8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 28, 2008

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XL CAPITAL LTD
(Exact name of registrant as specified in its charter)

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Cayman Islands	1-10804	98-0191089
(State or other jurisdiction	(Commission File Number)	(I.R.S. Employer Identification No.)
of incorporation)

XL House, One Bermudiana Road, Hamilton, Bermuda HM 11
(Address of principal executive offices)

Registrant’s telephone number, including area code: (441) 292 8515

Not Applicable
(Former name or former address, if changed since last report)

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))

[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))

Item 1.01.       Entry into a Material Definitive Agreement.

On July 28, 2008, XL Capital Ltd (the “Registrant”), XL Insurance (Bermuda) Ltd, XL Reinsurance America Inc., X.L. Global Services, Inc., XL Services (Bermuda) Ltd and X.L. America, Inc. (the “XL Parties”) entered into a Master Commutation, Release and Restructuring Agreement (the “Master Agreement”) with Security Capital Assurance Ltd (“SCA”), certain of SCA’s subsidiaries (together with SCA, the “SCA Parties”), pursuant to which (x) the XL Parties and the SCA Parties will commute all of the reinsurance agreements between the XL Parties and the SCA Parties and as a result all guarantees by the XL Parties in favor of the SCA Parties (other than the XL Parties’ guarantee of the SCA Parties’ financial guarantees issued in favor of the European Investment Bank (the “EIB Guarantee”)) will no longer have any force or effect, (y) certain other agreements between the XL Parties and the SCA Parties will be terminated and (z) the parties to the Master Agreement will release each other from all claims relating to any of such agreements. Pursuant to the terms of the Master Agreement, the SCA Parties will be required to use commercially reasonable efforts to commute the EIB Guarantee, subject to certain limitations. Certain of the counterparties to credit default swap agreements with SCA are also parties, and others may become parties (up to and including closing), to the Master Agreement. As consideration for the commutations, terminations and releases, the Registrant will (1) pay a cash amount to the SCA Parties of $1.775 billion, (2) issue eight million shares of the Registrant’s Class A Ordinary Shares to the SCA Parties and (3) transfer all of the common shares of SCA the Registrant owns to a trust.

The Master Agreement and the related transactions are described in the press release attached hereto as Exhibit 99.1 and are more fully described in Exhibit 99.2 hereto. Exhibit 99.1 (to the extent relating to the Master Agreement and the related transactions) and Exhibit 99.2 are incorporated by reference herein. The Master Agreement is attached hereto as Exhibit 10.1 and incorporated by reference herein.

Item 2.02.       Results of Operations and Financial Condition.

The following information is being furnished under Item 2.02, “Results of Operations and Financial Condition.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

The results for the second quarter ended June 30, 2008 are included in the press release attached hereto as Exhibit 99.1.

Item 3.02.       Unregistered Sales of Equity Securities.

In connection with the transactions described in the press release attached hereto as Exhibit 99.1, the Registrant intends to exercise a put option under the terms of Registrant’s Put Option Agreement, dated as of July 11, 2003, which was entered into in connection with the Registrant’s Mangrove Bay contingent capital transaction. Pursuant to the exercise of the put option, the Registrant will issue 20,000,000 Series C Preference Ordinary Shares to the trust in return for approximately $500 million in cash. The Registrant anticipates exercising this option such that it receives the proceeds concurrently with or shortly after the closing of the Offerings described below.

In connection with the Master Agreement, which is attached as Exhibit 10.1 hereto, the Registrant will issue eight million shares of the Registrant’s Class A Ordinary Shares to the SCA Parties. The Registrant will issue the shares as part of the consideration for the commutations, terminations and releases under the Master Agreement and will not receive any cash consideration for the shares. As the issuance will be made by the Registrant not involving any public offering, the shares will be issued pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.

Item 5.02.       Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Pursuant to the Registrant’s Amended and Restated 1991 Performance Incentive Program, on July 25, 2008, following the approval by the Compensation Committee of the Board of Directors, the Board of Directors approved grants to employees of the Registrant and its subsidiaries of options to purchase, in the aggregate, approximately 2,825,000 ordinary shares, including the following option grants to named executive officers of the Registrant: options to purchase 50,000 shares for Brian W. Nocco, the Registrant’s Chief Financial Officer, and options to purchase 100,000 shares for James H. Veghte, the Registrant’s Chief Executive of Reinsurance Operations. The option grants are intended to be in lieu of a portion of the grantees’ regular incentive compensation for 2008. The date of grant of the stock options will be the date that is ten trading days following the date of pricing of the offering (and subject to closing of the offering) of the Registrant’s ordinary shares described below in Item 8.01. The exercise price per share of the options will be the closing sales price per share of ordinary shares on the New York Stock Exchange on the date of grant. In the case of options granted to members of the Registrant’s senior leadership group, the options will be scheduled to vest on the date that is the later of three years from the date of grant or the date upon which the closing price of the ordinary shares on the New York Stock Exchange has equaled or exceeded 130% of the option exercise price for a period of at least ten consecutive trading days. In the case of options granted to other employees, the options will be scheduled to cliff vest on the third anniversary of the date of grant.

In addition, effective August 1, 2008, the annual base salary of James H. Veghte will be increased to $600,000.

In connection with a reorganization of the management structure of the Registrant, as announced in the press release attached hereto as Exhibit 99.1, the following management changes will take effect on the dates indicated below:

Fiona Luck, Executive Vice President and Chief of Staff, will become Special Advisor to the Chief Executive Officer, based in Bermuda and London, with a reduced time commitment and commensurate reduction in compensation. She will step down from her current role and the senior leadership group on August 1, 2008, at which time the role of Chief of Staff will be eliminated. In connection with the foregoing, the Employment Agreement between Ms. Luck and the Registrant was amended on July 28, 2008 to provide that any written notice pursuant to Section 8(d)(iv) or Exhibit B thereof resulting from the changes described above may be given by Ms. Luck at any time prior to January 31, 2009. The amendment to Ms. Luck’s employment agreement is attached hereto as Exhibit 10.2 and incorporated by reference herein.

Henry C.V. Keeling, Executive Vice President and Chief Operating Officer, will retire from the Registrant effective August 1, 2008 (the “Termination Date”). As a result of Mr. Keeling’s decision to retire, the role of the Chief Operating Officer will be eliminated. On July 28, 2008, the Registrant entered into a separation agreement with Mr. Keeling. The separation agreement provides that, as of the Termination Date, Mr. Keeling will resign from all officer positions with the Registrant and its affiliates as well as his membership on all boards of directors and committees of the Registrant and its affiliates. The separation agreement is attached hereto as Exhibit 10.3 and incorporated by reference herein.

The separation agreement provides for: (i) payment of base salary through the Termination Date; (ii) a lump sum cash payment of $3,953,125; (iii) reimbursement for business expenses incurred prior to the Termination Date; (iv) medical benefit plan coverage for Mr. Keeling and his dependents until the earlier of (A) 24 months from the Termination Date or (B) the date Mr. Keeling becomes eligible to receive medical benefits from another employer; (v) Registrant’s payment of or reimbursement for (in either case, on an after tax basis to Mr. Keeling) reasonable moving expenses in relocating from Bermuda to the United Kingdom; (vi) continuation of Mr. Keeling’s current monthly housing allowance from the Termination Date through the earlier of the end of the calendar year 2008 or the date of termination of the applicable housing lease; (vii) continuation of Mr. Keeling’s current automobile benefits from the Termination Date through the end of calendar year 2008 and (viii) reimbursement for the cost of household improvements incurred on or prior to April 30, 2008. Mr. Keeling’s benefits under the retirement plans of the Registrant will be paid in accordance with the terms of the plans and his elections made thereunder. The separation agreement contains Mr. Keeling’s release of claims against the Registrant as well as confidentiality, non-solicitation and non-disparagement provisions.

The separation agreement provides that all stock options and restricted stock granted to Mr. Keeling under the Registrant’s equity-based incentive compensation plans other than those stock options granted during calendar year 2008 will, to the extent unvested, become vested on the Termination Date. All of the Registrant stock options granted before January 1, 2000 held by Mr. Keeling will be exercisable for three years following the Termination Date (but in no event beyond the full ten year term of the option), after which time they will terminate, and all options granted on or after January 1, 2000 will remain exercisable for the duration of the term specified in the applicable option agreement. With respect to the options to purchase 130,000 shares of Registrant stock granted to Mr. Keeling during calendar year 2008, (i) 86,600 will become vested on the Termination Date and they will terminate ninety (90) days following the Termination Date and (ii) 43,400 will become vested on the Termination Date and remain exercisable for the duration of the term specified in the applicable option agreement.

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With respect to each award made to Mr. Keeling under the Registrant’s long-term incentive plan for which the award period has not ended on or prior to the Termination Date, to the extent the applicable performance metrics for the award are met at the end of the applicable award period and an amount would have been paid to Mr. Keeling under the award had his employment continued through the applicable award payment date, Mr. Keeling will receive a payment under the award equal to a pro rata portion of the award amount.

The separation agreement also provides for indemnification of Mr. Keeling by the Registrant to the maximum extent permitted by applicable law and the Registrant’s charter documents and requires the Registrant to maintain directors’ and officers’ liability coverage in an amount equal to at least $75,000,000 to be maintained in effect for a period of six years following the Termination Date.

Item 7.01.       Regulation FD Disclosure.

The following information is being furnished under Item 7.01, “Regulation FD Disclosure.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

A copy of the investor presentation and the structured credit data presentation, each to be used in connection with the marketing of the Offerings described below in Item 8.01, are attached hereto as Exhibit 99.4 and Exhibit 99.5, respectively.

Item 8.01.       Other Events.

The Registrant announced today that it currently plans to offer approximately $2.5 billion of securities in a combination of ordinary shares (the “Ordinary Shares”) and equity security units (the “Equity Security Units”) pursuant to the Registrant’s existing shelf registration statement (the “Offerings”). Each Equity Security Unit will consist of (i) a forward purchase contract requiring the holder to purchase, and XL to issue, a variable number of ordinary shares of XL and (ii) an ownership interest in a debt security of XL. In addition to the payments to the SCA Parties under the Master Agreement, the Registrant intends to use the net proceeds from the Offerings for general corporate purposes including capital funding of certain of the Registrant’s subsidiaries. The Offerings are described in a press release attached hereto as Exhibit 99.3 and incorporated by reference herein.

The Registrant announced today that its Board of Directors had approved a reduction in the quarterly dividend payable on the Registrant’s Class A Ordinary Shares to $0.19 per ordinary share, beginning with the next quarterly dividend. In line with that reduction, the Board of Directors declared a quarterly dividend of $0.19 per ordinary share payable on September 30, 2008 to ordinary shareholders of record as of September 12, 2008.

The Registrant also announced that the Board of Directors declared a dividend on the Registrant’s Series E Perpetual Non-Cumulative Preference Shares (“Preference Shares”) of $0.3250 per share payable on October 15, 2008 to Preference Shareholders of record on October 14, 2008. The aggregate dividend amount payable on the Preference Shares is $32.5 million.

Concurrently with the closing of the Offerings described above, the Registrant intends to call for redemption all $255.0 million aggregate principal amount of X.L. America, Inc.’s outstanding 6.58% Guaranteed Senior Notes due 2011. In connection with this redemption, the Registrant expects to record a charge of approximately $21.8 million in the quarter ending September 30, 2008.

On July 28, 2008, Michael S. McGavik, our Chief Executive Officer, informed us that he intends to purchase approximately $2.0 million worth of our ordinary shares in the open market following the opening of our next trading window, which is expected to commence on August 1, 2008, subject to any requirements of applicable law.

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Item 9.01.       Financial Statements and Exhibits.

The following exhibits are filed herewith:

Exhibit No.	Description
10.1	Master Commutation, Release and Restructuring Agreement by and among XL Capital Ltd, XL Insurance (Bermuda) Ltd, XL Reinsurance America Inc., X.L. Global Services, Inc., XL Services (Bermuda) Ltd and X.L. America, Inc., Security Capital Assurance Ltd (“SCA”), certain of SCA’s subsidiaries and certain financial institutions who have entered into various credit default swaps with affiliates of SCA, dated as of July 28, 2008.
10.2	Amendment No. 1, dated as of July 28, 2008, to Employment Agreement, dated as of November 1, 2006, between XL Capital Ltd and Fiona E. Luck.
10.3	Agreement and Release, dated as of July 28, 2008, between XL Capital Ltd and Henry C.V. Keeling.
99.1	Press Release (“XL Capital Ltd Announces Agreement with Security Capital Assurance with Respect to Pre-IPO Guarantee and Reinsurance Agreements”) dated July 28, 2008.
99.2	Description of Master Commutation, Release and Restructuring Agreement.
99.3	Press Release (“XL Capital Ltd Announces Plans to Offer Ordinary Shares and Equity Security Units”) dated July 28, 2008.
99.4	Investor Presentation.
99.5	Structured Credit Data Presentation.

SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 28, 2008

XL CAPITAL LTD
(Registrant)
By:	/s/ Kirstin Romann Gould
	Name:	Kirstin Romann Gould
	Title:	General Counsel and Secretary

EX-10.1

Exhibit 10.1

MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT

among

XL Capital Ltd; XL Insurance (Bermuda) Ltd; XL Reinsurance America Inc.; X.L. Global
Services, Inc.; XL Services (Bermuda) Ltd and X.L. America, Inc.;

Security Capital Assurance Ltd; XL Financial Assurance Ltd.; XL Capital Assurance Inc.; XL
Financial Administrative Services Inc.; SCA Bermuda Administrative Ltd.; XL Capital
Assurance (U.K.) Limited; and Certain Portfolio Trusts that are Affiliates of XL Capital
Assurance Inc. and may become party to this Agreement from time to time;

and

Counterparties to Credit Default Swap Agreements with XL Capital Assurance Inc. and
Affiliates of XL Capital Assurance Inc. that may become party to this Agreement from time to
time.

Dated as of July 28, 2008

TABLE OF CONTENTS

		Page
ARTICLE I
DEFINITIONS
Section 1.01	Certain Defined Terms	2
Section 1.02	Definitions	10
Section 1.03	Interpretation and Rules of Construction	11
ARTICLE II
COMMUTATION AND RELEASE
Section 2.01	Commutation and Release of Reinsurance Agreements	12
Section 2.02	Termination of the Other Terminated Agreements	12
Section 2.03	Commutation and Release of Quota Share Treaty	12
Section 2.04	Commutation and Amendment of Other Reinsurance Agreements	12
Section 2.05	Mutual Releases	13
Section 2.06	Consideration	17
Section 2.07	Closing	17
Section 2.08	Closing Deliveries by the SCA Parties	17
Section 2.09	Closing Deliveries by the XL Parties	18
Section 2.10	Escrow	19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SCA PARTIES
Section 3.01	Organization, Authority and Qualification of the SCA Parties	20
Section 3.02	No Conflict	20
Section 3.03	Governmental Consents and Approvals	21
Section 3.04	Financial Information	21
Section 3.05	Compliance with Laws	22
Section 3.06	Effect of Commutations	22
Section 3.07	Litigation	22
Section 3.08	Placement of Stock Consideration	22
Section 3.09	Regulatory Approvals	23
Section 3.10	MLI CDS Agreements	24
Section 3.11	Financial Security Master Facultative Commutation Agreement	24
Section 3.12	Third-Party Agreements	24
Section 3.13	Brokers	24

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE XL PARTIES
Section 4.01	Organization and Authority of the XL Parties	25
Section 4.02	No Conflict	25
Section 4.03	Governmental Consents and Approvals	25
Section 4.04	Capitalization	26
Section 4.05	XL Owned SCA Common Shares	26
Section 4.06	Litigation	26
Section 4.07	Regulatory Approvals	26
Section 4.08	Brokers	27
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE CDS COUNTERPARTIES
Section 5.01	Status	27
Section 5.02	Powers	27
Section 5.03	No Violation or Conflict	27
Section 5.04	Consents	27
Section 5.05	Obligations Binding	27
Section 5.06	Absence of Litigation	27
Section 5.07	Consent to Transactions	28
Section 5.08	Ownership of Insurance Instruments	28
Section 5.09	Brokers	28
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01	Public Disclosure and Confidentiality	28
Section 6.02	Regulatory and Other Authorizations; Notices and Consents	30
Section 6.03	Notice of Developments	31
Section 6.04	MLI ABS CDO Credit Default Swap Agreements	31
Section 6.05	Third-Party Reinsurance Agreements	31
Section 6.06	Ownership of Insurance Instruments	32
Section 6.07	Compliance with Securities Laws	32
Section 6.08	Passive Investor	32
Section 6.09	XL Owned SCA Common Shares Covenant	32
Section 6.10	Forbearance	32
Section 6.11	Control of Litigation and Cooperation	34
Section 6.12	CDS Counterparty Restructuring	35
Section 6.13	Restriction on Commutations	36
Section 6.14	Treatment of Public Finance Business	36
Section 6.15	Further Action	37

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Section 6.16	Resignation of XL Nominees	37
Section 6.17	Disclosure Schedules; Supplementation and Amendment of Schedules	37
Section 6.18	SCA Shareholder Entity	38
Section 6.19	Portfolio Trust	38
Section 6.20	BlackRock	38
Section 6.21	XLFA Merger	38
Section 6.22	Collipulli Temuco and Banco de Brasil Policies	38
Section 6.23	XLFA Redomestication	39
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.01	Conditions to Obligations of the SCA Parties	39
Section 7.02	Conditions to Obligations of the XL Parties	40
Section 7.03	Conditions to Obligations of the CDS Counterparties	41
Section 7.04	Frustration of Closing Conditions	42
ARTICLE VIII
TERMINATION AND WITHDRAWAL
Section 8.01	Termination	42
Section 8.02	Effect of Termination	44
Section 8.03	CDS Counterparty Withdrawal	44
ARTICLE IX
GENERAL PROVISIONS
Section 9.01	Expenses	44
Section 9.02	Notices	44
Section 9.03	Severability	45
Section 9.04	Joinder of CDS Counterparties and Additional SCA Parties	46
Section 9.05	Entire Agreement	46
Section 9.06	Assignment	46
Section 9.07	Amendment	46
Section 9.08	Waiver	46
Section 9.09	No Third-Party Beneficiaries	47
Section 9.10	Rights and Remedies	47
Section 9.11	Indemnification	47
Section 9.12	No Survival	48
Section 9.13	Several Liability of the CDS Counterparties	48
Section 9.14	Governing Law and Jurisdiction	48
Section 9.15	Waiver of Jury Trial	49
Section 9.16	Fully Negotiated Agreement	49
Section 9.17	Currency	49
Section 9.18	Counterparts	49

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EXHIBITS

Exhibit No.	Description
1.01(a)	2001 Facultative Quota Share Commutation Agreement
1.01(b)	Adverse Development Cover Commutation Agreement
1.01(c)	Joinder Agreement
1.01(d)	Excess of Loss Commutation Agreement
1.01(e)	Facultative Master Certificate Commutation Agreement
1.01(f)	Quota Share Treaty Commutation Agreement
1.01(g)	Subscription Agreement
1.01(h)	XL Stock Resale and Registration Rights Agreement
1.01(i)	SCA Shareholder Entity Agreement
1.01(j)	SCA Registration Rights Agreement
1.01(k)	Transition Agreement Amendment
2.06	Securities Law Representations of the SCA Shareholder Entity
6.18	Form of SCA Shareholder Entity Trust Agreement

SCHEDULES

Schedule	Description
1.01(a)	MLI ABS CDO Credit Default Swap Agreements
1.01(b)	Other Terminated Agreements
1.01(c)	Knowledge of SCA
1.01(d)	Terms of the Escrow Agreement
2.01	Commuted Reinsurance Agreements
2.04	Other Reinsurance to be Commuted or Amended
2.05	Schedule 2.05 Agreements
2.06(a)	SCA Parties Receiving a Portion of the Cash Consideration Amount
2.06(b)	SCA Parties Receiving a Portion of the Stock Consideration
9.02	Addresses for the CDS Counterparties

SCA PARTIES’ DISCLOSURE SCHEDULE

Section	Description
Section 3.02	Conflicts
Section 3.03	Governmental Consents and Approvals
Section 3.05	Compliance with Laws

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XL PARTIES’ DISCLOSURE SCHEDULE

Section	Description
Section 4.02	Conflicts
Section 4.03	Governmental Consents and Approvals
Section 4.04(a)	Capitalization

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PREAMBLE

                    MASTER COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT, dated as of July 28, 2008, is entered into by and among:

                    (a) XL CAPITAL LTD, an exempted limited company incorporated under the Laws of Cayman Islands (“XL”), XL INSURANCE (BERMUDA) LTD (formerly known as X.L. Insurance Ltd), a Bermuda exempted company (“XLI”), XL REINSURANCE AMERICA INC., a New York insurance corporation (“XLRA”), X.L. GLOBAL SERVICES, INC., a service company incorporated under the Laws of Delaware (“XLGS”), XL SERVICES (BERMUDA) LTD, a service company incorporated under the Laws of Bermuda (“XLBS”) and X.L. AMERICA, INC., a company incorporated under the Laws of Delaware (“XLA”);

                    (b) SECURITY CAPITAL ASSURANCE LTD, a Bermuda exempted company (“SCA”), XL FINANCIAL ASSURANCE LTD., a Bermuda exempted company (“XLFA”), XL CAPITAL ASSURANCE INC., a New York insurance company (“XLCA”), XL FINANCIAL ADMINISTRATIVE SERVICES INC., a company incorporated under the Laws of Delaware (“XLFAS”), SCA BERMUDA ADMINISTRATIVE LTD., a company incorporated under the Laws of Bermuda (“SCAB”), XL CAPITAL ASSURANCE (U.K.) LIMITED, an insurance company regulated by the Financial Services Authority and incorporated under the Laws of England and Wales (“XLCAUK”), and those portfolio trusts that are Affiliates of XLCA and become a Party to this Agreement from time to time pursuant to the execution of a joinder agreement in the form attached hereto as Exhibit 1.01(c); and

                    (c) Such counterparties to credit default swap agreements with XLCA or Affiliates of XLCA that may become a Party to this Agreement from time to time pursuant to the execution of a joinder agreement in the form attached hereto as
Exhibit 1.01(c).

RECITALS

                    WHEREAS, XLI is the record and beneficial owner of approximately forty-six percent (46%) of SCA’s issued and outstanding common shares (the “XL Owned SCA Common Shares”);

                    WHEREAS, certain XL Parties and SCA Parties have entered into the Excess of Loss Agreement, the Adverse Development Cover, the Facultative Master Certificate and the 2001 Facultative Quota Share Treaty (all as defined in
Article I);

                    WHEREAS, XLCA and XLFA previously entered into a Facultative Quota Share Reinsurance Treaty, dated as of October 6, 1999, as amended and restated by an Amended and Restated Facultative Quota Share Reinsurance Treaty, dated as of June 22, 2001, as further amended and restated by a Second Amended and Restated Facultative Quota Share Reinsurance Treaty, dated as of May 1, 2004, and as further amended and restated by a Third Amended and Restated Facultative Quota Share Reinsurance Treaty, dated as of June 29, 2006 and effective July 1, 2006 (the “Quota Share Treaty”);

                    WHEREAS, XLI guarantees the obligations of XLFA to XLCA under the Quota Share Treaty pursuant to the Reinsurance Agreement Guarantee, dated as of October 6, 1999, as amended as of June 22, 2001, as further amended as of May 1, 2004, and as further amended as of August 4, 2006 (the “Guarantee”);

                    WHEREAS, XLFA and XLCA wish to (i) commute the Quota Share Treaty and all individual risk cessions thereunder and (ii) fully and finally extinguish all rights and obligations thereunder and thereby render the Guarantee null and void;

                    WHEREAS, the XL Parties and the SCA Parties wish to (i) commute the Excess of Loss Agreement, the Adverse Development Cover, the Facultative Master Certificate and all individual risk cessions thereunder, and the 2001 Facultative Quota Share Treaty and all individual risk cessions thereunder and (ii) fully and finally extinguish all the Parties’ rights and obligations under all such agreements;

                    WHEREAS, the XL Parties and the SCA Parties have previously entered into those agreements listed on Schedule 1.01(b) and now wish to (i) terminate such agreements listed in Part I of Schedule 1.01(b) and (ii) fully and finally extinguish all the Parties’ rights and obligations under such agreements, except as may be explicitly set forth in this Agreement; and

                    WHEREAS, certain CDS Counterparties now and, on or prior to the Closing Date, additional CDS Counterparties may, wish to enter into this Agreement and agree to consent to the Transactions on the terms and conditions set forth in this Agreement relating to the restructuring of SCA and its Affiliates.

                    NOW, THEREFORE, in consideration of the payments, covenants, conditions, promises and releases contained herein, and for other fair and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS

                    Section 1.01 Certain Defined Terms. For purposes of this Agreement:

                    “1505 Application” means an application filed under Section 1505 of the New York Insurance Laws.

                    “2001 Facultative Quota Share Commutation Agreement” means the 2001 Facultative Quota Share Commutation Agreement to be executed by XLFA and XLI and delivered at the Closing, in the form of Exhibit 1.01(a).

                    “2001 Facultative Quota Share Treaty” means the Facultative Quota Share Reinsurance Agreement, dated as of August 17, 2001, as amended by Amendment No. 1 to the

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Facultative Quota Share Reinsurance Agreement, dated as of August 4, 2006, between XLFA and XLI.

                     “ABS CDO CDSs” means the asset backed securities collateralized debt obligation credit default swaps between XLCA or an Affiliate of XLCA and a CDS Counterparty that are listed on an official schedule held by the SCA Parties and the CDS Financial Advisor.

                     “Action” means any judicial, administrative or arbitral action, suit, or proceeding by or before any Governmental Authority.

                     “Adverse Development Cover” means the Adverse Development Reinsurance Agreement, dated as of August 4, 2006, between XLCA and XLRA, and the Indemnification Agreement, dated as of August 4, 2006, between XLFA and XLI.

                     “Adverse Development Cover Commutation Agreement” means the Adverse Development Cover Commutation Agreement to be executed by XLCA, XLRA, XLFA and XLI delivered at the Closing, in the form of Exhibit 1.01(b).

                     “Affiliate” means, with respect to any Person, any other Person directly or indirectly Controlling, Controlled by, or under common Control with such Person, provided, that none of the SCA Parties shall be deemed to be an Affiliate of any XL Party.

                     “Agreement” or “this Agreement” means this Master Commutation, Release and Restructuring Agreement among the Parties (including the Exhibits and Schedules hereto, the SCA Parties’ Disclosure Schedule and the XL Parties’ Disclosure Schedule) and all amendments or waivers hereto made in accordance with the provisions of Sections 9.07 or 9.08 and joinder agreements hereto made in accordance with the provisions of Sections 9.04.

                     “Ancillary Agreements” means the 2001 Facultative Quota Share Commutation Agreement, the Excess of Loss Commutation Agreement, the Adverse Development Cover Commutation Agreement, the Facultative Master Certificate Commutation Agreement, the Quota Share Treaty Commutation Agreement, the Subscription Agreement, the XL Stock Resale and Registration Rights Agreement and the SCA Shareholder Entity Agreement.

                     “Banco de Brasil Policy” means the Financial Guaranty Insurance Policy No. CA00127A, dated December 27, 2001, issued by XLCA in favor of MLI, together with any endorsements thereto, relating to payments that are required to be paid by FF Trust 2 to MLI in accordance with the original terms of a Single Transaction ISDA Master Agreement and Schedule thereto, dated as of December 27, 2001 between FF Trust 2 and MLI.

                     “BlackRock” means BlackRock Financial Management, Inc.

                     “BMA” means the Bermuda Monetary Authority.

                     “Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in Bermuda or New York.

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                     “CDS Counterparties” means those counterparties to credit default swap agreements with XLCA or Affiliates of XLCA that may become a Party to this Agreement from time to time on or prior to Closing by way of executing a joinder agreement pursuant to Section 9.04 in the form of Exhibit 1.01(c), either collectively or individually, as the context requires.

                     “CDS Financial Advisor” means FTI Consulting, Inc. or another advisor designated by the Required Consenting Counterparties.

                     “Closing Date” means the date of the Closing.

                     “Control,” “Controlled,” or “Controlling,” with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, as personal representative or executor, by contract, by credit arrangement or otherwise.

                     “Collipulli Temuco Policy” means the Financial Guaranty Insurance Policy No. 10030-X, together with any endorsements thereto, relating to up to UF 1,150,000 aggregate principal amount of outstanding borrowings under the Contrato de Apertura de Línea de Crédito, dated as of July 27, 2005, between Banco de Crédito e Inversiones and Ruta de la Araucanía Sociedad Concesionaria S.A. and issued pursuant to the Insurance and Reimbursement Agreement, dated as of November 29, 2005, between XLI and Banco de Crédito e Inversiones and Ruta de la Araucanía Sociedad Concesionaria S.A.

                     “Credit Agreement” means that certain Credit Agreement, dated as of August 1, 2006, among SCA, XLCA, and XLFA, the various lenders from time to time party thereto and Citibank, N.A., as administrative agent (as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof).

                    “Declaration of Trust” means a trust agreement in the form attached hereto as Exhibit 6.18 (with such reasonable changes thereto as the trustee of the SCA Shareholder Entity or its counsel may require and that are approved by counsel to the CDS Counterparties and counsel to the SCA Parties).

                     “EIB” means European Investment Bank, a non-profit bank owned by the Member States of the European Union and established under the Treaty of Rome.

                     “EIB Guarantees” means (i) the Financial Guaranty 10017-X, dated July 5, 2001, issued by XLI in favor of EIB (Algarve), (ii) the Financial Guaranty Number 10028-X, dated May 28, 2004, issued by XLI in favor of EIB (Autovia del Camino, S.A.), (iii) the Financial Guaranty Number 10029-X, dated October 28, 2004, issued by XLI in favor of EIB (Autovia del los Vinedos), (iv) the Financial Guaranty Number 10023-X, dated June 8, 2005, issued by XLI in favor of EIB (Transform School (North Lanarkshire) Funding plc), and (v) the Financial Guaranty Number 10019-X, dated May 4, 2005, issued by XLI in favor of EIB (Healthcare Support (Newcastle) Finance plc).

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                     “EIB Policies” means (i) the Financial Guaranty Number CA00041A, dated July 5, 2001, issued by XLCA in favor of EIB, (ii) the Financial Guaranty Number CA00995A, dated May 28, 2004, issued by XLCA in favor of EIB and the Financial Guaranty Number UK0003A, dated May 28, 2004 issued by XLCAUK in favor of EIB, (iii) the Financial Guaranty Number CA01220A, dated October 28, 2004, issued by XLCA in favor of EIB and the Financial Guaranty Number UK0004A, dated October 28, 2004, issued by XLCAUK in favor of EIB, (iv) the Financial Guaranty Number CA02062A, dated June 8, 2005, issued by XLCA in favor of EIB and the Financial Guaranty Number UK0008A, dated June 8, 2005, issued by XLCAUK in favor of EIB and (v) the Financial Guaranty Number CA01937A, dated May 4, 2005 issued by XLCA in favor of EIB and the Financial Guaranty Number UK0007B, dated May 4, 2005, issued by XLCAUK in favor of EIB.

                     “EIB Resolution Event” means (i) commutation of all of the EIB Policies and full and final extinguishment of all Persons’ rights and obligations thereunder, (ii) a general release in form reasonably acceptable to the XL Parties by EIB of the XL Parties’ obligations with respect to all of the EIB Guarantees or (iii) the provision by a creditworthy entity reasonably acceptable to the XL Parties of a guaranty guaranteeing 100% of the XL Parties’ obligations under all of the EIB Guarantees.

                     “Escrow Agent” means HSBC Private Bank, Bermuda Trust Company Limited.

                     “Escrow Agreement” means the agreement pursuant to which the Escrow Agent will hold the XL Owned SCA Common Shares pursuant to terms substantially the same as those set forth in Schedule 1.01(d), if the XL Owned SCA Common Shares are transferred to the Escrow Agent pursuant to Section 2.10.

                     “Excess of Loss Agreement” means the Excess of Loss Reinsurance Agreement by and between XLFA and XLI, dated as of October 3, 2001.

                     “Excess of Loss Commutation Agreement” means the Excess of Loss Commutation Agreement to be executed by XLFA and XLI and delivered at the Closing, in the form of Exhibit 1.01(d).

                     “Facultative Master Certificate” means the Facultative Master Certificate effective as of November 1, 2002, as amended and restated pursuant to the First Amended and Restated Facultative Master Certificate, effective as of August 4, 2006, and as further amended and restated pursuant to the Second Amended and Restated Facultative Master Certificate by and between XLRA and XLCA, dated as of March 1, 2007.

                     “Facultative Master Certificate Commutation Agreement” means the Facultative Master Certificate Commutation Agreement to be executed by XLCA and XLRA and delivered at the Closing, in the form attached hereto as Exhibit 1.01(e).

                     “Financial Statements” means the GAAP Financial Statements, the XLCA Statutory Financial Statements and the XLFA Statutory Financial Statements.

                     “Financial Security” means Financial Security Assurance Inc.

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                     “Financial Security Commutations” means the Financial Security Master Facultative Commutation and the commutations of the Other Financial Security Agreements.

                     “Financial Security Agreements” means the Financial Security Master Facultative Agreement and the Other Financial Security Agreements.

                     “Financial Security Guarantee” means the Reinsurance Agreement Guarantee, dated November 3, 1998 and amended on July 5, 2006, issued by X.L. Insurance Company, Ltd (later renamed XLI), guaranteeing XLFA’s obligations to Financial Security under the Financial Security Master Facultative Agreement.

                     “Financial Security Master Facultative Agreement” means the Amended and Restated Master Facultative Reinsurance Agreement, dated as of November 3, 1998, between Financial Security and XLFA; as amended by the First Amendment to the Master Facultative Reinsurance Agreement, dated as of November 3, 1998, between Financial Security and XLFA; as amended by the First Amendment to the Amended and Restated Master Facultative Reinsurance Agreement, dated as of July 6, 2006, between Financial Security and XLFA.

                     “Financial Security Master Facultative Commutation” means the commutation of the Financial Security Master Facultative Agreement pursuant to a commutation and release agreement.

                     “GAAP” means United States generally accepted accounting principles in effect from time to time.

                     “GAAP Financial Statements” means (i) the audited balance sheet of each of SCA, XLFA and XLCA for the fiscal year ended December 31, 2007 and the related audited statements of income, retained earnings, stockholders’ equity and changes in financial position, together with all related notes and schedules thereto and accompanied by the reports thereon of the SCA Parties’ accountants, and (ii) the unaudited balance sheet of each of SCA, XLFA and XLCA for the three month period ended March 31, 2008 and the related unaudited statements of income, retained earnings, stockholders’ equity and changes in financial position, together with all related notes and schedules thereto.

                     “Governmental Authority” means any federal, national, supranational, state, provincial, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.

                     “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award issued or entered by or with any Governmental Authority.

                     “Jeffco Policies” means (i) the Municipal Bond Insurance Policy Number CA00370A, together with any endorsements thereto, relating to $839,500,000 Jefferson County, Alabama, Sewer Revenue Refunding Warrants Series 2002-C, consisting of $74,450,000 Series 2002-C-1-A Warrants, $74,450,000 Series 2002-C-1-B Warrants, $74,450,000 Series 2002-C-1-C Warrants, $75,450,000 Series 2002-C-1-D Warrants, $73,700,000 Series 2002-C-2 Warrants, $98,300,000 Series 2002-C-3 Warrants, $73,700,000 Series 2002-C-4 Warrants, $98,300,000 Series 2002-C-5 Warrants, $147,600,000 Series 2002-C-6 Warrants and $49,100,000 Series

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2002-C-7 Warrants; (ii) the Municipal Bond Insurance Policy Number CA00522A, together with any endorsements thereto, relating to $300,000,000 Jefferson County, Alabama Sewer Revenue Refunding Warrants, Series 2003-B, consisting of $55,000,000 Series 2003-B-2 Warrants, $25,000,000 Series 2003B-3 Warrants, $25,000,000 Series 2003B-4 Warrants, $75,000,000 Series 2003B-5 Warrants, $15,000,000 Series 2003B-6 and $105,000,000 Series 2003B-7 Warrants; and (iii) the Debt Service Reserve Insurance Policy Number CA01568A, together with any endorsements thereto, relating to up to $164,863,746.40 Parity Securities as defined in the Trust Indenture, dated as of February 1, 1997, between Jefferson County, Alabama and The Bank of New York (as successor to AmSouth Bank of Alabama), as trustee, as such Indenture has been supplemented and amended.

                     “Knowledge of SCA” means the actual knowledge after due inquiry of those Persons identified on Schedule 1.01(c).

                     “Law” means any federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule (including any rules regarding discovery), code, order, requirement or rule of law (including common law).

                     “Lien” means any lien, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, proxy, voting trust or agreement, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever.

                     “Minimum Consenting CDS Counterparty Restructuring Threshold” means (i) at least seventy-five percent (75%) in notional amount of the aggregate sum of the notional amounts of (A) the ABS CDO CDSs and (B) the collateralized debt obligation credit default swaps between XLCA or an Affiliate of XLCA and a CDS Counterparty that are listed on an official schedule held by the SCA Parties and the CDS Financial Advisor; (ii) at least sixty-six and two-thirds percent (66 ²/₃%) in total notional amount of the ABS CDO CDSs; and (iii) at least sixty-six and two-thirds percent (66 ²/₃%) in aggregate number of the CDS Counterparties.

                     “MLI CDS Agreements” means the eight asset backed securities collateralized debt obligation credit default swap agreements listed on Schedule 1.01(a).

                     “NYID” means the New York State Insurance Department.

                     “Other Financial Security Agreements” means all agreements between any SCA Party and Financial Security, other than the Financial Security Master Facultative Agreement, as to which the obligations of such SCA Parties are secured by a letter of credit issued by the lenders pursuant to the Credit Agreement for the benefit of Financial Security on September 19, 2006, as heretofore amended, extended and renewed, bearing Citibank, N.A. reference number 61652611.

                     “Other Terminated Agreements” means those agreements listed on Schedule 1.01(b).

                     “Party” means any party to this Agreement.

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                     “Person” means an individual, corporation, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

                     “Quota Share Treaty Commutation” means the commutation of the Quota Share Treaty pursuant to the Quota Share Treaty Commutation Agreement.

                     “Quota Share Treaty Commutation Agreement” means the Quota Share Treaty Commutation Agreement to be executed by XLFA and XLCA and delivered at the Closing, in the form of Exhibit 1.01(f).

                     “Reinsurance Guarantees” means (i) the Guarantee, (ii) the Financial Security Guarantee and (iii) the EIB Guarantees.

                     “Required Consenting CDS Counterparties” means greater than 50% of the total notional amount of all the credit default swaps between XLCA or an Affiliate of XLCA and the CDS Counterparties.

                     “SCA Parties” means SCA, XLFA, XLCA, XLFAS, SCAB, XLCAUK and each of the portfolio trusts that executes a joinder agreement pursuant to Section 9.04 in the form attached hereto as Exhibit 1.01(c), either collectively or individually, as the context requires.

                     “SCA Registration Rights Agreement” means a registration rights agreement for the XL Owned SCA Common Shares in substantially the form attached hereto as Exhibit 1.01(j).

                     “SCA Share Sale Proceeds” means the proceeds, together with any interest that may accrue thereon, of any sale of the XL Owned SCA Common Shares as owned by the SCA Shareholder Entity and any cash dividends or distributions paid with respect to such shares during such time as the XL Owned SCA Common Shares are owned by the SCA Shareholder Entity.

                     “SCA Shareholder Entity” means a special purpose trust or other entity formed pursuant to the Declaration of Trust.

                     “SCA Shareholder Entity Agreement” means an agreement substantially in the form attached hereto as Exhibit 1.01(i).

                     “SCA Shareholder Entity Formation Conditions” means (i) the selection of a trustee of the SCA Shareholder Entity mutually acceptable to the Required Consenting CDS Counterparties and the SCA Parties; (ii) the establishment of the SCA Shareholder Entity; (iii) the delivery by the SCA Shareholder Entity of a true and correct written copy of customary securities Law representations and agreements set forth on Exhibit 2.06 to the XL Parties (or to the Escrow Agent, with a copy to the XL Parties, if the XL Owned Common Shares have been transferred to the Escrow Agent pursuant to Section 2.10); and (iv) any required approval the NYID, the Delaware Insurance Department and the UK FSA of the SCA Shareholder Entity’s acquisition of the XL Owned SCA Common Shares will have been obtained.

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                     “SCA Shareholder Entity Formation Conditions Certificate” means a certificate certified by the Secretaries of SCA, XLFA and XLCA stating that the SCA Shareholder Entity Formation Conditions have been satisfied.

                     “Securities Act” means the Securities Act of 1933, as amended.

                     “Subscription Agreement” means the Subscription Agreement to be executed by XLFA and XL and delivered at the Closing, in the form of Exhibit 1.01(g).

                     “Subsidiary” or “Subsidiaries” means, with respect to a specified Person, any corporation, partnership, limited partnership, limited liability company or other entity as to which the specified Person, directly or indirectly (including through one or more Subsidiaries), owns a majority of the outstanding shares of stock or other ownership interests having voting power under ordinary circumstances to elect directors of such corporation or other Persons performing similar functions for such entity.

                     “Third-Party Reinsurance Agreements” means (i) the Financial Security Master Facultative Agreement, and all individual risk cessions thereunder and (ii) the EIB Policies.

                     “Transaction Documents” means this Agreement, the Ancillary Agreements and any certificate, Financial Statement, report, list, writing or other document delivered pursuant to this Agreement or the transactions contemplated by this Agreement.

                     “Transactions” means all transactions contemplated by this Agreement and the Ancillary Agreements.

                     “Transfer” means, with respect to a given security, any transaction whereby a Person (a) offers, pledges, sells or contracts to sell any option or contract to purchase, purchases any option or contract to sell, grants any option, right or warrant to purchase, lends, or otherwise transfers or disposes of, directly or indirectly, such security or any security convertible into, or exercisable or exchangeable for, any or all of such security; or (b) enters into any swap or other arrangement that transfers to another Person, in whole or in part, any of the economic consequences of ownership of any or all of the given security, whether any such transaction described in clause (a) or (b) is to be settled by delivery of any or all of the given security or any other security, in cash or otherwise. Notwithstanding the foregoing, in no event shall any transfer or other transaction solely between or among the SCA Parties constitute a “Transfer.”

                     “Transition Agreement” means the Transition Agreement, dated as of August 4, 2006 and amended on May 3, 2007, among XL, XLI, XLA and SCA.

                     “Transition Agreement Amendment” means the Transition Agreement Amendment No. 2 among XL, XLI, XLA and SCA in the form attached hereto as Exhibit 1.01(k).

                     “Triggered Enforcement Rights” means a Party’s right to accelerate, liquidate, close out, terminate, assess or demand damages or termination payments under, withhold or set off payments under, alter the payment terms of, demand collateral in respect of, or otherwise exercise remedies or enforcement rights in respect of one or more transactions (including swap

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transactions), agreements, policies, guarantees or treaties to which an SCA Party or an Affiliate thereof is a party, other than in respect of the Credit Agreement; provided, that, solely for purposes of Section 6.10(b), the definition of “Triggered Enforcement Rights” includes the right of any counterparty to a credit default swap agreement with XLCA or Affiliates of XLCA to accelerate, liquidate, close out, terminate, assess or demand damages or termination payments under, withhold or set off payments under, alter the payment terms of, demand collateral in respect of, or otherwise exercise remedies or enforcement rights in respect of one or more transactions (including swap transactions), agreements, policies, guarantees or treaties to which an SCA Party or an Affiliate thereof is a party, other than in respect of the Credit Agreement.

                     “UK FSA” means the Financial Services Authority in the United Kingdom.

                     “XLCA Statutory Financial Statements” means the annual financial statements of XLCA filed with the NYID for the year ended December 31, 2007, the quarterly financial statements of XLCA filed with the NYID for the quarter ended March 31, 2008 and the Statement of Actuarial Opinion of XLCA filed with the NYID for the year ended December 31, 2007.

                     “XLFA Redomestication” means the discontinuance of XLFA as a company existing under the Laws of Bermuda and its continuation as a Delaware corporation and the contribution to XLCA by the SCA Parties of all of the common shares and Series A Redeemable Preferred Shares of XLFA.

                     “XLFA Statutory Financial Statements” means the annual financial statements of XLFA filed with the BMA for the year ended December 31, 2007, and the quarterly financial statements of XLFA filed with the BMA for the quarter ended March 31, 2008, each prepared in accordance with Bermuda statutory accounting principles applied on a basis consistent with past practices, and the Statement of Actuarial Opinion of XLFA filed with the BMA for the year ended December 31, 2007.

                     “XL Parties” means XL, XLI, XLRA, XLGS, XLBS and XLA, either collectively or individually, as the context requires.

                     “XL Public Offering” means an offering of XL’s Class A Ordinary Shares, par value $0.01 per share, and equity security units, in each case, registered pursuant to the Securities Act.

                     “XL Stock Resale and Registration Rights Agreement” means the Resale Registration Rights Agreement to be executed by XLFA and XL and delivered at the Closing, in the form of Exhibit 1.01(h).

                     “XL/SCA Commutation Agreements” means (i) the 2001 Facultative Quota Share Commutation Agreement, (ii) the Excess of Loss Commutation Agreement, (iii) the Adverse Development Cover Commutation Agreement and (iv) the Facultative Master Certificate Commutation Agreement.

                    Section 1.02 Definitions. The following terms have the meanings set forth in the Sections set forth below:

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Definition	Location
Allocated Funds	Section 6.12
Cash Consideration Amount	Section 2.06
CDS Counterparty Restructuring	Section 6.12
Challenging Action	Section 6.11(a)
Closing	Section 2.07
Confidential Information	Section 6.01(b)
Consideration	Section 2.06
Guarantee	Recitals
Losses	Section 9.11(a)
MLI	Section 3.10
MLI Agreement	Section 3.10
Providing Group	Section 6.01(b)
Quota Share Treaty	Recitals
Receiving Group	Section 6.01(b)
SCA	Preamble
SCA Indemnitees	Section 9.11(a)
SCAB	Preamble
SEC	Section 3.08(e)
Stock Consideration	Section 2.06
XL	Preamble
XL Indemnitees	Section 9.11(b)
XL Owned SCA Common Shares	Recitals
XLA	Preamble
XLBS	Preamble
XLCA	Preamble
XLCAUK	Preamble
XLFA	Preamble
XLFAS	Preamble
XLGS	Preamble
XLI	Preamble
XLRA	Preamble

                    Section 1.03 Interpretation and Rules of Construction. In this Agreement, except to the extent otherwise provided or that the context otherwise requires:

                    (a) when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or a Schedule or Exhibit to, this Agreement unless otherwise indicated;

                    (b) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

                    (c) whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

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                    (d) the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

                    (e) all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;

                    (f) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

                    (g) any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law or statute as from time to time amended, modified or supplemented, including by succession of comparable successor Laws;

                    (h) references to a Person are also to its successors and permitted assigns; and

                    (i) the use of “or” is not intended to be exclusive unless expressly indicated otherwise.

ARTICLE II

COMMUTATION AND RELEASE

                    Subject to the terms and conditions of this Agreement, at or prior to the Closing:

                    Section 2.01 Commutation and Release of Reinsurance Agreements. The SCA Parties and the XL Parties shall (i) commute the agreements listed in Part I of Schedule 2.01 and (ii) fully and finally extinguish all the Parties’ rights and obligations under all such agreements pursuant to the XL/SCA Commutation Agreements.

                    Section 2.02 Termination of the Other Terminated Agreements. The SCA Parties and the XL Parties shall terminate the Other Terminated Agreements listed in Part I of Schedule 1.01(b) and, notwithstanding anything in any of the Other Terminated Agreements listed in Part I of Schedule 1.01(b) that provides that any term or condition survives termination, fully and finally extinguish all rights and obligations of the Parties under all such agreements.

                    Section 2.03 Commutation and Release of Quota Share Treaty. XLCA and XLFA shall (i) commute the Quota Share Treaty and (ii) fully and finally extinguish all rights and obligations under the Quota Share Treaty pursuant to the Quota Share Treaty Commutation Agreement.

                    Section 2.04 Commutation and Amendment of Other Reinsurance Agreements. (a) The SCA Parties intend to, but shall not be obligated to, commute or amend the reinsurance agreements the SCA Parties have with third parties that are identified on Schedule 2.04; provided, that until October 15, 2008, no commutation or amendment of any agreement listed on

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Schedule 2.04 may involve the payment of cash or other consideration by any SCA Party. For the avoidance of doubt, no commutation or amendment of any agreement listed on Schedule 2.04 shall involve the payment of Allocated Funds.

                    (b) Notwithstanding the foregoing, (i) the Financial Security Commutations, (ii) the commutations of each EIB Policy, (iii) the general releases in a form reasonably acceptable to the XL Parties of the XL Parties with respect to each EIB Guarantee or (iv) the provision by a creditworthy entity reasonably acceptable to the XL Parties of a guarantee guaranteeing 100% of the XL Parties’ obligations under each EIB Guarantee may involve payment of cash or other consideration payable at any time by any SCA Party.

                    Section 2.05 Mutual Releases. (a) As of the Closing Date:

          (i) each SCA Party, on behalf of itself and its respective Subsidiaries, hereby irrevocably and unconditionally releases and forever discharges each XL Party, its parents, Subsidiaries and Affiliates, and its respective predecessors, successors, assigns, officers, directors, agents, employees, shareholders, representatives, underwriters, and attorneys, from any and all past, present and future actions, causes of action, suits, debts, Liens, contracts, rights, agreements, obligations, promises, liabilities, claims, counterclaims, demands, damages, controversies, losses, costs and expenses (including attorneys’ fees and costs actually incurred) of any kind, character, description or nature whatsoever, known or unknown to any of the SCA Parties, suspected or unsuspected, reported or unreported, fixed or contingent, accrued or unaccrued, liquidated or unliquidated, whether grounded in Law or equity or sounding in tort or contract or otherwise, which the SCA Party now has, owns, holds or claims to have, own, or hold, or at any time heretofore had, owned, or held or claimed to have had, owned, or held, or may hereafter have, own, or hold or claim to have, own, or hold, arising directly or indirectly out of, based upon, or in any way related to or in connection with (A) (1) the Financial Security Agreements; (2) the agreements, understandings, arrangements commuted or terminated pursuant to Sections 2.01, 2.02 and 2.03, and Other Terminated Agreements listed in Part II of Schedule 1.01(b); (3) any of the Reinsurance Guarantees; (4) any commutation of an EIB Policy; (5) the commutation or termination of any of the foregoing listed in clauses (1), (2), (3) and (4); or (6) any commutation or amendment of any agreement listed on Schedule 2.04 pursuant to or in accordance with this Agreement; (B) conduct or other matters occurring on or prior to the Closing, other than contractual obligations arising under written agreements between any XL Party and any SCA Party (including those described on Schedule 2.05, but excluding those expressly commuted or terminated pursuant to this Agreement or any Ancillary Agreement) or (C) any tax liability, whether stemming from policies issued by Subsidiaries of SCA prior to SCA’s IPO, after SCA’s IPO or otherwise, that results from the XLFA Redomestication; provided, however, with respect to both clauses (A) and (B), the provisions of this paragraph shall not discharge any obligation of any of the XL Parties that has been undertaken or imposed by the express terms of this Agreement or any Ancillary Agreement.

          (ii) each SCA Party hereby irrevocably and unconditionally releases and forever discharges each CDS Counterparty, its parents, Subsidiaries and Affiliates, and its

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respective predecessors, successors, assigns, officers, directors, agents, employees, shareholders, representatives, underwriters, and attorneys, from any and all past, present and future actions, causes of action, suits, debts, Liens, contracts, rights, agreements, obligations, promises, liabilities, claims, counterclaims, demands, damages, controversies, losses, costs and expenses (including attorneys’ fees and costs actually incurred) of any kind, character, description or nature whatsoever, known or unknown to any of the SCA Parties, suspected or unsuspected, reported or unreported, fixed or contingent, accrued or unaccrued, liquidated or unliquidated, whether grounded in Law or equity or sounding in tort or contract or otherwise, which the SCA Party now has, owns, holds or claims to have, own, or hold, or at any time heretofore had, owned, or held or claimed to have had, owned, or held, or may hereafter have, own, or hold or claim to have, own, or hold, arising directly or indirectly out of, based upon, or in any way related to or in connection with (A) (1) the Financial Security Agreements; (2) the agreements, understandings, arrangements commuted or terminated pursuant to Sections 2.01, 2.02 and 2.03, and Other Terminated Agreements listed in Part II of Schedule 1.01(b); (3) any of the Reinsurance Guarantees; (4) the commutation or termination of any of the foregoing listed in clauses (1), (2) and (3); (5) any commutation of an EIB Policy, any general release by EIB of the XL Parties’ obligations with respect to an EIB Guarantee, or any guaranty by a creditworthy entity reasonably acceptable to the XL Parties of the XL Parties’ obligations under any EIB Guarantee, each in accordance with this Agreement; or (6) any commutation or amendment of any agreement listed on Schedule 2.04 pursuant to or in accordance with this Agreement or (B) conduct occurring on or prior to the Closing with respect to this Agreement and the Transactions; provided, however, with respect to both clauses (A) and (B), the provisions of this paragraph shall not discharge any obligation of any of the CDS Counterparties that has been undertaken or imposed by the express terms of this Agreement, any Ancillary Agreement or any other agreement to which such CDS Counterparty is a party.

          (b) As of the Closing Date:

          (i) each XL Party, on behalf of itself and its respective Subsidiaries, hereby irrevocably and unconditionally releases and forever discharges each SCA Party, its parents, Subsidiaries and Affiliates, and its respective predecessors, successors, assigns, officers, directors, agents, employees, shareholders, representatives, underwriters, and attorneys, from any and all past, present and future actions, causes of action, suits, debts, Liens, contracts, rights, agreements, obligations, promises, liabilities, claims, counterclaims, demands, damages, controversies, losses, costs and expenses (including attorneys’ fees and costs actually incurred) of any kind, character, description or nature whatsoever, known or unknown to any of the XL Parties, suspected or unsuspected, reported or unreported, fixed or contingent, whether grounded in Law or equity or sounding in tort or contract or otherwise, which the XL Party now has, owns, holds or claims to have, own, or hold, or at any time heretofore had, owned, or held or claimed to have had, owned, or held, or may hereafter have, own, or hold or claim to have, own, or hold, arising directly or indirectly out of, based upon, or in any way related to or in connection with (A) (1) the Financial Security Agreements; (2) the agreements, understandings, arrangements commuted or terminated pursuant to Sections 2.01, 2.02 and 2.03, and Other Terminated Agreements listed in Part II of Schedule 1.01(b); (3) any

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of the Reinsurance Guarantees; (4) any commutation of an EIB Policy; (5) the commutation or termination of any of the foregoing listed in clauses (1), (2), (3) and (4); or (6) any commutation or amendment of any agreement listed on Schedule 2.04 pursuant to or in accordance with this Agreement or (B) conduct or other matters occurring on or prior to the Closing, other than contractual obligations arising under written agreements between any XL Party and any SCA Party (including those described on Schedule 2.05, but excluding those expressly commuted or terminated pursuant to this Agreement or any Ancillary Agreement); provided, however, with respect to both clauses (A) and (B), the provisions of this paragraph shall not discharge any obligation of any of the SCA Parties that has been undertaken or imposed by the express terms of this Agreement or any Ancillary Agreement.

          (ii) each XL Party hereby irrevocably and unconditionally releases and forever discharges each CDS Counterparty, its parents, Subsidiaries and Affiliates, and its respective predecessors, successors, assigns, officers, directors, agents, employees, shareholders, representatives, underwriters, and attorneys, from any and all past, present and future actions, causes of action, suits, debts, Liens, contracts, rights, agreements, obligations, promises, liabilities, claims, counterclaims, demands, damages, controversies, losses, costs and expenses (including attorneys’ fees and costs actually incurred) of any kind, character, description or nature whatsoever, known or unknown to any of the XL Parties, suspected or unsuspected, reported or unreported, fixed or contingent, accrued or unaccrued, liquidated or unliquidated, whether grounded in Law or equity or sounding in tort or contract or otherwise, which the XL Party now has, owns, holds or claims to have, own, or hold, or at any time heretofore had, owned, or held or claimed to have had, owned, or held, or may hereafter have, own, or hold or claim to have, own, or hold, arising directly or indirectly out of, based upon, or in any way related to or in connection with (A) (1) the Financial Security Agreements; (2) the agreements, understandings, arrangements commuted or terminated pursuant to Sections 2.01, 2.02 and 2.03, and Other Terminated Agreements listed in Part II of Schedule 1.01(b); (3) any of the Reinsurance Guarantees; (4) the commutation or termination of any of the foregoing listed in clauses (1), (2) and (3); (5) any commutation of an EIB Policy, any general release by EIB of the XL Parties’ obligations with respect to an EIB Guarantee, or any guaranty by a creditworthy entity reasonably acceptable to the XL Parties of the XL Parties’ obligations under any EIB Guarantee, each in accordance with this Agreement; or (6) any commutation or amendment of any agreement listed on Schedule 2.04 pursuant to or in accordance with this Agreement, or (B) conduct occurring on or prior to the Closing with respect to this Agreement and the Transactions; provided, however, with respect to both clauses (A) and (B), the provisions of this paragraph shall not discharge any obligation of any of the CDS Counterparties that has been undertaken or imposed by the express terms of this Agreement, any Ancillary Agreement or any other agreement to which such CDS Counterparty is a party.

                    (c) As of the Closing Date, each CDS Counterparty hereby irrevocably and unconditionally releases and forever discharges each SCA Party, each XL Party, each of their respective parents, Subsidiaries and Affiliates, and each of their respective predecessors, successors, assigns, officers, directors, agents, employees, shareholders, representatives, underwriters, and attorneys, from any and all past, present and future actions, causes of action,

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suits, debts, Liens, contracts, rights, agreements, obligations, promises, liabilities, claims, counterclaims, demands, damages, controversies, losses, costs and expenses (including attorneys’ fees and costs actually incurred, except those costs and expenses expressly agreed in writing to be paid by the SCA Parties) of any kind, character, description or nature whatsoever, known or unknown to any of the CDS Counterparties, suspected or unsuspected, reported or unreported, fixed or contingent, accrued or unaccrued, liquidated or unliquidated, whether grounded in Law or equity or sounding in tort or contract or otherwise, which the CDS Counterparty now has, owns, holds or claims to have, own, or hold, or at any time heretofore had, owned, or held or claimed to have had, owned, or held, or may hereafter have, own, or hold or claim to have, own, or hold, arising directly or indirectly out of, based upon, or in any way related to or in connection with (A) (1) the Financial Security Agreements; (2) the agreements, understandings, arrangements commuted or terminated pursuant to Sections 2.01, 2.02 and 2.03, and Other Terminated Agreements listed in Part II of Schedule 1.01(b); (3) any of the Reinsurance Guarantees; (4) the commutation or termination of any of the foregoing listed in clauses (1), (2) and (3); (5) any commutation of an EIB Policy, any general release by EIB of the XL Parties’ obligations with respect to an EIB Guarantee, or any guaranty by a creditworthy entity reasonably acceptable to the XL Parties of the XL Parties’ obligations under any EIB Guarantee, each in accordance with this Agreement; or (6) commutation or amendment of any agreement listed on Schedule 2.04 pursuant to or in accordance with this Agreement; or (B) conduct occurring on or prior to the Closing with respect to this Agreement and the Transactions; provided, however, that nothing in this Section 2.05(c) releases any SCA Party or any XL Party from fraud or intentional misconduct; provided, further, that with respect to both clauses (A) and (B), the provisions of this paragraph shall not discharge any obligation of any of the SCA Parties or XL Parties that has been undertaken or imposed by the express terms of this Agreement, any Ancillary Agreement or any other written agreement under which such CDS Counterparty has any rights (whether as a party or otherwise) or otherwise amend existing credit default swaps to which such CDS Counterparty is a party.

                    (d) The Parties acknowledge and agree that (A) the SCA Parties shall not be responsible for the performance, or lack thereof, of any other Party’s obligations pursuant to this Agreement or the Ancillary Agreements, (B) the XL Parties shall not be responsible for the performance, or lack thereof, of any other Party’s obligations pursuant to this Agreement or the Ancillary Agreements and (C) a CDS Counterparty shall not be responsible for the performance, or lack thereof, of any other Party’s obligations pursuant to this Agreement or the Ancillary Agreements.

                    (e) Waiver of Statutory Rights. In connection with the releases granted herein, each of the Parties hereby waives all rights conferred by the provisions of California Civil Code Section 1542 and/or any similar state or federal law. California Civil Code § 1542 provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

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The Parties understand and acknowledge the significance and consequence of their waiver of § 1542 of the California Civil Code, as well as any other federal or state statute or common law principle of similar effect, and acknowledge that this waiver is a material inducement to and consideration for each Party’s execution of this Agreement; provided, however, the provisions of this paragraph shall not discharge any obligation of any of the Parties that has been undertaken or imposed by the express terms of this Agreement, any Ancillary or any other written agreement to which such Party is a party.

                    Section 2.06 Consideration. At the Closing, the XL Parties shall (i) pay to the SCA Parties an aggregate amount (inclusive of any amounts specified within the XL/SCA Commutation Agreements) equal to One Billion, Seven Hundred and Seventy-Five Million Dollars ($1,775,000,000) (the “Cash Consideration Amount”), which will be paid to each of the SCA Parties in the amounts set forth on Schedule 2.06(a); (ii) issue and transfer to the SCA Parties, free and clear of any Liens, an aggregate of eight million (8,000,000) shares of XL’s Class A Ordinary Shares, par value $0.01 per share (the “Stock Consideration”), which will be transferred to each of the SCA Parties in the number of shares set forth on Schedule 2.06(b), pursuant to the terms of the Subscription Agreement and the XL Stock Resale and Registration Rights Agreement; and (iii) subject to Section 2.10, transfer to the SCA Shareholder Entity, free and clear of any Liens, all of the XL Owned SCA Common Shares to be held in accordance with the terms of the Declaration of Trust (the XL Owned SCA Common Shares, together with the Cash Consideration Amount and the Stock Consideration, the “Consideration”).

                    Section 2.07 Closing. (a) Subject to (i) satisfaction or waiver of all conditions to the obligations of the parties set forth in Article VII (other than those conditions anticipated to occur at Closing) and (ii) the completion of an XL Public Offering, the closing of the commutations, terminations and releases that are the subject of this Agreement (the “Closing”) will be held at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, NY 10153 at 10:00 a.m., New York time, on the same Business Day as the completion of an XL Public Offering, or at such other place or at such other time or on such other date as the Parties may mutually agree upon in writing. Notwithstanding anything to the contrary contained herein, under no circumstances will the XL Parties have any obligation to consummate any of the Transactions required to be completed on or prior to the Closing until the completion of an XL Public Offering.

                    (b) All of the actions to be taken at Closing will be deemed to occur simultaneously, except that the Cash Consideration Amount to be received by XLFA shall be received prior to the XLFA Redomestication, and the commutation of the Quota Share Treaty shall occur after the XLFA Redomestication.

                    Section 2.08 Closing Deliveries by the SCA Parties. (a) At Closing, the SCA Parties shall deliver or cause to be delivered to the XL Parties:

          (i) receipt for the Cash Consideration Amount and the Stock Consideration received by the applicable SCA Parties;

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          (ii) the Subscription Agreement executed by each SCA Party which is a party thereto;

         (iii) the XL Stock Resale and Registration Rights Agreement executed by each SCA Party which is a party thereto;

         (iv) the 2001 Facultative Quota Share Commutation Agreement executed by each SCA Party which is a party thereto;

          (v) the Excess of Loss Commutation Agreement executed by each SCA Party which is a party thereto;

         (vi) the Adverse Development Cover Commutation Agreement executed by each SCA Party which is a party thereto;

        (vii) the Facultative Master Certificate Commutation Agreement executed by each SCA Party which is a party thereto;

       (viii) a true and complete original copy of a fully executed Quota Share Treaty Commutation Agreement;

         (ix) the Transition Agreement Amendment executed by each SCA Party which is a party thereto; and

          (x) an SCA Shareholder Entity Formation Conditions Certificate, if the SCA Shareholder Entity Formation Conditions have been satisfied.

                    (b) At Closing, the SCA Parties shall deliver or cause to be delivered to the XL Parties and the CDS Counterparties a true and complete copy, certified by the Secretary or Director of each of the SCA Parties, of the resolutions duly and validly adopted by the Boards of Directors (or, in the case of each portfolio trust that is an SCA Party, a direction letter authorized by its unitholder) of each of the SCA Parties evidencing its authorization of the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the Transactions.

                    Section 2.09 Closing Deliveries by the XL Parties. (a) At Closing, the XL Parties shall deliver to the SCA Parties:

          (i) the Cash Consideration Amount by wire transfer in immediately available funds to a bank account or bank accounts of XLFA or XLCA (and, for the avoidance of doubt, no other entity) as SCA may direct, consistent with the allocation of the Cash Consideration Amount attached hereto as Schedule 2.06(a), in writing to XL at least three days prior to Closing;

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          (ii) stock certificates evidencing the Stock Consideration registered in the names of those SCA Parties designated on Schedule 2.06(b), together with an executed share transfer form evidencing the transfer of the XL Owned SCA Common Shares;

          (iii) the Subscription Agreement executed by each XL Party which is a party thereto;

          (iv) the XL Stock Resale and Registration Rights Agreement executed by each XL Party which is a party thereto;

          (v) the 2001 Facultative Quota Share Commutation Agreement executed by each XL Party which is a party thereto;

          (vi) the Excess of Loss Commutation Agreement executed by each XL Party which is a party thereto;

          (vii) the Adverse Development Cover Commutation Agreement executed by each XL Party which is a party thereto;

          (viii) the Facultative Master Certificate Commutation Agreement executed by each XL Party which is a party thereto; and

          (ix) the Transition Agreement Amendment executed by each XL Party which is a party thereto.

                    (b) At Closing, the XL Parties shall deliver to the SCA Parties and the CDS Counterparties a true and complete copy, certified by the Secretary or Director of each of the XL Parties, of the resolutions duly and validly adopted by the Boards of Directors of each of the XL Parties evidencing its authorization of the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the Transactions.

                    (c) At Closing, but subject to Section 2.10, the XL Parties shall cause the XL Owned SCA Common Shares (together with certificates evidencing such XL Owned SCA Common Shares and stock powers duly endorsed in blank to be transferred to the SCA Shareholder Entity, which will be owned and managed pursuant to the terms of the Declaration of Trust.

                    Section 2.10 Escrow. Notwithstanding anything to the contrary contained in this Agreement, if XL does not receive an SCA Shareholder Entity Formation Conditions Certificate from the SCA Parties in accordance with Section 2.08(a) at or prior to the Closing, the XL Parties shall, at Closing, deposit with the Escrow Agent certificates evidencing all of the XL Owned SCA Common Shares, free and clear of any Liens, together with stock powers duly endorsed in blank, which are to be held by the Escrow Agent until released in accordance with the Escrow Agreement. From and after delivery of such certificates to the Escrow Agent at Closing, the XL Parties shall refrain from exercising, and hereby irrevocably disclaim, any and all voting, economic or other rights with respect to the XL Owned SCA Common Shares, and the XL Parties will have no liability or further obligations to the SCA Parties or the CDS Counterparties thereafter with respect to the XL Owned SCA Common Shares.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SCA PARTIES

                    The SCA Parties hereby jointly and severally represent and warrant to each of the XL Parties and CDS Counterparties as follows:

                    Section 3.01 Organization, Authority and Qualification of the SCA Parties. Each of the SCA Parties is a corporation, company or business entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization and has all necessary power and authority to enter into this Agreement and the Ancillary Agreements to which it may be a party, to carry out its obligations hereunder and thereunder and to consummate the Transactions. Except as set forth in Section 3.01 of the SCA Parties’ Disclosure Schedule, each of the SCA Parties is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary. The execution and delivery of this Agreement and the Ancillary Agreements to which each SCA Party is a party, the performance by each SCA Party of its obligations hereunder and thereunder and the consummation by each SCA Party of the Transactions have been duly authorized by all requisite action on the part of each SCA Party and its shareholders. This Agreement, the Transition Agreement Amendment, the SCA Shareholder Entity Agreement and each Transaction have been approved by an independent committee of SCA’s Board of Directors that did not include any member that was nominated to SCA’s Board by any of the XL Parties, and this Agreement and each Ancillary Agreement and Transaction to which each other SCA Party is a party has been approved by such SCA Party’s Board of Directors (or, in the case of each portfolio trust that is an SCA Party, a direction letter authorized by its unitholder) or other appropriate authorizing body or Person. This Agreement has been, and, upon their execution, the Ancillary Agreements to which each SCA Party is a party shall have been, duly executed and delivered by each SCA Party, and, assuming due authorization, execution and delivery by each of the XL Parties and CDS Counterparties and receipt of all consents and approvals by Governmental Authorities as required by Law, this Agreement constitutes, and, upon their execution, the Ancillary Agreements shall constitute, legal, valid and binding obligations of the SCA Parties enforceable against each of the SCA Parties in accordance with their respective terms, subject to remedies under applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights.

                    Section 3.02 No Conflict. Assuming the making and obtaining of all filings, notifications, consents, approvals, authorizations and other actions referred to in Section 3.03, the execution, delivery and performance by each of the SCA Parties of this Agreement and the Ancillary Agreements to which it is a party do not and will not (a) violate, conflict with or result in the breach of any provision of the Certificate of Incorporation or Bye-Laws (or similar organizational documents) of any SCA Party, (b) conflict with or violate any Law or Governmental Order applicable to any of the SCA Parties or any of their assets, properties or businesses or, (c) except as set forth in Section 3.02 of the SCA Parties’ Disclosure Schedule, conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or

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cancellation of, any note, bond, mortgage, indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which any SCA Party is a party, which would adversely affect the ability of any SCA Party to carry out its obligations under this Agreement or any Ancillary Agreement or to consummate the Transactions.

                    Section 3.03 Governmental Consents and Approvals. (a) The execution, delivery and performance of this Agreement and each Ancillary Agreement to which any SCA Party is a party by the SCA Parties does not and will not require any consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority, except as described in Section 3.03 of the SCA Parties’ Disclosure Schedule.

                    (b) The SCA Parties sought and obtained (other than with respect to obtaining confirmation from the NYID, the Delaware Insurance Department and the UK FSA that they do not object to the transfer of the XL Owned SCA Common Shares to the SCA Shareholder Entity, which confirmation will be sought and is anticipated to be obtained promptly after the completion of the documentation related to the Shareholder Entity) approval of this Agreement and each commutation or other Transaction to which XLCA is a party from the NYID on the grounds that (among other things) they are collectively, and each is individually, fair and equitable. The SCA Parties have obtained (other than with respect to obtaining confirmation from the NYID, the Delaware Insurance Department and the UK FSA that they do not object to the transfer of the XL Owned SCA Common Shares to the SCA Shareholder Entity, which confirmation will be sought and is anticipated to be obtained promptly after the completion of the documentation related to the Shareholder Entity) or completed all consents, approvals, authorizations, orders, actions, filings or notifications listed on Section 3.03 of the SCA Parties’ Disclosure Schedule. The SCA Parties have provided true and correct copies of such approvals to the XL Parties. To the Knowledge of SCA, approvals have not been rescinded, modified or amended in any way.

                    Section 3.04 Financial Information. (a) True and complete copies of the Financial Statements have been delivered by the SCA Parties to the XL Parties and CDS Counterparties. The Financial Statements (i) were prepared in accordance with the books of account and other financial records of the SCA Parties and (ii) present fairly the financial condition and results of operations of the SCA Parties as of the dates thereof or for the periods covered thereby. The GAAP Financial Statements have been prepared in accordance with GAAP applied on a basis consistent with past practices. The XLCA Statutory Financial Statements have been prepared in accordance with New York State statutory accounting principles applied on a basis consistent with past practices. The XLFA Statutory Financial Statements have been prepared in accordance with Bermuda statutory accounting principles applied on a basis consistent with past practices.

                    (b) True and complete copies of all pro forma balance sheets of the SCA Parties and any related statements of income, retained earnings, stockholders’ equity, changes in financial position and related notes and schedules thereto, prepared to reflect each of the SCA Parties’ financial condition after giving effect to the Transactions and provided to the NYID, have been delivered by the SCA Parties to the XL Parties and the CDS Counterparties.

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                    Section 3.05 Compliance with Laws. (a) There is no violation of Law by any SCA Party that has, or, if known by an appropriate Governmental Authority, could reasonably be expected to adversely affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the Transactions and (b) except as provided in Section 3.05 of the SCA Parties’ Disclosure Schedule, there is no Governmental Order that is applicable to any SCA Party that has or could reasonably be expected to adversely affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the Transactions.

                    Section 3.06 Effect of Commutations. As of the Closing, as a result of (i) commutation of the Quota Share Treaty pursuant to the Quota Share Commutation Agreement and (ii) commutation of the Financial Security Master Facultative Agreement, the Guarantee and the Financial Security Guarantee shall no longer have any force or effect and for all purposes shall be considered a nullity. If any of the EIB Policies are commutated, then each EIB Guarantee that guarantees XLCA’s obligations under each commuted EIB Policy will no longer have any force or effect and will, for all purposes, be considered a nullity.

                    Section 3.07 Litigation. No Action by or against any of the SCA Parties is pending or, to the Knowledge of SCA, threatened, which could reasonably be expected to affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the Transactions.

                    Section 3.08 Placement of Stock Consideration. Each of the SCA Parties that will acquire a portion of the Stock Consideration:

                    (a) is acquiring the Stock Consideration for investment purposes only and not with a view to or for distributing or reselling such Stock Consideration or any part thereof, without prejudice, however, to such SCA Party’s right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Stock Consideration pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities or “blue sky” Laws. Each such SCA Party understands that it must bear the economic risk of this investment indefinitely, unless the Stock Consideration is registered pursuant to the Securities Act and any applicable state securities or “blue sky” Laws or an exemption from such registration is available. None of the SCA Parties has any intention of participating in the formulation, determination, or direction of the basic business decisions of any of the XL Parties;

                    (b) at the time it was first offered the Stock Consideration was, and at the date hereof is, an “accredited investor” as defined in Rule 501(a) under the Securities Act;

                    (c) understands that the Stock Consideration is being offered and provided as partial consideration to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities or “blue sky” Laws, and that the XL Parties are relying upon the truth and accuracy of, and such SCA Party’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such SCA Party set forth herein in order to determine the availability of such exemptions and the eligibility of such SCA Party to acquire the Stock Consideration;

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                    (d) has, either alone or together with its representatives, such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Stock Consideration, and has so evaluated the merits and risks of such investment. Such SCA Party understands that an investment in the Stock Consideration involves a high degree of risk that could result in complete loss, is able to bear the economic risk of an investment in the Stock Consideration and, at the present time, is able to afford a complete loss of such investment;

                    (e) is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in securities representing an investment decision like that involved in the acquisition of the Stock Consideration. Such SCA Party acknowledges that it has (i) access to XL’s disclosures about its Class A Ordinary Shares made in XL’s filings with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K for its last completed fiscal year, its Quarterly Reports on Form 10-Q for its latest fiscal quarters, and any Current Report on Form 8-K filed by XL since the date of its last respective Annual Report on Form 10-K for its last completed fiscal year; (ii) access to information about XL and its financial condition, results of operations, business, properties, management and prospects contained in an offering memorandum related to the issuance of the Stock Consideration provided to the SCA Parties; and (iii) adequate access and opportunity to discuss the investment opportunity with the management of the XL Parties;

                    (f) in connection with its acceptance of the Stock Consideration, has not relied upon any representations made by, or other information (whether oral or written) furnished by or on behalf of, any of the XL Parties other than as set forth in this Agreement, the Ancillary Agreements or XL’s filings with the SEC or an offering memorandum related to the issuance of the stock consideration provided to the SCA Parties.

                    (g) acknowledges that the Stock Consideration was offered and will be issued to the SCA Parties without any general solicitation or general advertising, including any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising;

                    (h) understands that nothing in this Agreement or any other materials presented by or on behalf of XL to the SCA Parties in connection with the issuance of the Stock Consideration constitutes legal, tax or investment advice. Each SCA Party has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its receipt of the Stock Consideration; and

                    (i) if located or domiciled outside the United States, has complied with all Laws in each foreign jurisdiction in which it will receive or be the record or beneficial owner of the Stock Consideration.

                    Section 3.09 Regulatory Approvals. The NYID has approved in writing the terms of this Agreement and any Transaction to which XLCA is a party, including the Quota Share Treaty Commutation Agreement, pursuant to applicable Law, including Section 1505 of the New York Insurance Law. The BMA has approved in writing the terms of this Agreement as they relate to XLFA prior to the XLFA Redomestication. The UK FSA has been provided a

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copy of this Agreement and has raised no objection to XLCAUK entering into this Agreement, and the UK FSA has confirmed in writing that the 14-day waiting period applicable under the Letter of Undertaking, dated May 20, 2008, will not apply to XLCAUK’s execution of this Agreement. A copy of each such written approval has been delivered to the XL Parties and the CDS Counterparties and such written approvals have not been withdrawn, rescinded, revoked, amended or altered in any way. The SCA Parties have provided the NYID, the BMA and the UK FSA with all information the SCA Parties deemed material and all information requested by the NYID, the BMA or the UK FSA. All information provided by the SCA Parties to the NYID, the BMA or the UK FSA was true, correct and complete in all material respects. Notwithstanding anything to the contrary, the NYID, the BMA and the UK FSA have not confirmed that they are not objecting to the transfer of the XL Owned SCA Common Shares to the SCA Shareholder Entity but the SCA Parties will seek to obtain such confirmations promptly and anticipate that such confirmations will be obtained promptly after the completion of the documentation related to the Shareholder Entity.

                    Section 3.10 MLI CDS Agreements. The SCA Parties have entered into an agreement with Merrill Lynch International (“MLI”) pursuant to which MLI will terminate the MLI CDS Agreements prior to or simultaneously with the Closing (the “MLI Agreement”). A true and correct copy of the MLI Agreement has been delivered to the XL Parties. The MLI Agreement remains in full force and effect and has not been amended, waived, terminated or repealed in any way. The amount of consideration for the termination of the MLI CDS Agreements pursuant to the MLI Agreement is no greater than $500 million in the aggregate together with the release of all claims related to such MLI CDS Agreements.

                    Section 3.11 Financial Security Master Facultative Commutation Agreement. The SCA Parties have entered into an agreement with Financial Security pursuant to which the Financial Security Master Facultative Agreement will be commuted prior to, or simultaneously with, the Closing. A true and correct copy of the Financial Security Master Facultative Commutation Agreement has been delivered to the XL Parties. The Financial Security Master Facultative Commutation Agreement remains in full force and effect and has not been amended, waived, terminated or repealed in any way.

                    Section 3.12 Third-Party Agreements. None of the transactions contemplated by Section 2.04 and listed on Schedule 2.04 is between any SCA Party or any of its affiliates, officers, directors, employees, agents, counsel, sub-contractors or other representatives or related parties, on the one hand, and any other SCA Party or any of its affiliates, officers, directors, employees, agents, counsel, sub-contractors or other representatives or related parties, on the other hand.

                    Section 3.13 Brokers. Except for Rothschild & Sons Limited, whose fees will be paid exclusively by the SCA Parties, no broker, advisor, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the SCA Parties.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE XL PARTIES

                    The XL Parties hereby jointly and severally represent and warrant to each of the SCA Parties and the CDS Counterparties as follows:

                    Section 4.01 Organization and Authority of the XL Parties. Each of the XL Parties is a corporation, company or business entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization and has all necessary power and authority to enter into this Agreement and the Ancillary Agreements to which it may be a party, to carry out its obligations hereunder and thereunder and to consummate the Transactions. Each of the XL Parties is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary. The execution and delivery of this Agreement and the Ancillary Agreements to which each XL Party is a party, the performance by each XL Party of its obligations hereunder and thereunder, and the consummation by each XL Party of the Transactions have been duly authorized by all requisite action on the part of each XL Party. This Agreement has been, and, upon the execution of the Ancillary Agreements to which each XL Party is a party, shall have been, duly executed and delivered by each XL Party, and, assuming due authorization, execution and delivery by each of the SCA Parties and CDS Counterparties and receipt of all consents and approvals by Governmental Authorities as required by Law, this Agreement constitutes, and upon their execution, the Ancillary Agreements shall constitute, legal, valid and binding obligations of the XL Parties enforceable against each of the XL Parties in accordance with their respective terms, subject to remedies under applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights.

                    Section 4.02 No Conflict. Assuming the making and obtaining of all filings, notifications, consents, approvals, authorizations and other actions referred to in Section 4.03, the execution, delivery and performance by each of the XL Parties of this Agreement and the Ancillary Agreements to which it is a party do not and will not (a) violate, conflict with or result in the breach of any provision of the Certificate of Incorporation or Bye-Laws (or similar organizational documents) of each XL Party, (b) conflict with or violate any Law or Governmental Order applicable to any XL Party or (c) except as set forth in Section 4.02 of the XL Parties’ Disclosure Schedule, conflict with, or result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage, indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which any XL Party is a party, which would adversely affect the ability of any XL Party to carry out its obligations under this Agreement or any Ancillary Agreement and to consummate the Transactions.

                    Section 4.03 Governmental Consents and Approvals. (a) The execution, delivery and performance of this Agreement and each Ancillary Agreement to which it is a party by each of the XL Parties does not and will not require any consent, approval, authorization or

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other order of, action by, filing with or notification to any Governmental Authority, except as described in Section 4.03 of the XL Parties’ Disclosure Schedule.

                    (b) The XL Parties sought and obtained approval of this Agreement and each commutation or other Transaction to which XLRA is a party from the NYID on the grounds that (among other things) they are collectively, and each is individually, fair and equitable. The XL Parties have provided true and correct copies of such approval to the SCA Parties. To the knowledge of XL’s executive officers, after due inquiry, such approval has not been rescinded, modified or amended in any way.

                    Section 4.04 Capitalization. (a) Section 4.04(a) of the XL Parties’ Disclosure Schedule sets forth the type and number of authorized equity securities of XL and the type and number of such equity securities that are issued and outstanding as at July 25, 2008.

                    (b) All issued and outstanding shares of XL’s capital stock as at July 28, 2008 have been duly authorized for issuance, are validly issued and are fully paid and nonassessable. The Stock Consideration has been duly authorized and, upon issuance to the SCA Parties pursuant to the terms of this Agreement and the Subscription Agreement, will be validly issued, fully paid and nonassessable, free and clear of all Liens other than those contained in applicable securities Laws.

                    Section 4.05 XL Owned SCA Common Shares. XLI is the record and beneficial owner of the XL Owned SCA Common Shares, free and clear of any and all Liens other than restrictions on transfer imposed by applicable securities and insurance Laws, has all right, title and interest in and to the XL Owned SCA Common Shares and has all requisite power and authority to sell, assign, transfer and deliver the XL Owned SCA Common Shares, free and clear of all Liens other than restrictions on transfer contained in applicable securities or insurance Laws, or deposit with the Escrow Agent certificates evidencing all of the XL Owned SCA Common Shares, free and clear of any Liens, together with stock powers duly endorsed in blank pursuant to Section 2.10, as the case may be, to the SCA Shareholder Entity.

                    Section 4.06 Litigation. No Action by or against any of the XL Parties is pending or, to the actual knowledge of each of the XL Parties after due inquiry, threatened, which could reasonably be expected to affect the legality, validity or enforceability of this Agreement, any Ancillary Agreement or the consummation of the Transactions.

                    Section 4.07 Regulatory Approvals. The NYID has approved in writing the terms of this Agreement and any Transaction to which XLRA is a party, including the Adverse Development Cover Commutation Agreement, pursuant to applicable Law, including Section 1505 of the New York State Insurance Laws. A copy of each such written approval has been delivered to the SCA Parties and the CDS Counterparties and such written approvals have not been withdrawn, rescinded, revoked, amended or altered. The XL Parties have provided the NYID, the BMA and the UK FSA with all information the XL Parties deemed material and all information requested by the NYID, the BMA or the UK FSA. All information provided by the XL Parties to the NYID, the BMA or the UK FSA was true, correct and complete in all material respects.

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                    Section 4.08 Brokers. Except for The Blackstone Group L.P. whose fees will be paid exclusively by the XL Parties, no broker, advisor, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions (other than in respect of the XL Public Offering) based upon arrangements made by or on behalf of the XL Parties.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE CDS COUNTERPARTIES

                    Each of the CDS Counterparties hereby represents and warrants as to itself only, and neither jointly nor jointly and severally with the other CDS Counterparties, to each of the XL Parties and SCA Parties as follows:

                    Section 5.01 Status. It is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, is in good standing.

                    Section 5.02 Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement (including the Ancillary Agreements to which it is a party), to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver, and to perform its obligations under this Agreement, and it has taken all necessary action to authorize such execution, delivery and performance.

                    Section 5.03 No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets.

                    Section 5.04 Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement have been obtained and are in full force and effect and all conditions of any such consents have been complied with.

                    Section 5.05 Obligations Binding. Its obligations under this Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar Laws affecting creditors’ rights generally, and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at Law)).

                    Section 5.06 Absence of Litigation. There is no pending, and it has not received written threat of any action, suit or proceeding at Law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability of this Agreement against it or its ability to perform its obligations under this Agreement.

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                    Section 5.07 Consent to Transactions. It consents to the effect of the consummation of the covenants contained in this Agreement and the Ancillary Agreements, including (i) the commutation of the Quota Share Treaty pursuant to the Quota Share Commutation Agreement, (ii) the commutation of the Financial Security Master Facultative Agreement, (iii) the commutation of any EIB Policy in accordance with Section 6.05(c) and (iv) as a consequence of the foregoing, the effective nullity of the Guarantee and the Financial Security Guarantee and, if any EIB Policy is commuted, the EIB Guarantee that guarantees XLCA’s obligation under such commuted EIB Policy, such that each has no further force or effect.

                    Section 5.08 Ownership of Insurance Instruments. (a) It has:

          (i) provided to the SCA Parties a written list (prepared in good faith by, and reflecting the best belief of, an officer of such CDS Counterparty) of (A) those credit default swap agreements with XLCA or Affiliates of XLCA to which such CDS Counterparty is party, and of which such CDS Counterparty is a beneficial owner, at the time it became a Party and (B) the notional amount of each such credit default swap agreement; or

          (ii) confirmed in writing by an officer of such CDS Counterparty, to the best belief of such confirming officer, a list provided by the SCA Parties of (A) those credit default swap agreements with XLCA or Affiliates of XLCA to which such CDS Counterparty is party, and of which such CDS Counterparty is a beneficial owner, at the time it became a Party and (B) the notional amount of each such credit default swap agreement.

                    (b) For an abundance of clarity, the foregoing representations and warranties contained in Section 5.08(a) only reflect the best belief of the officer of the CDS Counterparty preparing the list or confirming a list prepared by SCA. The CDS Counterparty is not making any representation or warranty that is not qualified by the best belief of such officer, and it will not be bound by or subject to liability based on any inaccuracy contained in any such list that ultimately results from such officer’s best belief being inadvertently inaccurate.

                    Section 5.09 Brokers. Except for the CDS Financial Advisor and BlackRock, whose fees will be paid exclusively by the SCA Parties, no broker, advisor, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission from it in connection with the Transactions based upon arrangements made by or on behalf of any of the CDS Counterparties.

ARTICLE VI

ADDITIONAL AGREEMENTS

                    Section 6.01 Public Disclosure and Confidentiality. (a) No SCA Party or XL Party shall make or permit any of its officers, employees, agents, counsel, sub-contractors or other representatives to make any public disclosure simultaneously with, or close in time to, the

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execution of this Agreement or the Closing, other than in conjunction with an XL Public Offering (such information disclosed in conjunction with an XL Public Offering to be pursuant to a Quarterly Report on Form 10-Q, a Current Report on Form 8-K, a prospectus supplement, or other material that complies with the requirements of the Securities Act, including any press release, other material or internet postings) regarding the existence or terms of this Agreement, to any person or company or to the public, without the prior written consent of the other Parties subject to this Section 6.01, such consent not to be unreasonably withheld or delayed; provided, further, that XL and any of its officers, employees, agents, counsels, sub-contractors or other representatives (expressly including any investment banks) may make disclosures relating to the existence and terms of this Agreement and the Transactions to rating agencies and potential investors in connection with the marketing of an XL Public Offering, including, for the avoidance of doubt, information relating to the reinsurance agreements and guarantees being terminated pursuant to this Agreement such as exposures, valuations and other data; provided, further, that if a disclosure is required by Law, the SCA Party or the XL Party so required may make such disclosure so long as (i) it uses its reasonable best efforts to reasonably cooperate as to the timing and content of such disclosure to the extent reasonably practicable without violating any Law and (ii) other than with respect to press releases, securities filings and similar public disclosure or disclosures in conjunction with an XL Public Offering, it reasonably cooperates with any other SCA Party or XL Party seeking to obtain a protective order concerning such disclosure if such XL Party or SCA Party requesting cooperation shall pay for all reasonable fees and expenses, including legal fees, associated with such cooperation.

                    (b) Past Confidential Information. The SCA Parties and their officers, employees, agents, counsel, sub-contractors and other representatives, as a group, and the XL Parties and their officers, employees, agents, counsel, sub-contractors and other representatives, as a group, agree to keep confidential within their groups any information received prior to Closing from any Party in the other group pursuant to a confidentiality agreement, arrangement or understanding in place prior to Closing between the SCA Parties and the XL Parties that was commuted or terminated pursuant to Sections 2.01, 2.02 or 2.03 of this Agreement or set forth in Part II of Schedule 1.01(b) (“Confidential Information”), including information about exposure, claims, mark or other information related to an individual CDS Counterparty; provided, that Confidential Information will not include any information that (i) was publicly available prior to its disclosure to a member of the group receiving the Confidential Information (a “Receiving Group”), (ii) was known to a member of the Receiving Group prior to disclosure by a member of the group providing the Confidential Information (a “Providing Group”) and was not received under obligations of confidentiality or from a Person obligated to keep such information confidential or (iii) is or becomes available to the Receiving Group on a nonconfidential basis from a source other than the Providing Group or its agents, provided, that such other Person is not bound by a confidentiality agreement with the Providing Group, provided, further, that XL and any of its officers, employees, agents, counsels, sub-contractors or other representatives (expressly including any investment banks) may make disclosures relating to the existence and terms of this Agreement and the transactions contemplated in this Agreement to rating agencies and investors in connection with the marketing of an XL Public Offering, including, for the avoidance of doubt, information relating to the reinsurance agreements and guarantees being terminated pursuant to this Agreement such as exposures, valuations and other data. In the event that any Party subject to this Section 6.01(b), or such Party’s agents, becomes legally compelled by deposition, subpoena, or other court or action by a Governmental Authority to disclose any of

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the Confidential Information covered by this Agreement, the Receiving Group with which such Party is associated is permitted to make such disclosure of Confidential Information as it determines is reasonably necessary, upon consultation with counsel, to comply with applicable Laws; provided, that such Receiving Group makes a reasonable effort to provide the Providing Group with prompt written notice to that effect and such Receiving Group reasonably cooperates with the Providing Group if the Providing Group seeks to obtain a protective order concerning such Confidential Information, provided, that the Providing Group pays for all of the Receiving Group’s fees and expenses, including legal fees, associated with such cooperation. Notwithstanding anything contained in any other agreement, arrangement or understanding between the SCA Parties and the XL Parties, (i) the XL Parties may disclose Confidential Information, as reasonably needed, to any other XL Party, any nationally recognized rating agency then providing a financial strength rating for any XL Party or any officer, employee, agent, counselor, sub-contractor and other representative of any such agency or any XL Party, (ii) the SCA Parties may disclose Confidential Information, as reasonably needed, to any other SCA Party, any nationally recognized rating agency then providing a financial strength rating for any SCA Party, or any officer, employee, agent, counselor, sub-contractor and other representative of any such agency or any SCA Party and (iii) this Section 6.01(b) supersedes all prior confidentiality rights and obligations between the SCA Parties and the XL Parties with respect to “Confidential Information,” as defined above.

                    (c) Regulatory Compliance. The SCA Parties will provide the XL Parties, at the XL Parties’ sole cost and expense, upon reasonable notice and during normal business hours, all documents, files, books and records and reasonable access to, and will request reasonable cooperation from, all employees of the SCA Parties, as the XL Parties may reasonably request from time to time, for the limited use by the XL Parties in compliance with any legal, regulatory, accounting, or audit requirement or examination. The XL Parties will provide the SCA Parties, at the SCA Parties’ sole cost and expense, upon reasonable notice and during normal business hours, all documents, files, books and records and reasonable access to, and will request reasonable cooperation from, all employees of the XL Parties, as the SCA Parties may reasonably request from time to time, for the limited use by the SCA Parties in compliance with any legal, regulatory, accounting, or audit requirement or examination. The XL Parties and the SCA Parties will treat all information received pursuant to this Section 6.01(c) as if it were Confidential Information subject to Section 6.01(b).

                    Section 6.02 Regulatory and Other Authorizations; Notices and Consents. The SCA Parties and the XL Parties shall use their reasonable best efforts to obtain and maintain all authorizations, consents, orders and approvals of all Governmental Authorities and officials that may be or become necessary for the execution and delivery of, and the performance of their obligations pursuant to, this Agreement and the Ancillary Agreements, and will reasonably cooperate with the other SCA Parties and XL Parties in promptly seeking to obtain all such authorizations, consents, orders and approvals. Each of the SCA Parties and XL Parties shall use reasonable best efforts to resolve objections, if any, as may be asserted by any Governmental Authority with respect to the Transactions under any Law. In connection therewith, if any Action is instituted (or threatened to be instituted) challenging any Transaction as violative of any Law, subject to and in accordance with Section 6.11, the SCA Parties and the XL Parties shall use their reasonable best efforts and reasonably cooperate with one another to contest and resist any such Action and to have vacated, lifted, reversed, or overturned any decree, judgment,

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injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents, or restricts consummation of the Transactions, including by pursuing all available avenues of administrative and judicial appeal, unless, by mutual agreement, the SCA Parties and the XL Parties decide that litigation is not in their respective best interests.

                    Section 6.03 Notice of Developments. Prior to the Closing, each Party shall promptly notify the other Parties in writing of all events, circumstances, facts and occurrences arising subsequent to the date of this Agreement which could reasonably be expected to result in any material breach of a representation or warranty or covenant of such Party contained in this Agreement or which could have the effect of making any material representation or warranty of such Party contained in this Agreement untrue or incorrect in any respect.

                    Section 6.04 MLI ABS CDO Credit Default Swap Agreements. Prior to the Closing, the SCA Parties shall not amend, alter, waive or repeal any of the terms of the MLI CDS Agreement without the prior written approval of the XL Parties.

                    Section 6.05 Third-Party Reinsurance Agreements. (a) The SCA Parties shall (i) provide the XL Parties with copies of all documents, files, books and records relating to any Third-Party Reinsurance Agreement for so long as it remains in force as reasonably requested by the XL Parties from time to time, and reasonable access to, and will request reasonable cooperation from, upon reasonable notice during normal business hours, all employees of the SCA Parties whose employment responsibilities are related to any Third-Party Reinsurance Agreement for so long as it remains in force and (ii) subject to any applicable Law, pay all claims under any Third-Party Reinsurance Agreement for so long as it remains in force as they become due, other than claims reasonably contested by the SCA Parties in good faith.

                    (b) Prior to the Closing, the SCA Parties shall not amend, alter, waive or repeal any of the terms of the Financial Security Master Facultative Commutation Agreement without the prior written approval of the XL Parties.

                    (c) The SCA Parties shall use their commercially reasonable efforts to commute each of the EIB Policies and fully and finally extinguish each Person’s rights and obligations thereunder pursuant to commutation and release agreements in forms reasonably satisfactory to the XL Parties or effectuate another EIB Resolution Event; provided, however, that the use of such commercially reasonable efforts shall not require the SCA Parties to pay amounts in excess of those set forth in a letter delivered concurrently herewith to the XL Parties and the CDS Financial Advisor. Until an EIB Resolution Event occurs, XLCA shall (i) refrain from novating or assigning the EIB Policies to any Person, provided, that it may reinsure the EIB Policies as it sees fit and (ii) refrain from selling, leasing, assigning, reinsuring or transferring in any way (whether in one transaction or a series of related transactions) a majority of its assets to any Person, unless either (A) the EIB Policies are sold, leased, assigned, reinsured or transferred (as the case may be) with all or substantially all of such assets to the Person purchasing, leasing, reinsuring, or receiving all or substantially all of such assets or (B) the XL Parties provide their consent, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, nothing in this paragraph shall in any way restrict or limit the SCA Parties from selling, leasing, assigning, reinsuring, transferring or otherwise disposing of, in any manner (whether in one or more transactions) the public finance business of the SCA Parties.

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                    Section 6.06 Ownership of Insurance Instruments. (a) On and as of the date hereof, and on the Closing Date (at a time prior to the Closing) and as of the Closing, the SCA Parties shall provide written notice to the XL Parties setting forth, to the Knowledge of SCA, the then current aggregate notional value of all credit default swap agreements with XLCA or Affiliates of XLCA of which the CDS Counterparties have either represented in writing to the SCA Parties in accordance with Section 5.08 or confirmed in writing to the SCA Parties in accordance with Section 5.08, as being a party thereto and a beneficial owner thereof.

                    (b) Each CDS Counterparty, in respect of itself, agrees that, prior to Closing, it will not sell or transfer in any way any right to or title in any credit default swap agreement with XLCA or an Affiliate of XLCA in which such CDS Counterparty has beneficial ownership, or to which it is party, unless the transferee agrees to become a Party to this Agreement pursuant to Section 9.04 by signing a joinder agreement immediately upon consummation of any such sale or transfer.

                    Section 6.07 Compliance with Securities Laws. If any SCA Party is or becomes the record or beneficial owner of any or all of the Stock Consideration, it will comply with all Laws applicable to the Transfer of any or all of the Stock Consideration.

                    Section 6.08 Passive Investor. For a period of two years from the Closing, none of the SCA Parties will take any action to participate in the formulation, determination or direction of the basic business decisions of any of the XL Parties.

                    Section 6.09 XL Owned SCA Common Shares Covenant. If any CDS Counterparty becomes the record or beneficial owner of any or all of the XL Owned SCA Common Shares, it will comply with all Laws applicable to the Transfer of any or all of the XL Owned SCA Common Shares.

                    Section 6.10 Forbearance. The Parties covenant and agree with each other and their respective Affiliates, successors and assigns, that:

                    (a) subsequent to the date hereof:

                    (i) none of the SCA Parties shall hereinafter, for any reason whatsoever, demand, claim, file suit or initiate any Action against any of the XL Parties or the CDS Counterparties in respect of any rights released pursuant to Section 2.05(a);

                    (ii) none of the XL Parties shall hereinafter, for any reason whatsoever, demand, claim, file suit or initiate any Action against any of the SCA Parties or the CDS Counterparties in respect of any rights released pursuant to Section 2.05(b); and

                    (iii) none of the CDS Counterparties shall hereinafter, for any reason whatsoever, demand, claim, file suit or initiate any Action against any of the SCA Parties or the XL Parties in respect of any rights released pursuant to Section 2.05(c).

                    (b) Subsequent to the date hereof and until the earlier of (i) October 15, 2008 or (ii) the termination of this Agreement pursuant to Section 8.01, no CDS Counterparty will exercise any Triggered Enforcement Right to the extent triggered (or argued by any CDS

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Counterparty to be triggered) as a result of the fact that any of the SCA Parties or any of their Affiliates (A) is or is becoming insolvent (either because its financial condition is such that the sum of its debts is greater than the fair market value of its assets, or because the fair saleable value of its assets is less than the amount required to pay its probable liabilities on its existing debts as they mature), (B) has or will have unreasonably small capital with which to engage in its business, (C) has or will have incurred debts beyond its ability to pay as they become due, (D) does not have or will not have an excess of required reserves and other liabilities over admitted assets, (E) has or will have insufficient assets to reinsure all outstanding risks with other solvent authorized assuming insurers after paying all accrued claims owed, (F) has a credit rating that has been downgraded or withdrawn by any rating agency, or has sold credit protection or provided a guarantee with respect to an asset-backed security or other reference obligation and the credit rating with respect to such asset-backed security or other reference obligation has been downgraded or withdrawn by any rating agency, (G) is a party to an agreement with or for the benefit of a CDS Counterparty where a cross-default or termination event has occurred or to the extent it results from the occurrence of an event described in clauses (A) through (F), or (H) has admitted in writing to any set of circumstances described in clauses (A) through (G); provided, that if any counterparty to a credit default swap agreement with XLCA or Affiliates of XLCA exercises a Triggered Enforcement Right in respect of such credit default swap as a result of the occurrence of an event described in clauses (A) through (E) or (H) (but solely with respect to clauses (A) through (E)), and the CDS Counterparties representing the Minimum Consenting CDS Counterparty Restructuring Threshold so elect in writing, this Section 6.10(b) shall no longer apply to any CDS Counterparty; provided, further that this sentence shall not apply with respect to any such Triggered Enforcement Right (x) withdrawn by such counterparty or deemed ineffective by a Governmental Authority within five (5) Business Days or (y) if the current payment obligation of the SCA Parties arising from the exercise of such Triggered Enforcement Right does not exceed $35 million with respect to any given counterparty. The SCA Parties shall give notice to the CDS Counterparties promptly after receiving notice of the exercise of a Triggered Enforcement Right.

                    (c) Subsequent to the date hereof and until the earlier of (i) Closing or (ii) the termination of this Agreement pursuant to Section 8.01, the XL Parties will not exercise any Triggered Enforcement Rights to the extent triggered as a result of the fact that any of the SCA Parties or any of their Affiliates (A) is or is becoming insolvent (either because its financial condition is such that the sum of its debts is greater than the fair market value of its assets or because the fair saleable value of its assets is less than the amount required to pay its probable liabilities on its existing debts as they mature), (B) has or will have unreasonably small capital with which to engage in its business and (C) has or will have incurred debts beyond its ability to pay as they become due, (D) does not have or will not have an excess of required reserves and other liabilities over admitted assets, (E) has or will have insufficient assets to reinsure all outstanding risks with other solvent authorized assuming insurers after paying all accrued claims owed, (F) has a credit rating that has been downgraded or withdrawn by any rating agency, or has sold credit protection or provided a guarantee with respect to an asset-backed security or other reference obligation and the credit rating with respect to such asset-backed security or other reference obligation has been downgraded or withdrawn by any rating agency, (G) is a party to an agreement with or for the benefit of a CDS Counterparty where a cross-default or termination event has occurred or to the extent it results from the occurrence of an event described in clauses

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(A) through (F), or (H) has admitted in writing to any set of circumstances described in clauses (A) through (G).

                    (d) For the avoidance of doubt, nothing herein shall restrict or impair the exercise of Triggered Enforcement Rights by any CDS Counterparty or by any XL Party in the event that any of the SCA Parties or any of their Affiliates institutes or has instituted against it a proceeding relating to its insolvency, bankruptcy, rehabilitation, liquidation, or reorganization under any bankruptcy or insolvency Law or other similar Law affecting creditors’ rights, or has a petition presented relating to its winding-up, rehabilitation, insolvency, bankruptcy, reorganization or liquidation, regardless of whether or not such proceeding or petition (i) results in a judgment of insolvency or bankruptcy or the entry of an order against it relating to any rehabilitation, insolvency, bankruptcy, reorganization or liquidation or (ii) is not dismissed, discharged, stayed or restrained. Further, for the avoidance of doubt, the CDS Counterparties may submit claims on account of their credit default swaps, policies or other agreements with any SCA Party to the SCA Parties as they become due in the ordinary course, other than claims subject to forbearance pursuant to Section 6.10(b).

                    Section 6.11 Control of Litigation and Cooperation. (a) As between the SCA Parties and the XL Parties, the XL Parties shall have the right (but not the obligation) to control and direct, through counsel of its own choosing, the defense and settlement of any Action against any SCA Party brought by any Person that challenges the validity or enforceability of this Agreement or any Ancillary Agreement, including any fraudulent conveyance Action or any other Action under any bankruptcy or insolvency Law or other similar Law affecting creditors’ rights (a “Challenging Action”). The SCA Parties and the XL Parties shall promptly provide written notice to each other and the CDS Counterparties upon becoming aware of any Challenging Action or threatened Challenging Action. Subject to the first sentence of this Section 6.11(a), the SCA Parties shall be entitled to participate fully in the defense of such Challenging Action with internal counsel or with outside counsel (at the SCA Parties’ own expense).

                    (b) The SCA Parties shall actively and in good faith reasonably cooperate in any defense of a Challenging Action controlled by the XL Parties. Such cooperation by the SCA Parties shall include (i) providing to the XL Parties, upon their reasonable request, all documents and information necessary to, or which could assist in, the defense, appeal or settlement of any such Challenging Action, (ii) making the SCA Parties’ employees (and using its commercially reasonable efforts to make the SCA Parties’ former employees) and representatives available to be interviewed by the XL Parties upon reasonable notice and at reasonable times and (iii) offering truthful deposition and trial testimony upon the request of the XL Parties.

                    (c) The XL Parties and the SCA Parties shall actively and in good faith reasonably cooperate in the defense of any third-party Actions other than Challenging Actions brought or made against any such Party relating to the subject matter of, or any Transactions consummated or to be consummated under, this Agreement or any Ancillary Agreement. Such cooperation shall include (i) providing to any such Party against which any such Action is made, upon such Party’s reasonable request, all documents and information necessary to, or which could assist in, the defense, appeal or settlement of any such Action, (ii) making its employees (and using its commercially reasonable efforts to make its former employees) and representatives

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available to be interviewed by the Party against which any such Action is made upon reasonable notice and at reasonable times, (iii) offering truthful deposition and trial testimony upon the request of the Party against which any such Action is made and (iv) otherwise consulting with the Party against which any such Action is made and, to the extent the Action is made against more than one Party, coordinating, to the extent feasible, the handling and defense of any such Action; provided, however, that nothing herein shall require disclosure by any such Party of any information subject to the attorney-client privilege or in conflict with any contractual confidentiality restriction to which such Party is bound, except when a protective order issued by a Governmental Authority would reasonably ensure Confidentiality of the disclosed.

                    Section 6.12 CDS Counterparty Restructuring. Following the Closing Date (except to the extent the Allocated Funds, as defined below, are paid to or for the benefit of the CDS Counterparties pursuant to clause (i) or (ii) of this Section 6.12), XLCA shall segregate and hold an aggregate amount of Eight Hundred and Twenty Million Dollars ($820,000,000) in cash (together with any SCA Share Sale Proceeds and the premiums or other payments described in the last sentence of this Section 6.12) separately in an interest bearing account or otherwise invested as may be agreed in writing between the SCA Parties and the Required Consenting CDS Counterparties (together with any interest earned thereon, the “Allocated Funds”), it being understood that such interest bearing account or other investment vehicle described in this sentence will be maintained at Wilmington Trust Company, or, if maintained with a CDS Counterparty or an Affiliate of a CDS Counterparty, such CDS Counterparty shall have waived in writing its rights of set-off with respect to, and any security interest or other lien on, the Allocated Funds, solely for purposes of (i) commuting, terminating, amending and/or otherwise restructuring, as applicable, existing agreements (a “CDS Counterparty Restructuring”) pursuant to an agreement among the applicable SCA Parties and CDS Counterparties representing not less than the Minimum Consenting CDS Counterparty Restructuring Threshold and (ii) after October 15, 2008, the payment of any actual claims or losses on existing agreements and insurance policies issued to or for the benefit of CDS Counterparties and, it being understood that, such funds shall not be used for any other purpose, except that, in the event that XLCA becomes subject to a rehabilitation or liquidation proceeding, the Allocated Funds shall no longer be separately held or segregated or limited in use to the purpose stated above and shall be part of the general assets of XLCA. XLCA shall provide quarterly reports to the CDS Counterparties setting forth an accounting, in reasonable detail, with respect to the Allocated Funds and any investments maintained therein; provided, that nothing in this Section 6.12, including the creation of the Allocated Funds, shall (i) in any way limit the rights or claims of the CDS Counterparties, the liabilities of the SCA Parties in respect of such claims, or the rights of the CDS Counterparties in respect of other assets of the SCA Parties or (ii) constitute a waiver of any defense the SCA Parties may have with respect to any such claims or liabilities. Notwithstanding anything else herein, no CDS Counterparty has any obligation to participate in the CDS Counterparty Restructuring, including, for the avoidance of doubt, commuting, terminating, amending and/or otherwise restructuring, as applicable, existing agreements. The premiums or other payments that a CDS Counterparty makes in respect of its credit default swap agreements with XLCA or Affiliates of XLCA during the period that such CDS Counterparty forbears from exercising any Triggered Enforcement Right under such credit default swap pursuant to Section 6.10(b) shall be included in the Allocated Funds. After the Closing, the SCA Parties and the CDS Counterparties will negotiate in good faith in an effort to reach agreement on a CDS Counterparty Restructuring on or prior to October 15, 2008 that is fair and equitable to both the SCA Parties and the CDS Counterparties.

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                    Section 6.13 Restriction on Commutations. Until October 15, 2008, the SCA Parties shall not effect any commutations, settlements, restructurings or terminations of policies or contracts not expressly contemplated by this Agreement that involve the payment of any consideration by the SCA Parties, without the consent of CDS Counterparties representing the Minimum Consenting CDS Counterparty Restructuring Threshold, provided, that during such period the SCA Parties may effect any action (including commutations) related to the EIB Policies in accordance with Section 6.05, may consummate the Financial Security Commutations, and may effect commutations, settlements, restructurings and terminations (i) that involve cash payments not in excess of an aggregate amount set forth in a letter delivered concurrently herewith to the XL Parties and the CDS Financial Advisor during such period (of which (A) an amount set forth in such letter may not be used for the commutation, settlement, restructuring or termination of any policy or contract other than JeffCo Policies and (B) no more than an amount set forth in such letter may be for CDS policies and contracts); provided, however, that no such commutation, settlement, restructuring or termination (other than with respect to JeffCo Policies) may involve payment by the SCA Parties of cash, debt or other consideration in excess of the reserves (including case and unearned premium reserves) related to the risks being commuted; (ii) of the reinsurance contracts provided in Schedule 2.04 (in accordance with Section 2.04); (iii) that are settlements required pursuant to the express terms of insurance policies and contracts of the SCA Parties; and (iv) that are for cash collateralization of up to $24 million of letters of credit issued under the Credit Agreement; provided, that such outstanding letters of credit shall be extended for one year; provided, further, that until October 15, 2008, prior to effecting any commutation, settlement, restructuring or termination permitted under Section 6.13(i) or (ii): (w) XLCA shall provide the CDS Financial Advisor reasonable advance notice and such information as may be reasonably necessary to evaluate such proposed commutation, settlement, restructuring or termination (which advance notice and information shall be supplied to the CDS Financial Advisor not later than five (5) Business Days prior to consideration of such commutation, settlement, restructuring or termination by XLCA’s board of directors as provided below); (x) at the option of the CDS Financial Advisor, and no later than five (5) Business Days after being provided such notice and information by XLCA regarding such proposed commutation, settlement, restructuring or termination, the CDS Financial Advisor may provide XLCA with a written response to such proposed commutation, settlement, restructuring or termination; (y) XLCA shall provide such written response to its board of directors for consideration at the XLCA board of directors meeting at which such commutation, settlement, restructuring or termination will be presented for approval; and (z) will obtain the approval of the XLCA board of directors for such commutation, settlement, restructuring or termination after so providing such response to the board. For the avoidance of doubt, no such commutation, settlement, restructuring or amendment shall involve the payment of Allocated Funds except to the extent provided in Section 6.12.

                    Section 6.14 Treatment of Public Finance Business. The SCA Parties and the CDS Counterparties understand that the approval by the NYID of any CDS Counterparty Restructuring will require addressing XLCA’s public finance business to the satisfaction of the NYID. The SCA Parties and the CDS Counterparties hereby agree to negotiate in good faith in an effort to reach an agreement on the appropriate treatment of such public finance business in

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connection with the CDS Counterparty Restructuring (it being understood that failure to reach such agreement, notwithstanding good faith negotiations, shall not constitute a default hereunder or give rise to any cause of action against any Party hereto). Without the consent of CDS Counterparties representing the Minimum Consenting CDS Counterparty Restructuring Threshold, the SCA Parties shall not transfer or otherwise dispose of such public finance business prior to October 15, 2008, except for reinsurance cessions for risk management purposes not intended to effectuate a transfer of the business in whole or any substantial part or to the extent it is agreed between the NYID and the SCA Parties that to transfer such public finance business is necessary and/or in the public interest (as to which the CDS Counterparties reserve all rights to challenge or object).

                    Section 6.15 Further Action. Subject to the next sentence, each of the Parties shall use its reasonable best efforts to take, or cause to be taken, all appropriate action, to do or cause to be done all things necessary, proper or advisable under applicable Law, and to execute and deliver such documents and other papers, as may be required to carry out the provisions of this Agreement and the Ancillary Agreements to which it is a party and to consummate and make effective the Transactions reasonably as requested by the Parties, including the matters contemplated by Section 6.18. Notwithstanding anything to the contrary herein or otherwise, the Parties agree that the XL Parties have (i) complete and sole discretion whether or not any XL Public Offering will be completed and (ii) no obligation to the SCA Parties or the CDS Counterparties to complete any XL Public Offering.

                    Section 6.16 Resignation of XL Nominees. The XL Parties shall use their reasonable best efforts to cause those four members of the SCA Board of Directors nominated by any of the XL Parties to resign from SCA’s Board of Directors effective as of the Closing. From and after the Closing, XL shall refrain from exercising any rights granted to it under SCA’s Bye-Laws.¹

                    Section 6.17 Disclosure Schedules; Supplementation and Amendment of Schedules. The SCA Parties may, at their option, include in the Schedules items that are not material in order to avoid any misunderstanding, and such inclusion, or any references to dollar amounts, shall not be deemed to be an acknowledgement or representation that such items are material, to establish any standard of materiality or to define further the meaning of such terms for purposes of this Agreement. Information disclosed in the Schedules shall constitute a disclosure for all purposes under this Agreement notwithstanding any reference to a specific section, and all such information shall be deemed to qualify the entire Agreement and not just such section. From time to time, prior to the Closing, the SCA Parties shall have the right to supplement or amend the Schedules with respect to any matter arising hereafter or discovered after the delivery of the Schedules pursuant to this Agreement. No such supplement or amendment shall have any effect on the satisfaction of the condition to closing set forth in Section 7.01(a); provided, however, if the Closing shall occur, then the Parties (other than the SCA Parties) shall be deemed to have waived any right or claim pursuant to the terms of this Agreement or otherwise, including pursuant to Section 9.11 hereof, with respect to any and all matters disclosed pursuant to any such supplement or amendment prior to the Closing.

¹ Consider naming directors.

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                    Section 6.18 SCA Shareholder Entity. The SCA Parties and the CDS Counterparties agree to cause the SCA Shareholder Entity to be promptly created, and in no event later than ten (10) days after the Closing, by taking all actions reasonably necessary to cause a trustee to enter into the Declaration of Trust. SCA and the SCA Shareholder Entity shall enter into the SCA Shareholder Entity Agreement and the SCA Registration Rights Agreement concurrent with or promptly after creation of the SCA Shareholder Entity. If the XL Owned SCA Common Shares are transferred to the Escrow Agent pursuant to Section 2.10, then SCA and XLCA shall promptly, but in no event later than two (2) Business Days following the satisfaction of the SCA Shareholder Entity Formation Conditions, deliver a written notice to the Escrow Agent conforming to the requirements of the Escrow Agreement directing the Escrow Agreement to release all of the XL Owned SCA Common Shares (together with the related certificates and stock powers) to the SCA Shareholder Entity. The vacancies on the board of directors of SCA created by the resignations as of the Closing of the four directors of SCA nominated by the XL Parties shall be filled by appointment of the initial nominees of the SCA Shareholder Entity to the board of directors of SCA in accordance with the SCA Shareholder Entity Agreement. Each of the SCA Parties and the Required Consenting CDS Counterparties will use their reasonable best efforts to take all appropriate action and will cooperate fully with each other and their respective officers, directors, employees, agents, counsel, accountants and other designees in connection with any steps required to be taken to satisfy each of the SCA Shareholder Entity Formation Conditions. Furthermore, the SCA Parties and the CDS Counterparties shall work together in good faith to achieve the goals of the SCA Parties and the CDS Counterparties as set forth in this Agreement and any Ancillary Agreement to which an SCA Party and a CDS Counterparty is a party, and those described in this Section 6.18. Notwithstanding Sections 9.07 and 9.08, the SCA Shareholder Entity Formation Conditions may be amended and modified from time to time upon the written agreement of SCA and the Required Consenting CDS Counterparties.

                    Section 6.19 Portfolio Trust. The SCA Parties will direct each portfolio trust that is a party to a credit default swap agreement with a CDS Counterparty to execute a joinder agreement in the form attached hereto as Exhibit 1.01(c) and become a Party to this Agreement promptly upon receiving notice that such CDS Counterparty became a Party, and in no event later than the earlier of (i) the Closing or (ii) three (3) Business Days after such CDS Counterparty became a Party.

                    Section 6.20 BlackRock. The SCA Parties shall reasonably cooperate with BlackRock, including providing BlackRock with reasonable access to information and reasonable access to, and will request reasonable cooperation from, personnel of the SCA Parties, in order to permit BlackRock to complete its work as early in the month of August 2008 as is reasonably practicable.

                    Section 6.21 XLFA Merger. As soon as practicable following the later of (i) the Closing and (ii) the occurrence of the XLFA Redomestication, XLFA as continued in Delaware or its successor pursuant to the XLFA Redomestication shall merge into and with XLCA.

                    Section 6.22 Collipulli Temuco and Banco de Brasil Policies. (a) (i) The SCA Parties will provide the XL Parties with copies of all documents, files, books and records relating to either the Collipulli Temuco Policy or the Banco de Brasil Policy as reasonably requested by the XL Parties from time to time, and reasonable access to, and will request reasonable

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cooperation from, upon reasonable notice and during normal business hours, all employees of the SCA Parties whose employment responsibilities are related to either the Collipulli Temuco Policy or the Banco de Brasil Policy.

          (ii) The XL Parties will provide the SCA Parties with copies of all documents, files, books and records relating to either the Collipulli Temuco Policy or the Banco de Brasil Policy as reasonably requested by the SCA Parties from time to time, and reasonable access to, and will request reasonable cooperation from, upon reasonable notice and during normal business hours, all employees of the XL Parties whose employment responsibilities are related to either the Collipulli Temuco Policy or the Banco de Brasil Policy.

                    (b) The XL Parties will reasonably cooperate with the SCA Parties in connection with the remediation of the Collipulli Temuco Policy and will cause XLI to issue a replacement policy for the Collipulli Temuco Policy to the new liquidity provider on substantially the same terms as the XLI policy currently in force.

                    (c) Upon written direction of the SCA Parties, and only upon written direction of the SCA Parties, the XL Parties will exercise any right, power or authority provided to it with respect to the Collipulli Temuco transaction, including the giving of consents, providing appropriate waivers and taking any other actions related to the performance and enforcement of its rights under the financing documents; provided, that the XL Parties are not required to take any action that will be in violation of any Law, and may take any action required by, or necessary to be in compliance with, any applicable Law.

                    Section 6.23 XLFA Redomestication. Prior to the Closing, the SCA Parties shall pre-clear the certificate that will effect the XLFA Redomestication with the Delaware Secretary of State and provide evidence of such pre-clearance to the other parties hereto. At the Closing, after XLFA receives the Cash Consideration Amount to be received by it under Section 2.08, the SCA Parties shall cause such pre-cleared certificate to be filed with the Secretary of State of Delaware, thereby effecting the XLFA Redomestication.

ARTICLE VII

CONDITIONS TO CLOSING

                    Section 7.01 Conditions to Obligations of the SCA Parties. The obligations of the SCA Parties to consummate the Transactions are subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

                    (a) Representations, Warranties and Covenants. (i) The representations and warranties of the XL Parties contained in this Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as

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of the Closing, except to the extent such representations and warranties are as of another date, in which case such representations and warranties will be true and correct as of that date, (ii) the covenants and agreements contained in this Agreement to be complied with by the XL Parties on or before the Closing will have been complied with in all material respects, (iii) the representations and warranties of the CDS Counterparties contained in this Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations and warranties are as of another date, in which case such representations and warranties will be true and correct as of that date, and (iv) the covenants and agreements contained in this Agreement to be complied with by the CDS Counterparties on or before the Closing will have been complied with in all material respects;

                    (b) No Proceeding or Litigation. No Action will have been commenced by any Governmental Authority against any of the Parties seeking to restrain or materially and adversely alter the Transactions which, in the reasonable, good faith determination of the Board of Directors of each of the SCA Parties, after consulting with legal counsel, is likely to render it impossible or unlawful to consummate such transactions;

                    (c) Outside Date. 10:00 a.m., New York time, on August 5, 2008, shall have passed;

                    (d) Closing Deliveries. All closing documents required to be delivered under Section 2.08 and Section 2.09 hereof shall have been delivered;

                    (e) Financial Security Commutations. The Financial Security Commutations shall have been consummated prior to or simultaneously with the Closing;

                    (f) MLI CDS Agreements. Termination of the MLI CDS Agreements will have occurred prior to, or will occur simultaneously with, the Closing;

                    (g) Effectiveness of Board Resignations. All four directors of SCA designated by the XL Parties shall have tendered their resignations effective as of the Closing;

                    (h) Consents. None of the consents listed in Section 3.03 of the SCA Parties’ Disclosure Schedule or Section 4.03 of the XL Parties’ Disclosure Schedule have been withdrawn, rescinded, revised, amended or altered in any way; and

                    (i) Officers Certificate. Receipt of a certificate simultaneously with the Closing of a duly authorized officer of each of the XL Parties certifying in respect of such XL Party as to the matters set forth in Sections 7.01(a)(i) and 7.01(a)(ii).

                    Section 7.02 Conditions to Obligations of the XL Parties. The obligations of the XL Parties to consummate the Transactions are subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

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                    (a) Representations, Warranties and Covenants. (i) The representations and warranties of the SCA Parties contained in this Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations and warranties are as of another date, in which case such representations and warranties will be true and correct as of that date, (ii) the covenants and agreements contained in this Agreement to be complied with by the SCA Parties on or before the Closing will have been complied with in all material respects, (iii) the representations and warranties of the CDS Counterparties contained in this Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations and warranties are as of another date, in which case such representations and warranties will be true and correct as of that date, and (iv) the covenants and agreements contained in this Agreement to be complied with by the CDS Counterparties on or before the Closing will have been complied with in all material respects;

                    (b) Financial Security Commutations. The Financial Security Commutations shall have been consummated prior to or simultaneously with the Closing;

                    (c) No Proceeding or Litigation. No Action will have been commenced by any Governmental Authority against any of the Parties seeking to restrain or materially and adversely alter the Transactions which, in the reasonable, good faith determination of the Board of Directors of each of the XL Parties, after consulting with legal counsel, is likely to render it impossible or unlawful to consummate such transactions;

                    (d) Consents. None of the consents listed in Section 3.03 of the SCA Parties’ Disclosure Schedule or Section 4.03 of the XL Parties’ Disclosure Schedule have been withdrawn, rescinded, revised, amended or altered in any way;

                    (e) Closing Deliveries. The closing documents required to be delivered under Section 2.08 and Section 2.09 hereof shall have been delivered;

                    (f) MLI CDS Agreements. Termination of the MLI CDS Agreements will have occurred prior to, or will occur simultaneously with, the Closing; and

                    (g) Officers Certificate. Receipt of a certificate simultaneously with the Closing of a duly authorized officer of each of the SCA Parties certifying in respect of such SCA Party as to the matters set forth in Sections 7.02(a)(i) and 7.02(a)(ii).

                    Section 7.03 Conditions to Obligations of the CDS Counterparties. The obligations of each CDS Counterparty to consummate the Transactions are subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

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                    (a) Representations, Warranties and Covenants. (i) The representations and warranties of the SCA Parties contained in this Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations and warranties are as of another date, in which case such representations and warranties will be true and correct as of that date, (ii) the covenants and agreements contained in this Agreement to be complied with by the SCA Parties on or before the Closing will have been complied with in all material respects, (iii) the representations and warranties of the XL Parties contained in this Agreement (A) that are not qualified by “materiality” will have been true and correct in all material respects when made and will be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, and (B) that are qualified by “materiality” will have been true and correct when made and will be true and correct as of the Closing with the same force and effect as if made as of the Closing, except to the extent such representations and warranties are as of another date, in which case such representations and warranties will be true and correct as of that date, and (iv) the covenants and agreements contained in this Agreement to be complied with by the XL Parties on or before the Closing will have been complied with in all material respects;

                    (b) No Proceeding or Litigation. No Action will have been commenced by any Governmental Authority against any of the Parties seeking to restrain or materially and adversely alter the Transactions which, in the reasonable, good faith determination of the CDS Counterparties, after consulting with legal counsel, is likely to render it impossible or unlawful to consummate such Transactions;

                    (c) Effectiveness of Board Resignations. All four directors of SCA designated by the XL Parties shall have tendered their resignations effective as of the Closing; and

                    (d) Closing Deliveries. The closing documents required to be delivered under Section 2.08 and Section 2.09 hereof shall have been delivered.

                    Section 7.04 Frustration of Closing Conditions. None of the XL Parties, the SCA Parties or any CDS Counterparty may rely on the failure of any condition set forth in Section 7.01, Section 7.02 or Section 7.03, as the case may be, to be satisfied if such failure was primarily caused by such Party’s or Parties’ breach of any provision of this Agreement or failure to use its or their reasonable best efforts to consummate the Transactions in accordance with the terms of this Agreement.

ARTICLE VIII

TERMINATION AND WITHDRAWAL

                    Section 8.01 Termination. This Agreement may be terminated at any time prior to the Closing:

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                    (a) by the XL Parties, provided, that they are not in breach of this Agreement, if between the date hereof and the Closing Date if: (i) any of the representations and warranties of any of the SCA Parties or the CDS Counterparties contained in this Agreement, (A) that are not qualified by “materiality,” were not true and correct in all material respects when made, or, (B) that are qualified by “materiality,” were not true and correct when made; (ii) any of the SCA Parties or the CDS Counterparties failed to comply in any material respect with the covenants or agreements contained in this Agreement to be complied with by it; or (iii) any of the SCA Parties makes a general assignment for the benefit of its creditors or any proceeding is instituted by or against any of the SCA Parties seeking to adjudicate any one of them as bankrupt or insolvent, seeking the liquidation, winding up or reorganization of any one of them, or seeking any arrangement, adjustment, protection, relief or composition of its debts under any Law relating to bankruptcy, insolvency, rehabilitation or reorganization as to any one of them; provided, however, that prior to termination for any breach of this Agreement described in the preceding subsection (i) or (ii), the XL Parties must provide written notice of such breach to the SCA Parties and such breach must remain outstanding without material cure for fifteen (15) days after delivery of such notice;

                    (b) by the SCA Parties, provided, that they are not in breach of this Agreement, if between the date hereof and the Closing Date if: (i) any of the representations and warranties of any of the XL Parties or the CDS Counterparties contained in this Agreement, (A) that are not qualified by “materiality,” were not true and correct in all material respects when made, or, (B) that are qualified by “materiality,” were not true and correct when made; (ii) any of the XL Parties or the CDS Counterparties failed to comply in any material respect with the covenants or agreements contained in this Agreement to be complied with by it; or (iii) any of the XL Parties makes a general assignment for the benefit of its creditors or any proceeding is instituted by or against any XL Party seeking to adjudicate any one of them as bankrupt or insolvent, seeking the liquidation, winding up or reorganization of any one of them, or seeking any arrangement, adjustment, protection, relief or composition of its debts under any Law relating to bankruptcy, insolvency, rehabilitation or reorganization as to any one of them; provided, however, that prior to termination for any breach of this Agreement described in the preceding subsection (i) or (ii), the SCA Parties must provide written notice of such breach to the XL Parties and such breach must remain outstanding without material cure for fifteen (15) days after delivery of such notice;

                    (c) by the SCA Parties, as a group, or the XL Parties, as a group, if the Closing shall not have occurred on or prior to August 15, 2008; provided, however, that the right to terminate this Agreement under this Section 8.01(c) shall not be available to the SCA Parties, as a group, or the XL Parties, as a group, if failure to fulfill any obligation under this Agreement by any member of such group shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date;

                    (d) by any Party, in the event that any Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Transactions, and such order, decree, ruling or other action shall have become final and non-appealable; or

                    (e) by the mutual written consent of the SCA Parties and the XL Parties.

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                    Section 8.02 Effect of Termination. In the event of termination of this Agreement as provided in Section 8.01, this Agreement shall forthwith become void and there shall be no continuing obligations on the part of any Party hereto except (a) as set forth in Sections 6.01, 9.01, 9.11, 9.12, 9.13 and 9.14, and (b) that nothing herein shall relieve any Party from liability for any breach of this Agreement prior to its termination.

                    Section 8.03 CDS Counterparty Withdrawal. If the Closing does not take place on or prior to August 15, 2008, a CDS Counterparty may withdraw from this Agreement and such CDS Counterparty shall have no obligations or rights hereunder or in connection with the Transactions (including under Sections 2.05(c) and 6.10(b) and notwithstanding any provision to the contrary in Section 9.08 or otherwise), by providing notice of such withdrawal to all Parties by August 20, 2008, and after such withdrawal, such CDS Counterparty will no longer be deemed to be a “CDS Counterparty” for purposes of this Agreement and any Ancillary Agreement.

ARTICLE IX

GENERAL PROVISIONS

                    Section 9.01 Expenses. Except as otherwise specified in this Agreement or any other written agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the Transactions, shall be paid by the Party incurring such costs and expenses, whether or not the Closing shall have occurred.

                    Section 9.02 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by facsimile or electronic mail (upon electronic confirmation of delivery), or by registered or certified mail (postage prepaid, return receipt requested), to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 9.02):

(a)	if to any of the SCA Parties:
	Address:	c/o XL Capital Assurance Inc.
		1221 Avenue of the Americas
		New York, NY 10020-1001
	Facsimile:	212.478.3579
	Electronic Mail:	susan.comparato@scafg.com
	Attention:	Susan Comparato, General Counsel
	with a copy to:

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	Address:	Weil, Gotshal & Manges
		767 Fifth Avenue
		New York, NY 10153
	Facsimile:	212.310.8007
	Electronic Mail:	gary.holtzer@weil.com
	Attention:	Gary T. Holtzer
(b)	if to any of the XL Parties:
	Address:	c/o XL Capital Ltd
		XL House
		One Bermudiana Road
		Hamilton
		Bermuda, HM 11
	Facsimile:	441.294.7307
	Electronic Mail:	kirstin.gould@xlgroup.com
	Attention:	Kirstin Gould, General Counsel
with a copy to:
	Address:	Cadwalader, Wickersham & Taft LLP
		One World Financial Center
		New York, NY 10281
	Facsimile:	212.504.6666
	Electronic Mail:	louis.bevilacqua@cwt.com
	Attention:	Louis J. Bevilacqua

                    (c) if to the CDS Counterparties, to the address, facsimile or electronic mail address listed on Schedule 9.02 hereto, which shall be kept on file by XL, and updated by XL from time to time (with copies of updates provided to the SCA Parties and Davis Polk & Wardwell at the address listed below) based on the execution and delivery of joinder agreements by additional CDS Counterparties in accordance with Section 9.04 below:

with a copy to:
	Address:	Davis Polk & Wardwell
		450 Lexington Avenue
		New York, NY 10017
	Facsimile:	212.450.3092
	Electronic Mail:	donald.bernstein@dpw.com
	Attention:	Donald S. Bernstein

                    Section 9.03 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to either Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an

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acceptable manner so that the Transactions are consummated as originally contemplated to the greatest extent possible.

                    Section 9.04 Joinder of CDS Counterparties and Additional SCA Parties. Any counterparty to a credit default swap agreement with XLCA or an Affiliate of XLCA or any portfolio trust that is an Affiliate of XLCA may become a Party to this Agreement prior to the Closing by executing a joinder agreement in the form attached hereto as Exhibit 1.01(c). Upon execution and delivery of each joinder agreement pursuant to its terms, each party will be deemed to be a CDS Counterparty or an SCA Party (as applicable) for all purposes related hereto and shall be deemed, without limitation, to have made the releases set forth in Section 2.05(c) hereof (with respect to the CDS Counterparties) or in Section 2.05(a) hereof (with respect to the SCA Parties).

                    Section 9.05 Entire Agreement. This Agreement and the Ancillary Agreements constitute the entire agreement of the Parties with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between any of the Parties with respect to the subject matter hereof and thereof.

                    Section 9.06 Assignment. This Agreement may not be assigned by operation of Law or otherwise without the express written consent of all Parties (which consent may be granted or withheld in the sole discretion of each of the Parties) and any such assignment or attempted assignment without such consent shall be void.

                    Section 9.07 Amendment. This Agreement may not be amended, altered, supplemented or modified except (a) by an instrument in writing signed by, or on behalf of, all Parties, or (b) by a waiver in accordance with Section 9.08; provided, that, notwithstanding anything to the contrary in this Section 9.07 or in Section 9.08 below, the following sections and definitions set forth in this Agreement may not be amended, altered, supplemented, modified or waived without the unanimous consent of the CDS Counterparties: the definitions of “XLFA Redomestication,” “Minimum Consenting CDS Counterparty Restructuring Threshold” and “Required Consenting CDS Counterparties,” and Sections 2.05, 2.06, 2.07(b), 2.10, 6.03, 6.04, 6.05, 6.06, 6.07, 6.10(b), 6.10(d), 6.12, 6.13, 6.14, 6.16, 6.18, 6.20, 6.21, 6.23, 9.07 and 9.08.

                    Section 9.08 Waiver. Subject to the provisions in Section 9.07 above, which provide that, notwithstanding anything to the contrary in Section 9.07 or this Section 9.08, the following sections and definitions set forth in this Agreement may not be amended, altered, supplemented, modified or waived without the unanimous consent of the CDS Counterparties: the definitions of “XLFA Redomestication,” “Minimum Consenting CDS Counterparty Restructuring Threshold” and “Required Consenting CDS Counterparties,” and Sections 2.05, 2.06, 2.07(b), 2.10, 6.03, 6.04, 6.05, 6.06, 6.07, 6.10(b), 6.10(d), 6.12, 6.13, 6.14, 6.16, 6.18, 6.20, 6.21, 6.23, 9.07 and 9.08, the SCA Parties, acting unanimously as a group, and the XL Parties, acting unanimously as a group, may (a) extend the time for the performance of any of the obligations that one or more members of another group owes to one or more of its members, (b) waive any right that one or more of its members may have due to inaccuracies in the representations and warranties made by any member of another group or contained in any Transaction Document or (c) waive compliance with any of the agreements of any member of another group, solely as they relate to the members of such waiving group, or conditions to the obligations of the members of such waiving group contained herein. Any such extension, waiver

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or amendment shall be valid only if set forth in an instrument in writing signed by all of the SCA Parties and XL Parties to be bound thereby. Any such extension, waiver or amendment will promptly be provided to all CDS Counterparties in writing and, if any CDS Counterparty objects to such extension, waiver or amendment, such CDS Counterparty will have five (5) Business Days from receipt of such extension, waiver or amendment to provide written notice to all other Parties that it intends to withdraw from this Agreement. If such CDS Counterparty provides such timely notice, it will be deemed to have withdrawn as a Party to this Agreement on the date that such waiver, extension or amendment becomes effective and the terms hereof shall have no further force or effect with regard to such CDS Counterparty; provided, that (i) any release made by any CDS Counterparty withdrawing as a party to this Agreement pursuant to this Section 9.08 and any release made by any SCA Party or any XL Party with respect to such withdrawing CDS Counterparty, in each case to the extent such releases shall have become effective prior to the time of such withdrawal, shall in each case remain in full force and effect after such withdrawal, and (ii) following such withdrawal, subject to the preceding clause (i), such withdrawing CDS Counterparty shall cease to have any other obligations or rights hereunder or in connection with the Transactions (including under Sections 2.05(c) and 6.10(b)), and after such withdrawal, such CDS Counterparty will no longer be deemed to be a “CDS Counterparty” for purposes of this Agreement or any Ancillary Agreement. If the CDS Counterparty does not provide such timely notice, it shall be deemed to have approved the waiver, extension or amendment. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition or as a waiver of any other term or condition of this Agreement. The failure of any Party hereto to assert any of its rights hereunder shall not constitute a waiver of any other rights. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

                    Section 9.09 No Third-Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit of the Parties and, except as provided in Section 2.05, their respective successors and permitted assigns, and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit, remedy or right of action of any nature whatsoever, arising directly or indirectly out of, based upon, or in any way related to or in connection with this Agreement or the Ancillary Agreements.

                    Section 9.10 Rights and Remedies. Each Party acknowledges and agrees that each Party would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any material breach of this Agreement by another Party could not be adequately compensated by monetary damages alone. Accordingly, in addition to any other right or remedy to which such Party may be entitled, at Law or in equity, it shall be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent breaches or threatened breaches of any of the provisions of this Agreement, without posting any bond or other undertaking. For the avoidance of doubt, any liability of any CDS Counterparty that may arise in connection with this Agreement shall neither be joint nor joint and several with any other CDS Counterparty.

                    Section 9.11 Indemnification. (a) The XL Parties shall jointly and severally indemnify and hold harmless each of the SCA Parties, and their respective Subsidiaries, Affiliates, officers, directors, employees, agents, successors and permitted assigns (collectively,

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“SCA Indemnitees”), for and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties (including attorneys’ and consultants’ fees and expenses) actually suffered or incurred (including any action, claim, suit or other proceeding brought or otherwise initiated by any of them) (“Losses”) by any such SCA Indemnitee arising out of or resulting from the breach of any provision of this Agreement prior to Closing by any of the XL Parties.

                    (b) The SCA Parties shall jointly and severally indemnify and hold harmless each of the XL Parties, and their respective Subsidiaries, Affiliates, officers, directors, employees, agents, successors and permitted assigns (collectively, “XL Indemnitees”), for and against any and all Losses incurred by any such XL Indemnitee arising out of or resulting from (i) the breach of any provision of this Agreement prior to Closing by any of the SCA Parties or (ii) any action taken pursuant to the written direction of the SCA Parties under Section 6.22 or prohibited to be taken pursuant to Section 6.22.

                    Section 9.12 No Survival. None of the representations and warranties other than those contained in Sections 3.01 (other than as to enforceability for reasons other than fraud, ultra vires action, improper authorization, or failure to be duly organized, validly existing or in good standing in any applicable jurisdiction), 3.02, 3.03, 4.01, 4.02, 4.03, 4.04, 4.05, 5.01, 5.02 and 5.03 shall survive the Closing. The representations and warranties contained in Sections 3.01 (other than as to enforceability for reasons other than fraud, ultra vires action, improper authorization, or failure to be duly organized, validly existing or in good standing in any applicable jurisdiction), 3.02, 3.03, 4.01, 4.02, 4.03, 4.04, 4.05, 5.01, 5.02 and 5.03 shall survive for the statute of limitations for contracts of the nature of this Agreement.

                    Section 9.13 Several Liability of the CDS Counterparties. For the avoidance of doubt, the obligations of the CDS Counterparties under this Agreement shall be several and not joint and several.

                    Section 9.14 Governing Law and Jurisdiction. This Agreement shall be interpreted under and governed by the Laws of the State of New York without giving effect to conflicts of law provisions thereof. In the event that there is a dispute between or among the Parties arising under this Agreement, other than with respect to events arising under the 2001 Facultative Quota Share Commutation Agreement or the Excess of Loss Commutation Agreement, the Parties (i) agree that the exclusive forum to seek remedy shall be to institute a legal proceeding in the courts of the State of New York located in the City and County of New York, (ii) hereby expressly submit to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waive any claim of lack of personal jurisdiction and improper venue and any claim that such courts are an inconvenient forum and (iii) agree that the prevailing Parties shall be entitled to recover their reasonable attorneys’ fees, costs and disbursements from the other Parties (in addition to any other relief to which the prevailing Parties may be entitled). Each Party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the address provided to the Parties in accordance with Section 9.02, such service to become effective ten (10) days after such mailing.

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                    Section 9.15 Waiver of Jury Trial. Each of the Parties hereby waives to the fullest extent permitted by applicable Law any right it may have to a trial by jury with respect to any litigation directly or indirectly arising out of, under, or in connection with this Agreement or the Transactions. Each of the Parties hereby (i) certifies that no representative, agent or attorney of any other Party has represented, expressly or otherwise, that such other Party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter into this Agreement and the Transactions, as applicable, by, among other things, the mutual waivers and certifications in this Section 9.15.

                    Section 9.16 Fully Negotiated Agreement. Each Party has had the opportunity to negotiate the terms, consult with counsel, and modify the provisions of this Agreement and the Ancillary Agreements. Therefore, the terms of this Agreement and the Ancillary Agreements shall be considered and interpreted without any presumption, inference or rule requiring construction or interpretation of any provision of this Agreement against the interests of the drafter of the Agreement.

                    Section 9.17 Currency. Unless otherwise specified in this Agreement, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) Dollars and all payments hereunder shall be made in United States Dollars.

                    Section 9.18 Counterparts. This Agreement may be executed and delivered in multiple counterparts, each of which, when so executed and delivered, shall be an original, but such counterparts shall together constitute but one and the same instrument and agreement. A facsimile or Portable Document Format copy of a signature shall have the same force and effect as an original signature.

[NO FURTHER TEXT ON THIS PAGE]

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                    IN WITNESS WHEREOF, the SCA Parties, XL Parties and CDS Counterparties have caused this Agreement to be executed as of the date first written above.

XL CAPITAL LTD
By:	/s/ Fiona Luck
	Name: Fiona Luck
	Title: Executive Vice President and Chief of Staff
XL INSURANCE (BERMUDA) LTD
By:	/s/ Fiona Luck
	Name: Fiona Luck
	Title: Executive Vice President and Chief of Staff
XL REINSURANCE AMERICA INC.
By:	/s/ Steven P. Agosta
	Name: Steven P. Agosta
	Title: Vice President, General Counsel and Secretary
X.L. GLOBAL SERVICES, INC.
By:	/s/ Kenneth P. Meagher
	Name: Kenneth P. Meagher
	Title: Assistant Secretary
XL SERVICES (BERMUDA) LTD
By:	/s/ Fiona Luck
	Name: Fiona Luck
	Title: Deputy Chairman

[SIGNATURE PAGE – COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

X.L. AMERICA, INC.
By:	/s/ Richard G. McCarty
	Name: Richard G. McCarty
	Title: Senior Vice President, General Counsel and Secretary
SECURITY CAPITAL ASSURANCE LTD
By:	/s/ Claude LeBlanc
	Name: Claude LeBlanc
	Title: Executive Vice President
XL FINANCIAL ASSURANCE LTD.
By:	/s/ Thomas Currie
	Name: Thomas Currie
	Title: Senior Vice President
XL CAPITAL ASSURANCE INC.
By:	/s/ Susan Comparato
	Name: Susan Comparato
	Title: Senior Vice President and General Counsel
XL FINANCIAL ADMINISTRATIVE SERVICES INC.
By:	/s/ Susan Comparato
	Name: Susan Comparato
	Title: Managing Director and Secretary

[SIGNATURE PAGE – COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

SCA BERMUDA ADMINISTRATIVE LTD.
By:	/s/ Thomas Currie
	Name: Thomas Currie
	Title: Senior Vice President
XL CAPITAL ASSURANCE (U.K.) LIMITED
By:	/s/ Fredrick B. Hnat
	Name: Fredrick B. Hnat
	Title: Managing Director and Chief Operating Officer

[SIGNATURE PAGE – COMMUTATION, RELEASE AND RESTRUCTURING AGREEMENT]

EX-10.2

Exhibit 10.2

XL Capital Ltd

July 28, 2008

Ms. Fiona E. Luck
c/o XL Capital Ltd
XL House
One Bermudiana Road
Hamilton, Bermuda HM 11

Dear Fiona:

     In connection with the change in your position, time commitment and compensation described in the Form 8-K filed with the United States Securities and Exchange Commission by XL Capital Ltd (the “Company”) of even date herewith (the “Form 8-K”), by this letter we hereby amend Section 8(d)(iv) and Exhibit B of your Employment Agreement with the Company dated November 1, 2006 to provide that any written notice pursuant thereto resulting from such changes set forth in the Form 8-K may be given by you at any time prior to January 31, 2009.

Sincerely,
XL CAPITAL LTD
By:	/s/ Brian W. Nocco
Title: Chief Financial Officer

ACKNOWLEDGED AND AGREED:
/s/ Fiona E. Luck
Fiona E. Luck
XL Insurance Ltd
By:	/s/ Brian W. Nocco
Title: Chief Financial Officer
XL Re Ltd
By:	/s/ Brian W. Nocco
Title: Chief Financial Officer

EX-10.3

Exhibit 10.3

AGREEMENT AND RELEASE

     This Agreement and Release (“Agreement”) is entered into as of this 28th day of July, 2008, between XL Capital Ltd. (the “Company”) and Henry C.V. Keeling (the “Executive”).

     The Executive and the Company agree as follows:

     1.The employment relationship between the Executive and the Company will terminate on August 1, 2008 (the “Termination Date”). Effective as of the Termination Date, the Executive hereby resigns all officer positions with the Company and its Affiliates (as defined below) as well as his membership on all Boards of Directors and Committees of the Company and its Affiliates.

     2.In consideration for the covenants of the Executive and the release of claims by the Executive contained herein, and in full payment of all obligations of any nature or kind whatsoever owed or owing to the Executive by the Company and any of its Affiliates, the Company shall pay, or provide benefits to, the Executive as follows:

     (a)the Company shall pay the Executive’s base salary, at the rate in effect on the date hereof, through the Termination Date;

     (b)the Company shall make a lump sum cash payment to the Executive on August 15, 2008 in an amount equal to $3,362,500;

     (c)the Executive shall be reimbursed for business expenses reasonably incurred by him prior to the Termination Date in accordance with the Company’s expense reimbursement program;

     (d)all stock options and restricted stock granted to the Executive under the Company’s equity-based incentive compensation plans other than those stock options granted during calendar year 2008 (a complete list of which is attached hereto as Exhibit A) will, to the extent unvested, become vested on the Termination Date; all of the Company stock options granted before January 1, 2000 held by the Executive will be exercisable for three years following the Termination Date (but in no event beyond the full ten year term of the option), after which time they will terminate, and all options granted on or after January 1, 2000 will remain exercisable for the duration of the term specified in the applicable option agreement;

     (e)with respect to the options to purchase 130,000 shares of Company stock granted to the Executive during calendar year 2008, (i) 86,600 will become vested on the Termination Date and they will terminate ninety (90) days following the Termination Date, and (ii) 43,400 will become vested on the Termination Date and

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remain exercisable for the duration of the term specified in the applicable option agreement;

     (f)medical benefit plan coverage (including dental and vision benefits if provided under the applicable plans) will be continued for the Executive (and the Executive’s dependents, if any) for a period of twenty-four (24) months following the Termination Date under the Company’s medical benefit plans upon substantially the same terms and conditions (including cost of coverage to the Executive) as is then in existence for other executives during the coverage period; provided, however, that, in the event the Executive becomes reemployed with another employer and becomes eligible to receive medical benefits from such employer, the medical benefits described herein shall immediately cease;

     (g)the Executive’s vested accrued benefits under the Company’s pension and deferred compensation plans shall be paid to the Executive in accordance with the terms of such plans;

     (h)with respect to each award made to the Executive under the Company’s Long-Term Incentive Plan for which the award period has not ended on or prior to the Termination Date, to the extent the applicable performance metrics for the award are met at the end of the applicable award period and an amount would have been paid to the Executive under the award had his employment continued through the applicable award payment date (the “Award Amount”), the Executive will receive a payment under the award equal to a pro rata portion of the Award Amount, determined by multiplying the Award Amount by a fraction, the numerator of which is the number of months (rounding a partial month up to a full month) in the applicable award period through the Termination Date, and the denominator of which is the full number of months in the award period, and such amount, if any, shall be paid, less applicable taxes required to be withheld, to the Executive at the time payment for such award is made to active employees of the Company;

     (i)the Company shall make a lump-sum cash payment on August 15, 2008 in an amount equal to the product of $1,012,500, multiplied by a fraction, the numerator of which is 7 and the denominator of which is 12;

     (j)the Company shall pay directly or reimburse the Executive, in either case on an after-tax basis to the Executive, for reasonable moving expenses in relocating the Executive and his immediate family and their household effects from Bermuda to a location in the United Kingdom designated by the Executive following the Executive’s Termination Date (provided that any such expenses must be incurred by the Executive not later than the last day of the calendar year following the calendar year which includes the Termination Date), any such reimbursement for moving expenses shall be made promptly by the Company and, in all events, no later than the last day of

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the second calendar year following the calendar year which includes the Termination Date, and any such payment or reimbursement for taxes shall be made on or before the due date of the Executive’s tax return for the applicable year, but in no event later than the end of the Executive’s taxable year next following the Executive’s taxable year in which he remits the related taxes; and

     (k)the Company shall (w) continue to pay to the Executive his current monthly housing allowance from the Termination Date through the earlier of the end of calendar year 2008 or the date of termination of the applicable housing lease, (x) reimburse the Executive for the cost of household improvements incurred on or prior to April 30, 2008, (y) permit the Executive to continue to occupy his Bermuda residence through May 1, 2009, and (z) permit the Executive to continue to use his Company provided automobile through May 1, 2009, provided that, in the case of such use after December 31, 2008, all related expenses shall be the responsibility of the Executive and the Executive will pay to the Company the agreed value of any such use after De-cember 31, 2008.

     3.The Executive acknowledges and agrees that he is not entitled to any salary, bonuses, long-term or short-term incentive compensation or other compensation, payments, rights or benefits of any kind in respect of his employment with the Company and/or other positions with its Affiliates, the termination of such employment and/or other positions, or under any of the compensation or benefit plans of the Company or its Affiliates, except as provided by this Agreement.

     4.In consideration of the above, the sufficiency of which the Executive hereby acknowledges, the Executive, on behalf of the Executive and the Executive’s heirs, executors, administrators, representatives, agents and assigns (the “Releasors”) hereby irrevocably and unconditionally releases and forever discharges the Company and its members, shareholders, parents, Affiliates, subsidiaries, divisions, any and all current and former directors, officers, employees, agents, and contractors (in their capacities as such) and their heirs and assigns, and any and all employee pension benefit or welfare benefit plans of the Company or its Affiliates, including current and former trustees and administrators of such employee pension benefit and welfare benefit plans (collectively, the “Releasees”), from all claims, actions, causes of action, rights, judgments, obligations, damages, charges, accountings, demands or liabilities of whatever kind or character, in law or in equity, whether known or unknown, (collectively, the “Claims”) which may have existed or which may now exist from the beginning of time to the date of this Agreement, including, without limitation, any Claims the Releasors may have arising from or relating to the Executive’s employment or termination from employment with the Company or its Affiliates or relating to the Amended Employment Agreement between the Company and the Executive dated as of December 1, 2006 (the “Employment Agreement”) or any other agreement between the Executive and the Company or an Affiliate, and any Claims the Releasors may have under any federal, state,

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local or foreign statute, or common law relating to employment, wages, hours, or any other terms and conditions of employment. This release does not release the Company from any obligations due to the Executive under this Agreement, and the Executive is not waiving any right of indemnification he may have under the Company’s charter documents and applicable law or under any employee benefit plan or the right to assert coverage under any directors & officers liability insurance maintained by the Company.

     5.The Executive understands and agrees that the consideration provided for herein is more than the Executive would otherwise be entitled to if he did not agree to the provisions of Section 4 above.

     6.The Executive waives any right to reinstatement or future employment with the Company following the Executive’s separation from the Company.

     7.The Executive agrees not to make any disparaging statements about the Company, its Affiliates or their current or former officers, directors and/or employees, to anyone, including but not limited to the Company’s customers, competitors, suppliers, employees, former employees or the press or other media, unless placed under legal compulsion to do so by a court or other governmental authority. Similarly, the Company will not make disparaging statements about the Executive to the Company’s customers, competitors, suppliers, employees, or former employees, his prospective employers or the press or other media, unless placed under legal compulsion to do so by a court or other governmental authority.

     8.(a) The Executive agrees that the products of the Company and its Affiliates shall constitute the exclusive property of the Company and its Affiliates. For the avoidance of doubt, all trademarks, policy language or forms, products or services (including products and services under development), trade names, trade secrets, service marks, designs, computer programs and software, utility models, copyrights, know-how and confidential information, applications for registration of any of the foregoing and the right to apply for them in any part of the world (whether any of the foregoing shall be registered or unregistered) created or discovered or participated in by the Executive during the course of his employment or under the instructions of the Company or its Affiliates are and shall be the absolute property of the Company and its Affiliates, as appropriate. Without limiting the foregoing, the Executive hereby assigns to the Company any and all of the Executive’s rights, title and interest, if any, pertaining to the insurance and reinsurance (including, without limitation, finite insurance and reinsurance), risk assumption, risk management, brokerage, financial and other products or services developed or improved upon by the Executive (including, without limitation, any related “know-how”) while employed by the Company or its Affiliates, including any patent, trademark, trade name, copyright, ownership or other right that may pertain thereto.

     (b) Since the Executive has obtained in the course of the Executive’s employment with the Company and its Affiliates knowledge of trade names, trade secrets, know-

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how, products and services (including products and services under development), techniques, methods, lists, computer programs and software and other confidential information relating to the Company and its Affiliates, and their employees, clients, business or business opportunities, the Executive hereby undertakes that (x) with respect to Section 8(b)(i) below, for the period through the first anniversary of the Termination Date and (y) with respect to Section 8(b)(ii) below, the period through the six month anniversary of the Termination Date:

     (i)the Executive will not (either alone or jointly with or on behalf of others and whether directly or indirectly) encourage, entice, solicit or endeavor to encourage, entice or solicit away from employment with the Company or its Affiliates, or hire or cause to be hired, any officer or employee of the Company or its Affiliates (or any individual who was within the prior twelve months an officer or employee of the Company or its Affiliates), or encourage, entice, solicit or endeavor to encourage, entice or solicit any individual to violate the terms of any employment agreement or arrangement between such individual and the Company or any of its Affiliates; and

     (ii)the Executive will not (either alone or jointly with or on behalf of others and whether directly or indirectly) participate in, or provide advice with respect to, mergers, acquisitions, asset sales, or proxy contests involving the Company or engage in other similar conduct.

     (c) For purposes of this Agreement, an “Affiliate” of the Company includes any person, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the Company, and such term shall specifically include, without limitation, the Company’s majority-owned subsidiaries.

     (d) The limitations on the Executive set forth in this Section shall also apply to any agent or other representative acting on behalf of Executive.

     (e) While the restrictions aforesaid are considered by both parties to be reasonable in all the circumstances, it is recognized that restrictions of the nature in question may fail for reasons unforeseen and accordingly it is hereby declared and agreed that if any of such restrictions or scope thereof shall be adjudged to be void as going beyond what is reasonable in the circumstances for the protection of the interests of the Company and its Affiliates but would be valid if part of the wording thereof were deleted and/or the periods thereof reduced and/or other area dealt with thereby reduced in scope then said restrictions shall apply with such modifications as may be necessary to make them valid and effective.

     9.The Executive covenants that he shall not, without the prior written consent of the Company, use for the Executive’s own benefit or the benefit of any other person or entity other than the Company and its Affiliates or disclose to any person, any confidential, proprietary, secret, privileged or work product information about the Company or its

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Affiliates or their business or operations, including, but not limited to, information concerning trade secrets, know-how, software, data processing systems, policy language and forms, inventions, designs, processes, formulae, notations, improvements, financial information, business plans, prospects, referral sources, lists of suppliers and customers, legal advice and other information with respect to the affairs, business, clients, customers, agents or other business relationships of the Company or its Affiliates. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret, confidential, proprietary, privileged or work product information or data relating to the Company or any of its Affiliates or predecessor companies, and their respective businesses, which shall have been obtained by the Executive during his employment, unless and until such information has become known to the public generally (other than as a result of unauthorized disclosure by the Executive) or unless he is required to disclose such information by a court or by a governmental body with apparent authority to require such disclosure; provided, however, the Executive acknowledges that he is not authorized to, and agrees that he shall not, waive any privilege or work product protection applicable to communications or other information of the Company or its Affiliates. The foregoing covenant by the Executive shall be without limitation as to time and geographic application.

     10.The Executive shall be provided indemnification by the Company to the maximum extent permitted by applicable law and its charter documents against expenses incurred and damages paid or payable by the Executive with respect to claims based on actions or failures to act by the Executive in his capacity as an officer, director or employee of the Company or its Affiliates on in any other capacity, including any fiduciary capacity, in which the Executive served at the request of the Company or an Affiliate. In addition, he shall be covered by a directors & officers liability policy with coverage for all directors and officers of the Company in an amount equal to at least US$75,000,000. Such directors & officers liability insurance shall be maintained in effect for a period of six years following the Termination Date. The indemnification in this Section is in addition to, and not in lieu of, any indemnification or insurance rights that exist at law or pursuant to the Company’s charter documents or employee benefit plans.

     11.On or before the date hereof the Executive shall return all property of the Company and its Affiliates in the Executive’s possession, including, but not limited to, the Company’s credit, telephone, identification and similar cards, keys, cellular phones, computer equipment, software and peripherals and originals and copies of books, records, and other information pertaining to the business of the Company or its Affiliates.

     12.The Executive shall, at the request of the Company and within reason, cooperate with the Company in the defense and/or investigation of any third party claim, dispute or any investigation or proceeding, whether actual or threatened, including meeting with attorneys and/or other representatives of the Company to provide reasonably requested information regarding same and/or participating as a witness in any litigation, arbitration, hearing

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or other proceeding between the Company and a third party or any government body. The Company shall reimburse the Executive for all reasonable expenses incurred by him in connection with such assistance including reasonable travel expenses.

     13.This Agreement shall be governed by and construed in accordance with the laws of New York, without reference to the principles of conflict of laws thereof.

     14.The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld therefrom pursuant to any applicable law or regulation.

     15.This Agreement represents the complete agreement between the Executive and the Company concerning the subject matter in this Agreement and supersedes all prior agreements or understandings, written or oral, including the Employment Agreement. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

     16.Each of the sections contained in this Agreement shall be enforceable independently of every other section in this Agreement, and the invalidity or nonenforceability of any section shall not invalidate or render unenforceable any other section contained in this Agreement.

     17.This Agreement has been entered into voluntarily and not as a result of coercion, duress, or undue influence. The Executive acknowledges that he has read and fully understands the terms of this Agreement and has been advised to consult with, and has consulted with, an attorney before executing this Agreement.

     18.The Company will require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, of all, or substantially all, of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if such succession or assignment had not taken place.

     19.This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executors, administrators, heirs, distributees, devisees and legatees. If the Executive dies while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee or, if there be no such designee, to the Executive’s estate.

     20.This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separate coun-

-8-

terparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

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     The parties to this Agreement have executed this Agreement as of the day and year first written above.

XL CAPITAL LTD.
By:	/s/ Brian W. Nocco
	Name: Brian W. Nocco
	Title: Chief Financial Officer
HENRY C.V. KEELING
/s/ Henry C. V. Keeling

Exhibit A

Options

	Shares Subject
Grant Date	to Option	Option Price	Expiration Date
8/7/1998	40,000	$ 79.25	8/7/2008
12/4/1998	20,000	$ 73.00	12/4/2008
12/9/1999	85,000	$ 50.00	12/9/2009
3/9/2001	50,000	$ 80.00	3/9/2011
3/8/2002	55,000	$ 93.00	3/8/2012
3/7/2003	40,000	$ 68.62	3/7/2013
3/5/2004	45,000	$ 77.10	3/5/2014
1/5/2005	75,000	$ 75.95	1/5/2015
3/4/2005	80,000	$ 75.48	3/4/2015
2/24/2006	30,000	$ 67.93	2/24/2016

Restricted Shares
	Unvested Shares
Grant Date	(Vest on Termination
	Date)
3/4/2005	2500
3/10/2006	4000
3/10/2007	9000
2/28/2008	18,750

EX-99.1

EXHIBIT 99.1

XL Capital Ltd
XL House
One Bermudiana Road
P.O. Box HM 2245
Hamilton HM JX
Bermuda

Phone: (441) 292-8515
Fax:      (441) 292-5280

Contact:	David Radulski	Carol A. Parker Trott
	Investor Relations	Media Relations
	(441) 294-7460	(441) 294-7290

XL CAPITAL LTD ANNOUNCES AGREEMENT WITH

SECURITY CAPITAL ASSURANCE WITH RESPECT TO

PRE-IPO GUARANTEE AND REINSURANCE AGREEMENTS

Also announces:

•      Results for three months ended June 30, 2008

•      Reduction of quarterly dividend to $0.19 per ordinary share and declaration of such dividend

•      Launch of Operational Transformation Program

•      Strategic review of Life Reinsurance Operations

•      Expense initiative to take effect in Q3 2008

•      Changes to Executive Management

HAMILTON, BERMUDA, July 28, 2008 -- XL Capital Ltd (“XL” or the “Company”) (NYSE: XL) announced today that XL and certain of its subsidiaries have entered into an agreement (the “Master Agreement”) with Security Capital Assurance Ltd and certain of its subsidiaries (sometimes collectively referred to herein as “SCA”) in connection with the termination of certain reinsurance and other agreements as described below. Certain of the counterparties to credit default swap agreements with SCA are also parties, and others may become parties (at any time on or prior to the closing under the Master Agreement), to the Master Agreement. Such counterparties that are or become party to the Master Agreement are herein called the “Counterparties.”

                    The Master Agreement provides for the payment by XL to SCA of $1.775 billion in cash, the issuance by XL to SCA of eight million Class A Ordinary Shares to be newly issued by XL and the transfer by XL of all of the shares it owns in SCA (representing approximately 46% of SCA’s issued and outstanding shares) (the “SCA Shares”) to a trust. This consideration will be made in exchange for, among other things, the full and unconditional:

• commutation of the Third Amended and Restated Facultative Quota Share Reinsurance Treaty, effective July 1, 2006, between XL Financial Assurance Ltd. (“XLFA”) and XL Capital Assurance

Inc. (“XLCA”), and all individual risk cessions thereunder, as a result of which the guarantee by XL subsidiary XL Insurance (Bermuda) Ltd (“XLIB”) of XLFA’s obligations to XLCA thereunder (the “XLFA Guarantee”) will no longer have any force or effect;

• commutation of the Excess of Loss Reinsurance Agreement, executed on October 3, 2001, pursuant to which XLIB agreed to reinsure certain liabilities of XLFA (the “Excess of Loss Agreement”);

• commutation of the Second Amended and Restated Facultative Master Certificate, effective March 1, 2007, pursuant to which XL Re America, Inc. (“XLRA”) agreed to reinsure certain liabilities of XLCA, and all individual risk cessions thereunder (the “XLRA Master Facultative Agreement”);

• commutation of the Facultative Quota Share Reinsurance Agreement, effective August 17, 2001, as amended by Amendment No. 1 to such agreement, dated as of August 4, 2006, pursuant to which XLIB agreed to reinsure certain liabilities of XLFA and all individual risk cessions thereunder;

• commutation of the Adverse Development Reinsurance Agreement, dated as of August 4, 2006, between XLCA and XLRA, and the Indemnification Agreement, dated as of August 4, 2006, between XLFA and XLIB; and

• termination of certain indemnification and services agreements between XL and SCA.

                    After giving effect to the closing of the Master Agreement, $64.6 billion of the Company’s total net exposure (which was $65.7 billion as at June 30, 2008) under reinsurance agreements and guarantees with SCA subsidiaries will be eliminated.

                    Pursuant to the terms of the Master Agreement, SCA will be required to use commercially reasonable efforts to commute the agreements that are the subject of the Company’s guarantee of XLCA’s obligations under certain financial guarantees issued by XLCA to European Investment Bank (the “EIB Policies”), subject to certain limitations. In the event such commutations are not completed by the closing of the Master Agreement, XL’s exposures relating to the EIB Policies (which relate to project finance transactions) as of June 30, 2008 would be approximately $1.1 billion.

                    The Company expects to record a charge of between $1.4 billion and $1.5 billion in respect of the Master Agreement in the quarter ending September 30, 2008.

                    It is expected that the SCA Shares will be transferred at closing of the Master Agreement into a trust for the benefit of XLFA and/or XLCA until such time as an agreement between XLCA and the Counterparties is reached, and thereafter the trust will act for the benefit of the Counterparties. To the extent that the required regulatory approvals for the transfer are not received prior to such closing, the SCA Shares will be deposited into escrow pending the transfer. Upon any such deposit into escrow, XL will irrevocably disclaim any and all voting, economic or other rights with respect to the SCA Shares.

                    As part of the transaction, the Counterparties will provide releases to XL and SCA.

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                    The Company and SCA have obtained approval from the New York State Insurance Department for the Master Agreement and each of the commutations to which XLRA or XLCA is a party. SCA has also obtained applicable approvals from the Bermuda Monetary Authority, the Delaware Insurance Department and other regulators.

                    In addition to customary closing conditions, the Master Agreement is conditioned on the commutation by SCA of the Amended and Restated Master Facultative Reinsurance Agreement, dated November 3, 1998, between Financial Security Assurance, Inc. (“Financial Security”) and XLFA, and all individual risk cessions thereunder. As a result of this commutation, XL’s guarantee of XLFA’s obligations thereunder (“Financial Security Guarantee”) will no longer have any force or effect. SCA announced today that it has entered into an agreement with Financial Security to commute such agreement simultaneously with the closing of the Master Agreement.

                    The closing is also conditioned upon the termination of eight Merrill Lynch International (“Merrill Lynch”) asset backed security collateralized debt obligation credit default swaps entered into between Merrill Lynch and SCA. SCA announced today that it has entered into an agreement with Merrill Lynch to terminate such agreements simultaneous with the closing of the Master Agreement.

                    The closing of the Master Agreement is also conditioned upon the successful completion of XL’s capital raise (as described below). The closing of the transactions contemplated by the Master Agreement is expected to take place in early August 2008 and concurrently with the closing of the capital raise discussed below. The parties may choose to terminate the Master Agreement if the closing does not occur by August 15, 2008.

                    In order to fund the payments described above, XL separately announced today that it currently plans to sell approximately $2.5 billion of securities in a combination of ordinary shares and equity security units pursuant to the Company’s existing shelf registration statement. This press release does not constitute an offer to sell or the solicitation of an offer to buy any ordinary shares or equity security units.

Other Transactions

                    XL also intends to (i) exercise the put option under its Mangrove Bay contingent capital facility entered into in July 2003 resulting in net proceeds to the Company of approximately $500 million in exchange for the issuance by the Company of 20,000,000 Series C Preference Ordinary Shares and (ii) upon XL’s completion of its capital raise (as discussed above) and the closing of the transactions contemplated by the Master Agreement, redeem X.L. America, Inc.’s outstanding $255.0 million 6.58% Guaranteed Senior Notes due April 2011. In connection with this redemption, the Company expects to record an additional charge of approximately $21.8 million in the quarter ending September 30, 2008.

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Second Quarter Results

                    For the quarter ended June 30, 2008, XL recorded net income available to ordinary shareholders of $237.9 million as compared to $544.5 million for the quarter ended June 30, 2007 and “net income excluding realized gains and losses”¹ of $266.2 million as compared to $526.3 million in the prior year quarter. The key elements are as follows:

• A solid underwriting performance with gross written premiums for the quarter of $1,947.5 million, a reduction of 12.7% from the prior year quarter which included gross written premiums of $52.0 million from SCA. Gross written premiums for the current quarter included $1,388.8 million from the Insurance segment and $397.5 million from the Reinsurance segment compared with $1,417.9 million and $526.3 million, respectively, in the prior year quarter. The loss ratio for the quarter was 62.2% with a combined ratio of 92.3% as compared to 56.9% and 86.3%, respectively, in the prior year quarter. The results for the current quarter benefited from favorable prior year development of $182.6 million but were adversely affected by $98.1 million of natural catastrophe losses. In the prior year quarter there was favorable prior year development of $124.1 million offset in part by $30.0 million of natural property catastrophe losses. Further details of the performance of the operating segments are set out below.

• A charge of $82.4 million arising from guarantee and reinsurance agreements with SCA. This was comprised of $22.7 million in respect of the XLRA Master Facultative Agreement, $3.7 million for the unwinding of the discounted loss reserves in respect of the Excess of Loss Agreement and $56.0 million in respect of the XLFA Guarantee.

• A contribution of $28.2 million from the Life Operations segment and a contribution of $6.2 million from the Other Financial Lines segment compared with contributions of $24.7 million and $6.8 million, respectively, in the prior year quarter.

• Net investment income from P&C operations, excluding investment income from structured products, was $298.1 million as compared to $323.0 million in the prior year quarter. Net investment income from P&C structured products was $25.1 million as compared to $31.0 million in the prior year quarter. Both reductions were caused principally by lower average

1           Defined as net income available to ordinary shareholders excluding net realized gains and losses on investments, net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax, for the Company and its share of these items for SCA and the Company’s other insurance company operating affiliates and charges in respect of guarantees issued to cedents of XLFA, herein referred to as “net income excluding net realized gains and losses.” “Net income excluding net realized gains and losses” is a non-GAAP measure. See the schedule entitled “Reconciliation” at the end of this release for a reconciliation of net income (loss) excluding net realized gains and losses to net income available to ordinary shareholders.

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yields for the period. There was a net loss of $20.4 million from investment affiliates as compared to a profit of $67.0 million in the prior year quarter and net income from investment manager affiliates of $1.7 million compared to $43.9 million in the prior year quarter. Both results reflected the difficult market conditions during the period.

• Net income from financial and operating affiliates, excluding the SCA related charges noted above, was $11.7 million as compared to a loss of $2.2 million in the prior year quarter.

• There were net realized gains of $2.0 million in the quarter arising from the Company’s investment portfolio including a charge of $47.7 million for other than temporary impairments. In the prior year quarter, XL recorded net realized gains of $18.3 million. The 2007 total included a gain of $81.3 million on the sale by XL of shares of SCA.

• Operating expenses for the quarter were $298.3 million as compared to $306.6 million in the prior year quarter. The expense for the current quarter was lower than the prior year quarter principally due to the inclusion in the prior year quarter of $19.5 million of expenses relating to SCA from the time that it was a subsidiary. The underlying increase in operating expenses was caused principally by $17.0 million arising from the US Dollar being weaker than in the prior year quarter, professional fees of $10.9 million incurred in connection with the Company’s negotiations with SCA and $9.5 million of expenses from the XL GAPS business that was acquired in the fourth quarter of 2007. These items were offset in part by lower accruals for performance based compensation.

                    For the first half of 2008, net income available to ordinary shareholders was $449.7 million as compared to $1,094.3 million in the prior year period. “Net income excluding net realized gains and losses” for the same period was $543.1 million compared to $1,066.3 million in the prior year period.

                    The Company’s ordinary shareholders’ equity at June 30, 2008 was $7.77 billion, a reduction of $486.2 million from $8.26 billion at March 31, 2008. This reduction reflected the net income for the quarter offset by an increase of $686.3 million in unrealized losses within the investment portfolio, caused principally by interest rate increases in the quarter. Further details on the Company’s investment portfolio are set out in the Company’s Second Quarter Financial Supplement and Second Quarter Structured Credit Data presentations that are available on the Company’s website at www.xlcapital.com. Book value per ordinary share at June 30, 2008 was $43.39.

                    The annualized return on ordinary shareholders’ equity, based on “net income excluding net realized gains and losses,” was 13.3% for the quarter as compared to 21.3% in the prior year quarter.

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Segment Highlights – Second quarter 2008 versus second quarter 2007

          Insurance

                    Gross and net premiums written decreased by 2.1% and 1.8%, respectively, during the three months ended June 30, 2008 compared with the three months ended June 30, 2007. Gross premiums written decreased as a result of continued decreases in premium rates across most lines of business as market conditions continued to soften, selective non-renewals and decreases in new business within certain specialty lines including professional, environmental and aerospace lines of business. To date, the Company has seen limited lost renewals from recent rating actions, largely limited to U.S. professional lines as noted above. Partially offsetting these decreases was growth in certain lines of business where the Company has expanded its operations recently and favorable foreign exchange rate movements of $43.1 million. Net premiums written decreased as a result of the factors noted above affecting gross premiums written.

                    Net premiums earned decreased by 3.3% in the three months ended June 30, 2008 compared with the three months ended June 30, 2007. The decrease resulted primarily from the earn-out of overall lower net premiums written in the past twelve months, including decreases in professional, aerospace, programs and marine lines of business, partially offset by growth in excess and surplus lines as well as certain property lines of business.

                    The loss ratio was 64.2% and the combined ratio was 94.0% compared to 62.6% and 90.6%, respectively, in the prior year quarter. The current quarter results included favorable prior year development of $99.7 million (or 9.8 loss ratio points) and $59.9 million (or 5.9 loss ratio points) from natural catastrophe loss activity in the quarter. The prior year quarter included $43.7 million (or 4.2 loss ratio points) of favorable prior year releases and $20.0 million (or 1.9 loss ratio points) from natural catastrophe loss activity. In addition, the 5 point increase in standard professional lines loss ratio initiated in the first quarter of 2008 related to sub-prime loss activity on the 2008 report year had a 1.3 point impact on the segment loss ratio in the second quarter of 2008.

Reinsurance

                    Gross and net premiums written during the three months ended June 30, 2008 decreased by 24.5% and 31.2%, respectively, as compared to the second quarter in 2007. These decreases resulted from softening market conditions and the Company declining certain business where market rates were below the Company’s acceptable underwriting return levels, together with increased retentions by clients. For the three months ended June 30, 2008, premium rate decreases were most significant in non-U.S. property lines of business as well as U.S. casualty lines. Up to June 30, 2008 the negative impact on gross premiums written as a result of rating agency actions was limited. Since that date, some ceding companies have taken actions placing limitations on the amount of new and/or renewal business that they will cede to us. The overall impact of these actions has, to date, been limited. The Company anticipates that many of these companies will remove these

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limitations after the Master Agreement closes and our financial strength ratings are clarified. Net premiums written reflect the above changes in gross premiums written combined with a reduction in ceded premiums in the three months ended June 30, 2008 as compared to the same period in 2007. Ceded premiums written decreased as a result of property catastrophe cessions to Cyrus Re II in 2008 being 10% as compared to cessions of 35% to Cyrus Re throughout 2007. This reduction has been offset by ceded premiums totaling $23.3 million associated with the purchase of additional catastrophe loss protection including industry loss warranty covers in the second quarter of 2008.

                    Net premiums earned in the second quarter of 2008 decreased 18.0% as compared to the second quarter of 2007. This decrease was a reflection of the overall reduction of net premiums written over the last 24 months, partially offset by the impact of favorable foreign exchange rate movements.

                    The loss ratio was 58.1% and the combined ratio was 89.0% in the three months ended June 30, 2008 compared to 46.8% and 78.4%, respectively, in the prior year quarter. The current quarter results included favorable prior year development of $82.9 million (or 16.9 loss ratio points) and $38.2 million (or 7.8 loss ratio points) from natural catastrophe loss activity in the quarter. Additionally, there was $14.6 million (or 3.0 loss ratio points) of activity arising from certain property risk and catastrophe losses impacting three structured products transactions. The prior year quarter included $80.4 million (or 13.4 loss ratio points) of favorable prior year releases and $10.0 million (or 1.7 loss ratio points) from natural catastrophe loss activity.

Life Operations

                    Gross written premiums for the life operations was $161.2 million during the three months ended June 30, 2008 as compared to $235.0 million in the prior year quarter, which included a single premium for $94.6 million. The contribution for the quarter was $28.1 million as compared to $24.7 million in the prior year quarter, the increase arising principally from higher investment income, caused in part by foreign exchange rate fluctuations.

Other Financial Lines

                    The other financial lines segment recorded a contribution of $6.2 million during the three months ended June 30, 2008 as compared to a contribution of $6.8 million in the prior year quarter. During the quarter, $778 million of funding agreements matured and the outstanding deposit liabilities in respect of this business at June 30, 2008 were $1,058 million. The lower income in the quarter arising from lower underlying balances was offset mostly by reduced operating expenses.

                    In the prior year quarter, SCA was a separate segment until the effective date of the secondary sale by XL of shares in SCA. This sale reduced XL’s interest in SCA from 63% to 46% and, following that sale, SCA was accounted for as an affiliate rather than as a consolidated subsidiary. The contribution from SCA

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as a subsidiary in the prior year quarter was $14.4 million. The income statement impact of all transactions with SCA subsequent to the June 6, 2007 sale have been included in “net (loss) income from operating affiliates.”

Dividend Reduction and Declaration of Dividend

                    The Company also announced that the Board of Directors has approved a reduction in the quarterly dividend payable on the Company’s Class A Ordinary Shares to $0.19 per ordinary share beginning with the next quarterly dividend. In line with that reduction, the Board of Directors declared a quarterly dividend of $0.19 per ordinary share payable on September 30, 2008 to ordinary shareholders of record as of September 12, 2008.

                    The Company also announced that the Board of Directors declared a dividend on the Company's Series E Perpetual Non-Cumulative Preference Shares (“Preference Shares”) of $0.3250 per share payable on October 15, 2008 to Preference Shareholders of record on October 14, 2008. The aggregate dividend amount payable on the Preference Shares is $32.5 million.

Ratings

                    Based on the above announcement as relating to the Master Agreement and the Company’s planned concurrent capital raise, if successful, it is management's expectation that the Company’s financial strength and debt ratings will ultimately be affirmed at their current levels, though the Company does expect that some of the rating agencies will maintain or assign a ‘negative’ outlook to XL.

Operational Transformation

                    The Company also announced the launch of a five-year operational transformation program for XL Insurance.

                    The transformation of XL Insurance’s operating systems will result in the consolidation of multiple business processes and technology systems into a unified global architecture. In addition, the transformation will enhance key business functions through advanced technology for global claims, new underwriting and policy administration for most U.S. policy volume, strategic and operational management information, technical accounting and reinsurance administration.

                    Accenture, the global management consulting, technology services and outsourcing company, will provide business consulting and technological services under a multi-year contract.

Other Actions

                    Commenting on these developments, XL’s Chief Executive Officer Michael S. McGavick said: “When I joined XL less than three months ago, I said my three primary areas of focus would be to resolve SCA, enhance Enterprise Risk Management and pursue stable ratings from our rating agencies. From the actions

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above, I believe you can see that we have delivered on the commitment to put the SCA overhang firmly behind us and this will allow us to emphasize again XL’s world class reputation as an insurer and reinsurer. The transactions contemplated by the Master Agreement eliminates more than 98% of the exposure from SCA and the remainder is likely to be eliminated. Even if this remainder is not eliminated, these residual contracts are performing well and we have not been advised of any losses to SCA under these contracts.

                    As part of our efforts to refocus XL on our property and casualty roots, we are also exploring strategic opportunities related to our Life Reinsurance operations. This review, along with the appointment of a new Chief Enterprise Risk Officer, which I hope to announce shortly, forms part of our enhanced commitment to risk management. The capital raise we have announced separately reflects my desire to maintain a capital cushion with each of the major rating agencies allowing us to focus exclusively on our core P&C Insurance and Reinsurance businesses. Our investment in our operational transformation program is also critical to achieving our growth aspirations and continuing to deliver value to our customers and shareholders. It matches our commitment to maintaining our position as a global commercial insurance leader by continuing to deliver the quality coverage products and services long associated with the XL brand.”

                    Mr. McGavick continued. “Further, given the softening market conditions, we will take actions during the remainder of 2008 to eliminate between $110 million and $120 million from XL’s run rate operating expenses from 2009 onwards, reducing XL’s expense base by approximately $70 million from 2008 levels. As a result of this we expect to record a charge of between $50 million and $60 million in the remainder of 2008. This expense reduction will involve all parts of the organization geographically but the primary emphasis will be on streamlining corporate functions. This will be achieved through job eliminations, increased outsourcing and the cessation of certain projects and activities.”

Executive Management Changes

                    The Company also announced some Executive Management changes.

                    Henry Keeling, Executive Vice President and Chief Operating Officer, will retire from the Company effective August 1, 2008. As a result of Henry’s decision to retire, the role of the Chief Operating Officer will be eliminated. Mike commented: “Regrettably Henry has decided to retire. Henry has driven our successful dual platform strategy in our P&C businesses as well as leading our Life Reinsurance business. He has made a significant contribution in many parts of the organization since he joined the XL group in 1993. The Board of Directors and all of Henry’s XL colleagues appreciate his leadership and commitment throughout his tenure at XL, but in particular through these recent challenging times.”

                    Michael “Spike” Lobdell will leave his current position of Executive Vice President and Chief Executive of Global Business Services, effective August 31, 2008.

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                    Mike McGavick thanked Spike for his commitment and leadership to Global Business Services, commenting: “The decision Spike and I came to to realign the majority of Global Business Services within the business operations means that the current executive structure will no longer be required. Spike has led this area through significant change over the past two years and I want to thank him for his leadership and selflessness.”

                    In addition, Fiona Luck, Executive Vice President and Chief of Staff, will become Special Advisor to the CEO, based in Bermuda and London and with a reduced time commitment. She will step down from her current role and the senior leadership group on August 1, 2008, at which time the role of Chief of Staff will be eliminated. Mike commented: “I look forward to having continued access to Fiona’s knowledge and expertise as I work with my new senior leadership group.”

                    Mr. McGavick also announced that Susan Cross, Global Chief Actuary, will join the senior leadership group with immediate effect.

                    Mr. McGavick concluded: “Each of these management changes are occurring for different reasons, but XL has great bench strength which I am determined to retain. To do so and to motivate success, we will make a limited number of targeted option awards. Options awarded to the most senior executives will have a performance vesting feature. I have complete confidence that our new streamlined leadership will deliver on our refined strategy. Indeed, I believe all of our actions today will reinforce the confidence of our customers and investors in the strength of our underlying businesses which continue to perform strongly.”

#    #    #

This press release contains forward-looking statements. Statements that are not historical facts, including statements about XL's beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates, and expectations. Actual results may differ materially from those included in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes (a) the risk that the transactions described above are not completed for any reason; (b) greater risk of loss in connection with obligations guaranteed by certain of our insurance company operating affiliates due to recent deterioration in the credit markets stemming from the poor performance of sub-prime residential mortgage loans; (c) greater frequency or severity of claims and loss activity than XL’s underwriting, reserving or investment practices anticipate based on historical experience or industry data; (d) trends in rates for property and casualty insurance and reinsurance; (e) developments in the world’s financial and capital markets that adversely affect the performance of XL’s investments or access to such markets including, but not limited to, further market developments relating to sub-prime and residential mortgages; (f) changes in general economic conditions, including foreign currency exchange rates, inflation and other factors; (g) changes in the size of XL’s claims relating to natural catastrophe losses due to the preliminary nature of

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some reports and estimates of loss and damage to date and (h) the other factors set forth in XL’s most recent reports on Form 10-K, Form 10-Q, and other documents on file with the Securities and Exchange Commission, as well as management’s response to any of the aforementioned factors. XL undertakes no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future developments or otherwise.

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XL CAPITAL LTD
SUMMARY CONSOLIDATED FINANCIAL DATA
(U.S. dollars in thousands)

	Three Months Ended						Six Months Ended
Income Statement Data:	June 30						June 30
	(Unaudited)						(Unaudited)
		2008			2007			2008			2007
Revenues:
Gross premiums written :
- P&C operations	$	1,786,231		$	1,944,186		$	4,487,125		$	4,898,478
- Life operations		161,251			234,961			396,209			448,236
- Financial operations		-			52,025			-			156,983
Net premiums written :
- P&C operations		1,359,467			1,504,533			3,496,020			3,902,540
- Life operations		150,933			224,487			375,146			427,425
- Financial operations		-			45,720			-			130,445
Net premiums earned :
- P&C operations		1,508,787			1,651,149			3,061,567			3,248,820
- Life operations		172,935			239,853			332,517			386,847
- Financial operations		-			39,303			-			85,682
Net investment income		440,352			567,215			939,581			1,120,307
Net realized gains (losses) on investments		2,040			18,296			(100,211	)		27,588
Net realized and unrealized gains on derivative investments		8,124			9,188			52,806			16,929
Net (loss) income from investment affiliates		(20,435	)		67,043			(8,636	)		185,979
Fee and other income		12,796			4,649			21,087			7,986
Total revenues	$	2,124,599		$	2,596,696		$	4,298,711		$	5,080,138
Expenses:
Net losses and loss expenses incurred	$	938,585		$	941,948		$	1,939,478		$	1,936,735
Claims and policy benefits		209,725			279,100			406,024			467,443
Acquisition costs		246,237			298,021			512,534			557,972
Operating expenses		298,298			306,552			562,122			587,055
Exchange losses		7,936			22,600			75,681			46,169
Interest expense		65,441			164,695			189,553			307,486
Amortization of intangible assets		420			420			840			840
Total expenses	$	1,766,642		$	2,013,336		$	3,686,232		$	3,903,700
Net income before minority interest, income tax
and net income from operating affiliates	$	357,957		$	583,360		$	612,479		$	1,176,438
Minority interest in net income of subsidiary		-			9,096			-			23,994
Income tax		51,205			61,288			81,907			134,043
Net loss (income) from operating affiliates		68,901			(41,639	)		48,348			(98,721	)
Net income	$	237,851		$	554,615		$	482,224		$	1,117,122
Preference share dividends		-			(10,080	)		(32,500	)		(22,869	)
Net income available to ordinary shareholders	$	237,851		$	544,535		$	449,724		$	1,094,253

-12-

XL CAPITAL LTD
SUMMARY CONSOLIDATED FINANCIAL DATA
(Shares in thousands, except per share amounts)

	Three Months Ended		Six Months Ended
Income Statement Data (continued) :	June 30		June 30
	(Unaudited)		(Unaudited)
	2008	2007	2008	2007
Weighted average number of ordinary shares
and ordinary share equivalents :
Basic	176,655	178,378	176,453	178,650
Diluted	176,910	181,613	176,946	180,570
Per Share Data :
Net income available to ordinary shareholders	$1.34	$3.00	$2.54	$6.06
Ratios – P&C operations :
Loss ratio	62.2%	56.9%	63.3%	59.6%
Expense ratio	30.1%	29.4%	29.6%	28.6%
Combined ratio	92.3%	86.3%	92.9%	88.2%

-13-

XL CAPITAL LTD
SUMMARY CONSOLIDATED FINANCIAL DATA
(U.S. dollars in thousands, except per share amounts)

Balance Sheet Data:	As at	As at
	June 30, 2008	December 31, 2007
	(Unaudited)
Total investments available for sale	$31,042,720	$36,265,803
Cash and cash equivalents	3,704,249	3,880,030
Investments in affiliates	2,401,799	2,611,149
Unpaid losses and loss expenses recoverable	4,129,001	4,697,471
Total assets	52,079,962	57,762,264
Unpaid losses and loss expenses	22,955,473	23,207,694
Deposit liabilities	2,956,423	7,920,085
Future policy benefit reserves	6,904,505	6,772,042
Unearned premiums	5,355,644	4,681,989
Notes payable and debt	2,869,230	2,868,731
Total shareholders’ equity	8,769,193	9,948,142
Fully diluted book value per ordinary share	43.39	50.29
Basic book value per ordinary share	43.39	50.30

XL CAPITAL LTD
RECONCILIATION

The following is a reconciliation of the Company’s (i) net income (loss) available to ordinary shareholders to ‘net income (loss) excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax, for the Company and its share of these items for SCA and the Company’s other insurance company operating affiliates and charges in respect of guarantees issued to cedents of XL Financial Assurance Ltd. ² (which is a non-GAAP measure, the “Exclusions”) and (ii) annualized return on ordinary shareholders’ equity (based on net income (loss) minus the Exclusions) to average ordinary shareholders’ equity for the three and six months ended June 30, 2008 and 2007 (U.S. dollars in thousands, except per share amounts):

2           Defined as “net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax.”

-14-

	Three Months Ended
	June 30
	(Unaudited)
		2008			2007
					(Note 2)
Net income available to ordinary shareholders	$	237,851		$	544,535
Net realized (gains) losses on investments, net of tax		(2,590	)		(21,524	)
Net realized and unrealized (gains) losses on investment
derivatives, net of tax		(5,695	)		(19,655	)
Net realized and unrealized losses (gains) on credit and
structured financial derivatives, net of tax		1			12,885
Net realized and unrealized (gains) losses on investments and
derivatives of the Company's insurance company operating
affiliates		(1,416	)		10,051
Net change in value of credit derivatives in respect of
reinsurances of SCA Group Companies		(17,946	)		-
Charge in respect of guarantee issued to XLCA		56,000			-
Net income excluding net realized gains and losses (Note 1)	$	266,205		$	526,292
Per ordinary share results:
Net income available to ordinary shareholders	$	1.34		$	3.00
Net income excluding net realized gains and losses (Note 1)	$	1.50		$	2.90
Weighted average ordinary shares outstanding:
Basic		176,654,613			178,378,342
Diluted		176,909,594			181,612,516
Return on Ordinary Shareholders' Equity:
Average ordinary shareholders' equity	$	8,012,272		$	9,899,797
Net income excluding net realized gains and losses (Note 1)	$	266,205		$	526,292
Annualized net income excluding net realized gains and losses
(Note 1)	$	1,064,820		$	2,105,168
Annualized Return on Ordinary Shareholders' Equity - Net
income excluding net realized gains and losses (Note 1)		13.3%			21.3%

Note 1 : Defined as "net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax".

Note 2: Certain amounts in 2007 have been reclassified to conform with the current period presentation.

-15-

	Six Months Ended
	June 30
	(Unaudited)
		2008			2007
					(Note 2)
Net income available to ordinary shareholders	$	449,724		$	1,094,253
Net realized losses (gains) on investments, net of tax		95,787			(34,566	)
Net realized and unrealized (gains) losses on investment
derivatives, net of tax		(39,815	)		(24,349	)
Net realized and unrealized losses (gains) on credit and
structured financial derivatives, net of tax		58			24,295
Net realized and unrealized (gains) losses on investments and
derivatives of the Company's insurance company operating
affiliates		(736	)		6,666
Net change in value of credit derivatives in respect of
reinsurances of SCA Group Companies		(17,946	)		-
Charge in respect of guarantees issued to XLCA		56,000			-
Net income excluding net realized gains and losses (Note 1)	$	543,072		$	1,066,299
Per ordinary share results:
Net income available to ordinary shareholders	$	2.54		$	6.06
Net income excluding net realized gains and losses (Note 1)	$	3.07		$	5.91
Weighted average ordinary shares outstanding:
Basic		176,452,730		178,650,115
Diluted		176,945,794		180,569,702
Return on Ordinary Shareholders' Equity:
Average ordinary shareholders' equity	$	8,358,668		$	9,809,106
Net income excluding net realized gains and losses (Note 1)	$	543,072		$	1,066,299
Annualized net income excluding net realized gains and losses
(Note 1)	$	1,086,144		$	2,132,598
Annualized Return on Ordinary Shareholders' Equity - Net
income excluding net realized gains and losses (Note 1)		13.0%			21.7%

Note 1 : Defined as "net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit, structured financial and investment derivatives, Note 2: Certain amounts in 2007 have been reclassified to conform with the current period presentation.

Comment on Regulation G

                    This press release contains the presentation of (i) net income (loss) excluding net realized gains and losses on investments, net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax, for the Company and its share of these items for SCA and the Company’s other insurance company operating affiliates and charges in respect of guarantees issued to cedents of XL Financial Assurance Ltd. and (ii) annualized return on ordinary shareholders’ equity (based on net income minus the Exclusions) to average ordinary shareholders’ equity. These items are “non-GAAP financial measures” as

-16-

defined in Regulation G. The reconciliation of such measures to the most directly comparable GAAP financial measures in accordance with Regulation G is included above.

                    XL presents its operations in the way it believes will be most meaningful and useful to investors, analysts, rating agencies and others who use XL’s financial information in evaluating XL’s performance. This presentation includes the use of ‘net income excluding net realized gains and losses on investments, net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax’. Investment derivatives include all derivatives entered into by XL other than weather and energy and credit derivatives (discussed further below).

                    Although the investment of premiums to generate income (or loss) and realized capital gains (or losses) is an integral part of XL’s operations and those of SCA and the Company’s other insurance company operating affiliates, the determination to realize capital gains (or losses) is independent of the underwriting process. In addition, under applicable GAAP accounting requirements, losses can be created as the result of other than temporary declines in value without actual realization. In this regard, certain users of XL’s financial information, including certain rating agencies, evaluate earnings before tax and capital gains to understand the profitability of the recurring sources of income without the effects of these two variables. Furthermore, these users believe that, for many companies, the timing of the realization of capital gains is largely opportunistic and are a function of economic and interest rate conditions.

                    In addition, with respect to credit derivatives, because XL and its insurance company operating affiliates generally hold financial guaranty contracts written in credit default derivative form to maturity, the net effects of the changes in fair value of these credit derivatives are excluded (similar with other companies in the financial guarantee business) as the changes in fair value each quarter are not indicative of underlying business performance. Unlike these credit derivatives, XL’s weather and energy derivatives are actively traded (i.e., they are not held to maturity) and are, therefore, not excluded from net income as any gains or losses from this business are considered by management when evaluating and managing the underlying business.

                    Charges in respect of guarantees issued by XL Insurance (Bermuda) Ltd to cedents of XL Financial Assurance Ltd., a subsidiary of SCA, are excluded as these contracts were capital in nature and outside the scope of the Company’s underlying business.

                    In summary, XL evaluates the performance of and manages its business to produce an underwriting profit. In addition to presenting net income (loss), XL believes that showing net income (loss) exclusive of the items mentioned above enables investors and other users of XL’s financial information to analyze XL’s performance in a manner similar to how management of XL analyzes performance. In this regard, XL believes that providing only a GAAP presentation of net income (loss) makes it much more difficult for users of XL’s financial information to evaluate XL’s underlying business. Also, as stated above, XL believes

-17-

that the equity analysts and certain rating agencies that follow XL (and the insurance industry as a whole) exclude these items from their analyses for the same reasons and they request that XL provide this non-GAAP financial information on a regular basis.

                    Return on average ordinary shareholder’s equity (“ROE”) excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and investment derivative instruments, net of tax, for the Company and its share of these items for SCA and the Company’s other insurance company operating affiliates (the “Exclusions”), is a widely used measure of any company’s profitability. Annualized return on average ordinary shareholders’ equity (minus the Exclusions) is calculated by dividing annualized net income minus the Exclusions for any period by the average of the opening and closing ordinary shareholders’ equity. The Company establishes target ROEs (minus the Exclusions) for its total operations, segments and lines of business. If the Company’s ROE (minus the Exclusions) return targets are not met with respect to any line of business over time, the Company seeks to re-evaluate these lines. In addition, the Company’s compensation of its senior officers is dependant upon, among other things, the achievement of the Company’s performance goals to enhance shareholder value which include ROE (minus the Exclusions).

-18-

EX-99.2

  
  3B2 EDGAR HTML -- c54396_ex99-2.htm

EX-99.3

Exhibit 99.3

XL Capital Ltd 

XL House 

One Bermudiana Road 

P.O. Box HM 2245 

Hamilton HM JX 

Bermuda 

Phone: (441) 292-8515 

Fax: (441) 292-5280 

Contact:	David Radulski	Carol A. Parker Trott
	Investor Relations	Media Relations
	(441) 294-7460	(441) 294-7290

XL CAPITAL LTD ANNOUNCES PLANS TO

OFFER ORDINARY SHARES AND EQUITY SECURITY UNITS

     HAMILTON, BERMUDA, July 28, 2008 -- XL Capital Ltd (“XL” or the “Company”) (NYSE: XL) announced today that it currently plans to offer approximately $2.5 billion of securities in a combination of ordinary shares (the “Ordinary Shares”) and equity security units (the “Equity Security Units”) pursuant to the Company’s existing shelf registration statement (the “Offerings”). Each Equity Security Unit will consist of (i) a forward purchase contract requiring the holder to purchase, and XL to issue, a variable number of ordinary shares of XL and (ii) an ownership interest in a debt security of XL. The Company has not yet determined the exact breakdown between Ordinary Shares and Equity Security Units, but currently expects that the Ordinary Shares will constitute approximately $1.75 to $2.0 billion of the total.

     The Company intends to use the net proceeds from the Offerings to pay $1.775 billion in connection with an agreement it entered into today with Security Capital Assurance Ltd and certain of its subsidiaries (sometimes collectively referred to herein as “SCA”) and certain other parties thereto in connection with the termination of certain reinsurance and other agreements and for general corporate purposes including capital funding of certain of the Company’s subsidiaries.

     The joint book-running managers for the Offerings are Goldman, Sachs & Co. and UBS Investment Bank. Full details of the Offerings, including a description of the Ordinary Shares and the Equity Security Units and certain risk factors related to the Company and these securities, will be contained in a prospectus supplement that will be available through the underwriters.

      Any offer will be made only by means of a prospectus, including a prospectus supplement, forming a part of the Company’s effective shelf registration statement. A copy of the prospectus supplement meeting the requirements of Section 10 of the Securities Act of 1933 may be obtained from either (i) Goldman, Sachs & Co., Attn: Prospectus Department, 85 Broad St., New York, NY 10004 or by faxing (212) 902-9316 or by emailing prospectus-ny@ny.email.gs.com or (ii) UBS Prospectus Department, UBS Investment Bank, Attn: Prospectus Department, 299 Park Avenue, New York, NY 10171 or by calling (888) 827-7275.

      This press release does not constitute an offer to sell or the solicitation of an offer to buy any of the Ordinary Shares, Equity Security Units or any other securities, nor will there be any sale of the Ordinary Shares, Equity Security Units or any other securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

# # #

This press release contains forward-looking statements. Statements that are not historical facts, including statements about XL’s beliefs, plans or expectations, are forward-looking statements. These statements are based on current plans, estimates, and expectations. Actual results may differ materially from those included in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes (a) the risk that the transactions described above are not completed for any reason; (b) greater risk of loss in connection with obligations guaranteed by certain of our insurance company operating affiliates due to recent deterioration in the credit markets stemming from the poor performance of sub-prime residential mortgage loans; (c) greater frequency or severity of claims and loss activity than XL’s underwriting, reserving or investment practices anticipate based on historical experience or industry data; (d) trends in rates for property and casualty insurance and reinsurance; (e) developments in the world’s financial and capital markets that adversely affect the performance of XL’s investments or access to such markets including, but not limited to, further market developments relating to sub-prime and residential mortgages; (f) changes in general economic conditions, including foreign currency exchange rates, inflation and other factors; (g) changes in the size of XL’s claims relating to natural catastrophe losses due to the preliminary nature of some reports and estimates of loss and damage to date and (h) the other factors set forth in XL’s most recent reports on Form 10-K, Form 10-Q, and other documents on file with the Securities and Exchange Commission, as well as management’s response to any of the aforementioned factors. XL undertakes no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future developments or otherwise.

2

EX-99.4

Exhibit 99.4

Investor Presentation

July 2008

Cautionary Note on Forward-Looking Statements

This document and the presentations made in connection with this document contain forward-looking
statements. Statements that are not historical facts, including statements about XL’s beliefs, plans or
expectations, are forward-looking statements. These statements are based on current plans, estimates,
and expectations. Actual results may differ materially from those included in such forward-looking
statements and therefore you should not place undue reliance on them. A non-exclusive list of the
important factors that could cause actual results to differ materially from those in such forward-looking
statements includes the following: (a) the risk that the transactions described herein are not completed
for any reason; (b) greater risk of loss in connection with obligations guaranteed by certain of our
insurance company operating affiliates due to recent deterioration in the credit markets stemming from
the poor performance of sub-prime residential mortgage loans; (c) greater frequency or severity of
claims and loss activity than XL’s underwriting, reserving or investment practices anticipate based on
historical experience or industry data; (d) trends in rates for property and casualty insurance and
reinsurance; (e) developments in the world’s financial and capital markets that adversely affect the
performance of XL’s investments or access to such markets including, but not limited to, further market
developments relating to sub-prime and residential mortgages; (f) changes in general economic
conditions, including foreign currency exchange rates, inflation and other factors; (g) changes in the size
of XL’s claims relating to natural catastrophe losses due to the preliminary nature of some reports and
estimates of loss and damage to date and (h) the other factors set forth in XL’s most recent reports on
Form 10-K, Form 10-Q, and other documents on file with the Securities and Exchange Commission, as
well as management’s response to any of the aforementioned factors.  XL undertakes no obligation to
update or revise publicly any forward-looking statement, whether as a result of new information, future
developments or otherwise.

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

2

Ticker

 (listing):

XL (NYSE)

Common

Mandatory

$[2,000] million

(plus 15% greenshoe)

$[500] million

(plus 15% greenshoe)

Targeted

Offering Size:

—

3 year unit structure mandatory

—

Coupon [tbd]

—

Conversion premium [tbd]

Common Dividend:

Annual dividend of $1.52 reduced to $0.76 (as of July 25)

Use of Proceeds:

Funding SCA Agreement & General corporate purposes including the

repayment of certain debt

Anticipated Pricing:

July 29, 2008

Bookrunners:

Goldman, Sachs & Co., UBS Investment Bank

Offering Summary

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

3

XL Senior Management Team
(in speaking order)

Mike McGavick CEO

Dave DuclosChief Executive of Insurance operations

Jamie VeghteChief Executive of Reinsurance operations

Sarah StreetChief Investment Officer

Brian NoccoChief Financial Officer

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

4

Priorities for XL Capital

Resolve SCA issues

Institutionalize risk management & simplify
the business model:

Take enterprise risk management to next level

Focus exclusively on P&C businesses

Review strategic opportunities for Life Reinsurance

Increase accountability & a flatter leadership structure

Streamline expenses

Simplify investment portfolio over time

Increased stability of earnings & capital

Maintain strong ratings

Position XL core
businesses for
Industry-Leading
Returns

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

5

SCA Agreement

On Quarter 1 earnings call, committed to investors that we would resolve

Agreement now signed

Background to exposures: gross notional $66 billion

Agreement extinguishes existing reinsurance & service agreements:

Commutation of XL’s exposures under all reinsurance agreements; as a result of
which $65bn guarantee will no longer have any force or effect ⁽¹⁾

Payment terms:

$1,775m cash payment

8m XL shares (subject to 6 month lock-up)

Transfer of XL’s 46% ownership of SCA

Charge of $1.4bn to $1.5bn will be reported in Q3 2008

⁽¹⁾  The agreement requires SCA to use commercially reasonable efforts to commute its obligations to the European Investment
      Bank (which are guaranteed by XLI): gross notional exposure = $1.1bn

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

6

Simplify: XL’s enterprise risk management will be at a new
level through the following actions

Resolve SCA issues

Relentless focus on core franchise: global P&C businesses

Review strategic alternatives for Life Reinsurance

Increase accountability and a flatter leadership structure

Hire Chief Enterprise Risk Officer

Simplify operational model: discipline & streamlining

Eliminate approximately $110m - $120m from 2008 run-rate resulting in a
charge in the range of $50m - $60m (majority Quarter 3). Delivers net year-
on-year expense savings of approximately $70m: we will make this partially
available for re-investment in our Insurance businesses

Global platform built: no major acquisitions

Simplify and re-align the investment portfolio

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

7

XL’s Competitive Advantage

• Unique insight in our sector: two businesses each  
right-sized yielding breadth & depth

• Commercial & Wholesale lines focus

• Superior technical underwriting and analytical skills

• Structural and operational efficiencies

• Our culture

Insurance

Global
specialty foot-
print yields only
a handful of
competitors

Reinsurance

Agility,
Flexibility &
Optimal
positioning in
terms of market
reach

Dual Platform

Barrier to
Entry

Agility in
Cycle;
“Bellows”

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

8

XL’s underlying results are strong:
Underwriting Result 2004 to H1 2008

96.7%

93.6%

91.7%

91.4%

95.2%

22.1%

20.1%

0%

20%

40%

60%

80%

100%

120%

140%

2004

2005

2006

2007

H1 2008

CR excl KRW & Winterthur

KRW

Winterthur

96.0%

93.6%

88.5%

88.8%

92.9%

27.3%

12.0%

0%

20%

40%

60%

80%

100%

120%

140%

2004

2005

2006

2007

H1 2008

CR excl KRW & Winterthur

KRW

Winterthur

95.1%

93.6%

83.4%

83.9%

88.3%

33.2%

0%

20%

40%

60%

80%

100%

120%

140%

2004

2005

2006

2007

H1 2008

CR excl KRW

KRW

INSURANCE

REINSURANCE

TOTAL

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

9

XL is an Industry-Leading Franchise

Leading Global Player

Q2 2008 Total Assets:$52bn

Pro Forma Equity⁽¹⁾:$9.6bn

Financial Strength Ratings:A1/A+/A/A+

(Moody’s, S&P, AM Best, Fitch)

Q2 2008 LTM Gross Premiums: $8.4bn

Offices:77

Countries:27

Our Business Strategy

Focus on global P&C Insurance /
Reinsurance

Insurance:

Global program capabilities in over
100 countries

Leading market competitor in all
chosen product lines

Products, segments, geography

Reinsurance:

Specialty focus with excess of loss
bias

Discipline & flexibility to grow
business in markets only with
attractive returns

⁽¹⁾ Comprises Common & Equity Security units (Mandatory) as at 6/30/08

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

10

Insurance Segment

Premiums Written ($bn)

The business

Global commercial footprint

Transformed from niche excess player
to global commercial company through
tactical and organic growth

Approx 60% of premiums from
international (non-US) operations

Product breadth & depth

Strategic partner of choice

Lead market player, delivering multiple
products, services and capacity

Extensive risk engineering capabilities
(XL GAPS, Casualty, Environmental)

Technical Claims expertise

Barriers to entry

58 offices in 25 countries

Capability to issue policies in over 100
countries (through partners)

$3.7

$4.4

$4.3

$4.2

$4.2

$2.4

$1.5

$1.5

$1.5

$1.4

$1.2

$0.6

$0.7

$5.2

$5.9

$5.8

$5.6

$5.4

$3.0

$3.0

$2.3

2003

2004

2005

2006

2007

Q2

2007

YTD

Q2

2008

YTD

Net Premiums Written

Gross premiums Written

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

11

Premium breakdown (total $5.4bn)

Market Position

XL Insurance
2007 Gross Written Premium by product

E&S 1%

Property 16%

Casualty 25%

Professional

28%

Specialty 30%

Market leader in global programs,
professional lines, aviation and
environmental

Growth areas

Continued build-out of US excess and
surplus unit, private commercial

Expansion into upper middle markets

Emerging market

Strong reinsurance support, leading
capacity in the market

Specialty expertise and worldwide
presence mitigate cyclical pressures

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

12

Insurance Market Outlook

Profit Focus

Optimize ROE over cycle; strategic view

Expect further market softening near term;  selectively write new business and renew
existing profitable business

Manage cost structure, leverage platform, invest in technology infrastructure

Growth Strategy

Product, Geography, Segment

Further penetration in established products and geographies

Expansion in targeted segments and emerging markets

Cycle Management

Enhanced metrics (e.g. pricing models, breakpoint analysis)

Consistency of underwriting process

Integration of risk management practices, including operational risk

Positioning: ready and able

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

13

Reinsurance Segment

Premiums Written ($bn)

The business

Diversified, specialty franchise

Agile and flexible model

Non-Life NPW grew 190%
through hard market 2001–2004

Disciplined cycle management
in current environment

Selective opportunistic underwriting  
to achieve consistently high returns

Not market-share driven

$2.9

$2.9

$2.7

$2.4

$2.1

$1.6

$1.2

$0.6

$0.6

$0.6

$0.7

$0.6

$0.3

$0.2

$3.4

$3.5

$3.4

$3.1

$2.7

$1.9

$1.5

2003

2004

2005

2006

2007

Q2

2007

YTD

Q2

2008

YTD

Net Premiums Written

Gross premiums Written

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

14

Reinsurance Segment Geographic Profile
In 2007, we wrote roughly $2.7 billion of premium, with 410 staff in 21
locations

GWP

$1.07b

No of Locations

10

XLRA (US and Canada)

XL Re Emerging Markets

XL Re Bermuda

XL Re Europe

68

Headcount

6

No of Locations

$0.26b

GWP

45

Headcount

1

No of Locations

$0.62b

GWP

133

Headcount

164

Headcount

4

No of Location

$0.68b

GWP

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

15

XL Reinsurance
2007 Gross Written Premium by product

Structured

products 1%

Other 9%

Marine &

Energy 4%

Property

Other 36%

Casualty 30%

Property Cat

18%

Aviation &

Satellite 2%

Diversified portfolio by line

Focus on low frequency, high severity
markets

Our casualty portfolio focuses on  
specialty lines, e.g. D&O, E&O, Med-Mal

Combined ratio 2006 & 2007 < 85%

Underwriting discipline

Lean but global structure

Geographic and product diversity

Market position

Premium Breakdown (total $2.7bn)

Strictly Private and Confidential

© 2008, XL Capital Ltd, All rights reserved

16

BB & Below

3%

AAA

49%

NR

AA

20%

A

19%

BBB

9%

ABS Other - 2%

ABS Auto - 3%

Credit Card - 2%

Core CDO

(1)

- 3%

Prime -  4%

Subprime - 2%

Alt-A - 2%

Agency - 4%

CMBS - 10%

Structured

Credit

32%

Corporates

37%

Government,

Agency & Cash

31%

Fixed Income Portfolio: $34.3 billion
As of June 30, 2008

Fixed Income Portfolio (AA rated) comprised of:

Government, Agency & Cash (AAA rated)$10.8bn

Corporate Credit (A rated) $12.6bn

Structured Credit Portfolio (AA+ rated)          $10.9bn

⁽¹⁾Core CDO are principally CLO and have no subprime exposure

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Strategic Realignment of Investment Portfolio Over Time

Reposition P&C portfolio to one that supports a focused P&C operation:

Reduce the book value volatility arising from the portfolio

Reduce lower rated credit

Reduce financials & CMBS

Reduce asset classes held for ‘Financial Lines’ activities

Realignment will be achieved by cash generated from:

Bond maturities & coupon reinvestment

Cashflow from business operations

Opportunistic sales

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Recapitalization plan

1.

Enhance Capital Position

[$2bn common]

[$500m mandatory convertibles]

Convert contingent capital facility $500m

Redemption of private placement debt $255m

Reduce dividend by 50%

2.

Fund SCA Payment of $1.775bn & incur Qtr 3 charge of $1.4bn -$1.5bn

3.

Maintain Superior Capital

Hold capital at our aspirational rating levels

Additional protection for unforeseen events

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Pro Forma

($millions, except per share amounts)

6/30/2008

6/30/2008

Notes Payable and Debt

2,124

1,869

Preferred Equity

1,000

1,500

Equity Security Units (Mandatory)

745

1,240

Common Shareholders’ Equity

7,769

8,391

Total Capitalization

11,638

13,000

Book Value per Share

$43.39

$29.09¹

Current
Ratings

Financial Strength Rating (Moody’s / S&P / AM Best / Fitch)

[A1 / A+ / A / A+]

Pro Forma Summary Capitalization

Rating agency outlook

Pro forma capitalization:

Payment of $1.775bn to SCA

Issuance of [$2.1bn] of common equity (including 8m shares issued to SCA at offer price) and
[$500]m of mandatory convertible units

Exercise option to convert our contingent capital facility of $500m

Redemption of private placement debt $255m

⁽¹⁾Assumes an issuance reference price of $19.68 (based on closing price on 22-Jul-2008)

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Earnings Impact of SCA & Restructuring Initiatives

Quarter 2:

SCA impacts P&L by $82m:

Incur reserve on XLI guarantee of XLFA quota share $56m

Unwind of discount on XOL reserves of $4m

Charge of $22m in respect of the facultative reinsurance agreements
(including the CDS mark)

Quarter 3:

One-time charge for SCA agreement of $1.4bn -$1.5bn, which includes
XL shares issued to SCA

Cost of redemption of private placement debt: $22m

Implement expense savings: severance and other charges of $50m to
$60m, the majority of which will be in Quarter 3

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Quarterly Financial Comparison

($millions, except per share amounts)

Q2 '08

Q2 '07

Q2 '08 YTD

Q2 '07 YTD

Selected Income Statement

Gross Premiums Written

1,948

    2,231

4,883

5,504

Net Premiums Earned

1,682

    1,930

3,394

3,721

Operating Earnings

     266

         526

      543

1,066

Operating EPS

   1.50

$        

        2.90

$         

     3.07

$         

     5.91

$         

Selected Balance Sheet

Invested Assets

34,076

42,250

34,076

42,250

Common Shareholders’ Equity

7,769

10,005

7,769

10,005

Book Value per Common Share

43.39

$      

  54.74

$      

43.39

$      

   54.74

$      

Other Metrics

Combined Ratio

92.3%

 86.3%

 92.9%

   88.2%

ROE

 13.3%

  21.3%

  13.0%

   21.7%

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Outlook

Market conditions remain soft near term

Focus on maintaining strong results through difficult market
conditions:  

Disciplined underwriting

Expense management

Core business focus

Over the cycle continue to target superior ROE’s (>15%) from
P&C operations (excluding investment affiliates)   

Maintain double digit ROE’s through this (soft) part of cycle

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Key Takeaways

SCA issues resolved

Initiatives announced simplify the Company
& focus on core strengths — unique dual
platform

Strengthened balance sheet through
capital raise and management action

Enhanced risk management approach
will help protect stability of earnings and
capital

Experienced management team

Position XL forIndustry-Leading
Returns

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