2005 MANAGEMENT INCENTIVE PLAN
 
     1.  PURPOSE OF THE PLAN.  The purpose of the Alleghany Corporation
Management Incentive Plan (the "Plan") is to allow Alleghany Corporation (the
"Company") to provide performance-based incentive compensation that satisfies
the requirements for performance-based compensation in Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), consisting of incentive
compensation bonuses to its officers, upon whom, in large measure, the sustained
progress, growth and profitability of the Company depends.
 
     2.  ADMINISTRATION OF THE PLAN.  The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"). Subject to the provisions of the Plan, the Committee shall have
the exclusive authority to select the officers to participate in the Plan, to
establish performance goals for performance during each Performance Period (as
defined in Section 4), to determine the amount of the incentive compensation
bonus payable to any Participant (as defined in Section 3), and to make all
determinations and take all other actions necessary or appropriate for the
proper administration and operation of the Plan. Any determination by the
Committee on any matter relating to the Plan shall be made in its sole
discretion and need not be uniform among Participants. The Committee's
interpretation of the Plan shall be final, conclusive and binding on all parties
concerned, including the Company, its stockholders and any Participant.
 
     3.  ELIGIBILITY.  Incentive compensation bonuses under the Plan may be paid
to those officers (including officers who are directors) of the Company who
shall be selected by the Committee after consideration of management's
recommendations ("the Participants"). Participants may receive multiple
incentive compensation bonuses during the same year under the Plan.
 
     4.  PERFORMANCE PERIODS.  Incentive compensation bonuses may be payable to
each Participant as a result of the satisfaction of performance goals in respect
of the calendar year or such other period as is selected by the Committee (a
"Performance Period").
 
     5.  INCENTIVE COMPENSATION BONUSES.
 
     (a) Target Incentive Compensation Bonuses.  Prior to the beginning of each
Performance Period, or at such other time no later than such time as is
permitted by the applicable provisions of the Code, the Committee after
consideration of management's recommendations shall establish in writing the
target (or range of) incentive compensation bonus opportunity for each
Participant based upon the attainment of one or more performance goals
established by
 
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the Committee at such time. The Committee may provide for a threshold level of
performance below which no amount of incentive compensation bonus will be paid
and a maximum level of performance above which no additional incentive
compensation bonus will be paid, and it may provide for the payment of differing
amounts for different levels of performance.
 
     (b) Performance Goals.  Performance goals, which may vary from Participant
to Participant and target incentive compensation bonus opportunity to target
incentive compensation bonus opportunity, shall be based upon the attainment of
specific amounts of, or increases in, one or more of the following: revenues,
operating income, cash flow, earnings before income taxes, net income, earnings
per share, stockholders' equity, return on equity, underwriting profits,
compound growth in net loss and loss adjustment expense reserves, loss ratio or
combined ratio of the Company's insurance businesses, operating efficiency or
strategic business objectives consisting of one or more objectives based on
meeting specified cost targets, business expansion goals and goals relating to
acquisitions or divestitures, all whether applicable to the Company or any
relevant subsidiary or business unit or entity in which the Company has a
significant investment, or any combination thereof as the Committee may deem
appropriate.
 
     Each performance goal may be expressed on an absolute and/or relative
basis, may be based on, or otherwise employ, comparisons based on internal
targets, the past performance of the Company and/or the past or current
performance of other companies, may provide for the inclusion, exclusion or
averaging of specified items in whole or in part, such as catastrophe losses,
realized gains or losses on strategic investments, discontinued operations,
extraordinary items, accounting changes, and unusual or nonrecurring items, and,
in the case of earnings-based measures, may use or employ comparisons relating
to capital, shareholders' equity and/or shares outstanding, assets or net
assets.
 
     (c) Incentive Compensation Bonus Determination.  As soon as practicable
after the end of each Performance Period but before any incentive compensation
bonuses are paid, the Committee shall certify in writing (i) whether the
performance goal or goals were attained and (ii) the amount of the incentive
compensation bonus payable to each Participant based upon the attainment of the
performance goals established by the Committee. The Committee may determine to
grant a Participant an incentive compensation bonus equal to, but not in excess
of, the amount specified in the foregoing certification. The Committee may also
reduce or eliminate the amount of any incentive compensation bonus of any
Participant at any time prior to payment thereof, based on such criteria as it
shall determine, including but not limited to individual merit and attainment
of, or the failure to attain, specified personal goals established by the
Committee. Under no circumstance may the Committee increase the amount of the
incentive compensation bonus otherwise payable to a Participant beyond the
amount originally established, waive the attainment of the performance goals
established by Committee or
 
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otherwise exercise its discretion so as to cause any incentive compensation
bonus not to qualify as performance-based compensation under Section 162(m) of
the Code.
 
     (d) Payment.  As soon as practicable following the Committee's
determination of the amount of any incentive compensation bonus payable to a
Participant, such incentive compensation bonus shall be paid by the Company in
cash to such Participant.
 
     (e) Death, Disability, Etc.  In the event a Participant shall die or become
disabled prior to the end of a Performance Period, the Participant (or in the
event of the Participant's death, the Participant's beneficiary) shall be
entitled to receive such pro-rata portion of the incentive compensation bonus
established for the Participant as shall be determined by the Committee, subject
to Section 7(a). In the event a Participant's employment with the Company is
otherwise terminated during the Performance Period, the Committee, in its
discretion, shall determine the amount, if any, of the incentive compensation
bonus that shall be payable to the Participant.
 
     (f) Annual Maximum.  The incentive compensation bonuses payable to any
Participant pursuant to the Plan in a single calendar year shall not exceed $5
million.
 
     6.  DILUTION AND OTHER ADJUSTMENTS.  To the extent that a performance goal
is based on, or calculated with respect to, the Company's common stock (such as
increases in earnings per share or other similar measures), then in the event of
any corporate transaction involving the Company (including, without limitation,
any subdivision or combination or exchange of the outstanding shares of common
stock, stock dividend, stock split, spin-off, split-off, recapitalization,
capital reorganization, liquidation, reclassification of shares of common stock,
merger, consolidation, extraordinary cash distribution, or sale, lease or
transfer of substantially all of the assets of the Company), the Committee shall
make or provide for such adjustments in such performance goal as the Committee
may in good faith determine to be equitably required in order to prevent
dilution or enlargement of any increase or decrease in the rights of
Participants.
 
     7.  MISCELLANEOUS PROVISIONS.
 
     (a) Right to Incentive Compensation Bonus.  No officer or other person
shall have any claim or right to receive any incentive compensation bonus under
the Plan prior to the actual payment thereof.
 
     (b) No Assurance of Employment.  Neither the establishment of the Plan nor
any action taken thereunder shall be construed as giving any officer or other
person any right to be retained in the employ of the Company.
 
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     (c) Withholding Taxes.  The Company shall have the right to deduct from all
incentive compensation bonuses payable hereunder any federal, state, local or
foreign taxes required by law to be withheld with respect to such payments.
 
     (d) No Transfers or Assignments.  No incentive compensation bonus under the
Plan nor any rights or interests herein or therein shall be assigned,
transferred, pledged, encumbered, or hypothecated to, or in favor of, or subject
to any lien, obligation, or liability of a Participant to, any party (other than
the Company or any subsidiary), except, in the event of the Participant's death,
to his designated beneficiary as hereinafter provided.
 
     (e) Beneficiary.  Any payments on account of an incentive compensation
bonus payable under the Plan to a deceased Participant shall be paid to such
beneficiary as has been designated by the Participant in writing to the
Secretary of the Company or in the absence of such designation, according to the
Participant's will or the laws of descent and distribution.
 
     (f) Non-exclusivity of Plan.  Nothing in the Plan shall be construed in any
way as limiting the authority of the Committee, the Board of Directors of the
Company, the Company or any subsidiary to establish any other annual or other
incentive compensation bonus plan or as limiting the authority of any of the
foregoing to pay cash bonuses or other supplemental or additional incentive
compensation to any persons employed by the Company, whether or not such person
is a Participant in this Plan and regardless of how the amount of such bonus or
compensation is determined.
 
     8.  AMENDMENT OR TERMINATION OF THE PLAN.  The Board of Directors of the
Company, without the consent of any Participant, may at any time terminate or
from time to time amend or terminate the Plan in whole or in part, whether
prospectively or retroactively, including in any manner that adversely affects
the rights of Participants; provided, however, that no amendment that would
require the consent of the stockholders of the Company pursuant to Section
162(m) of the Code shall be effective without such consent.
 
     9.  LAW GOVERNING.  The validity and construction of the Plan shall be
governed by the laws of the State of New York, but without regard to the
conflict laws of the State of New York except to the extent that such conflict
laws require application of the laws of the State of Delaware.
 
     10.  EFFECTIVE DATE.  The Plan shall be effective commencing January 1,
2005, subject to approval by the stockholders of the Company in accordance with
Section 162(m) of the Code.