, the "Participants"),


                                       3
<PAGE>


who are responsible for the management, growth and protection of the business of
the Employer and its subsidiaries as determined by the Committee are eligible to
be granted awards of shares of Phantom Stock under the Plan. It is intended that
this plan  qualify  as an  unfunded  "top hat" plan for the  benefit of a select
group of management  or highly  compensated  employees,  as described in Section
201(2) of the Employee  Retirement  Security Act of 1974, and that the Committee
limit participation in the Plan accordingly.

     Section 5. Shares of Phantom Stock.

     5.1 In  General.  Each  share  of  Phantom  Stock  granted  under  the Plan
constitutes a right to receive in cash the appreciation in the Fair Market Value
of one share of Employer  Stock, as determined as of the date of the exercise of
such share of Phantom Stock, over the Measurement Value of such share of Phantom
Stock.  The  Measurement  Value  shall be stated in the  grant as  described  in
Section  5.3 below and shall be subject to  adjustment  as provided in Section 8
below.

     5.2 Number of Shares of Phantom Stock Subject to Grant. The total number of
shares  of  Phantom  Stock  that  may be  granted  under  the  Plan is  shall be
determined by the  committee.  If any shares of Phantom Stock shall be forfeited
or otherwise  expire  without  being  exercised or be retired by Employer,  such
shares of Phantom Stock shall not again be granted under the Plan.

     5.3 Grant of Phantom Stock. The Committee,  in its sole  discretion,  shall
from  time to  time  prior  to the  termination  of the  Plan,  determine  which
individuals, from among those eligible, shall be granted shares of Phantom Stock
under the Plan. As promptly as  practicable  after an employee is granted shares
of Phantom Stock,  the Committee shall send the  participant a document  setting
forth the terms of the grant,  including the Date of Grant.  The Committee shall
establish or cause to be established a bookkeeping  account for each participant
and shall record or cause to be recorded  the number of shares of Phantom  Stock
granted to each  Participant  pursuant to each grant,  the Date of Grant and the
Measurement Value of such shares of Phantom Stock.


                                       4
<PAGE>


     Section 6. Vesting and Exercise.

     6.1 Vesting. (a) Except as provided otherwise by the Committee, and subject
to the provisions of this Section 6 and Section 8 below, a  Participant's  right
to payment for any shares of Phantom Stock granted to him or her shall vest, and
thereby become  exercisable,  in the following  percentages of shares of Phantom
Stock awarded to such Participant on the following  anniversaries of the Date of
Grant of such shares of Phantom Stock.

         Percentage of Phantom Stock         Anniversary
           Awarded to Participant                of
              which are Vested              Date of Grant
         ---------------------------        -------------

                   20%                          First
                   40%                          Second
                   60%                          Third
                   80%                          Fourth
                  100%                          Fifth

Notwithstanding the foregoing, for vesting purposes alone, the shares of Phantom
Stock initially  granted under this Plan as set forth in Schedule 1 hereto shall
be deemed to have been  granted on (and the Date of Grant with  respect  thereto
shall be) December 3, 1998. all shares of Phantom Stock, including vested shares
of Phantom  Stock,  shall be  subject  to  termination  in  accordance  with the
provisions of this Plan.

     (b)  Termination.  Shares  of  Phantom  Stock  shall  cease  to  vest  if a
Participant's  employment  with the Employer is terminated.  All of
such participant's unvested shares of Phantom Stock shall thereupon be forfeited
without any payment being due.

     6.2  Exercise.  Upon  vesting  of  shares of  Phantom  Stock  awarded  to a
Participant, the Participant may, by a written notice to the Company, specifying
the number of shares of Phantom  Stock being  exercised,  cause the  Employer to
promptly  redeem said shares of Phantom Stock in exchange for a payment by check
or bank  deposit  for the account of the  Participant  in the amount of the Fair
Market Value of such shares of Phantom Stock,  as of the date of exercise,  over
the Measurement Value of such shares,  subject,  however, to the limitations set
forth in this  Section 6. No  exercise  may be made later than 10 years from the
date of the grant of any  shares of Phantom  Stock nor more than 6 months  after
termination  of employment of the  Participant.  In the event an exercise  would
result in the payment to a Participant of amounts in excess of those  deductible
pursuant to Code  Section  162(m),  such excess  amounts  will be payable to the
participant in the following calendar year.

     6.3  "Golden  Parachute"   Limitations  on  Payment.   Notwithstanding  the
provisions  of Section  6.2,  in the event that an exercise of shares of Phantom
Stock by a Participant  would, in the reasonable  judgment of the Committee,  be
considered a "parachute payment" within the meaning


                                       5
<PAGE>


of Code  Section  280G,  the  Participant's  aggregate  entitlement  to  receive
payments  under this Plan shall be  limited so that such  participant  shall not
receive any amount in respect of exercised shares of Phantom Stock to the extent
such payments would equal or exceed 3 times of such participant's  "base amount"
as defined in Code Section 280G.

     6.4  Interpretation  by Committee.  The time of cessation of employment and
the extent of the vesting period  provided under Section 6.1 shall be determined
by the Committee.

     6.5  Withholding  and Other Tax  Matters.  The Employer  shall  include all
payments  made  pursuant  to  the  Plan  in   determining   each   Participant's
compensation  for  services  rendered  and  shall  reflect  such  amount in such
Participant's  Form W-2 or 1099,  as  applicable.  From all such  payments,  the
Employer shall withhold all taxes as required by Federal, state and local income
tax laws.

     6.6  Source of  Payments.  All  payments  under the Plan  shall be from the
general  assets of the  Employer,  and no  special  or  separate  fund  shall be
established  or  segregated  to  assure  or  otherwise  guaranty  such  payments
hereunder.  Participants shall have no rights greater than those of an unsecured
creditor  of the  Company  with  respect to any  vested  Phantom  Stock  granted
hereunder.

     Section 7.  Beneficiaries.  Designation  of  beneficiaries  to receive  any
amounts payable under the Plan subsequent to the death of a Participant shall be
made in  writing  and filed  with the  Employer  in such form and  manner as the
Committee  may from  time to time  prescribe.  Beneficiary  designations  may be
changed by a Participant  or former  Participant  in the same manner at any time
prior to death, and may thereafter,  with respect to the interest of a surviving
beneficiary  eligible  to receive a payment,  be  designated  or changed by such
surviving   beneficiary  unless  a  successor   beneficiary  to  such  surviving
beneficiary has been designated by the Participant,  former Participant or prior
beneficiary.  If a Participant,  former  Participant or beneficiary  eligible to
receive any payment under the Plan dies without a surviving  beneficiary  having
been designated, or with his or her estate or a trust designated as beneficiary,
his or her shares of Phantom  Stock,  which shall remain subject to the exercise
and vesting  limitations  set forth in this Plan,  shall be  distributed  to the
legal  representative of his or her estate, or to the trustee of any such trust,
in the manner  provided for in Section 6.1 as soon as  practicable  after his or
her death.


                                       6
<PAGE>


     Section 8. Changes in  Capitalization;  Adjustments to  Measurement  Value.

     8.1 Changes in Capitalization. In the event there is a change in the number
of shares of Employer Stock as a result of a distribution, split, reverse split,
subdivision,   recapitalization,  merger,  consolidation  (whether  or  not  the
Employer is a surviving  entity),  combination or exchange of equity  interests,
reorganization  or liquidation or similar event, the maximum aggregate number of
shares of  Phantom  Stock  which may be  granted  under the Plan,  the number of
shares of Employer Stock underlying outstanding shares of Phantom Stock, and the
determination  of Fair Market Value and the  Measurement  Value of any shares of
Phantom Stock may, at the discretion of the Committee, be appropriately adjusted
to give effect to such change.

     8.2 Trigger  Event -  Acceleration  of Vesting.  In the event a  Triggering
Event occurs,  all unvested shares of Phantom Stock issued pursuant to this Plan
as of the  effective  date of any such  Triggering  Event,  shall  accelerate in
vesting and be deemed  vested as of the  effective  date of any such  Triggering
Event.

     8.3 Determination by Committee. The Committee shall make all determinations
under this Section 8, and all such determinations,  absent manifest error, shall
be conclusive and binding.

     Section 9.  Amendment and  Termination of Plan. No further grants of shares
of Phantom  Stock may be made after  December 3, 2003.  Prior to such date,  the
Committee,  in its sole  discretion  and at any time,  may terminate the Plan or
adopt such  written  amendments  or  modifications  of the Plan and any award of
shares of Phantom  Stock under the Plan as it may deem  advisable,  effective at
any date the Committee determines;  provided, however, that no such termination,
amendment  or   modification   shall,   without  the  consent  of  the  affected
participants, deprive any Participant of any right or benefit to which he or she
has previously become entitled under the Plan.

     Section 10. Miscellaneous Provisions.

     10.1  Limitation of Rights.  No employee or any other person shall have any
claim or right to be granted any shares of Phantom Stock under the Plan. Nothing
herein is intended or shall be  interpreted to give any employee or other person
participating  in the Plan the right to be employed,  reemployed or continued to
be employed by the Employer or any of its subsidiaries or will interfere with or
restrict  in any way the rights of the  Employer or any of its  subsidiaries  to
discharge  any employee at any time for any reason  whatsoever,  with or without
Cause.  Nothing  herein shall confer any right or benefit or any  entitlement to
any benefit on any  Participant  unless and until a benefit is  actually  vested
pursuant to the Plan.  The  adoption  and  maintenance  of the Plan shall not be
deemed to constitute a contract of employment or otherwise  between the Employer
or any of its  subsidiaries  and any employee,  or to be a consideration  for an
inducement or condition


                                       7
<PAGE>


of any employment.

     10.2 No Trust  Created.  Neither the  provisions of the Plan nor any action
taken by the Employer or the  Committee  pursuant to the  provisions of the Plan
shall be deemed to create  any  trust,  express  or  implied,  or any  fiduciary
relationship  between or among the Employer,  the  Committee,  any member of the
Committee, or any Participant, former Participant or beneficiary of either.

     10.3 Voting and Distribution Rights. No Participant,  former Participant or
beneficiary  of either  shall be  entitled to any voting  rights,  any rights to
receive  any  distributions  in respect of Employer  Stock,  or any right to any
other attribute of equity ownership provided for by applicable state law.

     10.4 Non-Alienation of Benefits. No right or benefits under this Plan shall
be subject to  alienation,  transfer,  sale,  assignment,  pledge,  encumbrance,
charge,  security interest,  hypothecation,  levy,  attachment or execution of a
judgment  of any  kind,  otherwise  than  by will or the  laws  of  descent  and
distribution to the extent provided  herein.  No right or benefit under the Plan
shall in any manner be liable for or subject to the debts,  contract liabilities
or torts of any Participant, former participant or beneficiary of either.

     10.5  Applicable  State Law. All questions  pertaining to the Plan shall be
determined  under  the  laws of the  State of New York  without  regard  to such
State's conflicts of law principles.


                                       8




                                                                      EXHIBIT 21

Subsidiaries of  NYMAGIC, INC.

         New York Marine And General Insurance Company Gotham Insurance Company
         MMO UK, Ltd.
         MMO EU, Ltd.
         Mutual Marine Office, Inc.
         Pacific Mutual Marine Office, Inc.
         Mutual Marine Office of the Midwest, Inc
         MMO Underwriting Agency, Ltd.




                                                                      EXHIBIT 23

                        CONSENT OF INDEPENDENT AUDITORS

The Board of Directors NYMAGIC, INC.:

We consent  to  incorporation  by  reference  in  registration  statements  (No.
33-10780, 2-94924 and 33-88342) on Form S-8 of NYMAGIC, INC. of our report dated
February 15, 2000 relating to the consolidated  balance sheets of NYMAGIC,  INC.
and subsidiaries as of December 31, 1999 and 1998, and the related  consolidated
statements of income,  shareholders' equity and cash flows for each of the years
in the three-year  period ended  December 31, 1999,  and all related  schedules,
which  report  appears in the  December  31, 1999 Annual  Report on Form 10-K of
NYMAGIC, INC.


                                /s/ KPMG LLP
                                KPMG LLP

New York, New York
March 30, 2000



<TABLE> <S> <C>

<ARTICLE>  7
<LEGEND>
This  schedule  contains  summary  financial   information  extracted  from  the
financial statements of NYMAGIC,  INC., as of December 31, 1999 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK>                   0000847431
<NAME>                  NYMAGIC, INC.
<MULTIPLIER>            1,000

<S>                     <C>
<PERIOD-TYPE>           12-MOS
<FISCAL-YEAR-END>                      DEC-31-1999
<PERIOD-END>                           DEC-31-1999
<DEBT-HELD-FOR-SALE>                       297,293
<DEBT-CARRYING-VALUE>                            0
<DEBT-MARKET-VALUE>                              0
<EQUITIES>                                  71,682
<MORTGAGE>                                       0
<REAL-ESTATE>                                    0
<TOTAL-INVEST>                             396,710
<CASH>                                       1,017
<RECOVER-REINSURE>                         255,762
<DEFERRED-ACQUISITION>                       4,851
<TOTAL-ASSETS>                             764,304
<POLICY-LOSSES>                                  0
<UNEARNED-PREMIUMS>                         56,033
<POLICY-OTHER>                             425,469
<POLICY-HOLDER-FUNDS>                            0
<NOTES-PAYABLE>                             12,458
                            0
                                      0
<COMMON>                                    15,018
<OTHER-SE>                                 216,124
<TOTAL-LIABILITY-AND-EQUITY>               764,304
                                  56,155
<INVESTMENT-INCOME>                         18,642
<INVESTMENT-GAINS>                          12,504
<OTHER-INCOME>                                 238
<BENEFITS>                                  36,853
<UNDERWRITING-AMORTIZATION>                 11,077
<UNDERWRITING-OTHER>                        19,326
<INCOME-PRETAX>                             21,180
<INCOME-TAX>                                 4,766
<INCOME-CONTINUING>                         16,413
<DISCONTINUED>                                   0
<EXTRAORDINARY>                                  0
<CHANGES>                                        0
<NET-INCOME>                                16,413
<EPS-BASIC>                                   1.69
<EPS-DILUTED>                                 1.69
<RESERVE-OPEN>                             213,589
<PROVISION-CURRENT>                         48,838
<PROVISION-PRIOR>                          (12,183)
<PAYMENTS-CURRENT>                          11,517
<PAYMENTS-PRIOR>                            41,862
<RESERVE-CLOSE>                            196,865
<CUMULATIVE-DEFICIENCY>                    (12,183)



</TABLE>


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