UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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	Arch Capital Group Ltd.
	Waterloo House, Ground Floor
	100 Pitts Bay Road
	Pembroke HM 08, Bermuda
	T:  (441) 278-9250
	www.archcapgroup.com

March 28, 2018

DEAR FELLOW SHAREHOLDER:

You are cordially invited to join Arch Capital Group Ltd.’s Board of Directors and senior leadership at the 2018 annual meeting of shareholders, which will be held at 8:45 a.m. local time on Wednesday, May 9, 2018. The meeting will be held at our offices located at Waterloo House, Ground Floor, 100 Pitts Bay Road, Pembroke HM 08, Bermuda.

The attached notice of the 2018 annual meeting of shareholders and proxy statement provide important information about the meeting and will serve as your guide to the business to be conducted at the meeting. Your vote is very important to us. We urge you to read the accompanying materials regarding the matters to be voted on at the meeting and to submit your voting instructions by proxy. The Board of Directors recommends that you vote “FOR” each of the proposals as listed on the attached notice.

You may submit your proxy either over the telephone or the Internet. In addition, if you have requested or received a paper copy of the proxy materials, you can vote by marking, signing, dating and returning the proxy card or voter instruction form sent to you in the envelope accompanying the proxy materials.

Thank you for your continued support.

Sincerely,

CONSTANTINE IORDANOU

Chairman of the Board

3 | 2018 PROXY STATEMENT

NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS

When: Wednesday, May 9, 2018, 8:45 a.m., local time

Where: Waterloo House, Ground Floor, 100 Pitts Bay Road,

Pembroke HM 08, Bermuda

We are pleased to invite you to the Arch Capital Group Ltd. 2018 Annual Meeting of Shareholders.

Items of Business:

1. Elect four Class II Directors to serve for a term of three years or until their respective successors are elected and qualified (Item 1);

2. Advisory vote to approve named executive officer compensation (Item 2);

3. Appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2018 (Item 3);

4. Approve the Arch Capital Group Ltd. 2018 Long-Term Incentive and Share Award Plan (Item 4);

5. Approve a three-for-one common share split effective on June 18, 2018 (Item 5);

6. Elect certain individuals as Designated Company Directors of certain of our non-U.S. subsidiaries, as required by our bye-laws (Item 6);

7. Conduct other business if properly raised.

You are eligible to vote if you were a shareholder of record at the close of business on March 14, 2018.

Susie Tindall

Secretary

Hamilton Bermuda

March 28, 2018

Voting Information

Ensure that your shares are represented at the 2018 Annual Meeting of Shareholders by voting in one of several ways:

	Go to the website listed on your proxy card or Notice to vote VIA THE INTERNET.
	Call the telephone number specified on your proxy card or on your Voting Instruction Form to vote BY TELEPHONE.
	If you received paper copies of your proxy materials, mark, sign, date and return your proxy card in the postage-paid envelope provided to vote BY MAIL.
	Scan the QR Code on your proxy card, Notice or Voting Instruction Form to vote with your MOBILE DEVICE.
	Attend the meeting to vote IN PERSON (see Annual Meeting Attendance in Annex A—General Information).

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

This proxy statement and 2017 Annual Report to Shareholders are available at www.proxyvote.com. On or about March 29, 2018, we expect to mail to our shareholders a Notice of Internet Availability containing instructions on how to access our proxy materials, including our proxy statement and 2017 Annual Report to Shareholders. The Notice of Internet Availability also will instruct you on how to access and submit your proxy through the Internet, by phone or with your mobile device.

2018 PROXY STATEMENT | 4

TABLE OF CONTENTS

PROXY SUMMARY	6
Roadmap of Voting Matters	6
Director Nominees	7
Compensation Program Enhancements	7
Shareholder Engagement	8
Sound Governance Practices and Enhancements	8
General Information	8
Learn More About Our Company	8
GOVERNANCE	9
Item 1 — Election of Directors	9
Appointed Directors, Continuing Directors and Senior Management	12
Board	18
Committees of the Board	20
Director Compensation	22
Certain Relationships and Related Transactions	25
SHARE OWNERSHIP	26
Security Ownership of Certain Beneficial Owners and Management	26
Common Shares	26
Preferred Shares	28
Ownership of Watford Holdings Ltd. Shares	29
Section 16(a) Beneficial Ownership Reporting Compliance	29
COMPENSATION	30
Item 2 — Advisory Vote to Approve Named Executive Officer Compensation	30
Compensation Discussion and Analysis	30
2017 Performance Highlights	31
Executive Compensation Philosophy	35
Elements of Compensation Program	35
Compensation Program Enhancements	36
2017 Compensation Decisions	39
How We Make Decisions	43
Additional Compensation Policies and Practices	45
Tax Considerations	46

Report of the Compensation Committee on the Compensation Discussion and Analysis	47
Compensation Committee Interlocks and Insider Participation	48
Executive Compensation Tables	49
Employment Arrangements	58
Share-Based Award Agreements	65
AUDIT MATTERS	67
Report of the Audit Committee of the Board	67
Principal Auditor Fees and Services	68
Item 3 — Appointment of Independent Registered Public Accounting Firm	69
2018 LONG-TERM INCENTIVE AND SHARE AWARD PLAN	70
Item 4 — Approval of 2018 Plan	70
Reasons for the Proposal	70
Description of 2018 Plan	72
THREE-FOR-ONE COMMON SHARE SPLIT	78
Item 5 — Approval of Amendment of Memorandum to Effect a Three-For-One Common Share Split	78
Effects and Purposes of the Share Split	78
Effective Date of Proposed Amendment and Issuance of Shares for Share Split	79
SUBSIDIARY DIRECTORS	80
Item 6 — Election of Subsidiary Directors	80
Nominees	80
ANNEX A: GENERAL INFORMATION	A-1
ANNEX B: 2018 LONG-TERM INCENTIVE AND SHARE AWARD PLAN	B-1
ANNEX C: NON-GAAP FINANCIAL MEASURES	C-1

5 | 2018 PROXY STATEMENT

PROXY SUMMARY

This summary highlights information contained in the Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement before voting. As used in this report, “we,” “us,” “our,” “Arch” or the “Company” refer to the consolidated operations of Arch Capital Group Ltd. (“Arch Capital”) and its subsidiaries. For more complete information regarding the Company’s 2017 performance, please review the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

ROADMAP OF VOTING MATTERS

Shareholders are being asked to vote on the following matters at the 2018 Annual Meeting of Shareholders:

	Our Board’s Recommendation
ITEM 1 - Election of Directors (page 9)
The Board and the Nominating Committee believe that the four Director nominees possess the necessary qualifications and experience to provide quality advice and counsel to the Company’s management and effectively oversee the business and the long-term interests of shareholders.	FOR each Director Nominee
ITEM 2 - Advisory Vote to Approve Named Executive Officer Compensation (page 30)
The Company seeks a non-binding advisory vote to approve the compensation of its named executive officers as described in the Compensation Discussion and Analysis beginning on page 30 and the Compensation Tables beginning on page 49. The Board values shareholders’ opinions, and the Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions.	FOR
ITEM 3 - Appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm (page 69)
The Audit Committee and the Board believe that the retention of PricewaterhouseCoopers LLP to serve as the Independent Auditors for the fiscal year ending December 31, 2018, is in the best interests of the Company and its shareholders. As required by Bermuda law, shareholders are being asked to appoint the Audit Committee’s selection of the Independent Auditors.	FOR One Year
ITEM 4 - Approval of the Arch Capital Group Ltd. 2018 Long-Term Incentive and Share Award Plan (page 70)
On February 28, 2018, with the recommendation of the Compensation Committee, the Board adopted the 2018 Long-Term Incentive and Share Award Plan (the “2018 Plan”), subject to shareholder approval. The Board and the Compensation Committee believe that the 2018 Plan provides for competitive compensation opportunities, encourages long-term service, recognizes individual contributions and rewards achievement of performance goals, and promotes the creation of long-term value for shareholders by aligning the interests of such persons with those of shareholders.	FOR
ITEM 5 - Approval of Three-For-One Common Share Split (page 78)
The Board and management believe that an increase in the number of issued common shares resulting from a three-for-one common share split would place the market price of the common shares in a more accessible trading range that would be increasingly attractive to investors, particularly individuals, as well as existing and prospective employees. The share split will also increase the number of Arch Capital’s authorized but unissued shares.	FOR
ITEM 6 - Election of Designated Company Directors of Certain Non-U.S. Subsidiaries (page 80)
The Board and management believe that the named Designated Company Director nominees possess the necessary qualifications and experiences to provide oversight for the Company’s non-U.S. subsidiaries.	FOR each Director Nominee

2018 PROXY STATEMENT | 6

DIRECTOR NOMINEES See page 9.

The Board is comprised of ten members, divided into three classes, serving staggered three-year terms. The Board intends to present for action at the Annual Meeting the election of the following Class II directors for a term of three years or until their successors are duly elected and qualified:

					Committee Membership (1)
Name		Age	Director Since	Primary Occupation	UW	A	C	E	FIR	N
Eric W. Doppstadt		58	November 2010	Vice President and Chief Investment Officer of the Ford Foundation					n	n
Laurie S. Goodman		62	Nominee	Vice President of the Housing Finance Policy Center at the Urban Institute
Constantine Iordanou	(2)	68	January 2002	Chairman of Arch Capital				n	n
John M. Pasquesi		58	November 2001	Managing Member of Otter Capital LLC	n		n	n	n	n

(1) UW = Underwriting Oversight Committee; A = Audit Committee; C = Compensation Committee; E = Executive Committee; FIR = Finance, Investment and Risk Committee; N = Nominating Committee

(2) Effective March 3, 2018, Marc Grandisson succeeded Constantine Iordanou as CEO of the Company. Mr. Iordanou served as CEO until March 2, 2018, and will continue as Chairman of the Board.

COMPENSATION PROGRAM ENHANCEMENTS See page 36.

We have made several key enhancements to our compensation programs to continue to improve the link between compensation and our business performance and talent strategies as well as the long-term interests of our shareholders.

2018 Short-Term Incentive Plan

Beginning in 2018, we have adopted a more formulaic approach to our annual incentive plan design for our senior executive team. In prior years, the results of the formulaic plans, which have been in place at our underwriting units since inception, has been the basis upon which the compensation decisions have been made for our named executive officers. However, with the adoption of our new plan design, we will now formally link the financial performance achieved by each of our reporting segments (i.e., insurance, reinsurance, and mortgage) and of our investment function, as measured under the current formulaic plans, to the specific payments to be made to our named executive officers. Under the formulaic plans, bonus awards are determined for each underwriting unit based on return on capital (ROC) measures (measured over the applicable 10-year development periods) and for the investment unit on the relative performance of our investment portfolio compared to the benchmark index (over the past 1, 3 and 5 years). These calculations reflect the long-term nature of the insurance business where actual results become known over time. This performance against financial goals will receive a 70% weight. In addition, a 30% weight will be assigned to the performance of our senior executive team against strategic goals. Strategic goals will

be designed to incentivize our executives to achieve certain corporate objectives that cannot be measured by financial metrics. Specific individual financial and strategic goals will be set at the beginning of each year, and payouts will be determined by performance against the pre-established minimum, target and maximum goals.

2018 Long-Term Incentive Plan

To further align the interests of our executives and shareholders, we have moved away from exclusive time-based vesting to add a majority of performance-based vehicles to the structure of our long-term incentive awards for senior executives. Beginning with grants in 2018, the majority of such awards will be in the form of performance shares. The value mix of such long-term awards will be approximately (i) 80% performance-based, consisting of 55% performance shares and 25% stock options, and (ii) 20% time-based restricted shares. The performance shares will vest based on growth in tangible book value per share in relation to pre-established threshold, target and maximum goals over a rolling three year performance period. The resulting payout level will be secondarily modified by relative total shareholder return (“TSR”) over the performance period in relation to a pre-determined peer group. The maximum number of shares that can be earned will be 200% of target.

7 | 2018 PROXY STATEMENT

SHAREHOLDER ENGAGEMENT

We maintain an ongoing, proactive outreach effort with our shareholders. Throughout the year, members of our Investor Relations team and leaders of our business engage with our shareholders to seek their input, to remain well-informed regarding their perspectives and to help increase their understanding of our business.

Over the past year, as part of our engagement with our shareholders, members of our compensation committee,

our lead director and members of senior management had discussions with institutional shareholders representing a significant number of our outstanding common shares to discuss, among other things, our executive compensation program. We remain committed to listening to feedback from shareholders as we continue to review and evaluate our compensation programs.

SOUND GOVERNANCE PRACTICES AND ENHANCEMENTS See page 35.

Our governance framework includes these key compensation policies and practices:

▪ Stock ownership guidelines: Executives and non-employee directors must hold common shares with a value at least equal to6 times salary for our CEO, 4 times salary for our Section 16 officers and 3 times salary for our senior management, and 3 times the annual cash retainer for our non-employee directors.

▪ Stock holding requirement:Executives and non-employee directors must retain 50% of net shares received through equity awards until holding requirements are achieved.

▪ Double-trigger change in control benefits:Equity awards that are assumed by an acquirer in the case of a change in control are subject to double-trigger vesting.

▪ No excise tax gross-ups: Executives receive no excise tax gross-up payments in connection with change in control benefits.

▪ Clawbackpolicy: All incentive-based compensation is subject to potential clawback in the event of a financial restatement.

▪ Anti-hedging policy:Executives and directors are prohibited from engaging in hedging activities.

As part of our ongoing review of our policies, we have also recently established enhanced policies:

▪ Limiting the shares that can be pledged by an executive or non-employee director.

▪ Eliminating tax gross-up paymentson executive perquisites.

▪ Independent consultant:In March 2017, we selected and directly retained the services of Meridian Compensation Partners, LLC, an independent executive compensation consulting firm.

GENERAL INFORMATION See page A-1.

Please see the General Information section, Annex A for important information about the proxy materials, voting, the 2018 Annual Meeting, Company documents,

communications and the deadlines to submit shareholder proposals and director nominees for the 2019 Annual Meeting of Shareholders.

LEARN MORE ABOUT OUR COMPANY

You can learn more about the Company by visiting:

▪ Our website — www.archcapgroup.com

▪ Proxy website —www.proxyvote.com which includes this proxy statement and our 2017 Annual Report to Shareholders.

2018 PROXY STATEMENT | 8

GOVERNANCE

ITEM 1—ELECTION OF DIRECTORS

The Board of Arch Capital is currently comprised of ten members with an eleventh Board member nominated for election, divided into three classes, serving staggered three-year terms. The Board intends to present for action at the annual meeting the election of Eric W. Doppstadt, Laurie S. Goodman, Constantine Iordanou, andJohn M. Pasquesi to serve as Class II Directors for a term of three years or until their successors are duly elected and

qualified. Such nominees were recommended for approval by the Board by the nominating committee of the Board.

Unless authority to vote for these nominees is withheld, the enclosed proxy will be voted for these nominees, except that the persons designated as proxies reserve discretion to cast their votes for other persons in the unanticipated event that any of these nominees is unable or declines to serve.

Nominees

Eric W. Doppstadt
n	58 years old	Mr. Doppstadt serves as Vice President and Chief Investment Officer of the Ford Foundation. Mr. Doppstadt has been with the Ford Foundation for more than 28 years, most recently as director of private equity investments for the foundation’s endowment. He joined the Ford Foundation in 1989 as resident counsel, later assuming senior positions managing the Ford’s alternative investment portfolio. He has also served on the investment advisory boards of numerous private equity and venture capital funds. Mr. Doppstadt holds the Chartered Financial Analyst designation from the CFA Institute and is a director of Makena Capital Management, LLC. He holds an A.B. from The University of Chicago and a J.D. from New York University School of Law. Mr. Doppstadt’s qualifications for service on our Board include his extensive investment experience and investment management skills.
n	Director since November 2010
n	Class II Director of Arch Capital
n	Finance, Investment and Risk Committee
n	Nominating Committee

9 | 2018 PROXY STATEMENT

Laurie S. Goodman
n	62 years old	Ms. Goodman is the founder and serves as Co-Director of the Housing Finance Policy Center at the Urban Institute. Before joining the Urban Institute in 2013, Ms. Goodman spent 30 years at several Wall Street firms. From 2008 to 2013, she was Senior Managing Director at Amherst Securities Group LP. From 1993 to 2008, Ms. Goodman was head of global fixed income research and Manager of U.S securitized products research at UBS and predecessor firms. Before that, she was a senior fixed income analyst, a mortgage portfolio manager and a senior economist at the Federal Reserve Bank of New York.   Ms. Goodman serves on the board of directors of the real estate investment trust MFA Financial, is an adviser to Amherst Capital Management and is a member of the Federal Reserve Bank of New York’s Financial Advisory Roundtable. She has also served on the Bipartisan Policy Center’s Housing Commission and Fannie Mae’s Affordable Housing Advisory Council. Ms. Goodman has a B.A. in Mathematics from the University of Pennsylvania and an A.M. and Ph.D. in Economics from Stanford University. The nominating committee engaged an independent consulting firm to assist it in identifying and assessing potential director candidates, resulting in the identification, evaluation and nomination of Ms. Goodman for election to the Board. Ms. Goodman’s qualifications for service on our Board include her extensive analytics and strategy experience, her housing finance expertise and her service on boards of directors of other companies.
n	Nominated Director

Constantine Iordanou
n	68 years old	Mr. Iordanou has been Chairman of the Board of Arch Capital since November 2009 and was Chief Executive Officer of Arch Capital from August 2003 to March 2018. From March 1992 through December 2001, Mr. Iordanou served in various capacities for Zurich Financial Services and its affiliates, including as Senior Executive Vice President of group operations and business development of Zurich Financial Services, President of Zurich-American Specialties Division, Chief Operating Officer and Chief Executive Officer of Zurich-American and Chief Executive Officer of Zurich North America. Prior to joining Zurich, he served as President of the commercial casualty division of the Berkshire Hathaway Group and served as Senior Vice President with the American Home Insurance Company, a member of the American International Group. Since 2001, Mr. Iordanou has served as a director of Verisk Analytics, Inc. (formerly known as ISO Inc.). He holds an aerospace engineering degree from New York University. Mr. Iordanou’s qualifications for service on our Board include his extensive leadership, executive management and operating experience in the insurance industry, his in-depth knowledge of our operations and service on boards of directors of other companies.
n	Director since January 2002
n	Chairman of the Board and Class II Director of Arch Capital
n	Executive Committee
n	Finance, Investment and Risk Committee

2018 PROXY STATEMENT | 10

John M. Pasquesi
n	58 years old	Mr. Pasquesi is the Managing Member of Otter Capital LLC, a private equity investment firm he founded in January 2001. He holds an A.B. from Dartmouth College and an M.B.A. from Stanford Graduate School of Business. Mr. Pasquesi’s qualifications for service on our Board include his investment skills, extensive experience in evaluating and overseeing companies in a wide range of industries, including the insurance industry, and service on boards of directors of other companies.
n	Director since October 2001
n	Class II Director of Arch Capital
n	Lead Independent Director
n	Compensation Committee
n	Executive Committee
n	Finance, Investment and Risk Committee
n	Nominating Committee
n	Underwriting Oversight Committee

Required Vote

A majority of the voting power represented by the votes cast at the annual meeting will be required to elect the above nominees as Class II Directors of Arch Capital.

Recommendation of the Board

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL.

11 | 2018 PROXY STATEMENT

Appointed Directors, Continuing Directors and Senior Management

The following individuals are our appointed and continuing directors:

John L. Bunce, Jr.
n	59 years old	Mr. Bunce is a Managing Director and founder of Greyhawk Capital Management, LLC and a Senior Advisor to Hellman & Friedman LLC. He joined Hellman & Friedman in 1988 and previously served as a Managing Director of the firm. Before joining Hellman & Friedman, Mr. Bunce was Vice President of TA Associates. Previously, he was employed in the mergers & acquisitions and corporate finance departments of Lehman Brothers Kuhn Loeb. He has served as a director of Duhamel Falcon Cable Mexico, Eller Media Company, Falcon Cable TV, National Radio Partners, VoiceStream Wireless Corporation, Western Wireless Corporation, National Information Consortium, Inc. and Young & Rubicam, Inc. Mr. Bunce also was an advisor to American Capital Corporation and Post Oak Bank. He holds an A.B. from Stanford University and an M.B.A. from Harvard Business School. Mr. Bunce’s qualifications for service on our Board include his corporate finance background, investment skills, extensive experience in evaluating and overseeing companies in a wide range of industries and service on boards of directors of other companies.
n	Director since November 2001
n	Class III Director of Arch Capital
n	Term expires 2019
n	Compensation Committee
n	Executive Committee
n	Finance, Investment and Risk Committee
n	Nominating Committee

Marc Grandisson
n	50 years old	Mr. Grandisson was promoted to the position of President and Chief Executive Officer of Arch Capital on March 3, 2018 and was appointed to our Board in February 2018. From January 2016 to March 2018, he was President and Chief Operating Officer of Arch Capital. Prior to that role, he was Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group from 2005 to 2015, and the Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group from February 2014 to December 2015. He joined Arch Reinsurance Ltd. (“Arch Re Bermuda”) in October 2001 as Chief Actuary. He subsequently held various leadership roles, including Chief Underwriting Officer and Actuary, President and Chief Operating Officer, eventually being named President and Chief Executive Officer at Arch Re Bermuda. Prior to joining Arch, he held various positions with the Berkshire Hathaway Group, F&G Re, Inc. and Tillinghast/Towers Perrin. He holds a B.Sc. in Actuarial Science from Université Laval in Canada and an M.B.A. from The Wharton School of the University of Pennsylvania. He is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Mr. Grandisson’s qualifications for service on our Board include his financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations.
n	With Arch since October 2001
n	President and Chief Executive Officer of Arch Capital
n	Director since February 2018
n	Class III Director of Arch Capital
n	Term expires 2019
n	Executive Committee

2018 PROXY STATEMENT | 12

Yiorgos Lillikas
n	57 years old	Mr. Lillikas is the Chief Executive Officer of BlueTree Consultants, a corporate consulting firm he founded in 2008. From 2006 to 2007, Mr. Lillikas served as the Minister of Foreign Affairs of the Republic of Cyprus (E.U.). From 2003 to 2006, he was the Minister of Commerce, Industry and Tourism of the Republic of Cyprus. From 1996 through 2003, Mr. Lillikas served as a member of the House of Representatives of the Republic of Cyprus and a member of the Parliamentary Committees for Economic and Budget, Commerce, Foreign and European Affairs and Environment. In 2000 he was elected Vice President of the Committee of Political Affairs of the Parliamentary Assembly of the OSCE. He was founder and Chief Executive Officer of Marketway, a strategic, advertising and public relations firm. Prior thereto, he served the Republic of Cyprus in various roles, including special advisor to the president. He holds a diploma in political sciences from the Institute of Political Sciences in the University of Lyon II, a D.E.A. (a diploma of doctorate cycle) in political sciences from the Institute of Political Science in Grenoble. Mr. Lillikas’ qualifications for service on our Board include his extensive experience in the fields of international and European affairs.
n	Director since November 2010
n	Class III Director of Arch Capital
n	Term expires 2019
n	Audit Committee
n	Underwriting Oversight Committee

Louis J. Paglia
n	60 years old	Mr. Paglia is the founding member of Oakstone Capital LLC, a private investment firm. He previously founded Customer Choice LLC in April 2010, a data analytics company serving the electric utility industry. He previously served as Executive Vice President of UIL Holdings Corporation, an electric utility, contracting and energy infrastructure company. Mr. Paglia also served as UIL Holdings’ Chief Financial Officer and as President of its investment subsidiaries. Prior to joining UIL Holdings, Mr. Paglia was Executive Vice President and Chief Financial Officer of eCredit.com, a credit evaluation software company. Prior to that, Mr. Paglia served as the Chief Financial Officer for TIG Holdings Inc., a property and casualty insurance and reinsurance holding company, and Emisphere Technologies, Inc. He holds a B.S. in Engineering from Massachusetts Institute of Technology and an M.B.A. from The Wharton School of the University of Pennsylvania. Mr. Paglia’s qualifications for service on our Board include his strong financial background and extensive executive management and operating experience in financial services companies.
n	Director since July 2014
n	Class I Director of Arch Capital
n	Term expires 2020
n	Audit Committee
n	Compensation Committee
n	Nominating Committee
n	Underwriting Oversight Committee

13 | 2018 PROXY STATEMENT

Brian S. Posner
n	56 years old	Mr. Posner has been a private investor since March 2008 and is the President of Point Rider Group LLC, a consulting and advisory services firm within the financial services industry. From 2005 to March 2008, Mr. Posner served as the President, Chief Executive Officer and Co-Chief Investment Officer of ClearBridge Advisors, LLC, an asset management company and a wholly owned subsidiary of Legg Mason. Prior to that, Mr. Posner co-founded Hygrove Partners LLC, a private investment fund, in 2000 and served as the Managing Member for five years. He served as a portfolio manager and an analyst at Fidelity Investments from 1987 to 1996 and, from 1997 to 1999, at Warburg Pincus Asset Management/Credit Suisse Asset Management where he also served as Co-Chief Investment Officer and director of research. Mr. Posner currently serves on the board of directors of Biogen Inc. and he is a trustee of the AQR Funds. He holds a B.A. from Northwestern University and an M.B.A. from the University of Chicago Booth School of Business. Mr. Posner’s qualifications for service on our Board include his strong financial background, investment skills and extensive experience as a leading institutional investment manager and advisor.
n	Director since November 2010
n	Class I Director of Arch Capital
n	Term expires 2020
n	Audit Committee
n	Finance, Investment and Risk Committee
n	Underwriting Oversight Committee

Eugene S. Sunshine
n	68 years old	Mr. Sunshine retired at the end of August 2014 as the Senior Vice President for Business and Finance at Northwestern University, the university’s chief financial and administrative officer. Before joining Northwestern in 1997, he was Senior Vice President for Administration at The Johns Hopkins University. Prior to Johns Hopkins, Mr. Sunshine held positions as New York State Deputy Commissioner for Tax Policy and New York State Treasurer as well as Director of Energy Conservation for the New York State Energy Office. He currently is a member of the boards of directors of Chicago Board Options Exchange and Kaufman Hall and Associates. Mr. Sunshine is a former member of the boards of Bloomberg L.P., National Mentors Holdings and Nuveen Investments. He holds a B.A. from Northwestern University and a Master of Public Administration degree from Syracuse University’s School of Citizenship and Public Affairs. Mr. Sunshine’s qualifications for service on our Board include his strong financial background and extensive executive management and operating experience.
n	Director since July 2014
n	Class III Director of Arch Capital
n	Term expires 2019
n	Audit Committee
n	Compensation Committee
n	Nominating Committee

2018 PROXY STATEMENT | 14

John D. Vollaro
n	73 years old	Mr. Vollaro has been a Senior Advisor of Arch Capital since April 2009. He was Executive Vice President and Chief Financial Officer of Arch Capital from January 2002 to March 2009 and Treasurer of Arch Capital from May 2002 to March 2009. Prior to joining us, Mr. Vollaro acted as an independent consultant in the insurance industry since March 2000. Prior to March 2000, Mr. Vollaro was President and Chief Operating Officer of W.R. Berkley Corporation from January 1996 and a director from September 1995 until March 2000. Mr. Vollaro was Chief Executive Officer of Signet Star Holdings, Inc., a joint venture between W.R. Berkley Corporation and General Re Corporation, from July 1993 to December 1995. Mr. Vollaro served as Executive Vice President of W.R. Berkley Corporation from 1991 until 1993, Chief Financial Officer and Treasurer of W.R. Berkley Corporation from 1983 to 1993 and Senior Vice President of W.R. Berkley Corporation from 1983 to 1991. Mr. Vollaro currently serves on the board of directors of Tiberius Acquisition Corporation. Mr. Vollaro’s qualifications for service on our Board include his financial background, extensive executive management and operating experience in the insurance industry and his in-depth knowledge of our operations.
n	Director since November 2009
n	Class I Director of Arch Capital and Senior Advisor
n	Term expires 2020
n	Finance, Investment and Risk Committee
n	Underwriting Oversight Committee

The following individuals are members of senior management, including our executive officers, who do not serve as directors of Arch Capital:

Mark D. Lyons
n	61 years old	Mr. Lyons has served as Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital since September 2012. From September 2012 to May 2015, he also functioned as Chief Risk Officer. Prior to that, he served as Chairman and Chief Executive Officer of Arch Worldwide Insurance Group, an officer position of Arch Capital, and Chairman and Chief Executive Officer of Arch Insurance Group Inc. (“Arch Insurance Group”) since July 2008. Prior thereto, he served as President and Chief Operating Officer of Arch Insurance Group from June 2006. Prior to June 2006, he served as Executive Vice President of group operations and Chief Actuary of Arch Insurance Group from August 2003. From August 2002 to 2003, he was Senior Vice President of group operations and Chief Actuary of Arch Insurance Group. From 2001 until August 2002, Mr. Lyons worked as an independent consultant. From 1992 to 2001, Mr. Lyons was Executive Vice President of product services at Zurich U.S. From 1987 until 1992, he was a Vice President and actuary at Berkshire Hathaway Insurance Group. Mr. Lyons holds a B.S. in Mathematics from Elizabethtown College. He is also an Associate of the Casualty Actuarial Society and a Member of the American Academy of Actuaries.
n	With Arch since August 2002
n	Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital

15 | 2018 PROXY STATEMENT

Nicolas Papadopoulo
n	55 years old	Mr. Papadopoulo is Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for the Property & Casualty Group, executive positions at Arch Capital. From July 2014 to September 2017, Mr. Papadopoulo was Chairman and Chief Executive Officer of Arch Reinsurance Group at Arch Capital. He joined Arch Re Bermuda in December 2001 where he held variety of underwriting roles. Prior to joining Arch, he held various positions at Sorema N.A. Reinsurance Group, a U.S. subsidiary of Groupama and he was also an insurance examiner with the Ministry of Finance, Insurance Department, in France. Mr. Papadopoulo graduated from École Polytechnique in France and École Nationale de la Statistique et de l’Administration Economique in France with a masters degree in statistics. He is also a Member of the International Actuarial Association and a Fellow at the French Actuarial Society.
n	With Arch since December 2001
n	Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for the Property & Casualty Group

Maamoun Rajeh
n	47 years old	Mr. Rajeh was promoted to the position of Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group in October 2017. From July 2014 to September 2017, he was Chairman and Chief Executive Officer of Arch Re Bermuda. He joined Arch Re Bermuda in 2001 as an underwriter, ultimately becoming Chief Underwriting Officer in November 2005. Most recently, he was President and Chief Executive Officer of Arch Reinsurance Europe Underwriting Designated Activity Company from October 2012 to July 2014. From 1999 to 2001, Mr. Rajeh served as Assistant Vice President at HartRe, a subsidiary of The Hartford Financial Services Group, Inc. Mr. Rajeh also served in several business analysis positions at the United States Fidelity and Guarantee Company between 1992 and 1996 and as an underwriter at F&G Re from 1996 to 1999. He has a B.S. from The Wharton School of Business of the University of Pennsylvania and he is a Chartered Property Casualty Underwriter.
n	With Arch since December 2001
n	Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group

Andrew T. Rippert
n	57 years old	Mr. Rippert has served as Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group at Arch Capital since January 2014. Prior to that, he served as President and Chief Executive Officer of Arch Mortgage Insurance Designated Activity Company from December 2011 to March 2014. Prior to December 2011, he served as senior executive of mortgage insurance at Arch Re Bermuda. He joined Arch Insurance Company (Europe) Limited in September 2010 as a Senior Vice President. Prior to that time, he worked as a consultant to mortgage insurers and mortgage backed security investors. From 2001 through 2006, he held various positions at Radian Guaranty Inc., a subsidiary of Radian Group Inc., including senior vice president and managing director of the international mortgage insurance group. He has also worked in reinsurance as an actuary and underwriter. Mr. Rippert serves on the board of directors of the Mortgage Bankers Association (“MBA”) and the MBA’s Opens Doors Foundation. He is also a member of the Executive Committee of the Housing Policy Council and a voting member of the MBA’s Residential Board of Governors. Mr. Rippert graduated from Drexel University with a B.S. in Physics and Mathematics and has an M.B.A. from The Wharton School of the University of Pennsylvania. Mr. Rippert is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries.
n	With Arch since September 2010
n	Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group

2018 PROXY STATEMENT | 16

Dennis R. Brand
n	67 years old	Mr. Brand is Chairman, Worldwide Services at Arch Capital Services Inc. Mr. Brand also serves on the Group Reinsurance Steering Committee. He served as Senior Executive Vice President and Chief Administration Officer for Arch Insurance Group until December 2017. Mr. Brand joined Arch Insurance Group in 2004 as Senior Vice President and Chief Reinsurance Officer where he oversaw reinsurance, finance, information technology, actuarial, corporate underwriting, human resources, legal and premium audit departments. Prior to joining Arch Insurance Group, Mr. Brand held various positions in the insurance industry: first in finance, then in assumed underwriting and ceded reinsurance, as well as serving in other operational roles in the industry. Mr. Brand has over 40 years of reinsurance and executive management experience through positions held at Kemper and Reliance National. Mr. Brand holds a B.A. in Business from West Virginia University; he has also served in the United States Navy.
n	With Arch since February 2004
n	Chairman, Worldwide Services at Arch Capital Services Inc.

W. Preston Hutchings
n	61 years old	Mr. Hutchings has served as President of Arch Investment Management Ltd. since April 2006 and Senior Vice President and Chief Investment Officer of Arch Capital since July 2005. Prior to joining Arch Capital, Mr. Hutchings was at RenaissanceRe Holdings Ltd. from 1998 to 2005, serving as Senior Vice President and Chief Investment Officer. Previously, he was Senior Vice President and Chief Investment Officer of Mid Ocean Reinsurance Company Ltd. from January 1995 until its acquisition by XL Group plc in 1998. Mr. Hutchings began his career as a fixed income trader at J.P. Morgan & Co., working for the firm in New York, London and Tokyo. He graduated in 1978 with a B.A. from Hamilton College and received in 1981 an M.A. in Jurisprudence from Oxford University, where he studied as a Rhodes Scholar.
n	With Arch since July 2005
n	President of Arch Investment Management Ltd. and Senior Vice President and Chief Investment Officer of Arch Capital

François Morin
n	50 years old	Mr. Morin is Senior Vice President, Chief Risk Officer and Chief Actuary of Arch Capital, a position he has held since May 2015. He joined Arch Capital in October 2011 as Chief Actuary and Deputy Chief Risk Officer. From January 1990 through September 2011, Mr. Morin served in various roles for Towers Watson & Co. and its predecessor firm Towers Perrin Forster & Crosby, including its actuarial division, Tillinghast. He holds a B.Sc. in Actuarial Science from Université Laval in Canada. He is a Fellow of the Casualty Actuarial Society, a Chartered Financial Analyst, a Chartered Enterprise Risk Analyst, and a Member of the American Academy of Actuaries.
n	With Arch since October 2011
n	Senior Vice President, Chief Risk Officer and Chief Actuary of Arch Capital

Louis T. Petrillo
n	52 years old	Mr. Petrillo has been President and General Counsel of Arch Capital Services Inc. since April 2002. From May 2000 to April 2002, he was Senior Vice President, General Counsel and Secretary of Arch Capital. From 1996 until May 2000, Mr. Petrillo was Vice President and Associate General Counsel of Arch Capital’s reinsurance subsidiary. Prior to that time, Mr. Petrillo practiced law at the New York firm of Willkie Farr & Gallagher LLP. He holds a B.A. from Tufts University and a law degree from Columbia University.
n	With Arch since January 1996
n	President and General Counsel of Arch Capital Services Inc.

17 | 2018 PROXY STATEMENT

Board

Leadership Structure

The Board reviews the Company’s leadership structure from time to time, and as a result of the transition of the role of Chief Executive Officer from Mr. Iordanou to Mr. Grandisson, the Board has determined that a split in the role of chairman of the board and chief executive officer is appropriate and in the best interests of the Company’s shareholders at this time. The Board has also determined to maintain the role of independent lead director, a role in which John Pasquesi currently serves. The Board believes that this governance structure allows it to continue to independently oversee the Company’s business and leverage the experience and perspectives of Mr. Iordanou, while also allowing Mr. Grandisson to focus his time and energy on operating and managing the Company. Throughout this period of transition, the Board will continue to assess these roles and the Board leadership structure to ensure the interests of the Company and its shareholders are best served.

Several factors ensure that we have a strong and independent Board. As indicated below, all directors, with the exception of Messrs. Grandisson, Iordanou and Vollaro, are independent as defined under the applicable listing standards of The NASDAQ Stock Market LLC (“NASDAQ”), and the audit, compensation and nominating committees of our Board are composed entirely of independent directors. The Company’s independent directors bring experience, oversight and expertise from many industries, including the insurance industry. In addition to feedback provided during the course of Board meetings, the independent directors regularly meet in executive session without management present. The Board also has regular access to our management team.

The lead director coordinates the activities of the other non-management/independent directors, and performs such other duties and responsibilities as the Board may determine. The lead director presides at all meetings of the Board at which the chairman of the board is not present, including executive sessions of the non-management/independent directors, and has the authority to call meetings of the non-management/independent directors. The lead director also serves as principal liaison among the chairman of the board, the chief executive officer and the non-management/independent directors and works with the chairman of the board to develop an appropriate schedule of Board meetings and to establish the agendas for Board meetings. In addition, the lead director advises the chairman of the board as to the quality, quantity and timeliness of the flow of information from the Company’s management that is necessary for the independent directors to effectively and responsibly perform their duties.

The lead director is also available, when appropriate, for consultation and direct communication with major shareholders.

Board Independence and Composition

The Board is required to determine which directors satisfy the criteria for independence under the rules of NASDAQ. To be considered independent, a director may not maintain any relationship that would interfere with his or her independent judgment in completing the duties of a director. The rules state that certain relationships preclude a board finding of independence, including a director who is, or during the past three years was, employed by the company, and any director who accepts any payments from the company in excess of $120,000 during the current year or any of the past three years, other than director fees or payments arising solely from investments in the company’s securities. The rules specifically provide that ownership of company stock by itself would not preclude a board finding of independence.

Our Board consists of ten directors, including seven non-employee directors. Our Board has concluded that the following seven non-employee directors and the nominated director, Laurie S. Goodman, are independent in accordance with the director independence standards set forth in Rule 5600 of the rules of NASDAQ: John L. Bunce, Jr., Eric W. Doppstadt, Yiorgos Lillikas, Louis J. Paglia, John M. Pasquesi, Brian S. Posner and Eugene S. Sunshine. In making these independence determinations, the Board reviewed the relationships with the directors set forth under the captions “Compensation Committee Interlocks and Insider Participation” and “Certain Relationships and Related Transactions,” including ordinary course transactions not meeting the disclosure threshold with insurers, reinsurers and producers in which a director or a fund affiliated with any of our directors maintained at least a 10% ownership interest.

Role in Risk Oversight

Our Board, as a whole and also at the committee level, has an active role in overseeing management of the Company’s risks. The Board regularly reviews information regarding the Company’s business and operations, including with respect to underwriting, investments, capital management, liquidity, financial reporting and compliance, as well as the risks associated with these activities.

2018 PROXY STATEMENT | 18

As outlined below, Committees of the Board help oversee the business and operations of the Company.

Underwriting Oversight Committee	Oversees risks relating to our underwriting activities, including with respect to accumulations and aggregations of exposures in our insurance, reinsurance and mortgage businesses.
Audit Committee	Oversees management of financial reporting and compliance risks.
Compensation Committee	Oversees the management of risks relating to the Company’s compensation plans and arrangements, retention of personnel and succession planning.
Finance, Investment and Risk Committee	Oversees risks relating to the financial, investment, operational (including information technology and data security) and other risk affairs of the Company.
Nominating Committee	Oversees risks associated with the composition of the Board.

While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about such risks. Please refer to “Committees of the Board.”

Code of Business Conduct, Committee Charters and Corporate Governance Guidelines

We have adopted a Code of Business Conduct, which describes our ethical principles, and charters of responsibilities for all of our standing Board committees, including underwriting oversight, audit, compensation, executive, finance, investment and risk and nominating committees. We have also adopted Corporate Governance Guidelines that cover issues such as executive sessions of our Board, director qualification and independence requirements, director responsibilities, access to management, evaluation and communications with the Board in order to help maintain effective corporate governance at the Company. The full text of our Code of Business Conduct, each committee charter and our Corporate Governance Guidelines are available on the Company’s website located at www.archcapgroup.com. None of the material on our website is incorporated herein by reference.

Meetings

The Board held four meetings during 2017. Each director attended 75% or more of all meetings of the Board and any committees on which the director served during fiscal year 2017. Directors are encouraged, but not required, to attend our annual meeting of shareholders. All of our then current directors attended the 2017 annual meeting.

Communications with the Board

Shareholders may communicate with the Board or any of the directors by sending written communications addressed to the Board or any of the directors, to:

Arch Capital Group Ltd.

Waterloo House, Ground Floor

100 Pitts Bay Road

Pembroke HM 08, Bermuda

Attention: Secretary

Facsimile: (441) 278-9255

All shareholder communications will be compiled by the Secretary for review by the Board.

19 | 2018 PROXY STATEMENT

Committees of the Board

Director

Audit

Compensation

Executive

Finance, Investment and Risk

Nominating

Underwriting Oversight

John L. Bunce, Jr.

n

n

n

n

Chair

Eric W. Doppstadt

n

Chair

n

Marc Grandisson

n

Constantine Iordanou

n

Chair

n

Yiorgos Lillikas

n

n

Louis J. Paglia

n

n

n

n

John M. Pasquesi

n

n

n

n

n

Brian S. Posner

n

Chair

n

n

Eugene S. Sunshine

n

n

Chair

n

John D. Vollaro

n

n

Chair

Audit Committee

The audit committee of the Board assists the Board in monitoring (1) the integrity of our financial statements, (2) the qualifications and independence of the independent registered public accounting firm, (3) the performance of our internal audit function and independent registered public accounting firm and (4) the compliance by the Company with legal and regulatory requirements.

All of our audit committee members are considered independent under the listing standards of NASDAQ governing the qualifications of the members of audit committees and the independence requirements under Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board has determined that Mr. Posner qualifies as an “audit committee financial expert” under the rules of the Securities and Exchange Commission (“SEC”). The audit committee held five meetings during 2017.

Compensation Committee

The compensation committee of the Board approves the compensation of our senior executives and has overall responsibility for approving, evaluating and making recommendations to the Board regarding our officer compensation plans, policies and programs.

All of our compensation committee members are considered independent under the listing standards of NASDAQ governing the qualifications of the members of compensation committees. In addition, no executive officer of the Company served on any board of directors or compensation committee of any entity (other than Arch

Capital) with which any member of our Board serves as an executive officer. The compensation committee held five meetings during 2017.

Executive Committee

The executive committee of the Board may generally exercise all the powers and authority of the Board, when it is not in session, in the management of our business and affairs, unless the Board otherwise determines. The executive committee did not meet during 2017.

Finance, Investment and Risk Committee

The finance, investment and risk committee of the Board oversees the Board’s responsibilities relating to the financial, operational (including information technology and data security) and other risk affairs of the Company and recommends to the Board financial policies, risk tolerances, strategic investments and overall investment policy, including review of manager selection, financial and risk benchmarks and investment performance. The finance, investment and risk committee held four meetings during 2017.

Nominating Committee

The nominating committee of the Board is responsible for identifying individuals qualified to become directors and recommending to the Board the director nominees for consideration at each annual meeting of shareholders.

2018 PROXY STATEMENT | 20

All of our nominating committee members are considered independent under the listing standards of NASDAQ governing the qualifications of the members of nominating committees. The nominating committee held four meetings during 2017.

When the Board determines to seek a new member, whether to fill a vacancy or otherwise, the nominating committee will consider recommendations from Board members, management and others, including shareholders. In general, the committee will look for new members, including candidates recommended by shareholders, possessing superior business judgment and integrity who have distinguished themselves in their chosen fields of endeavor and who have knowledge and experience in the areas of insurance, reinsurance or other aspects of our business, operations or activities, as well as knowledge of the business environments in the jurisdictions in which we currently operate or intend to operate in the future. The Company endeavors to maintain a Board representing a diverse spectrum of expertise, background, perspective, race, gender and experience.

Since the departure of two very valuable Board members in the past year, the nominating committee’s search focused on candidates who offer a range of perspectives, experience and expertise required to reflect the diverse nature of the business environment in which we operate. In particular, given the growth of our mortgage insurance business, we believed that the Board would benefit from the addition of a respected leader in the mortgage insurance industry and, therefore, focused its search to meet that goal. Our search resulted in the nomination of Laurie S. Goodman for election to the Board. As this selection demonstrates, the nominating committee is committed to building value for shareholders over the long-term by having professionals of the highest caliber serving on our Board. 

A shareholder who wishes to recommend a director candidate for consideration by the nominating committee should send such recommendation in writing to:

Arch Capital Group Ltd.

Waterloo House, Ground Floor

100 Pitts Bay Road

Pembroke HM 08, Bermuda

Attention: Secretary

The recommendation should comply with the advance notice requirements set forth in our bye-laws, as described under the caption “Shareholder Proposals for the 2019 Annual Meeting.” As described below in more detail, every submission must include a statement of the qualifications of the nominee, a consent signed by the candidate evidencing a willingness to serve as a director if elected, and

a commitment by the candidate to meet personally, if requested, with the nominating committee. It is the policy of the committee to review and evaluate each candidate for nomination submitted by shareholders in accordance with the above procedures on the same basis as candidates that are suggested by our Board.

From time to time, the nominating committee engages independent search firms to assist in identifying potential Board candidates. Services provided by the search firms include identifying and assessing potential director candidates meeting criteria established by the nominating committee, verifying information about the prospective candidate’s credentials, and obtaining a preliminary indication of interest and willingness to serve as a Board member. The nominating committee engaged an independent consulting firm to assist it in identifying and assessing potential director candidates, resulting in the identification, evaluation and nomination of Laurie S. Goodman for election to the Board. The nominating committee has not rejected a candidate recommended by a 5% shareholder, but reserves the right to do so.

Underwriting Oversight Committee

The underwriting oversight committee of the Board assists the Board by reviewing the underwriting activities of our insurance, reinsurance and mortgage businesses. The members of the underwriting oversight committee regularly participate in the underwriting review meetings held in our insurance, reinsurance and mortgage operations. The underwriting oversight committee held four meetings in 2017.

21 | 2018 PROXY STATEMENT

Director Compensation

The compensation committee is responsible for reviewing and making recommendations to the Board regarding all matters pertaining to compensation paid to directors for Board, committee and committee chair services.

In making non-employee director compensation recommendations, the compensation committee takes various factors into consideration, including, but not limited to, input received from the compensation committee’s independent consultant, the responsibilities of directors generally, as well as committee chairs, and the form and amount of compensation paid to directors by comparable companies. The Board reviews the recommendations of the compensation committee and determines the form and amount of director compensation.

The following table provides information concerning the compensation of our directors for the year ended December 31, 2017. Arch Capital’s Board is led by our chairman, Constantine Iordanou, who was also the chief executive officer of the Company until March 2, 2018. Directors who also serve as employees of the Company do not receive payment for service as directors.

For a complete understanding of the table, please read the footnotes and the narrative disclosures that follow the table. Please also refer to the “2017 Summary Compensation Table” for Messrs. Iordanou and Grandisson’s compensation.

Name		Fees Earned or Paid in Cash ($)(1)	Stock Awards ($)(2)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Non- qualified Deferred Compensation Earnings ($)	All Other Compensation ($)(3)	Total ($)
John L. Bunce, Jr.	C	158,528	74,933	—	—	—	—	233,461
Eric W. Doppstadt	FC	154,528	74,933	—	—	—	15,000	244,461
Kewsong Lee	*	157,528	—	—	—	—	50,000	207,528
Yiorgos Lillikas		173,528	74,933	—	—	—	—	248,461
Deanna Mulligan (4)		—	—	—	—	—	—	—
Louis J. Paglia		179,528	74,933	—	—	—	50,000	304,461
John M. Pasquesi	LD*	174,028	74,933	—	—	—	50,000	298,961
Brian S. Posner	AC	204,528	74,933	—	—	—	50,000	329,461
Eugene S. Sunshine	C	184,528	74,933	—	—	—	20,900	280,361
John D. Vollaro (5)(6)	C	700,000	—	—	—	—	77,777	777,777

LD = Lead Director, C = Committee Chair, AC = Audit Committee Chair, FC = Finance, Investment and Risk Committee Chair

* John Pasquesi was appointed lead director at the November 2, 2017 Board meeting. Kewsong Lee was the lead director until his resignation on November 2, 2017.

(1)	Non-Employee Director Cash Compensation	Annual Cash Retainer
	Non-Employee Director Retainer (A)	$	125,000
	Additional Retainers and Fees for Board Members, Committee Chairs, Committee Members (B)
	Meeting Fees
	Board	$	2,500
	Committee	$	1,500
	Audit Committee Chair	$	50,000
	Audit Committee Member	$	25,000
	Finance, Investment & Risk Committee Chair	$	15,000
	Committee Chair (other than above)	$	10,000

2018 PROXY STATEMENT | 22

(A) Each non-employee member may elect to receive the retainer fee in the form of common shares instead of cash. If so elected, the number of shares distributed to the non-employee director would be equal to 100% of the amount of the annual retainer fee otherwise payable divided by the fair market value of our common shares. This column includes the annual retainer (whether paid in cash or, at the election of the director, in common shares), meeting fees and committee chairman and retainer fees, as applicable and as described above. For the 2017-2018 annual period, Mr. Sunshine received his annual retainer fees in the form of cash and Messrs. Bunce, Doppstadt, Lee, Lillikas, Paglia, Pasquesi and Posner received their annual retainers in the form of 1,286 common shares.

(B) Beginning in May 2018, each non-employee director serving as chairman of the finance, investment and risk committee, the nominating committee and the compensation committee will receive an annual fee of $25,000 and the audit committee and executive committee chairs will continue to receive a retainer of $50,000, and $10,000, respectively. In addition, the lead director will receive an annual fee of $25,000.

(2) Each year, the non-employee directors are granted a number of restricted shares equal to $75,000 divided by the closing price on the date of grant (i.e., the first day of the annual period of compensation for the non-employee directors), and such shares vest on May 1st of the following year. The grant date fair value indicated in the table has been calculated in accordance with FASB ASC Topic 718 Compensation—Stock Compensation. On May 4, 2017, each non-employee director received 771 restricted common shares, which will vest on May 1, 2018. With respect to Ms. Mulligan and Mr. Lee, such restricted shares were canceled on February 23, 2017 and November 2, 2017 respectively, the dates of their respective resignations. Beginning in May 2018, non-employee directors will be granted a number of restricted shares equal to $95,000, an increase of $20,000 from 2017.

The aggregate number of share awards outstanding (i.e., unvested) as of December 31, 2017 for Messrs. Bunce, Doppstadt, Lillikas, Paglia, Pasquesi, Posner and Sunshine was 771 common shares each. In addition, as of December 31, 2017, Mr. Vollaro had 66,600 outstanding share appreciation rights (“SARs”), which were awarded while he was chief financial officer of the Company. For additional information on ownership of Arch Capital’s securities, please refer to “Security Ownership of Certain Beneficial Owners and Management.”

(3) The amounts in the “All Other Compensation” column for Messrs. Doppstadt, Lee, Paglia, Pasquesi, Posner, and Sunshine include matching gifts made under the Company’s matching gift program.

The Company provides a matching gift program pursuant to which the Company matches eligible contributions by non-employee directors to qualified charitable organizations. During 2017, the Company made an aggregate of approximately $236,000 in matching contributions on behalf of the non-employee directors.

(4) Ms. Mulligan served as a Director until her resignation from our Board on February 23, 2017 due to a potential conflict of interest. Ms. Mulligan received no compensation during 2017.

(5) Mr. Vollaro is a senior advisor and an employee of the Company. Mr. Vollaro’s employment agreement provides that he receives an annual base salary of $250,000 and a bonus determined by the compensation committee and the Board for his role as Senior Advisor of the Company. For 2017, Mr. Vollaro received a cash bonus of $450,000. In addition, Mr. Vollaro serves as chairman of the underwriting and oversight committee and is a member of the finance, investment and risk committee of the Board. A description of Mr. Vollaro’s employment agreement is included below.

(6) The amount for Mr. Vollaro includes: (a) $32,790 in contributions to our defined contribution plans and (b) $6,369, which represents an additional payment to reimburse Mr. Vollaro for the approximate amount of additional tax liability for club dues. In addition, the total amount also includes the payment for club dues, life insurance premiums and tax preparation services, which did not exceed the greater of $25,000 or 10% of the total amount of these benefits for Mr. Vollaro.

In addition to the arrangements described above, all non-employee directors are entitled to reimbursement for their reasonable out-of-pocket expenses in connection with their travel to and attendance at meetings of the Board or committees.

Employment Agreement of John Vollaro

Our employment agreement with John Vollaro provides for his employment period to continue on the terms and conditions set forth in the agreement for an indefinite period until terminated by either party by providing at least six months’ prior written notice to the other party. Pursuant to the agreement, Mr. Vollaro has served as Senior Advisor of Arch Capital since April 1, 2009. Mr. Vollaro’s base salary is paid at the rate $250,000 per annum, and the target rate for the annual cash bonus is 100% of the annual base salary. Mr. Vollaro is eligible to receive annual cash bonuses and

share-based awards at the discretion of Arch Capital’s Board and is also entitled to participate in employee benefit programs such as major medical, life insurance and disability insurance, the cost of preparation of annual tax returns and associated tax planning, and other fringe benefits customarily provided to similarly situated senior executives. His agreement also provides that the Company will reimburse him for his reasonable expenses incurred traveling between Bermuda and the United States.

23 | 2018 PROXY STATEMENT

The agreement provides that if Mr. Vollaro’s employment is terminated without cause prior to the end of the term, he will be entitled to receive an amount equal to the sum of the total remaining base salary and target annual bonus which would have been paid to Mr. Vollaro under his employment agreement for the period through six months after the date of termination of employment (the “Severance Amount”). The Severance Amount would be payable over 12 months. The agreement also provides that if Mr. Vollaro’s employment is terminated for cause, as a result of his resignation, as a result of death or permanent disability, or by written notice of the intention not to renew the agreement by us or Mr. Vollaro, he (or his estate) will be entitled to receive his base salary through the date of termination. The agreement further provides that if Mr. Vollaro’s employment is terminated by reason of death or permanent disability, he (or his estate) will also be entitled to receive for the period extending through the remainder of the employment period, an amount equal to the Severance Amount, in each case, (i) offset by any proceeds received from any insurance coverages provided by the Company, and (ii) such amount, will be paid to him (or his estate) promptly upon death or permanent disability, as applicable, and in no event later than March 15 of the calendar year following the calendar year of such termination of employment. Mr. Vollaro’s major medical insurance coverage benefits pursuant to his employment agreement will continue for 12 months after the date of termination (or until he is provided by another employer with benefits substantially comparable, with no pre-existing condition limitations, to the benefits provided by such plan) in the event that his employment ends due to permanent disability, or he is terminated other than for cause.

Mr. Vollaro has agreed that, during the employment period and for a period of two years after termination of employment for cause or as a result of his resignation, he will not compete with the businesses of Arch Capital or any of its subsidiaries as such businesses exist or are in process or being planned as of the date of termination. If we terminate Mr. Vollaro’s employment without cause, the term of his non-competition period will extend for one year following termination. Mr. Vollaro also agreed that he will not, for a period of two years following his date of termination, induce or attempt to induce any of our employees to leave his or her position with us or induce any customer to cease doing business with us.

Matters Relating to Director Share Ownership

In an effort to further align the interests of the non-employee directors with the interests of shareholders, the Company has adopted:

Share Ownership Guidelines: Share ownership guidelines require the directors to retain common shares having a value of at least three times the annual cash retainer fee payable to the director. Each non-employee director has five years to comply with the guidelines, and stock options, share appreciation rights (SARs) and unvested restricted shares/units do not count toward the requirement.

Share Holding Requirements: Until our non-employee directors meet their target ownership levels, they must retain an amount equal to 50% of the net profit shares received from Arch Capital’s equity awards until they have attained the applicable share ownership level. Net profit shares are the shares remaining after payment of the exercise price of an option and taxes owed on exercise of options or SARs, vesting of restricted stock, or vesting and payout under restricted stock units and performance shares.

No Hedging Permitted: Under the insider trading policy included in our Code of Business Conduct, our non-employee directors are not permitted to engage in hedging activities with respect to Arch Capital’s securities. Specifically, these insiders may not engage in short sales, purchases on margin or buying or selling put options or call options with respect to our securities.

2018 PROXY STATEMENT | 24

Certain Relationships and Related Transactions

Generally, transactions with related persons are subject to the review by the Board of Arch Capital. The Board has adopted written procedures regarding the review of transactions involving companies affiliated with a company in which a non-employee director or executive officer of Arch Capital has a material interest (each a “portfolio company”), on the one hand, and Arch Capital or one of its subsidiaries, on the other hand.

Under the procedures, these transactions must be reviewed and approved by the management of Arch Capital or the operating subsidiary entering into the transaction (as applicable), and the terms of such transaction should be arm’s-length or on terms that are otherwise fair to Arch Capital and its subsidiaries. In addition, these transactions also require the approval of Arch Capital under its holding company oversight guidelines, except for the following: (1) ordinary course transactions pursuant to which any insurance subsidiary of Arch Capital writes a direct insurance policy for a portfolio company where the Company will receive less than $3 million in annual premiums and (2) a transaction in which a U.S.-based subsidiary of Arch Capital (a) assumes reinsurance from, or cedes reinsurance to, a portfolio company or (b) provides direct insurance to a portfolio company pursuant to which the Company will receive $3 million or more in annual premiums, in which case, the general counsel of Arch Capital Services Inc. should be pre-notified and appropriate steps will be implemented based on the transaction. In reviewing these proposed transactions, the effects, if any, on the independence of the relevant directors are considered under the governing NASDAQ and SEC standards. Any applicable regulatory, tax and ratings agency matters are also considered. Under these procedures, the Board is provided with an update of related party transactions entered into by the Company in accordance with the procedures on a regular basis.

Graham B. Collis, a director of certain of our non-U.S. subsidiaries, is a director of the law firm of Conyers Dill & Pearman Limited, which provides legal services to the Company and its subsidiaries.

See also “Compensation Committee Interlocks and Insider Participation” for a description of transactions with certain related persons.

Based on a Schedule 13G/A filed in January 2018, BlackRock Inc. (“BlackRock”) owned approximately 6.5% of the outstanding common shares of Arch Capital as of December 31, 2017. BlackRock, through its subsidiaries, provides various investment management, investment trade support and risk analysis services to Arch Capital and its subsidiaries.

During 2017, the Company incurred $11.6 million of fees, in the aggregate, under these services arrangements with BlackRock.

In January 2017, the Company and Kelso & Co. (“Kelso”), sponsored Premia Reinsurance Ltd., a newly formed multiline Bermuda reinsurance company (“Premia Re”). Premia Re’s strategy is to reinsure or acquire companies or reserve portfolios in the non-life property and casualty insurance and reinsurance run-off market. The initial capitalization of Premia Re’s parent, Premia Holdings Ltd. (“Premia”), consists of $400.0 million in common equity and $110.0 million in unsecured senior debt. Arch Re Bermuda and certain Arch co-investors, including senior management of Premia, invested $100.0 million and acquired 25.0% of Premia’s common equity as well as warrants to purchase additional common equity. Two of the co-investors included Nicolas Papadopoulo, Chairman and CEO of Arch Worldwide Insurance Group and Chief Underwriting Officer for Property and Casualty Operations, who invested $2.5 million for a 0.625% stake, and Maamoun Rajeh, Chairman and CEO of Arch Worldwide Reinsurance Group, who invested $0.5 million for a 0.125% stake. Affiliates of Kelso, along with co-investors of Kelso, invested $300.0 million and acquired the balance of Premia’s common equity as well as warrants to purchase additional common equity. Arch Re Bermuda is providing a 25% whole account quota share reinsurance treaty on business written by Premia Re which generated net premiums written and earned of $45.4 million for 2017. Arch Re Bermuda has appointed two directors to serve on the seven person board of directors of Premia Re. Subsidiaries of Arch Capital are providing certain administrative and support services to Premia pursuant to services agreements.

In 2017, we made a $125,000 contribution to the Urban Institute, a non-profit research organization that employs Laurie S. Goodman, a nominee for Class II Director at our annual meeting.   

From time to time, in the ordinary course of our business, we may enter into transactions, including insurance and reinsurance transactions and brokerage or other arrangements for the production of business, with entities in which companies or funds affiliated with beneficial owners of more than 5% of our outstanding voting shares or directors of Arch Capital may have an ownership or other interest.

25 | 2018 PROXY STATEMENT

SHARE OWNERSHIP

Security Ownership of Certain Beneficial Owners and Management

Common Shares

The following table sets forth information available to us as of March 14, 2018 with respect to the ownership of our voting shares by (1) each person known to us to be the beneficial owner of more than 5% of any class of our outstanding voting shares, (2) each director and named executive officer of Arch Capital and (3) all of the directors and executive officers of Arch Capital as a group. Except as otherwise indicated, each person named below has sole investment and voting power with respect to the securities shown.

	Common Shares
Name and Address of Beneficial Owner	(A) Number of Common Shares Beneficially Owned(1)	(B) Rule 13d-3 Percentage Ownership(1)
Artisan Partners Holdings LP (2) 875 East Wisconsin Avenue, Suite 800 Milwaukee, Wisconsin 53202	17,572,350	12.9	%
Cascade Investment, L.L.C. (3) 2365 Carillon Point Kirkland, Washington 98033	11,511,099	8.4	%
The Vanguard Group (4) 100 Vanguard Blvd. Malvern, Pennsylvania 19355	10,654,794	7.8	%
BlackRock Inc. (5) 55 East 52nd Street New York, New York 10022	8,897,534	6.5	%
Baron Capital Group, Inc. (6) 767 Fifth Avenue New York, New York 10153	8,433,758	6.2	%
Constantine Iordanou (7)	2,422,476	1.7	%
Marc Grandisson (8)	865,640	*
John L. Bunce, Jr. (9)	688,022	*
Eric W. Doppstadt (10)	15,904	*
Yiorgos Lillikas (11)	18,053	*
Louis J. Paglia (12)	7,191	*
John M. Pasquesi (13)	1,723,538	1.3	%
Brian S. Posner (14)	22,439	*
Eugene S. Sunshine (15)	4,128	*
John D. Vollaro (16)	184,616	*
Mark D. Lyons (17)	171,660	*
Nicolas Papadopolou (18)	227,314	*
Maamoun Rajeh (19)	203,211	*
Andrew T. Rippert (20)	74,217	*
All directors and executive officers (16 persons) (21)	7,107,361	5.1	%

_________________________

* Denotes beneficial ownership of less than 1%

(1) Pursuant to Rule 13d-3 promulgated under the Exchange Act, amounts shown include common shares that may be acquired by a person within 60 days of March 14, 2018. Therefore, column (B) has been computed based on (a) 136,702,745 common shares actually

2018 PROXY STATEMENT | 26

outstanding as of March 14, 2018 ; and (b) solely with respect to the person whose Rule 13d-3 Percentage Ownership of common shares is being computed, common shares that may be acquired within 60 days of March 14, 2018 upon the exercise of options held only by such person. All references to “options” in the above table and the related footnotes include SARs, as applicable.

(2) Based on a Schedule 13G/A filed with the SEC on February 7, 2018 jointly by Artisan Partners Limited Partnership (“APLP”), Artisan Investments GP LLC (“Artisan Investments”), Artisan Partners Holdings LP (“Artisan Holdings”), Artisan Partners Asset Management Inc. (“APAM”) and Artisan Partners Funds, Inc. (“Artisan Funds”). APLP is an investment advisor and Artisan Funds is an investment company. Artisan Holdings is the sole limited partner of APLP and the sole member of Artisan Investments. Artisan Investments is the general partner of APLP and APAM is the general partner of Artisan Holdings. The Schedule 13G/A reported that the common shares have been acquired on behalf of discretionary clients of APLP, which holds 17,572,350 common shares, including 8,415,949 common shares on behalf of Artisan Funds. In addition, the Schedule 13G/A reported that (a) APLP, Artisan Investments, Artisan Holdings and APAM each has shared voting with respect to 16,335,076 common shares and shared dispositive power with respect to 17,572,350 common shares and (b) Artisan Funds has shared voting and dispositive power with respect to 8,415,949 common shares.

(3) Based on a Schedule 13G/A filed with the SEC on February 14, 2013 jointly by Cascade Investment, L.L.C. (“Cascade”) and William H. Gates III. In the Schedule 13G/A, it is reported that Cascade has sole voting and dispositive power with respect to 11,511,099 common shares. In addition, all common shares held by Cascade may be deemed to be beneficially owned by William H. Gates III as the sole member of Cascade.

(4) Based on a Schedule 13G/A filed with the SEC on February 8, 2018 by The Vanguard Group (“Vanguard”). In the Schedule 13G/A it is reported that Vanguard has shared dispositive power with respect to 128,793 common shares, sole voting power with respect to 101,216 shares, shared voting power with respect to 36,952 common shares and sole dispositive power with respect to 10,526,001 common shares.

(5) Based on a Schedule 13G/A filed with the SEC on January 30, 2018 by BlackRock. In the Schedule 13G/A, it is reported that BlackRock has sole voting power with respect to 7,767,696 common shares and sole dispositive power with respect to 8,897,534 common shares.

(6) Based upon a Schedule 13G/A filed with the SEC on February 14, 2018 jointly by Baron Capital Group, Inc. (“BCG”), BAMCO, Inc. (“BAMCO”), Baron Capital Management, Inc. (“BCM”) and Ronald Baron (collectively, the “Baron Group”). In the Schedule 13G/A, the Baron Group reported that BAMCO and BCM are subsidiaries of BCG, and Ronald Baron owns a controlling interest in BCG. In addition, the Schedule 13G/A reported that (a) BCG has shared voting power with respect to 8,108,685 common shares and shared dispositive power with respect to 8,433,758 common shares; (b) BAMCO has shared voting power with respect to 7,757,314 common shares and shared dispositive power with respect to 8,082,414 common shares; (c) BCM has shared voting power with respect to 351,344 common shares and shared dispositive power with respect to 351,344 common shares; and (d) Ronald Baron has shared voting power with respect to 8,108,685 common shares and shared dispositive power with respect to 8,433,758 common shares.

(7) Amounts in columns (A) and (B) reflect (a) 99,578 common shares owned directly by Mr. Iordanou (including 50,054 restricted shares, which are subject to vesting); (b) 3,297 common shares owned by limited liability companies, for which Mr. Iordanou serves as the managing member for the benefit of members of his family; (c) 201,676 common shares, which are held by a grantor retained annuity trust; (d) stock options and SARs with respect to 992,334 common shares that are exercisable currently or within 60 days of the date hereof, (e) stock options and SARs with respect to 1,109,726 common shares that are exercisable currently or within 60 days of the date hereof, which are held by two grantor retained annuity trusts; and (f) 15,865 restricted stock units that will be settled in common shares within 60 days hereof. Amounts do not include (a) stock options and SARs with respect to 46,987 common shares that are not exercisable within 60 days of the date hereof, (b) 31,635 restricted common share units that will not be settled in common shares within 60 days of the date hereof; and (c) 13,251 restricted common share units that will be settled in common shares after the termination of Mr. Iordanou’s employment, as provided in the award agreement. Mr. Iordanou holds a security agreement with respect to 49,524 directly owned common shares, which is not currently being utilized. Mr. Iordanou’s reported beneficial ownership (pursuant to Rule 13d-3) decreased by approximately 31% compared to the amount reported in the Proxy Statement filed on March 24, 2017. This decrease is primarily due to estate planning changes and family trust distributions.

(8) Amounts in columns (A) and (B) reflect 608,762 common shares owned indirectly by Mr. Grandisson (including 35,805 restricted shares which are subject to vesting); (b) 660 common shares owned by his spouse; and (c) stock options and SARs with respect to 256,218 common shares that are exercisable currently or within 60 days of the date hereof. Amounts do not include stock options and SARs with respect to 19,319 common shares that are not exercisable within 60 days of the date hereof.

(9) Amounts in columns (A) and (B) reflect 688,022 common shares owned directly by Mr. Bunce.

(10) Amounts in columns (A) and (B) reflect 15,904 common shares owned directly by Mr. Doppstadt.

(11) Amounts in columns (A) and (B) reflect (a) 17,968 common shares owned directly by Mr. Lillikas and (b) 85 common shares owned by his child.

(12) Amounts in columns (A) and (B) reflect 7,191 common shares owned directly by Mr. Paglia.

(13) Amounts in columns (A) and (B) reflect (a) 407,231 common shares owned by Otter Capital LLC, for which Mr. Pasquesi serves as the Managing Member; (b) 1,033,021 common shares owned indirectly by revocable trusts for which Mr. Pasquesi and his spouse are the trustees; (c) 52,515 common shares owned indirectly by a family limited partnership; (d) 230,000 common shares, which are held

27 | 2018 PROXY STATEMENT

by a grantor retained annuity trust; and (e) 771 common shares owned directly by Mr. Pasquesi. In addition, 436,620 common shares held by the trusts and by the family limited partnership are subject to a security agreement, which is not currently being utilized. This security agreement provides for a secured loan of up to 30% of the total market value of the common shares subject to the security agreement.

(14) Amounts in columns (A) and (B) reflect 22,439 common shares owned directly by Mr. Posner.

(15) Amounts in columns (A) and (B) reflect 4,128 common shares owned directly by Mr. Sunshine.

(16) Amounts in columns (A) and (B) reflect (a) 118,016 common shares owned by a revocable trust for which Mr. Vollaro serves as trustee and (b) stock options and SARs with respect to 66,600 common shares that are exercisable currently.

(17) Amounts in columns (A) and (B) reflect (a) 76,494 common shares owned directly by Mr. Lyons (including 16,932 restricted shares, which are subject to vesting); and (b) stock options and SARs with respect to 95,166 common shares that are exercisable currently or within 60 days of the date hereof. Amounts do not include (a) stock options and SARs with respect to 8,126 common shares that are not exercisable within 60 days of the date hereof; and (b) 86,722 restricted common share units, which will be settled in common shares after the termination of Mr. Lyons’ employment as provided in the award agreements.

(18) Amounts in columns (A) and (B) reflect (a) 216,914 common shares owned directly by Mr. Papadopolou (including 30,290 restricted shares, which are subject to vesting) and (b) stock options and SARs with respect to 10,400 common shares that are exercisable currently or within 60 days of the date hereof. Amounts do not include stock options and SARs with respect to 57,331 common shares that are not exercisable within 60 days of the date hereof.

(19) Amounts in columns (A) and (B) reflect (a) 115,060 common shares owned directly by Mr. Rajeh (including 21,565 restricted shares, which are subject to vesting) and (b) stock options and SARs with respect to 88,151 common shares that are exercisable currently or within 60 days of the date hereof. Amounts do not include (a) stock options and SARs with respect to 15,802 common shares that are not exercisable within 60 days of the date hereof.

(20) Amounts in columns (A) and (B) reflect (a) 36,550 common shares owned directly by Mr. Rippert (including 11,243 restricted shares, which are subject to vesting) and (b) stock options and SARs with respect to 37,667 common shares that are exercisable currently or within 60 days of the date hereof. Amounts do not include stock options and SARs with respect to 5,795 common shares that are not exercisable within 60 days of the date hereof.

(21) In addition to securities beneficially owned by the directors and the named executive officers reflected in the table, includes an aggregate of 478,952 common shares, including common shares issuable upon exercise of stock options and SARs that are exercisable currently or within 60 days of the date hereof, which are beneficially owned by executive officers who are not directors of Arch Capital.

Preferred Shares

The following table sets forth information available to us as of March 14, 2018 with respect to the ownership of our non-cumulative preferred shares by (1) each director and named executive officer of Arch Capital who owns such shares and (2) all of the directors and executive officers of Arch Capital as a group. Except as otherwise indicated, each person named below has sole investment and voting power with respect to the securities shown. Our preferred shares are not convertible into common shares, and the holders of the preferred shares do not have any voting rights (except under certain limited circumstances). For a description of the terms of our preferred shares, please see note 19, “Shareholders’ Equity,” of the notes accompanying our consolidated financial statements included in our 2017 Annual Report.

	Preferred Shares
Name of Beneficial Owner	Number of Series E Preferred Shares Beneficially Owned	Percentage of Class Owned	Number of Series F Preferred Shares Beneficially Owned	Percentage of Class Owned
Constantine Iordanou (1)	*	*	10,000	*
Brian S. Posner	6,000	*	_	*
All directors and executive officers (16 persons)	6,000	*	10,000	*

_________________________

* Denotes beneficial ownership of less than 1%

(1) 7,000 of such preferred shares are directly owned by Mr. Iordanou and 3,000 preferred shares are owned by Mr. Iordanou’s spouse.

2018 PROXY STATEMENT | 28

Ownership of Watford Holdings Ltd. Shares

We, through certain of our subsidiaries, serve as insurance portfolio manager for Watford Re, a subsidiary of Watford and a privately held multi-line Bermuda reinsurance company. We own common and preferred interests in Watford and have the right to designate two members of Watford’s six member board of directors. In addition, Watford has 9,065,200 cumulative redeemable preference shares outstanding with a liquidation preference of $25.00 per share. The preference shares are not convertible into or exchangeable for any other securities or property of Watford and do not have other general rights such as voting powers. For additional information about the terms of the preference shares, please see note 4, “Variable Interest Entity and Noncontrolling Interests,” of the notes accompanying our consolidated financial statements included in our 2017 Annual Report. We consolidate Watford’s financial results under applicable accounting principles. The following table sets forth information available to us as of March 14, 2018 with respect to the ownership of common and preferred shares of Watford, by (1) each director and named executive officer of Arch Capital who owns such shares and (2) all of the directors and executive officers as a group.

	Common Shares			Preferred Shares
Name of Beneficial Owner	(A) Number of Watford Common Shares Beneficially Owned(1)	(B) Rule 13d-3 Percentage Owned		(C) Number of Watford Preferred Shares Beneficially Owned(2)	(D) Percentage of Class Owned
Constantine Iordanou	50,000	*		120,000	1.3	%
Marc Grandisson	125,000	*		—	*
John M. Pasquesi	125,000	*		—	*
Nicolas Papadopoulo	62,500	*		—	*
Maamoun Rajeh	12,500	*		—	*
Mark D. Lyons	6,250	*		—	*
Brian S. Posner	6,250	*		—	*
All directors and executive officers (16 persons)	393,750	2.0	%	130,000	1.4	%

_________________________

* Denotes beneficial ownership of less than 1%

(1)    The purchase price for such shares was $40.00 per share

(2)    The purchase price for such shares was $24.50 per share.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our common shares, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of our equity securities. Such persons are also required by SEC regulation to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and representations that no other reports were required, we believe that all persons subject to the reporting requirements of Section 16(a) filed the required reports on a timely basis during the year ended December 31, 2017, except for one report relating to a scheduled vesting event for each of Mr. Iordanou and Mr. Petrillo. The reports were subsequently filed.

29 | 2018 PROXY STATEMENT

COMPENSATION

ITEM 2—ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

We are pleased to provide our shareholders the opportunity to vote on a non-binding advisory resolution to approve the compensation of our named executive officers as disclosed in this proxy statement.

We have a “pay-for-performance” philosophy that forms the foundation of all decisions regarding compensation of our named executive officers. This compensation philosophy, and the compensation programs approved by the compensation committee of our Board, is central to our ability to attract, retain and motivate individuals who can achieve superior results. Our approach has resulted in our ability to attract and retain the executive talent necessary to guide us during all phases of the underwriting cycle.

We are requesting shareholder approval of the compensation of our named executive officers pursuant to the compensation disclosure rules of the SEC, including the “Compensation Discussion and Analysis,” the compensation tables and any related material disclosed in this proxy statement. This vote is not intended to address

any one specific item of compensation, but instead the overall compensation of our named executive officers and the policies and practices described in this proxy statement.

This vote is advisory and therefore not binding on the Company, the compensation committee of the Board or the Board. The Board and the compensation committee value the views of our shareholders and, to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider those shareholders’ concerns and will evaluate whether any actions are necessary to address those concerns.

Recommendation of the Board

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL.

Compensation Discussion and Analysis

This section explains our compensation philosophy, summarizes our compensation programs and reviews compensation decisions for the named executive officers listed below.

Name	Title
Constantine Iordanou	Chairman of the Board and Class II Director of Arch Capital
Marc Grandisson	President, Chief Executive Officer and Class III Director of Arch Capital
Mark D. Lyons	Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital
Nicolas Papadopoulo	Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for the Property & Casualty Group
Maamoun Rajeh	Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group
Andrew T. Rippert	Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group

The compensation committee of our Board (which we refer to as the “Committee” in this section) is responsible for determining and approving the individual elements of total compensation paid to the chief executive officer and our other executive officers and establishing overall compensation policies for our employees. The Committee also oversees the administration of executive compensation plans and certain employee benefits. Our Board appoints each member of the Committee and has determined that each is an independent director under the applicable standards of NASDAQ.

2018 PROXY STATEMENT | 30

2017 Performance Highlights¹

Our discussion in this proxy statement includes certain financial measures that are not presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”), known as “non-GAAP financial measures” as defined by regulations of the Securities and Exchange Commission. More information on the rationale for the use of these measures and reconciliations to GAAP can be found in “Annex C–Non-GAAP Financial Measures.”

(U.S. Dollars in millions, except share data)	Year Ended December 31,
	2017			2016			Change
Book value per common share at year-end	$	60.91		$	55.19		10.4	%
Tangible book value per common share at year-end 2	$	56.19		$	49.48		13.6	%
Net income available to common shareholders	$	566.5		$	664.7		(14.8	)%
Per share	$	4.07		$	5.33		(23.6	)%
Net income return on average common equity	7.2		%	10.9		%	(3.7	)
After-tax operating income available to Arch common shareholders 2	$	447.2		$	577.4		(22.6	)%
Per share	$	3.21		$	4.63		(30.7	)%
Annualized return on average common equity	7.2		%	10.9		%	(3.7	)
Annualized operating return on average common equity 2	5.7		%	9.4		%	(3.7	)
Combined ratio	88.8		%	87.6		%	1.2
Gross premiums written	$	6,088		$	5,019		21.3	%
Net premiums written	$	4,408		$	3,518		25.3	%
Underwriting income 2	$	447.4		$	447.1		0.1	%
Net investment income	$	382		$	277		37.8	%
Per share	$	2.74		$	2.22		23.4	%
Weighted average common shares and common share equivalents outstanding	139.3			124.7			11.7	%

¹ Excludes amounts related to the ‘other’ segment (i.e., Watford Re). All per share amounts are on a diluted basis.

² See “Annex C—Non-GAAP Financial Measures.”

We performed reasonably well in 2017, as it was a challenging year for the property casualty industry. In 2017, pricing for many insurance and reinsurance lines remained under pressure and the industry incurred an estimated $130 billion of catastrophe losses as a result of California wildfires, three major Atlantic hurricanes and other natural disasters. Our strategic principles served us well in 2017, as we continue to grow in mortgage insurance, where we find market conditions to be favorable. Mortgage insurance is

an important third leg of our strategy, complementing our strong positions in specialty insurance and reinsurance and serving to counterbalance the cyclical nature of the property casualty market. Our diversification across these segments, together with our strong balance sheet, allows us to allocate capital between and within segments as market conditions dictate. Although the profitability of our property casualty insurance and reinsurance operations declined due to market softness, this was partly offset by the robust growth and excellent profitability of our mortgage insurance and reinsurance activities.

2017 performance highlights, which are considered in our compensation determinations:

▪ Net income available to Arch common shareholders was $566.5 million, or $4.07 per share, a decrease of 23.6% on a per-share basis, while after-tax operating income available to Arch common shareholders was $447.2 million, or $3.21 per share, a decrease of 30.7% on a per-share basis. The lower level of income primarily resulted from catastrophe losses, amortization of intangible assets from the acquisition of United Guaranty Corporation (“UGC”) and a one-off charge related to the new U.S. federal tax law.

▪ Our combined ratio for the year was 88.8% with underwriting income of $510.8 million, up 6.7% from 2016.

▪ Net premiums written increased 25.3% to $4.41 billion, emanating primarily from our mortgage segment and highlighting the benefits of our diversification.

▪ Net investment income rose to $382.1 million, a 23.4% increase on a per-share basis, primarily attributable to income generated on investable assets we acquired in the UGC acquisition.

▪ Book value per common share increased 10.4% to $60.91 per share.

▪ Tangible book value per common share increased 13.6% to $56.19 per share.

▪ Our annualized return on average common equity (“Net Income ROE”) was 7.2%, and contributes more directly to value creation and book value growth over time. In addition, Net Income ROE reflects the impact of our investment philosophy of maximizing total returns in our portfolio. Total return on investments includes net investment income, net realized gains and losses, changes in unrealized gains and losses, and equity in the

31 | 2018 PROXY STATEMENT

net income or losses of investment funds accounted for using the equity method.

▪ Our annualized operating return on average common equity (“Operating ROE”) was 5.7%, and is a key driver of book value growth, which produces a stable stream of earnings in the short term.

▪ Our total shareholder return (TSR) was 5.2%, which underperformed the benchmark indices. The annual

return of the S&P 500 Index and the S&P 500 Property & Casualty Insurance Index returned 21.8% and 22.4%, respectively. Although we underperformed the benchmark indices in 2017, our performance has been strong and has exceeded the benchmark indices over the longer term. Refer to “Long-Term Performance” below.

Long-Term Performance

We believe the Company’s performance is best measured over the long term. The following charts highlight certain of our key metrics for evaluating financial performance, which are considered in our compensation decisions. In evaluating the performance of the Company in connection with our compensation programs, we focus primarily on two main benchmarks: growth in book and tangible book value per share, which creates long-term shareholder value and Net Income ROE and Operating ROE, which drive book value growth and are key indicators of the efficient use of capital.

Book Value Per Common Share

Since our recapitalization in 2001, strong results have been delivered to our shareholders as our book value per common share has grown by approximately 900% from $6.09 at December 31, 2001 to $60.91 at December 31, 2017. Shareholders who invested in our recapitalization and continue to hold their common shares have seen the book value of their stock increase by 15.5% per year on a compounded basis and the price of their shares increase approximately 1,262% to $90.77 from $6.67.

Growth in Book Value Per Common Share

¹ Annualized growth rate from December 31, 2001 to December 31, 2017.

Tangible Book Value Per Common Share

Tangible book value per common share represents common shareholders’ equity available to Arch less goodwill and intangible assets divided by our common shares outstanding. In 2018, long-term incentive share-based

awards granted to our senior executives will pay out based on growth in our tangible book value per share, modified by our TSR performance compared to a pre-determined peer group over a three-year performance period. The Committee selected this measure because it is a strong

2018 PROXY STATEMENT | 32

indicator of growth in shareholder value for a property and casualty insurer and reinsurer and a common financial performance measure for companies in our industry. We believe goodwill and other intangible assets are not indicative of our underlying insurance results or trends. Tangible book value per common share increased 13.6% during 2017.

Our growth in book value per common share and tangible book value per common share is aligned with the trading price of our common stock (refer to “Common Share Performance” below). As such, Arch Capital focuses the long-term component of its executive compensation program on building tangible book value per common share over time, which is modified by our TSR performance relative to our defined peer group.

Return on Equity

As indicated in the following charts, our ROE for 2017 was impacted by catastrophe losses and compressed margins for many property casualty products. On a longer term, our ROEs have been closer to our return objectives, but reflect the continuing impact of low interest rates and competitive market conditions in the property casualty insurance market.

	Average Return on Equity (ROE)
	1 Year		3 Year		5 Year		10 Year
Net Income ROE	7.2	%	8.7	%	10.8	%	12.8	%
Operating ROE	5.7	%	8.0	%	9.4	%	10.8	%

Net Income ROE and Operating ROE

33 | 2018 PROXY STATEMENT

Capital Management and Balance Sheet

We maintain a strong, liquid balance sheet with appropriate leverage to support the Company’s underwriting activities and provide funds to capitalize on opportunities when they arise. In 2016, we had increased the Company’s debt and

hybrids as a percentage of total capital in connection with the UGC acquisition. In 2017, as planned, we began reducing our leverage ratios, as shown below:

	December 31,
	2017		2016		Change
Senior notes/total capital available to Arch	15.3	%	16.5	%	(1.2	)
Revolving credit agreement borrowings/total capital available to Arch	3.3	%	4.8	%	(1.5	)
Debt/total capital available to Arch	18.6	%	21.3	%	(2.7	)
Preferred/total capital available to Arch	7.7	%	7.4	%	0.3
Debt and preferred/total capital available to Arch	26.4	%	28.7	%	(2.3	)

In 2017, we issued $330 million of new Series F preferred shares carrying a 5.45% annual dividend and redeemed the existing 6.75% Series C preferred shares. Going forward, this will result in $4.3 million of annual dividend savings. We recorded a loss on redemption of preferred shares of $6.7 million to net income in 2017, and will record a loss in $2.7 million in 2018, to remove the original costs associated with the Series C issuance from additional paid-in capital.

Common Share Performance

The chart below summarizes Arch Capital’s cumulative total shareholder return, assuming reinvestment of dividends,

from December 31, 2001 to December 31, 2017, compared with the S&P 500 Composite Stock Index (“S&P 500 Index”) and the S&P 500 Property and Casualty Insurance Index. During this sixteen-year period, the price of Arch Capital’s common stock appreciated at a compound annual rate of 17.7%, compared with a compound annual rate of return of 7.6% for the S&P 500 Index and 8.3% for the S&P 500 Property and Casualty Insurance Index. The share price performance presented below is not necessarily indicative of future results.

Total Shareholder Return

2018 PROXY STATEMENT | 34

In addition, at December 31, 2017, our common share price represented approximately 149% of our year-end 2017 book value per common share. For the property and

casualty industry, price to book value is viewed as an important indicator of company performance by analysts and the investment community.

Executive Compensation Philosophy

Our executive compensation program has been designed to achieve our formal executive compensation philosophy, which has been streamlined as described below.

The objectives of the Company’s executive compensation program are to:

▪ Create Shareholder Alignment: Create strong shareholder alignment within our executive population;

▪ Link Pay with Performance: Link significant elements of executive compensation to the achievement of short- and long-term strategically important operating and financial performance goals without encouraging inappropriate risk taking;

▪ Attract and Retain: Attract and retain quality executives who will contribute to our long-term success and, thereby, increase shareholder value;

▪ Support Culture:Support the Arch Capital culture of teamwork, underwriting discipline and commitment to the highest ethical standards; and

▪ Provide Market Competitive Pay: For each executive position, we consider external market data at median values for base salary, annual target bonus levels, and annualized long-term incentive target grants. Based upon the considerable range of unique facts and circumstances pertaining to our executive talent, we adjust opportunities as appropriate, to take into consideration various factors such as consistent high performance and value delivery to the Company, retention, succession, successful tenure and other factors.

Elements of Compensation Program

The three primary components of our executive compensation program are:

1. base salary;

2. short-term annual cash incentive bonuses; and

3. long-term incentive share-based awards.

Base Salary

Base salaries are designed to provide competitive levels of compensation to executives based upon their experience, duties and scope of responsibility. We pay base salaries because they provide a basic level of compensation and are necessary to recruit and retain executives. The Committee has the ability, subject to the terms of any employment agreement, to make base salary adjustments to reflect an individual’s performance or changed responsibilities.

Short-Term Annual Cash Incentive Bonuses

Annual bonus awards are designed to provide competitive levels of compensation to executives based upon their experience, duties and scope of responsibilities. The size of an executive’s bonus award is influenced by corporate performance, individual performance and market practice. As an employee’s responsibilities increase, the portion of his or her bonus that is dependent on corporate performance increases.

Changes to our short-term incentive plan, including a more formulaic approach, are described below.

Long-Term Incentive Share-Based Awards

We emphasize long-term variable compensation at the senior executive levels because of our desire to reward effective long-term management decision making and to provide the named executive officers with a future interest in the Company. Our share-based compensation is designed to align the interests of executives to the interests of shareholders by providing value to the executive as the share price increases. Due to the variability of the share price, the value of stock options, performance shares and restricted share/unit awards is dependent upon our overall results and how we are perceived by our shareholders and the marketplace. Based on the foregoing, the Company believes that share-based awards encourage executives and other employees to focus on behaviors and initiatives that should lead to an increase in the price of our common shares, which benefits all Arch Capital shareholders.

Changes to our long-term incentive plan, including the use of performance shares, are described below.

35 | 2018 PROXY STATEMENT

Compensation Program Enhancements

As we discussed in last year’s proxy statement, as part of the Committee’s ongoing review of the Company’s programs and in order to help ensure continued alignment between pay and performance, the Committee has engaged in a process of evaluating the Company’s compensation programs for its senior management team. The results of this evaluation have included redesigning the annual and long-term incentive programs and shifting pay mix from short-term to long-term incentive pay. Specifically, effective for calendar year 2018 compensation, we have adopted the changes to our executive pay program, as described below.

2018 Short-Term Incentive Plan (“2018 STI Plan”)

2018 STI Plan Design

General Approach

For each executive participant in the 2018 STI Plan, a target bonus award level will be established, stated as a percentage of base salary. To establish these target bonus award levels, we consider external market data at median values adjusted as appropriate, to take into consideration various factors such as consistent high performance and value delivery to the Company, retention and succession. Group, Reporting Segments and individual performance during the year will be evaluated against a combination of pre-determined “financial” metrics and “strategic” goals.

Financial metrics will be determined from the financial performance achieved by each of the Reporting Segments (i.e., Insurance, Reinsurance, and Mortgage) and the Investment function (collectively, the “Operating Units”), such performance measured through the formula incentive compensation plans for each of the Operating Units. Group-level performance will be determined as a weighted average (weighted by allocated capital) of the performance of each of the formula plans.

Strategic goals are designed to incentivize employees to achieve certain corporate objectives that cannot be measured by financial metrics. Strategic goals will be developed for each participant and will be approved by the Committee before the end of the first quarter of each year. Performance against strategic goals will be evaluated at the end of the year.

We will use a weighting approach between the two metrics, with 70% for financial metrics and 30% for strategic metrics, to determine overall performance against goals. This performance modifier will then be applied to each individual’s stated target bonus award to derive the annual cash bonus.

Establish Minimum, Target and Maximum Opportunities

Performance against goals for each category will be subject to formally established minimum and maximum performance modifiers approved by the Committee at the beginning of each year, along with corresponding required levels of goal achievements. These payout levels and corresponding levels of goal achievement create a “payout curve.”

Establishing a formulaic payout curve ensures that earned bonuses are within a defined range of target each year. In years when target performance is not met, a lower payout can still be earned if the threshold level of performance is achieved. In addition, a formal payout curve, in conjunction with strategic metrics, will create a maximum payout cap on potential bonus payouts.

Strategic Goal Categories and Weightings

At the beginning of the year, specific strategic goals will be established for each executive in the 2018 STI Plan and will be evaluated based on a prescribed performance rating scale as already established in the organizational performance management process.

2018 STI Plan Structure

Identify Metrics, Goals and Weightings

At the beginning of each annual performance period, the Committee will establish the performance metrics, as well as the associated goals and weightings. Performance metrics include both financial and strategic metrics, as illustrated below.

Financial Metric(s) (70% weighting) + Individual/Operational Strategic Metric(s) (30% weighting)

Performance Criteria for 2018

For purposes of the 2018 STI Plan, the following performance criteria and weights will apply for Corporate and Unit Executives. Corporate Executives consist of senior-level executives that have a broad set of responsibilities across the entire group. They do not have specific Operating Unit profit and loss responsibilities. The employees in this group include the Arch Capital CEO and the Arch Capital CFO. Unit Executives consist of senior-level executives that have profit and loss responsibilities for a specific Operating Unit. The employees in this group include the Insurance Segment CEO, Reinsurance Segment CEO, Mortgage Segment CEO and the Arch Capital Chief Investment Officer.

36 | 2018 PROXY STATEMENT

As described below, the financial metric, with 70% weighting, for (i) the Corporate Executives will be based on overall group performance and (ii) the Unit Executives will

be based 50% on the results of the formulaic plan for the executive’s unit and 20% based on overall group performance.

Performance Criteria	Measurement	Weights for Corporate Executives		Weights for Unit Executives		Range of Performance Modifiers
Financial Metrics - Group Level	The Group Performance Modifier is derived as the weighted average ROE of each of the Operating Units. In order to develop an overall Group-level ROE, the investment unit’s payout multiple (as a % of target) is converted to an implied ROE using the underwriting units’ payout scale.	70	%	20	%	0 - 200%
Financial Metrics - Operating Unit Level	Under our existing incentive compensation formula plans, bonus awards are determined for each underwriting unit based on ROE measures (measured over the applicable 10-year development periods) and the relative performance of the investment unit compared to the benchmark index (over the past 1, 3 and 5 years). Performance against financial goals for each Unit Executive is evaluated against the overall results of his/her respective plan.	0%		50%		0 - 200%
Strategic Metrics	Based on year-end performance evaluation.	30%		30%		0 - 250% (1)
Total		100%		100%		0 - 200%

(1) For the Strategic criteria, performance modifiers over 200% may only be used if the overall Financial Criteria performance modifier is 100% (i.e., target level of performance) or higher.

For Unit Executives, a 20% weight on overall Group Financial Performance is used to further incentivize Unit Executives to support overall group objectives.

General Goal/Payout Matrix—Applicable to All Executives

The table below shows the performance modifiers at the threshold, target and maximum levels for each financial performance criteria:

Range of Performance Modifiers as % of Target - Financial Goals	Threshold/Minimum		Target		Maximum
Payout as a % of Target (1)	20%		100%		200%
Level of Goal Achievement Required: Financial - Group Level	85	%	100	%	115	%
Level of Goal Achievement Required: Financial - Operating Unit Level	50	%	100	%	150	%

(1) Payout for performance achievement between stated levels will be interpolated on a straight-line basis.

The table below shows the performance modifiers at each performance rating for strategic performance criteria:

Strategic Performance Rating	Performance Modifier (1)
Exceptional Achievements	250%
Exceeds Expectations	150%
Meets Expectations	100%
Needs Development	50%
Unsatisfactory	0%

(1) For the Strategic criteria, performance modifiers over 200% may only be used if the overall Financial Criteria performance modifier is 100% (i.e., target level of performance) or higher.

37 | 2018 PROXY STATEMENT

2018 Long-Term Incentive Plan (“2018 LTI Plan”)

General Approach

We have also changed the structure of our long-term incentive awards for senior executives beginning with grants in 2018 so that the majority of such awards will be in the form of performance shares. The value mix of such long-term awards will be approximately (i) 80% performance-based, consisting of 55% performance shares and 25% stock options, and (ii) 20% time-based restricted shares. The performance shares will pay out based on growth in tangible book value per share (adjusted for share buy-backs) in relation to pre-established threshold, target

and maximum goals over a three year performance period. The resulting payout level will be secondarily modified by relative total shareholder return (TSR) over the performance period in relation to a pre-determined peer group. The maximum number of shares that can be earned will be 200% of target. Grants of performance shares are expected to be made annually, with three-year overlapping cycles. Earned performance shares are paid out at the end of the three-year period, in shares of Arch Capital stock.

Proposed 2018 LTI Design

The changes to our long-term incentive design for 2018 are outlined below:

Performance Shares 55% of Economic Value		Stock Options 25% of Economic Value		Restricted Stock/Units 20% of Economic Value
Performance Period: 3-year, with overlapping 3-year cycles. Underlying Value: Denoted in shares of Arch Capital stock. Metrics: Absolute Tangible Book Value per share growth over the 3-year performance period (adjusted for share buy-backs), with a 25% +/- TSR modifier, relative to the TSR of an established peer group. Opportunities: Pre-established minimum, target and maximum opportunities (e.g., 50%, 100%, 200%). Payout: In shares at the end of the performance period, with the number of shares dependent upon the level of goal achievement.	+	Vesting: 3-year ratable commencing on first anniversary of grant date. Exercise Price: Equal to share price on grant date. Life: 10 year maximum term.	+	Vesting: 3-year ratable commencing on first anniversary of grant date. UnderlyingValue: Denoted in shares of Arch Capital stock. Payout: In shares. Dividends: Accrue and are paid out upon vesting.

Why Use This Approach?

A majority of the economic value is granted in performance-based vehicles, including performance shares and stock options to incent share price appreciation goals, and maintaining restricted stock to promote executive retention.

The performance share vehicle directly fulfills the Company’s objectives of linking pay with performance, and creating shareholder alignment. The TSR modifier (of 25% +/-) at the end of the three-year performance period will connect the results of the Tangible Book Value metric with the stock price results experienced by shareholders over the

same three-year period. Grants of performance shares are expected to be made annually, with three year overlapping cycles. Earned performance shares are paid out at the end of the three year period, in shares of Arch Capital stock. The stock options create strong shareholder alignment and focus on driving stock price. The restricted stock/units provide direct retention.

38 | 2018 PROXY STATEMENT

2017 Compensation Decisions

Constantine Iordanou

Chief Executive Officer (2017) and Chairman of the Board

Base Salary

Mr. Iordanou did not receive a salary adjustment in 2017.

Short-Term Cash Incentive

The variable performance-based component of Mr. Iordanou’s compensation, in the form of annual cash bonus and long-term incentive share-based awards, continued to represent more than 80% of his total compensation as shown in the 2017 Summary Compensation Table. In determining Mr. Iordanou’s performance-based compensation for 2017, including his annual bonus, the Committee, in the exercise of its business judgment, evaluated Mr. Iordanou’s contributions toward creation and enhancement of shareholder value by considering the performance of the Company and a number of other factors, including the Company’s financial results and strategic initiatives achieved under his leadership over the near and long-term. The Committee also took into account the orderly chief executive officer leadership transition process that was led by Mr. Iordanou.

As part of its evaluation of Company performance, the Committee reviewed the performance results for open underwriting years under its longstanding formula-based incentive compensation plan that applies to executives at the segment and investment units. That plan generally bases payouts on achievement of return on capital targets for the current underwriting year and prior underwriting years whose ten year development periods remain open, and, in the case of the investment unit, investment returns over one, three and five years. The level of goal achievement for 2017 for the open underwriting years was 110%.

The Committee also focused on the fact that, under Mr. Iordanou’s leadership, the Company has adopted and maintained a disciplined approach to underwriting, investment management and capital management that has served us and our shareholders well. Our diversification across three business segments under Mr. Iordanou’s leadership was another important consideration, allowing us to seek out the best underwriting opportunities. The Committee recognized the challenging operating environment for our property and casualty insurance and reinsurance businesses and that the Company’s diversified platform and its collaborative culture of performance, accountability, teamwork and ethical conduct allowed the Company to meet these challenges and remain financially strong.

The alignment of interests of Mr. Iordanou with the interests of shareholders is further strengthened due to the fact that, as the Committee was aware, Mr. Iordanou had elected to receive 100% of his total bonus in the form of at-the-money stock options instead of cash under an election program offered by the Company. Accordingly, share price appreciation over an extended period of time will be required in order for Mr. Iordanou to realize any significant compensation benefit from this important component of his 2017 compensation.

Based on the above considerations, Mr. Iordanou received an annual bonus of $5,000,000. As mentioned above, Mr. Iordanou elected to receive all of his annual bonus in the form of stock options under the Company’s existing election program.

Long-Term Incentive

Mr. Iordanou received a long-term incentive grant in May 2017 valued at $5,744,023, consisting of restricted common shares (80% of the value) and stock options (20% of the value), as reported in the 2017 Summary Compensation Table.

Marc Grandisson

President and Chief Operating Officer (2017)

Base Salary

Mr. Grandisson did not receive a salary adjustment in 2017.

Short-Term Cash Incentive

In determining Mr. Grandisson’s annual bonus for 2017, the Committee took into account principles similar to those underlying the new 2018 STI Plan described above. As his responsibilities extend to all aspects of the Group, with oversight of all of the Company’s operations, Mr. Grandisson’s 2017 bonus was generally based approximately 50% on Group financial performance and 50% on achievement of strategic metrics, as described below. His target bonus was increased to 165% of base salary based on external market data at median, together with various other factors such as consistent high performance, value delivery to the Company, retention and successful tenure.

The Group financial performance metrics considered were primarily the performance results for open underwriting years under the Company’s longstanding formula-based incentive compensation plan that applies to executives at the segment and investment units. That plan generally bases payouts on achievement of return on capital targets for the current underwriting year and prior underwriting years whose ten year development periods remain open, and, in the case of the investment unit, investment returns over one, three and five years. The Group financial

39 | 2018 PROXY STATEMENT

performance metrics represent the weighted average results under the plan formula for the insurance, reinsurance, mortgage and investment operating groups determined for 2017. The level of goal achievement for the open underwriting years was 110%, which would result (under the principles of the 2018 STI Plan as described above) in a payout factor of 137% of target for the financial goal portion of bonuses.

The strategic metrics considered for Mr. Grandisson included his effective leadership of all of the Company’s operations, including the three underwriting segments, investments and the services functions. The Committee took into account the Company’s profitability achieved under his guidance, the active role he has played in diversifying our businesses, the Company’s continued strong performance in relation to its peer group and the Company’s overall focus on underwriting discipline and its disciplined approach to investment and capital management. The Committee also reviewed Mr. Grandisson’s oversight of key operational matters, including expense management initiatives through the use of Arch Global Services and the focus on building predictive analytics, as well as risk management and infrastructure initiatives. The Committee also reflected Mr. Grandisson’s effective oversight of the implementation of the Company’s succession plan in the insurance and reinsurance groups, and his successful participation in the CEO transition process. The Committee’s determination of the level of his performance would, under the principles of the 2018 STI Plan, result in a performance multiplier of 250% on the portion of his bonus that was based on strategic performance.

Based generally on the considerations outlined above, the Committee determined that Mr. Grandisson’s annual bonus for 2017 would be $3,000,000.

Long-Term Incentive

Mr. Grandisson received a long-term incentive grant in May 2017 valued at $2,805,502, consisting of restricted common shares (80% of the value) and stock options (20% of the value), as reported in the 2017 Summary Compensation Table.

Mark D. Lyons

Executive Vice President and Chief Financial Officer

Base Salary

Mr. Lyons did not receive a salary adjustment in 2017.

Short-Term Cash Incentive

In determining Mr. Lyons’ annual bonus for 2017, the Committee took into account principles similar to those underlying the new 2018 STI Plan described above. As his responsibilities extend to all aspects of the Group, Mr. Lyons’

2017 bonus was generally based 50% on Group financial performance and 50% on achievement of strategic metrics, as described below. His target bonus was 125% of base salary for 2017 and will be increased to 135% of base salary for 2018 based on external market data at median, together with various other factors such as consistent high performance, value delivery to the Company, retention and successful tenure.

The Group financial performance metrics considered were primarily the performance results for open underwriting years under the Company’s longstanding formula-based incentive compensation plan that applies to executives at the segment and investment units. That plan generally bases payouts on achievement of return on capital targets for the current underwriting year and prior underwriting years whose ten year development periods remain open, and, in the case of the investment unit, investment returns over one, three and five years. The Group financial performance metrics represent the weighted average results under the plan formula for the insurance, reinsurance, mortgage and investment operating groups determined for 2017. The level of goal achievement for the open underwriting years was 110%, which would result (under the principles of the 2018 STI Plan as described above) in a payout factor of 137% of target for the financial goal portion of bonuses.

The strategic metrics considered for Mr. Lyons were his key leadership roles in financial reporting, enterprise risk management, regulatory and tax matters, investor relations, rating agency matters and capital management, including his leadership of the refinancing of our series C preferred shares with issuances of new series F preferred shares. The Committee’s determination of the level of his performance would, under the principles of the 2018 STI Plan, result in a performance multiplier of 175% on the portion of his bonus that was based on strategic performance.

Based generally on the considerations outlined above, the Committee determined that Mr. Lyons’ annual bonus for 2017 would be $1,365,000.

Long-Term Incentive

Mr. Lyons received a long-term incentive grant in May 2017 valued at $986,763, consisting of restricted common shares (80% of the value) and stock options (20% of the value), as reported in the 2017 Summary Compensation Table.

2018 PROXY STATEMENT | 40

Nicolas Papadopoulo

Chairman and CEO of Arch Worldwide Insurance Group and P&C Group CUO (October 1, 2017-Present)

Chairman and CEO of Arch Worldwide Reinsurance Group (July 1, 2014-September 30, 2017)

Base Salary

Mr. Papadopoulo received a raise from $650,000 to $750,000 in connection with his promotion on October 1, 2017.

Short-Term Cash Incentive

In determining Mr. Papadopoulo’s annual bonus for 2017, the Committee took into account principles similar to those underlying the new 2018 STI Plan described above. Mr. Papadopoulo’s 2017 bonus was generally based 50% on the performance of the reinsurance and insurance groups under his leadership, 20% on Group financial performance, and 30% on achievement of strategic metrics, as described below. His target bonus was increased to 135% of base salary based on external market data at median, together with various other factors such as consistent high performance, value delivery to the Company, retention and successful tenure.

The Group financial performance metrics considered were primarily the performance results for open underwriting years under the Company’s longstanding formula-based incentive compensation plan that applies to executives at the segment and investment units. That plan generally bases payouts on achievement of return on capital targets for the current underwriting year and prior underwriting years whose ten year development periods remain open, and, in the case of the investment unit, investment returns over one, three and five years. The Group financial performance metrics represent the weighted average results under the plan formula for the insurance, reinsurance, mortgage and investment operating groups determined for 2017. The level of goal achievement for the open underwriting years was 110%, which would result (under the principles of the 2018 STI Plan as described above) in a payout factor of 137% of target for the Group financial goal portion of bonuses.

The level of goal achievement for the open underwriting years under the formula plan for the reinsurance and insurance segments was 105% and 83%, respectively, which would result in a combined payout factor (under the principles of the 2018 STI Plan as described above) of 100% of target for the Segment financial goal portion of bonuses.

The strategic metrics considered for Mr. Papadopoulo included the Company’s continued strong performance in relation to its peer group and Mr. Papadopoulo’s effective

oversight of the reinsurance and insurance groups during the year, including an emphasis on managing the underwriting cycle. The Committee also took into account Mr. Papadopoulo’s role in strategic initiatives, including oversight of the Company’s investments in Watford and Premia and the Company’s branding activities. He also led a very orderly leadership transition process for the insurance and reinsurance groups. The Committee’s determination of the level of his performance would, under the principles of the 2018 STI Plan, result in a performance multiplier of 225% on the portion of his bonus that was based on strategic performance.

Based generally on the considerations outlined above, the Committee determined that Mr. Papadopoulo’s annual bonus for 2017 would be $1,500,000.

Long-Term Incentive

Mr. Papadopoulo received a long-term incentive grant in May 2017 valued at $888,812, consisting of restricted common shares (80% of the value) and stock options (20% of the value), as reported in the 2017 Summary Compensation Table.

Promotion

In connection with his promotion in October 2017, Mr. Papadopoulo received a long-term incentive grant valued at $3,146,095, consisting of restricted common shares (61% of the value) and stock options (39% of the value), as reported in the 2017 Summary Compensation Table. He also received payment of $2,316,414, representing legacy payments earned by him under the Incentive Compensation Plan relating to the reinsurance group.

Maamoun Rajeh

Chairman and CEO of Arch Worldwide Reinsurance Group

Base Salary

Mr. Rajeh received a raise from $525,000 to $650,000 in connection with his promotion on October 1, 2017.

Short-Term Cash Incentive

In determining Mr. Rajeh’s annual bonus for 2017, the Committee took into account principles similar to those underlying the new 2018 STI Plan described above. Mr. Rajeh’s 2017 bonus was generally based 50% on the performance of the reinsurance group under his leadership, 20% on Group financial performance and 30% on achievement of strategic metrics, as described below. His target bonus was increased to 135% of base salary based on external market data at median, together with various other factors such as consistent high performance, value delivery to the Company, retention and successful tenure.

41 | 2018 PROXY STATEMENT

The Group financial performance metrics considered were primarily the performance results for open underwriting years under the Company’s longstanding formula-based incentive compensation plan that applies to executives at the segment and investment units. That plan generally bases payouts on achievement of return on capital targets for the current underwriting year and prior underwriting years whose ten year development periods remain open, and, in the case of the investment unit, investment returns over one, three and five years. The Group financial performance metrics represent the weighted average results under the plan formula for the insurance, reinsurance, mortgage and investment operating groups determined for 2017. The level of goal achievement for the open underwriting years was 110%, which would result (under the principles of the 2018 STI Plan as described above) in a payout factor of 137% of target for the Group financial goal portion of bonuses.

The level of goal achievement for the open underwriting years under the formula plan for the reinsurance segment was 105%, which would result in a payout factor (under the principles of the 2018 STI Plan as described above) of 109% of target for the Segment financial goal portion of bonuses.

The strategic metrics considered for Mr. Rajeh included the Company’s continued strong performance in relation to its peer group and Mr. Rajeh’s oversight of the reinsurance group during the year. The Committee reviewed the profitability of the reinsurance group, including the group’s effectiveness in managing the underwriting cycle. The Committee also took into account Mr. Rajeh’s role in strategic initiatives, including development of the group’s platform in Europe. He also performed a seamless transition to his new role as CEO of the reinsurance group. The Committee ‘s determination of the level of his performance would, under the principles of the 2018 STI Plan, result in a performance multiplier of 175% on the portion of his bonus that was based on strategic performance.

Based generally on the considerations outlined above, the Committee determined that Mr. Rajeh’s annual bonus for 2017 would be $1,182,000 (inclusive of amounts calculated under the reinsurance segment’s formulaic plan for prior underwriting years).

Long-Term Incentive

Mr. Rajeh received a long-term incentive grant in May 2017 valued at $642,122, consisting of restricted common shares (80% of the value) and stock options (20% of the value), as reported in the 2017 Summary Compensation Table.

Promotion

In connection with his promotion in October 2017, Mr. Rajeh received a long-term incentive grant valued at $1,267,937, consisting of restrictedcommon shares (80% of the value)

and stock options (20% of the value), as reported in the 2017 Summary Compensation Table.

Andrew Rippert

Chairman and CEO of Arch Worldwide Mortgage Group

Base Salary

Mr. Rippert received a raise from $650,000 to $700,000, effective January 1, 2018.

Short-Term Cash Incentive

In determining Mr. Rippert’s annual bonus for 2017, the Committee took into account principles similar to those underlying the new 2018 STI Plan described above. Mr. Rippert’s 2017 bonus was generally based 50% on the performance of the mortgage group under his leadership, 20% on Group financial performance and 30% on achievement of strategic metrics, as described below. His target bonus was increased to 135% of base salary based on external market data at median, together with various other factors such as consistent high performance, value delivery to the Company, retention and successful tenure.

The Group financial performance metrics considered were primarily the performance results for open underwriting years under the Company’s longstanding formula-based incentive compensation plan that applies to executives at the segment and investment units. That plan generally bases payouts on achievement of return on capital targets for the current underwriting year and prior underwriting years whose ten year development periods remain open, and, in the case of the investment unit, investment returns over one, three and five years. The Group financial performance metrics represent the weighted average results under the plan formula for the insurance, reinsurance, mortgage and investment operating groups determined for 2017. The level of goal achievement for the open underwriting years was 110%, which would result (under the principles of the 2018 STI Plan as described above) in a payout factor of 137% of target for the Group financial goal portion of bonuses.

The level of goal achievement for the open underwriting years under the formula plan for the mortgage segment was 118%, which would result in a payout factor (under the principles of the 2018 STI Plan as described above) of 136% of target for the Segment financial goal portion of bonuses.

The strategic metrics considered for Mr. Rippert included the Company’s continued strong performance in relation to its peer group and Mr. Rippert’s oversight of the mortgage group during the year and the group’s strong profitability. The Committee also took into account Mr. Rippert’s role in overseeing a smooth integration of UGC, which was acquired by us on December 31, 2016, into the business and

2018 PROXY STATEMENT | 42

operations of the Company. The Committee also considered his oversight of risk management activities, including the programmatic use of the capital markets through the Bellemeade transactions, and strategic initiatives, including the closing of the acquisition of AIG United Guaranty Insurance (Asia) Limited during the year. The Committee’s determination of the level of his performance would, under the principles of the 2018 STI Plan, result in a performance multiplier of 175% on the portion of his bonus that was based on strategic performance.

Based generally on the considerations outlined above, the Committee determined that Mr. Rippert’s annual bonus for 2017 would be $1,299,000 (inclusive of amounts calculated under the mortgage segment’s formulaic plan for prior underwriting years).

Long-Term Incentive

Mr. Rippert received a long-term incentive grant in May 2017 valued at $789,652, consisting of restricted common shares (80% of the value) and stock options (20% of the value), as reported in the 2017 Summary Compensation Table.

How We Make Decisions

Committee Review

The Committee reviews the performance of, and approves the compensation paid to, the chief executive officer and the other named executive officers. The chief executive officer assists in the reviews of the named executive officers other than himself through making recommendations on goals and objectives, evaluating performance and making recommendations regarding compensation. With this input from the chief executive officer with respect to the other named executive officers, the Committee uses its judgment in determining compensation for these officers.

The Committee meets in executive sessions (without management present) as necessary, particularly when administering any aspect of the compensation program for the president and chief executive officer of Arch Capital. Compensation matters in respect of the president and chief executive officer of Arch Capital, the chief financial officer of Arch Capital, the general counsel of Arch Capital Services Inc., and other senior executives designated by the Committee are subject to ratification by the Board.

In determining the amount of named executive officer compensation each year, the Committee reviews overall corporate performance, the performance of the business unit or function that the executive leads and an assessment of each executive’s performance. In connection with establishing levels of base salary, annual incentives, long-term incentives and benefits, the Committee reviews

information compiled from annual reports on Form 10-K, proxy statements and other publicly available information for a representative sample of publicly-traded insurers and reinsurers which we believe compete directly with us for executive talent (the “Peer Group”). Many of these selected peers are of generally similar size and have generally similar numbers of employees, product offerings and geographic scope. See below.

The Committee also reviews extensive historical competition data, including comprehensive tally sheets.

Role of Compensation Consultant

In March 2017, the Committee selected and directly retained the services of Meridian Compensation Partners, LLC (“Meridian”), an independent executive compensation consulting firm. The Committee assessed the independence of Meridian pursuant to SEC and NASDAQ rules and concluded that no conflict of interest exists that would prevent Meridian from serving as an independent consultant to the Committee. At the Committee’s request, Meridian has been providing significant input for the Committee’s review of the Company’s director and executive compensation programs in 2017. Meridian did not provide any other services to the Company and no other fees were paid to Meridian except fees related to their services to the Committee.

Selected Competitors

We used compensation data derived from the Peer Group when making certain compensation decisions. We periodically review the companies in our Peer Group.

The table below describes the multi-step filtering exercise used to choose the Peer Group:

How the Peer Group Was Chosen
Step 1: Industry Filters	Select industries relative to Arch Capital’s business operations.
Step 2: Size Filters	Filter companies based on revenue and asset size.
Step 3: Additional Objective Filters	Remove Real Estate Investment Trusts, Financial Exchanges and Investment Banks / Brokerage companies.
Step 4: Additional Subjective Filters	Review business descriptions and additional financial measures.

43 | 2018 PROXY STATEMENT

The table below describes the three primary functions for the Peer Group:

How We Use the Peer Group
Pay Comparisons	Determine competitive pay levels and identify differences from general industry market data.
	Assess ability to attract, retain, engage and motivate top talent.
Compensation Structure	Provide benchmarks for compensation structure (pay mix, performance metrics, leverage, vehicles, etc.).
	Use as a foundation or reference when making design changes to the compensation program.
Performance Comparisons	Determine performance relative to companies facing similar business challenges.
	Input to setting incentive plan goals.

The Peer Group for 2017 was comprised of 22 competitors as follows:

2017 Peer Group

Alleghany Corporation

American Financial Group, Inc.

AmTrust Financial Services, Inc.

Argo Group International Holdings, Ltd.

Aspen Insurance Holdings Limited

Assurant, Inc.

AXIS Capital Holdings Limited

CNA Financial Corporation

Cincinnati Financial Corporation

Essent Group Ltd.

Everest Re Group, Ltd.

First American Financial Corporation

The Hanover Insurance Group, Inc.

The Hartford Financial Services Group

Markel Corporation

Old Republic International Corporation

Radian Group Inc.

RenaissanceRe Holdings Ltd.

Selective Insurance Group, Inc.

Validus Holdings, Ltd.

W. R. Berkley Corporation

XL Group Ltd

Relationship Between Compensation Policies and Risk Management

We believe our approach to evaluation of performance and the design of our compensation programs assists in

mitigating excessive risk-taking that could harm our Company and have concluded that there is no excessive risk inherent in our programs. We emphasize long-term compensation that is tied to Arch Capital’s performance. Furthermore, the Formula Approach included in our Incentive Compensation Plan, which is applied to employees in our insurance, reinsurance and mortgage groups, is based on underwriting performance during a given underwriting year. For each underwriting year, the bonus pool will be recalculated annually as actual underwriting results emerge, and any resultant payments will be made to the participants over a 10-year development period. Since much of our business requires multiple years to determine whether we have been successful in our assessment of risk, we have structured our plan in this manner so that incentive payments are made to employees as actual results become known, which effectively aligns pay with performance. In addition, a substantial component of variable compensation is granted in the form of multi-year vesting share-based awards, which make stock price appreciation over an extended period of time fundamental in realizing a compensation benefit.

Arch Capital’s compensation philosophy and related governance features are also complemented by several specific elements that are designed to align our compensation with long-term shareholder interests. These elements include the following:

Clawback Policy: A clawback policy covering all executive officers, including the chief executive officer, which provides for affected incentive-based compensation to be recouped by the Company in the event we are required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws.

Share Ownership guidelines and Share Holding Requirements: In an effort to further align the interests of the senior management team with the interests of shareholders, Arch Capital has share ownership guidelines and share holding requirements that together require our senior executives to maintain designated levels of ownership of the common shares of Arch Capital.

No Hedging Permitted: Under the insider trading policy included in our Code of Business Conduct, our named executive officers and other members of senior management are not permitted to engage in hedging activities with respect to Arch Capital’s securities.

Procedures Regarding Share-Based Compensation:

The Committee, or a sub-committee comprised of at least two of its members, approves all grants of share-based compensation to the named executive officers and other executives who file Section 16 reports with the SEC, and

2018 PROXY STATEMENT | 44

these awards have generally also been approved by the full Board. The Committee, or a sub-committee, approves annual share-based awards to other employees or, alternatively, may approve the size of the pool of such annual share-based awards to be granted to other employees, but may delegate to the chief executive officer and other members of senior management the authority to make and approve specific awards to other employees. In addition, the Committee has delegated to the chief executive officer or, in his absence, the chief financial officer, the authority to make and approve specific share-based awards to non-executives, principally new hires, who are not subject to Section 16 of the Exchange Act. The Committee reviews any grants made under this delegation on a regular basis.

Our practice is to determine the grant date for annual grants of share-based compensation on the dates of regularly scheduled meetings of the full Board. Our process for establishing the grant date soon after the May meeting of our Board provides assurance that grant timing is not being manipulated for employee gain. Generally, awards are granted to the named executive officers as part of the annual process, which encompassed 809 employees worldwide for awards granted in 2017 for 2016 performance. We may grant a small percentage of awards at other times throughout the year on the date of regularly scheduled meetings of the Committee or the full Board in connection with hiring or the promotion of an executive or special retention circumstances. In the case of new hire, the awards have grant dates corresponding to the date the employment commences for the new hire.

Additional Compensation Policies and Practices

Clawback Policy

The Company has a clawback policy covering all executive officers, including the chief executive officer. This policy provides that, in the event that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, the Committee will review all incentive-based compensation that was paid to current or former executive officers during the three-year period preceding the required restatement. If any such incentive-based compensation would have been lower as a result of the restated financial results, the Committee will require the reimbursement of the incremental portion of the incentive-based compensation in excess of the compensation that would have been paid based on the restated financial results (to the extent permitted by applicable law). This policy will be interpreted in accordance with the applicable rules of NASDAQ (or other securities

exchange on which our common shares are listed from time to time).

Share Ownership Guidelines

In an effort to further align the interests of the senior management team with the interests of shareholders, the Company has share ownership guidelines that require these executives to maintain designated levels of ownership of the common shares of Arch Capital. Specifically, these guidelines require common share ownership levels as follows: (1) chief executive officer of Arch Capital—six times base salary; (2) named executive officers and other executives who file reports under Section 16 of the Exchange Act and certain other members of senior management designated from time to time—four times base salary; and (3) other designated members of senior operating management—three times base salary. Each executive has five years to comply with the guidelines, and stock options, SARs and unvested restricted shares/units do not count toward the requirement. See also “Director Compensation—Matters Relating to Director Share Ownership” for a description of share ownership guidelines that require our non-employee directors to maintain designated levels of ownership of common shares of Arch Capital.

Share Holding Requirements for Executives

To ensure each of our senior executives meets our share ownership guidelines, the Company requires each senior executive retain 50% of the net profit shares received from Company equity awards until the executive meets target ownership levels. Net profit shares are the shares remaining after payment of the exercise price of an option and taxes owed on exercise of options or SARs, vesting of restricted stock, or vesting and payout under restricted stock units and performance shares. See also “Director Compensation—Matters Relating to Director Share Ownership” for a description of share retention guidelines that require our non-employee directors to maintain designated levels of ownership of common shares of Arch Capital.

No Hedging Permitted

Under the insider trading policy included in our Code of Business Conduct, our named executive officers and other members of senior management are not permitted to engage in hedging activities with respect to the Arch Capital’s securities. Specifically, these insiders may not engage in short sales, purchases on margin or buying or selling put options or call options with respect to our securities. See also “Director Compensation—Matters Relating to Director Share Ownership” for a description of comparable restrictions with respect to hedging activities by our non-employee directors.

45 | 2018 PROXY STATEMENT

Options and SARs

Our plans do not permit granting of stock options or SARs at an exercise price below the closing price on the grant date and also do not allow for repricing or reducing the exercise price of a stock option or SAR. We also do not allow out-of-the-money options or SARs to be exchanged for cash or other property. We set the exercise price of stock options and SARs at the closing share price on the date of grant.

No Excise Tax Gross-Ups

The Company does not provide excise tax gross-up payments to any of its executives in connection with change in control payments.

No Tax Gross-Ups

Effective for 2018, the Company will no longer include tax gross-up provisions in employment agreements and has eliminated tax gross-ups on certain perquisites and benefits provided to our named executives. The Company provides our named executive officers with benefits that we believe are reasonable and consistent with our overall compensation program to better enable the Company to attract and retain key employees. These perquisites and benefits primarily relate to those executives who work and reside in Bermuda and are typical of such benefits provided to expatriates located in Bermuda, such as housing allowances and home leave for executives and family working outside their home country. Prior to 2018, in certain of these situations, we provided an additional payment to reimburse the executive for approximate amounts of additional tax liability the executive will need to pay as a result of receiving these benefits. In 2018, we have reviewed and adjusted the amount of the underlying benefits and eliminated the practice of providing tax gross-ups on these benefits.

Limits on Pledging

Our Code of Business Conduct discourages the pledging of our common shares as collateral for loans since inception. In 2018, we recently adopted a provision that continues to discourage pledging for all employees, and have added a new limitation on pledging for all executive officers and directors. Specifically, our revised policy provides that: 

▪ in no event may any executive officer or director of the Company pledge an amount of common shares that exceeds the lesser of 30% of the common shares beneficially owned by the individual (as reported or would be reported in our proxy statement) or 0.5% of the then outstanding common shares of Arch Capital; and

▪ any securities pledged would not count toward satisfying any required ownership level of securities under relevant share retention guidelines.

Double Trigger Change in Control Provision

The award agreements for the named executive officers provide that, in the event that the officer’s employment is terminated by the Company other than for cause or by the officer for good reason within two years following the consummation of a change in control, unvested awards would immediately vest, and the options and SARs would have a remaining term of 90 days from termination. In the event of termination for any reason other than as indicated above in this section, all unvested awards would be forfeited, and the holder may exercise vested options and SARs for a period of 90 days from termination. The foregoing description is qualified in its entirety by reference to the award agreements.

Tax Considerations

Section 162(m)

Section 162(m) of the Code generally limits the deductible amount of annual compensation paid to a “covered employee” (i.e., the chief executive officer, chief financial officer and certain other current or former executive officers) to no more than $1,000,000 each. Since Arch Capital will not generally be subject to United States income tax, the limitation on deductibility will not directly apply to it. However, the limitation would apply to a United States subsidiary of Arch Capital if it employs a covered employee. The Committee believes that its primary responsibility is to provide a compensation program that will attract, retain and reward the executive talent necessary to our success. Consequently, the Committee recognizes that the loss of a tax deduction could be necessary or advisable in some circumstances due to the restrictions of Section 162(m).

Sections 409A and 457A

Section 409A of the Code, which governs deferred compensation arrangements, generally provides that distributions of deferred compensation to our senior officers as a consequence of termination of employment may not be made sooner than six months after termination. Section 409A also governs the timing of elections and distributions with respect to deferred compensation. In addition, Section 457A of the Code generally prohibits U.S. taxpayers from deferring U.S. income tax on compensation attributable to services performed after December 31, 2008 for certain employers, including Bermuda-based employers such as Arch Capital and Arch Re Bermuda. As a result, for periods on or after January 1, 2009, certain employees of Arch Capital, including Messrs. Iordanou, Grandisson, Lyons and Papadopoulo are no longer permitted to participate in the non-qualified defined contribution retirement plan. In lieu of pension and matching contributions previously provided to these former participants through the non-qualified plan, we provide comparable benefits to these

2018 PROXY STATEMENT | 46

participants in the form of current cash payments subject to taxation. In addition, in light of Section 457A, and in an effort to maintain comparable benefits for all employees, the Company has provided certain of its Bermuda-based employees who are U.S. taxpayers with the opportunity to receive a portion of their annual incentive bonus in the form of stock options or restricted shares. There is no matching or additional Company contributions associated with this

election and, as a result, the Company will not incur any additional expense by providing this benefit. As required in order to match income inclusions mandated by Section 457A, the non-qualified plan provided that compensation that was previously deferred by these employees would be distributed on or before December 31, 2017, with the exception of Mr. Lyons. Such distributions were made in December of 2017.

Report of the Compensation Committee on the Compensation Discussion and Analysis

The Committee reviewed and discussed the “Compensation Discussion and Analysis” section included in this proxy statement with management. Based on such review and discussion, the Committee recommended to the Board that the “Compensation Discussion and Analysis” section be included in the 2017 Annual Report and this proxy statement for filing with the SEC.

COMPENSATION COMMITTEE

Eugene S. Sunshine (chairman)

John L. Bunce, Jr.

Louis J. Paglia

John M. Pasquesi

47 | 2018 PROXY STATEMENT

Compensation Committee Interlocks and Insider Participation

During 2017, the compensation committee consisted of John L. Bunce, Jr., Kewsong Lee, Deanna Mulligan and Eugene S. Sunshine. Ms. Mulligan and Mr. Lee resigned from the committee in February 2017 and November 2017, respectively, and John M. Pasquesi was added to the committee in February 2017. Mr. Bunce served as chairman of the committee until he was succeeded by Mr. Sunshine in November 2017.

From time to time, in the ordinary course of our business, we may enter into transactions, including insurance and reinsurance transactions and brokerage or other arrangements for the production of business, with entities in which companies or funds affiliated with directors of Arch Capital may have an ownership or other interest.

Kewsong Lee, a director of Arch Capital until November 2, 2017, resigned from Arch Capital’s Board because of the expansion of his duties at The Carlyle Group (“Carlyle”) following his promotion to co-CEO effective January 1, 2018. As part of its investment philosophy, the Company invests a portion of its investment portfolio in alternative investment funds. As of December 31, 2017, the total value of the Company’s investments in funds or other investments managed by Carlyle was approximately $293.0 million, and the Company had aggregate unfunded commitments to funds managed by Carlyle of $468.8 million. The Company may make additional commitments to funds managed by Carlyle from time to time. During 2017, 2016 and 2015, the Company made aggregate capital contributions to funds managed by Carlyle of $131.8 million, $62.1 million and $116.5 million, respectively. During 2017, 2016 and 2015, the Company received aggregate cash distributions from funds managed by Carlyle of $55.6 million, $21.5 million and $44.6 million, respectively.

In the ordinary course of its investment activities, The Guardian Life Insurance Company of America (“Guardian”) invests funds in equity and debt securities of many companies, and from time to time may own equity and/or debt securities of the Company. In connection with our senior note offering in December 2013, Guardian purchased $30 million of the Arch Capital Group (U.S.) Inc. 5.144% senior notes due in 2043. In connection with our senior note offering in November 2016, Guardian purchased $20 million of Arch Capital Finance LLC’s 5.031% senior notes due in 2046. Deanna M. Mulligan, who served as a director of Arch Capital and a member of the compensation committee until her resignation from the Board on February 23, 2017, is President and Chief Executive Officer of Guardian.

Certain of our directors and executive officers acquired shares of Watford Holdings Ltd. (“Watford”) at the time of its launch in March 2014 at the same price per share paid by other investors. We own common and preferred interests in Watford and have the right to designate two members of Watford’s six member board of directors. We consolidate Watford’s financial results under applicable accounting principles. See “—Ownership of Watford Holdings Ltd. Shares” in this Proxy Statement and notes 4 “Variable Interest Entity and Noncontrolling Interests” and 5 “Segment Information,” of the notes accompanying our consolidated financial statements included in our 2017 Annual Report (as defined below) for more information about Watford.

During 2015, a subsidiary of Arch Capital, Arch Reinsurance Company (“Arch Re U.S.”), invested $8 million for an approximately 19% equity interest in Sojourner Holding Company LLC, which through its subsidiary Spinnaker Insurance Company (“Spinnaker”), conducts a property-focused program business. In connection with its investment, the Company has the right to appoint one member of Sojourner’s board of managers, and also has a right of first refusal to provide, on market terms, a specified percentage of certain reinsurance purchased by Spinnaker. At the same time, Otter Capital Partners LP (“OCP”) invested $10 million on the same economic terms for an approximately 24% equity interest in Sojourner. The general partner of OCP is Otter Capital LLC and John M. Pasquesi, one of Arch Capital’s directors, serves as the sole member. Otter Capital also has the right to appoint one member of Sojourner’s board of managers. We have a right of first refusal on certain of the business of Spinnaker, and, from time to time, may enter into reinsurance transactions with Spinnaker in the ordinary course of business. Arch Re U.S. entered into a quota share agreement with Spinnaker covering property risks which renewed in June 2017 at a 30% share and generated net premiums written and earned of $1.1 million and $1.4 million, respectively, for 2017. Arch Re U.S. also entered into property catastrophe excess of loss agreements with Spinnaker which renewed in June 2017 and generated net premiums written and earned of $313,000 and $114,000, respectively, for 2017. Additionally, in November 2016, Arch Re Bermuda entered into a quota share agreement with Spinnaker Insurance covering property business, with a 40% share, which generated net premiums written and earned of $42,000 and $52,000, respectively, for 2017.

2018 PROXY STATEMENT | 48

Executive Compensation Tables

The following tables, narrative and footnotes discuss the compensation of the chief executive officer, chief financial officer and the four other most highly compensated executive officers during 2017, who are referred to as the named executive officers.

2017 Summary Compensation Table

The following table provides information concerning the compensation for services in all capacities earned by the named executive officers for fiscal year 2017.

Name and Principal Position	Year	Salary ($)	Annual Bonus ($)		UGC Acquis. Bonus ($)(1)		Stock Awards ($)(2)	Option Awards ($)(2)	Non-Equity Incentive Plan Compen-sation ($)	Change in Pension Value and Non-qualified Deferred Compen-sation Earnings ($)	All Other Compen-sation ($)		Total ($)
Constantine Iordanou*	2017	1,000,000	5,000,000		—	(3)	4,572,350	1,171,673	—	—	1,008,073	(4)	12,752,096
Chairman of the Board and Class II Director of Arch Capital	2016	1,000,000	4,550,000		1,500,000	(3)	3,305,370	805,054	—	—	1,050,962		12,211,386
	2015	1,000,000	4,050,000		—	(3)	3,632,166	935,124	—	—	995,269		10,612,559
Marc Grandisson*	2017	900,000	3,000,000		—		2,233,232	572,270	—	—	426,243	(5)	7,131,745
President, Chief Executive Officer and Class III Director of Arch Capital	2016	900,000	2,500,000		1,200,000		832,437	202,748	—	—	416,167		6,051,352
	2015	775,000	2,250,000		—		914,448	235,430	—	—	421,646		4,596,524
Mark D. Lyons	2017	700,000	1,365,000		—		785,482	201,281	—	—	501,529	(6)	3,553,292
Executive Vice President, Chief Financial Officer and Treasurer of Arch Capital	2016	700,000	1,200,000		900,000		579,336	141,103	—	—	450,917		3,971,356
	2015	700,000	1,080,000		—		636,301	163,820	—	—	421,439		3,001,560
Nicolas Papadopoulo	2017	675,000	3,816,414	(7)	—		2,635,311	1,399,596	—	—	362,353	(8)	8,888,674
Chairman and Chief Executive Officer of Arch Worldwide Insurance Group and Chief Underwriting Officer for the Property & Casualty Group	2016	650,000	2,500,000	(7)	—		524,127	127,656	—	—	368,690		4,170,473
	2015	—	—		—		—	—	—	—	—		—
Maamoun Rajeh	2017	556,250	1,182,000		—	(9)	1,523,236	386,823	—	—	495,772	(10)	4,144,081
Chairman and Chief Executive Officer of Arch Worldwide Reinsurance Group	2016	—	—		—		—	—	—	—	—		—
	2015	—	—		—		—	—	—	—	—		—
Andrew T. Rippert	2017	650,000	1,299,000		—	(11)	628,578	161,074	—	—	380,479	(12)	3,119,131
Chairman and Chief Executive Officer of Arch Worldwide Mortgage Group	2016	—	—		—		—	—	—	—	—		—
	2015	—	—		—		—	—	—	—	—		—

_________________________

* Effective March 3, 2018, Marc Grandisson succeeded Constantine Iordanou as CEO of Arch Capital. Mr. Iordanou served as CEO until March 2, 2018, and continues to serve as Chairman of the Board.

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(1) Represents an additional bonus to reflect the named executive officers’ role in connection with the UGC acquisition, which closed on December 31, 2016. Please see “Compensation Discussion and Analysis—2017 Performance Highlights” and “Compensation Discussion and Analysis—2017 Compensation Decisions.”

(2) The amounts shown in these columns represent the aggregate grant date fair value of awards computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 Compensation—Stock Compensation, excluding the effect of forfeitures. We have computed the estimated grant date fair values of share-based compensation related to stock options using the Black-Scholes option valuation model having applied the assumptions set forth in the notes accompanying our financial statements. See note 20, “Share-Based Compensation,” of the notes accompanying our consolidated financial statements included in our 2017 Annual Report. These grants were made in May of the year for which they are reported and were based on performance for the prior year, e.g., the 2017 awards were based on 2016 performance.

(3) Mr. Iordanou elected to receive 100% of his approved cash bonuses for 2017, 2016 and 2015 in the form of stock options under elections provided by the Company for Bermuda-based employees. On March 1, 2018, February 24, 2017 and February 26, 2016, Mr. Iordanou was awarded 212,480, 250,468, and 244,750 stock options respectively, with a Black-Scholes value equal to $5.0 million, $6.05 million and $4.05 million, respectively, but each with an intrinsic value of zero on the grant date, respectively. The stock options awarded to Mr. Iordanou are fully vested and will expire 10 years from the date of grant. The stock options granted on February 24, 2017 are included in the Grants of Plan-Based Awards table.

(4) The amount for Mr. Iordanou includes: (a) contributions to our defined contribution plans of $32,790 and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of $105,850, which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of $137,419; (c) incremental costs to the Company of $451,458 resulting from the use of Company-provided aircraft primarily for commuting to the Company’s offices; and (d) an aggregate of $183,972 for additional payments pursuant to his employment agreement intended to reimburse the executive for approximate amounts of additional tax liability arising from his working and residing in Bermuda. The tax reimbursement payments are subject to adjustment—up or down—based upon the executive’s final tax return filed for the year (accordingly, such amount originally recorded for 2016 and 2015 has been adjusted). The calculation of the incremental cost for Company-provided aircraft use is based on the variable operating costs to the Company for each flight, including hourly charges, fuel variable charges and applicable international fees. In addition, the total amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Iordanou: an automobile allowance, tax preparation services, club dues, and life insurance premiums.

Many of the above listed benefits are provided to expatriates residing in Bermuda. For a description of these benefits and the Company’s other employee benefits programs, please see “Compensation Discussion and Analysis—Elements of Compensation Program—Benefits.”

(5) The amount for Mr. Grandisson includes: (a) contributions to our defined contribution plans of $20,000 and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of $91,350 which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of $210,754; (c) fees for children’s schooling of $61,829; and (d) payment of Bermuda social insurance in the amount of $1,792. In addition, the amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Grandisson: an automobile allowance, tax preparation services, family travel, club dues, and life insurance premiums.

Many of the above listed benefits are provided to expatriates residing in Bermuda. For a description of these benefits and the Company’s other employee benefits programs, please see “Compensation Discussion and Analysis—Elements of Compensation Program—Benefits.”

(6) The amount for Mr. Lyons includes: (a) $32,790 in contributions to our defined contribution plans and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of $62,350, which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of $79,101; (c) payment of Bermuda social insurance in the amount of $1,792; and (d) an aggregate of $269,478 for additional payments pursuant to his employment agreement intended to reimburse the executive for approximate amounts of additional tax liability arising from his working and residing in Bermuda. The tax reimbursement payments are subject to adjustment—up or down—based upon the executive’s final tax return filed for the year (accordingly, such amount originally recorded for 2016 and 2015 has been adjusted). In addition, the total amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Lyons: commercial jet for commuting to the Company’s offices, tax preparation services, and life insurance premiums.

Many of the above listed benefits are provided to expatriates residing in Bermuda. For a description of these benefits and the Company’s other employee benefits programs, please see “Compensation Discussion and Analysis—Elements of Compensation Program—Benefits.”

(7) The 2016 amount for Mr. Papadopoulo, who previously participated in the Formula Approach through the 2014 underwriting year, includes a payment of $1,171,364 based on the calculated results for prior underwriting years under such Formula Approach. The 2017 amount includes a payment received by Mr. Papadopoulo in December of 2017 of $2,316,414 in full settlement of his entitlements under the Formula Approach.

(8) The amount for Mr. Papadopoulo includes: (a) contributions to our defined contribution plans of $20,000 and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of $58,725, which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of $219,290; and (c) payment of Bermuda social insurance in the amount of $1,792. In addition, the amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Papadopoulo: fees for children’s schooling, automobile allowance, tax preparation services, family travel, club dues, and life insurance premiums.

Many of the above listed benefits are provided to expatriates residing in Bermuda. For a description of these benefits and the Company’s other employee benefits programs, please see “Compensation Discussion and Analysis—Elements of Compensation Program—Benefits.”

(9) The 2017 amount for Mr. Rajeh, who previously participated in the Formula Approach through the 2017 underwriting year, includes a payment of $851,547 based on the calculated results for prior underwriting years under such Formula Approach.

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(10) The amount for Mr. Rajeh includes: (a) contributions to our defined contribution plans of $32,790 and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of $41,506, which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of $197,403; (c) payment of Bermuda social insurance in the amount of $1,792; and (d) an aggregate of $129,742 for additional payments pursuant to his employment agreement intended to reimburse the executive for approximate amounts of additional tax liability arising from his working and residing in Bermuda. In addition, the amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Rajeh: fees for children’s schooling, automobile allowance, tax preparation services, family travel, club dues, and life insurance premiums.

Many of the above listed benefits are provided to expatriates residing in Bermuda. For a description of these benefits and the Company’s other employee benefits programs, please see “Compensation Discussion and Analysis—Elements of Compensation Program—Benefits.”

(11) The 2017 amount for Mr. Rippert, who previously participated in the Formula Approach through the 2016 underwriting year, includes a payment of $375,261 based on the calculated results for prior underwriting years under such Formula Approach.

(12) The amount for Mr. Rippert includes: (a) contributions to our defined contribution plans of $32,790 and payment of an amount equal to the pension and matching contributions set forth in the non-qualified deferred compensation plan of $55,100, which, due to applicable tax laws, was made outside the plan; (b) a housing allowance in Bermuda of $148,939; (c) payment of Bermuda social insurance in the amount of $1,792; and (d) an aggregate of $104,458 for additional payments pursuant to his employment agreement intended to reimburse the executive for approximate amounts of additional tax liability arising from his working and residing in Bermuda. In addition, the amount also includes the following other benefits, none of which individually exceeded the greater of $25,000 or 10% of the total amount of these benefits for Mr. Rippert: tax preparation services, family travel, and life insurance premiums.

Many of the above listed benefits are provided to expatriates residing in Bermuda. For a description of these benefits and the Company’s other employee benefits programs, please see “Compensation Discussion and Analysis—Elements of Compensation Program—Benefits.”

2017 Grants of Plan-Based Awards

The following table provides information concerning grants of share-based awards made to our named executive officers in fiscal year 2017:

Name	Grant Date	Estimated Future Payouts Under Non-Equity Incentive Plan Awards	Estimated Future Payouts Under Equity Incentive Plan Awards	All Other Stock Awards: Number of Shares of Stock or Units (#)(1)	All Other Option Awards: Number of Securities Underlying Options (#)(1)		Exercise or Base Price of Option Awards($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)(2)
Constantine Iordanou	2/24/2017	—	—	—	250,468	(3)	94.54	6,049,979
	5/8/2017	—	—	—	47,500		96.26	1,171,673
	5/8/2017	—	—	47,500	—		—	4,572,350
Marc Grandisson	5/8/2017	—	—	—	23,200		96.26	572,270
	5/8/2017	—	—	23,200	—		—	2,233,232
Mark D. Lyons	5/8/2017	—	—	—	8,160		96.26	201,281