STANDBY LETTER OF CREDIT AGREEMENT

In consideration of National Australia Bank Limited, New York Branch (the
“Bank”) issuing its irrevocable standby letter of credit (the “Credit”)
substantially in the form of Exhibit A hereto in favor of the Beneficiary
identified therein (as defined in the Credit, the “Beneficiary”), XL Capital
Ltd, a company incorporated under the laws of the Cayman Islands, X.L. America,
Inc., a Delaware corporation, XL Insurance (Bermuda) Ltd, a Bermuda limited
liability company, XL Europe Ltd, a company incorporated under the laws of
Ireland, and XL Re Ltd, a Bermuda limited liability company, jointly and
severally (collectively the “Applicants”), hereby agree with the Bank as
follows:

1.   The Applicants unconditionally agree to pay to the Bank, on demand in
immediately available funds (in United States Dollars), on each date on which a
disbursement is made by the Bank pursuant to the Credit, an amount equal to such
disbursement. If payment is not made on the date of disbursement, such amount
shall bear interest (based on a 360-day year and actual days elapsed) from the
date of disbursement until paid in full, but excluding the date paid, at a rate
per annum equal to the rate of interest from time to time announced by the Bank
as its prime rate plus 2%.

2.   The Applicants agree to pay to the Bank, (a) on the date hereof, an upfront
fee in the amount of US$ 50,000.00 and (b) quarterly in arrears and on the date
on which the Credit expires, letter of credit fees (based on a 360-day year and
actual days elapsed) in an amount equal to 0.425% per annum of the amount
available to be drawn under the Credit from time to time.

3.   The obligations of the Applicants hereunder are joint and several, shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with terms of this Agreement, irrespective of any of the following
circumstances: (a) any lack of validity or enforceability of the Credit or any
document or instrument relating thereto; (b) the existence of any claim, setoff,
defense or other rights which any of the Applicants may have at any time against
the Bank, the Beneficiary or any other person or entity, whether in connection
with this Agreement or any unrelated transaction; (c) any document presented
under the Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect
whatsoever; (d) payment by the Bank under the Credit against presentation of a
draft or certificate which does not strictly comply with the terms of the
Credit, provided such payment shall have been made by the Bank in good faith and
without gross negligence and payment is made against presentation of a draft or
other document that at least substantially complies with the terms of the letter
of credit; (e) any agreement by the Bank and the Beneficiary extending or
shortening the Bank’s time after presentation to examine documents or to honor
or give notice of discrepancies; or (f) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, provided that the
same shall not constitute gross negligence or bad faith on the part of the Bank.
Without limiting any other provision of this Agreement, the Bank: (i) may rely
upon any oral, telephonic, facsimile, electronic, written or other communication
believed by it in good faith to have been authorized by any Applicant, the
Beneficiary or anyone acting for any of them; (ii) shall not be responsible for
errors, omissions, interruptions or delays in transmission or delivery of any
message, advice or document in connection with the Credit, whether transmitted
by courier, mail, telecommunication or otherwise, or for errors in
interpretation of technical terms or in translation; (iii) shall not be
responsible for the identity or authority of any signer or the form, accuracy,
genuineness or legal effect of any draft, certificate or other document
presented under the Credit; and (iv) may accept as a draft any written or
electronic demand or other request for payment under the Credit, even if such
demand or other request is not in the form of a negotiable draft.

4.   If after the date hereof, the adoption of or any change in any law or
regulation or in the interpretation thereof by, or compliance by the Bank with
any guideline or request from any central bank or other authority charged with
the administration thereof (whether or not having the force of law) shall
impose, modify or deem applicable any (a) reserve, special deposit or similar
requirement against letters of credit issued by the Bank or (b) any capital
adequacy or similar requirement (including without limitation a requirement
which affects the manner in which the Bank allocates capital to letters of
credit), and the result thereof shall be to increase the cost to

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the Bank of issuing or maintaining the Credit (which increase in cost shall be
calculated in accordance with the Bank’s reasonable averaging and attribution
methods) or to reduce the rate of return on the Bank’s capital as a consequence
of its obligations under the Credit to a level below that which the Bank could
have achieved but for such circumstances, then the Applicants shall pay to the
Bank within 10 days of demand such additional amount or amounts as shall
compensate the Bank for such increase in cost or reduction in rate of return. A
certificate of the Bank as to such additional amount or amounts shall be
conclusive, absent manifest error.

5.   Any and all payments made by any Applicant hereunder shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, excluding taxes on or based on the
overall net income of the Bank (all such non-excluded taxes, levies, imposts,
deductions, charges and withholdings being hereinafter referred to as “Taxes”).
If an Applicant shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder to the Bank, (a) the sum payable shall be increased
as may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Paragraph) the Bank
receives an amount equal to the sum it would have received had no such
deductions been required and (b) such Applicant shall pay the full amount
deducted to the relevant taxing authority in accordance with applicable law and
shall provide the Bank with the original or a certified copy of the receipt
evidencing such payment.

6.   Should any of the following events (each an “Event of Default”) occur, the
Applicants shall pay to the Bank, on demand, for application to drawings under
the Credit the entire amount thereof which has not been drawn: (a) the
Applicants fail to make payment when due of any amount payable under this
Agreement and such failure continues unremedied for at least 3 days, (b) any
representation made in any financial statement or in any certificate or other
writing delivered to the Bank by or on behalf of any Applicant in connection
with this Agreement or the Credit is in any material respect false or misleading
when made, (c) an event of default under, and as defined in, the 364-Day Credit
Agreement dated as of June 25, 2003 among the Applicants, as account parties and
guarantors, various lenders parties thereto and JPMorgan Chase Bank, as
administrative agent (the “Credit Agreement”) occurs and is continuing; or (d)
the Applicants or any of them fail to observe or perform any covenant, condition
or agreement in the Credit Agreement or in any amendment thereof, supplement
thereto or replacement therefor and, in the case of covenants, conditions and
agreements other than negative covenants, such failure continues unremedied for
at least 20 days after notice thereof from the Bank. Any amount so paid which
has not been drawn at the expiration of the Credit shall be repaid to the
Applicants, without interest, upon the payment in full of all other amounts
owing hereunder.

7.   Promptly after the occurrence of an Event of Default or an event which with
the giving of notice or the passage of time, or both, would constitute an Event
of Default, the Applicants shall notify the Bank of such event, together with a
statement setting forth the actions being taken by the Applicants to remedy the
same.

8.   The Applicants agree to reimburse all reasonable attorney’s fees paid or
incurred by the Bank in the enforcement of its rights and remedies hereunder.

9.   The Applicants agree at all times to protect, indemnify and save harmless
the Bank from and against any and all losses, claims, demands, liabilities,
damages, costs, charges, counsel fees and other expenses which the Bank may at
any time incur by reason of the issuance and performance of the Credit except to
the extent resulting from the Bank’s gross negligence or willful misconduct.

10.   Each Applicant hereby consents to the non-exclusive jurisdiction of any
court of record in the City of New York or of the United States District Court
for the Southern District of New York for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement or the
Credit, and service of process by the Bank in any such suit, action, proceeding
or judgment may be made by mailing a copy thereof to such Applicant at its
address set forth in Paragraph 14 below. The Applicant also waives any claim
that New York County or the Southern District of New York is an inconvenient
forum.

11.   THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH NEW
YORK LAW.

12.   No failure on the part of the Bank to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Bank of any right,
remedy or power hereunder preclude any other or future exercise of any other
right, remedy or power. Each and every right,

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remedy and power hereby granted to the Bank or allowed it by law or other
agreement shall be cumulative and not exclusive the one of any other and may be
exercised by the Bank from time to time.

13.   The Bank shall provide the Applicants with not less than 60 days prior
written notice of its intent not to renew the term of the Credit.

14.   All demands for payment, notices or other communications hereunder shall
be given in writing (including communications by facsimile transmission) and
shall be addressed:

   If to the Bank, at 200 Park Avenue, New York, New York 10166, attention:
Letter of Credit Department, Fax No. (212) 983-1969; and

   If to the Applicants, c/o XL Capital Ltd, at XL House, One Bermudiana Road,
Hamilton, HM 11 Bermuda, attention: Mr. Roddy Gray, Fax No. (441) 296-6399;

or to such other address as such party may designate by notice to the other
parties.

15.   This Agreement shall be binding upon the Applicants and their successors,
assigns, and legal representatives, and shall inure to the benefit of, and be
enforceable by, the Bank, its successors and assigns. Neither the Bank nor the
Applicants may assign any of its rights or obligations under this Agreement
without the prior written consent of the other. Such consent not to be
unreasonably withheld.

16.   EACH APPLICANT AND THE BANK IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL
IN ANY ACTION OR PROCEEDING BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE
CREDIT OR ANY DEALINGS WITH ONE ANOTHER RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT.

IN WITNESS WHEREOF, the Bank and the Applicants have entered into this Agreement
as of the 25th day of July, 2003.

  NATIONAL AUSTRALIA BANK LIMITED (ABN 12 004 044 937), New York Branch

    By:   /s/ Dennis Cogan    

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      Name:    Dennis Cogan       Title:    Senior Vice President

  XL CAPITAL LTD

    By:   /s/ Roddy Gray    

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      Name: Roddy Gray       Title: Vice President & Deputy Treasurer

  X.L. AMERICA, INC.

    By:   /s/ Charles F. Barr    

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      Name:    Charles F. Barr       Title:    Vice President

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  XL INSURANCE (BERMUDA) LTD

    By:   /s/ Christopher A. Coelho    

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      Name: Christopher A. Coelho       Title: Senior Vice President & Chief
Financial and Operating Officer

  XL EUROPE LTD

    By:   /s/ Fiona Muldoon    

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      Name: Fiona Muldoon       Title: Chief Financial Officer & Company
Secretary

  XL RE LTD

    By:   /s/ James O’Shaughnessy    

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      Name: James O’Shaughnessy       Title: Senior Vice President & Chief
Financial Officer

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