Exhibit 10.4

 
EXECUTION VERSION
 
 
 
 

   
XL RE LTD (UK BRANCH)

AND

XL LIFE REINSURANCE (SAC) LTD. (FOR ITSELF AND ACTING IN RESPECT OF ITS
SEGREGATED ACCOUNT XL-1)

 
RETROCESSION AGREEMENT
 

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CONTENTS
Clause
Page
1.    Interpretation
1
2.    Insuring Clause
18
3.    Retrocession Premium
19
4.    Time on Risk Adjustment
20
5.    Effective Date and Termination
20
6.    Reporting Information
24
7.    Relevant Accounts
24
8.    Collateral Obligations
25
9.    Audit Rights
28
10.    Undertakings
29
11.    Agreed Capital and Dividends
31
12.    Negative Pledge
32
13.    Segregated Accounts
32
14.    Retrocessionaire Capital Account
33
15.    Set-Off
34
16.    Confidentiality
34
17.    Data Protection
35
18.    Currency
35
19.    Announcements
36
20.    Costs
36
21.    Further Assurance
36
22.    Entire Agreement
37
23.    Waivers
37
24.    Contracts (Rights of Third Parties) Act 1999
38
25.    Severability
38

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26.    Variation
38
27.    Assignment and Subcontracting
38
28.    Notices
38
29.    Governing Law
39
30.    Expert Resolution
39
31.    Jurisdiction
40
32.    Process Agent
40
33.    Delays, Errors and Omissions
41
34.    Counterparts
41
 
 
Schedule 1 Retroceded Policies
 
Part A SPA Business
 
Part B Non-SPA Business
 
Part C Security Agreements
 
Part D Ancillary Documents
 
Schedule 2 Client Account Reporting Information
 
Part A Client Account Report Information
 
Part B Relevant Account Report Information
 
Part C Client Account Report Format
 
Schedule 3 Agreed Capital Level
 
Schedule 4 Investment Management Arrangements
 
Part A Management of Retrocedant Assets
 
Part B Management of Retrocessionaire’s Assets
 
Part C Disputes
 
Part D Delivery of Reports and Notices
 
Part E Liability of XL GIL and the XL Retrocedants
 
Schedule 5 Initial Funds-Withheld Portfolio
 

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Agreed Form Documents
 
1. Client Account Report
 
2.    Relevant Account Report
 
3.    SIMA(s)
 
4.    Non-SPA Retrocedant Guidelines
 
5.    SPA Retrocedant Guidelines
 
6.    Participation Agreement
 
7.    Retrocessionaire Guidelines
 
8.    Deed of Charge
 
9.    Investment Management Governance and Operating Framework
 
 
 

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THIS AGREEMENT is made on 30 May 2014
BETWEEN:
(1)
XL Re Ltd, (UK Branch) a company incorporated under the laws of Bermuda
(registered no. EC21291) whose registered branch address is at XL House, 70
Gracechurch Street, London EC3V 0XL, England (the "Retrocedant");

(2)
XL Life Reinsurance (SAC) Ltd., an exempted company incorporated in Bermuda with
registration No. 49002 and registered as a segregated accounts company under the
SAC Act (as defined below), whose registered office is at O'Hara House, One
Bermudiana Road, Hamilton, HM08, Bermuda (the "Company"); and

(3)
XL Life Reinsurance (SAC) Ltd., an exempted company incorporated in Bermuda with
registration No. 49002 and registered as a segregated accounts company under the
SAC Act (as defined below), whose registered office is at O'Hara House, One
Bermudiana Road, Hamilton, HM08, Bermuda acting in respect of its segregated
account XL‑1 (the "Retrocessionaire"),

each a "Party" and together "the Parties".
INTRODUCTION:
(A)
The Company is incorporated in Bermuda as a segregated accounts company pursuant
to the SAC Act (as defined below), licensed as a Class C insurer pursuant to the
Insurance Act (as defined below) and has established the Retrocessionaire for
the purpose of reinsuring the Retroceded Policies.

(B)
The Retrocedant has agreed that the Retrocessionaire will reassure it in respect
of the Retroceded Policies.

(C)
The Parties wish to record the terms of the above agreement in this Agreement.

The Parties agree as follows:
1.
INTERPRETATION

"Account Date" means 1 January 2014 and thereafter each 1 April, 1 July, 1
October and 1 January in each year and the last "Account Date" shall be the
first such date falling after the last Reporting Date;
"Actuary" means the Retrocedant's Actuary and/or the Retrocessionaire's Actuary
(as the context requires);
"Administration Services Agreement" means the services agreement to be entered
into between the Service Provider and XL Services UK Limited, the Retrocedant
and XL Re Europe (acting through its UK branch) providing for the transfer of
certain resources from the XL Group to the Service Provider and the provision of
certain administration services for the benefit of the XL Retrocedants;

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"Affiliate" means with respect to any person, at the time in question, any other
person controlling, controlled by or under direct or indirect common control
with such person. For this purpose "control" means the power to direct or cause
the direction of the management or policies of a person through the ownership of
securities, by contract or otherwise and the terms "controlling" and
"controlled" shall be construed accordingly;
"Agreed Capital Level" means as at a Relevant Date, the amount determined in
accordance with the provisions of Schedule 3;
"Applicable Law and Regulation" means, at any time, and in respect of a Party,
any and all of the following as applicable to that Party and in force at that
time:
(a)
legislation (including enactments, statutes, statutory instruments, treaties,
regulations, orders, directives, by-laws and decrees) and common law, in each
case applicable to the relevant Party from time to time in the context of the
performance of its obligations under the Agreement or enjoyment of its rights
under this Agreement;

(b)
binding regulatory rules and binding codes of conduct, directions, rules and
guidance issued by, in the case of the Retrocedant, the BMA and the UK
Regulators and, in the case of the Retrocessionaire and the Company, the BMA (or
any rules from time to time in force which replace such rules), such rules and
guidance as reasonably interpreted by a Party in accordance with any specific
advice or individual guidance provided to that Party by the relevant regulator
in respect of that rule (a "Regulatory Requirement"); and

(c)
judgments, resolutions, decisions, orders, directions, notices, demands or other
requirements of a competent court, tribunal or the BMA or the UK Regulators in
the case of the Retrocedant and the BMA in the case of the Company and the
Retrocessionaire;

"Balance" means for the purposes of calculating a Call Amount or Return Amount
the balance standing to the credit of a Relevant Account valued in accordance
with the Valuation Basis, which shall be deemed to be increased by the amount of
$16.4m in the case of the Funds-Withheld Accounts, but only until such time as
any amount due to the Retrocedant or the Retrocessionaire pursuant to Clause
4.2.1 or 4.2.2 as applicable, is paid; provided, however, that in no event shall
the Balance take into account any assets deposited in or credited to such
Relevant Account by the Retrocedant or on its behalf by a member of the XL Group
as contemplated by Clause 7.8;
"Base Amount" means in respect of a Security Account, the amount the Retrocedant
is required to maintain in that Security Account pursuant to the Security
Agreement applicable to such Security Account or as operated by the Retrocedant
as at the date of this Agreement;
"BMA" means the Bermuda Monetary Authority;
"Board Resolution" means the resolution approved by the Board on 25 April 2014
pursuant to which the Retrocessionaire was created;

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“Buffer Percentage” means 1%;
"Business Day" means any day other than a Saturday or Sunday or public or bank
holiday in England and Bermuda;
"Buyer's Group Undertaking" means Holdco or a company which is, at any time on
or after the date of this Agreement, a subsidiary or holding company of Holdco
or a subsidiary of a holding company of Holdco and includes the Company after
the date of completion of the sale of the Company to Holdco pursuant to the Sale
and Purchase Agreement;
"Call Amount" means in respect of:
(a)
a Security Account, the amount (if any) by which the Balance of that Security
Account as of any Valuation Date is less than the Collateral Amount for that
Security Account as of such Valuation Date; or

(b)
the Funds-Withheld Accounts, the amount (if any) by which the aggregate Balance
of the Funds-Withheld Accounts as of any Valuation Date is less than the
Collateral Amount for the Funds-Withheld Accounts as of such Valuation Date;

“Call Amount Default” means, with respect to any Relevant Account, the failure
by the Retrocessionaire to pay any Call Amount with respect to such Relevant
Account on or prior to the Due Date therefor in accordance with the terms of
this Agreement and such Call Amount Default shall be deemed to continue until
such time as the Call Amount due in respect of such Relevant Account (as
adjusted as of any Valuation Date), together with all interest accrued thereon
in accordance with Clause 8.10, is paid by the Retrocessionaire to the
Retrocedant;
"Call Amount Default Period" means the period commencing as of the Business Day
immediately following the occurrence of either a Call Amount Default as defined
in this Agreement or a "Call Amount Default" as defined in either of the other
XL Retrocession Agreements and shall continue until such time as no Call Amount
Default under this Agreement nor any "Call Amount Default" as defined in either
of the other XL Retrocession Agreements is continuing;
"Call Notice" has the meaning given to it in Clause 8.4;
"Capital Notice" has the meaning given to it in Clause 11.2;
"Capital Notice Challenge" has the meaning given to it in Clause 11.3;
"Capital Requirements" means the regulatory capital requirements of the Company
and/or the Retrocessionaire calculated in accordance with the Insurance Act;
"Centre of Main Interest" has the meaning given to it in the EC Council
Regulation of 29 May 2000 on insolvency proceedings (1346/2000/EC);

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"Change of Control" means the occurrence of an event following the completion of
the sale of the Company and the Retrocessionaire to Holdco pursuant to the Sale
and Purchase Agreement whereby:
(a)
Holdco or the Investors, in aggregate, ceases to legally and beneficially own
100% of the issued and outstanding ordinary shares of capital stock of the
Company or any such shares become subject to any encumbrance that is not removed
within 30 days;

(b)
Holdco ceases to be the sole beneficial owner of the Retrocessionaire or any
such beneficial interest become subject to any encumbrance;

(c)
the Company or the Retrocessionaire amalgamates, merges or consolidates with or
into any other person or issues any securities, or any instruments convertible
or exchangeable into securities, or otherwise conveys to any person any right to
acquire any securities of the Company or the Retrocessionaire;

(d)
the Retrocessionaire transfers, including by way of reinsurance, all or
substantially all of its business, liabilities or assets;

(e)
Holdco amalgamates, merges or consolidates with or into any other person or
issues any securities, or any instruments convertible or exchangeable into
securities, or otherwise conveys to any person other than the Investors any
right to acquire any securities of Holdco; or

(f)
any Investor sells, disposes of or transfers any of its interest in Holdco other
than, pursuant to a transfer permitted by the Investor Support and Undertakings
Agreement;

"Client Account Report " means the report in the agreed form to be delivered
pursuant to Clause 6.1, reflecting the Client Account Report Information in
respect of each Retroceded Policy;
"Client Account Report Information" means the information specified in Part A of
Schedule 2, to be provided by the Retrocedant in respect of each Retroceded
Policy and reflected in the Client Account Report;
"Client Account Reporting Period" means a period of one Quarter;
"Closing Excess Assets" means $35m at the date of this Agreement, reducing by
$7m on each of the first five anniversaries of this Agreement;
"Collateral Amount" means:
(a)
in the case of a Security Account, the sum of: (i) the Base Amount as at the
Relevant Date; and (ii) an amount as at the Relevant Date, equal to the Base
Amount multiplied by the Buffer Percentage; or

(b)
in the case of the Funds-Withheld Accounts, the sum of: (i) the aggregate

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Value of the Funds-Withheld Reserves as at the Relevant Date; and (ii) an amount
as at the Relevant Date equal to the Funds-Withheld Reserves multiplied by the
Buffer Percentage;
"Collateral Fee" means an interest rate equal to the 5-year U.S. treasury bond
rate plus 700 basis points;
“Collateral Fee Payment Date” has the meaning given to it in Clause 8.9;
“Collateral Fee PIK Amount” means, as of any date, the amount of any Collateral
Fees added to the Collateral Fee PIK Amount pursuant to Clause 8.9, less the
amount of any Collateral Fee PIK Amounts repaid by the Retrocessionaire pursuant
to Clause 8.9;
"Constitutional Documents" means the following documents:
(a)
the memorandum of association of the Company;

(b)
the bye-laws of the Company; and

(c)
the Participation Agreement;

"Conversion Rate" means, in respect of any amount to be converted from one
currency into a second currency, the relevant rate used by the Retrocedant in
the preparation of its accounts will be treated as the prevailing rate as at the
Relevant Date;
"Costs" means all losses, liabilities, costs (including legal costs and experts'
and consultants' fees), charges, expenses, actions, proceedings, claims and
demands;
"Cross-Agreement Recapture Event" means an event which gives rise to the
obligation to pay a Recapture Amount (as defined in each of the XL Retrocession
Agreements respectively) under more than one of the XL Retrocession Agreements;
"Currency Block" means, in respect of the Retrocedant, all Retroceded Policies
ceded to this Agreement by the Retrocedant that are denominated in a particular
currency;
"Custodian" means such authorised person serving from time to time as the
custodian of a Security Account and/or the Funds-Withheld Accounts;
"Data Protection Laws" means, in relation to a Party, the laws and regulations
applicable to that Party regulating data protection, data privacy and/or the
protection of personal and/or sensitive information, including, where
applicable: the relevant principles of the Insurance Code of Conduct issued by
the Bermuda Monetary Authority in February 2010 relating to the safeguard of
sensitive information and the requirements for appropriate risk management
procedures relating to the same; and laws implementing EU Directive 95/46/EC
(including for example the UK Data Protection 1998);
"Deed of Charge" means the Bermuda law governed fixed and floating charge
entered into on the same date as this Agreement between (1) the
Retrocessionaire; (2) the Retrocedant; (3) XL Re and (4) XL Re Europe SE;

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"Difference" means the amount (whether positive or negative) determined by the
sum of: (i) the Recapture Amount determined by the Retrocedant's Actuary; less
(ii) the Recapture Amount determined by the Expert pursuant to Clause 30;
"Dispute" has the meaning given to it in Clause 31.1;
"Distribution" means every description of dividend or distribution of the
Retrocessionaire's assets to its beneficial owner(s) whether in cash or
otherwise;
"Due" has the meaning given under section 4.90(4) of the Insolvency Rules 1986;
"Due Date" has the meaning given to it in Clause 8.10;
"Effective Date" means 1 January 2014;
"Event of Default" means any event or circumstance referred to in Clause 5.2;
"Expert" has the meaning given to it in Clause 30.1;
"External Retrocession Agreements" means the following agreements:
(a)
a retrocession agreement between the Retrocedant and the Irish Branch of Sun
Life Assurance Company of Canada dated 30 August 2004 with reference number
XLRE001; and

(b)
a retrocession agreement between the Retrocedant and the Irish Branch of Sun
Life Assurance Company of Canada dated 30 November 2005 with reference number
XLRE002;

"Funds-Withheld Accounts" means the cash and securities accounts established by
the Retrocedant in relation to the Non-SPA Business, for the purposes of this
Agreement;
"Funds-Withheld Assets" means the assets from time to time deposited in or
otherwise standing to the credit of the Funds-Withheld Accounts;
"Funds-Withheld Reserves" means in respect of the Retroceded Policies relating
to the Non-SPA Business identified:
(a)
with a reserve basis "B" in Schedule 1, an amount as at the Relevant Date, equal
to 110% of the amount of the reserves calculated in accordance with the
methodology the Retrocedant reflects in the XL Group financial reports in
accordance with US GAAP (or such other accounting principles, practices or
standards as may succeed US GAAP); or

(b)
with a reserve basis "C" in Schedule 1, an amount as at the Relevant Date, equal
to 100% of the reserves calculated in accordance with the methodology the
Retrocedant reflects in its annual return to the UK Regulators;

"Guidance Notes" means the guidance notes issued by the Insurance Department of
the BMA, as amended or supplemented from time to time;

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"Guidelines" means the Non-SPA Retrocedant Guidelines and/or the SPA Retrocedant
Guidelines as the context requires;
"Holdco" means GreyCastle Holdings Ltd, a company incorporated under the laws of
Bermuda whose registered office is at Clarendon House, 2 Church Street,
Hamilton, Bermuda;
"In-Force" means, in respect of any reassurance or retrocession treaty or
agreement, such treaty or agreement if, and only if, the Retrocedant has any
liability or potential liability under it;
"Initial Funds-Withheld Portfolio means the cash and investment assets set out
in Schedule 5.
"Insolvency Event" means, in respect of the Company, the Retrocessionaire or
Holdco (unless otherwise specified below):
(a)
that person is or becomes insolvent, it is, or becomes, unable, or admits its
inability to pay, its debts as they fall due, suspends making payments on any of
its debts or, by reason of actual or anticipated financial difficulties,
commences negotiations with one or more of its creditors (or any class of them)
with a view to rescheduling any of its indebtedness;

(b)
the value of the assets of that person is or becomes less than its liabilities
(taking into account contingent and prospective liabilities), in each case
calculated and determined on the basis of, and by reference to either the
relevant regulatory returns or the relevant accounts;

(c)
a moratorium is declared in respect of that person’s indebtedness;

(d)
any corporate action, regulatory action, legal proceedings, or other procedure
or step is taken for:

(i)
the suspension of payments by, or a moratorium of any indebtedness, winding-up
(including a petition for winding up presented against the Company by the BMA
pursuant to Section 35 of the Insurance Act), dissolution, administration or
reorganisation (by way of voluntary arrangement, scheme of arrangement or
otherwise, but in each case other than a voluntary and solvent liquidation, or a
reorganisation, for the purposes of reconstruction or amalgamation) of, that
person;

(ii)
a composition, compromise, assignment or arrangement with one or more of that
person’s creditors or any class of them;

(iii)
the appointment of a liquidator, receiver, administrative receiver,
administrator, examiner, trustee in bankruptcy, compulsory manager or other
similar officer in respect of all or substantially all of that person’s assets
(including, in the case of the

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Retrocessionaire, the appointment of a receiver over its business and assets in
accordance with the provisions of the SAC Act); or
(iv)
enforcement of any security over all or a substantial part of that person’s
assets, and

where such corporate action, legal proceedings or other procedure or step is
taken by any third party other than that person and its directors, the action,
proceedings, procedure or step (as the case may be) is not discharged, stayed or
dismissed within fifteen (15) days;
(e)
an encumbrancer takes possession of the whole or any substantial part of the
assets of that person or distress or execution is levied or enforced upon or
sued out against the whole or any substantial part of that person's assets and,
in the case of any of the foregoing events, the matter is not discharged, stayed
or dismissed within fifteen (15) days;

(f)
any matter, or the occurrence of any event, in any jurisdiction which
corresponds with, or has an effect equivalent to, or is otherwise analogous to,
any of the matters or events referred to at any of (a) to (e) (in each case
inclusive) above; or

(g)
the Retrocessionaire or the Company ceases or suspends or threatens to cease or
suspend all or a material part of its operations or business for a period of
more than 20 Business Days;

"Insurance Act" means the Insurance Act 1978 (as amended) of Bermuda and its
related regulations;
"Interests" means all rights and obligations of a Non-Lead Investor in
connection with its direct or indirect investment in the Retrocessionaire and
its obligations in respect of Investor Capital Calls, including its obligations
set out in the Investor Support and Undertakings Agreement and the Investor
Contingent Capital Commitments (as such term is defined in the Investor Support
and Undertakings Agreement);
"Investment Management Costs" means any Costs consisting of: (i) investment
management fees and other costs or expenses of any XL External Managers, (ii)
costs or expenses of any Custodians, and (iii) costs and expenses of third-party
accountants, in each case that are suffered or incurred by the Retrocedant or
XLGIL in connection with the operation of the Security Accounts and/or the
Funds-Withheld Accounts, in the case of clause (iii) not to exceed three basis
points of the assets under management in the Security Accounts and the
Funds-Withheld Accounts per annum and, in each such case, including, without
limitation, (x) any costs and expenses incurred in terminating or appointing any
XL External Managers or Custodians, and (y) any withholding payments, taxes,
fees, duties, levies and contributions or charges in the nature of a tax
(whether supranational, domestic or foreign) on or associated with any of the
foregoing amounts (including, without limitation, VAT and any E.U. “financial
transactions tax” or similar taxes), and any penalty or interest connected
therewith. In addition, following a Retrocessionaire Change of Authority,
Investment Management Costs shall also include all of the foregoing types of
Costs suffered or incurred by the Retrocedant or

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XLGIL in managing the assets of the Retrocessionaire, as well as any: (i)
investment management fees and other costs or expenses of any Retrocessionaire
Managers (including any costs and expenses incurred in terminating or appointing
any Retrocessionaire Managers), (ii) third party costs and expenses incurred by
XLGIL in connection with the management of the assets of the Retrocessionaire,
and (iii) XLGIL’s internal costs and expenses incurred in connection therewith
(including the cost of the time expended by personnel of XLGIL with respect to
any such activities).
"Investment Management Governance and Operating Framework" means the governance
framework in the agreed form in relation to investment management to be adopted
by the Retrocessionaire;
"Investor Capital Calls" means the mandatory commitments imposed on the
Investors under the Sale and Purchase Agreement, the Investor Support and
Undertaking Agreement and the Investor Contingent Capital Commitments (as such
term is defined in the Investor Support and Undertakings Agreement), requiring
them to contribute cash to the Retrocessionaire upon the terms and conditions
set forth therein;
"Investor Contingent Capital Commitment Letter" has the meaning given in the
Sale and Purchase Agreement;
"Investor Support and Undertakings Agreement" means the agreement between the XL
Retrocedants, the Retrocessionaire, the Company, Holdco and the Investors dated
on or about 30 May 2014;
"Investors" means all holders of share capital from time to time in Holdco;
"Lead Investors" means the Investors so identified in the Investor Support and
Undertakings Agreement and such other person who from time to time acquires the
rights and/or obligations of such persons, whether by assignment, novation,
operation of law or otherwise;
"Losses" means, without limiting in any way the provisions of Clause 2.4, the
gross amount of any:
(a)
liability for losses, claims, payments, other Costs made and/or incurred and
settlements under or in respect of the Retroceded Policies and risks ceded and
attaching to the Retroceded Policies, including ex-gratia payments, "without
prejudice" payments, extra contractual payments arising under a Retroceded
Policy, punitive settlements and interest payments;

(b)
liability for payments to Underlying Cedants in consequence of recapture,
novation or termination of Retroceded Policies, premium rebates, returns
(including in respect of errors in calculations performed by an Underlying
Cedant prior to the Effective Date), refunds, surrender payments, commissions,
brokerage, and profit share payments in respect of the Retroceded Policies;

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(c)
regulatory levies (including to the extent applicable levies under the United
Kingdom Financial Services Compensation Scheme), but not fines, penalties or
other financial sanctions, to the extent referable to the Retroceded Policies;

(d)
any Costs relating to any disputes with Underlying Cedants in respect of a
Retroceded Policy;

(e)
any Costs associated with complying with a periodic payment order relating to a
Retroceded Policy;

(f)
any Costs, including interest payable, in respect of the late payment of amounts
owed under a Retroceded Policy;

(g)
allocated external loss adjustment expenses in respect of the Retroceded
Policies;

(h)
liability for premiums payable under any External Retrocession Agreements; and

(i)
any other Costs relating to the Retrocedant's obligations as reinsurer under the
Retroceded Policies which is suffered or incurred by the Retrocedant and which
is not otherwise excluded under this Agreement,

and includes, for the avoidance of doubt, any irrecoverable VAT component of the
losses in (d) above;
"Maximum Investor Capital Call Amount" means as of any date the aggregate
maximum amounts under all Investor Contingent Capital Commitment Letters;
"Net Retained Losses" means the Losses of the Retrocedant net of any amounts
actually recovered by the Retrocedant in respect of those Losses under any
External Retrocession Agreement;
"Non-Lead Investor" means any Investor other than a Lead Investor;
"Non-SPA Business" means the Retroceded Policies identified in Part B of
Schedule 1;
"Non-SPA Premium" has the meaning given to it in Clause 3.1.2;
"Non-SPA Retrocedant Guidelines" means the investment guidelines in the agreed
form in relation to the management of the Funds-Withheld Assets, as may be
amended or modified from time to time in accordance with Clause 10.6 and
Schedule 4;
"Notice of Challenge" has the meaning given to it in Clause 8.13;
"Participation Agreement" means the agreement between the Company, the
Retrocessionaire and the XL Retrocedants establishing a participation interest
in the Retrocessionaire in favour of the XL Retrocedants, dated on or about the
date of this Agreement;

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"Period of Risk" means the period commencing on the Effective Date and ending on
the earlier of: (a) the date on which the last of the Retroceded Policies ceases
to be In-Force; or (b) the date on which the Retroceded Policies are recaptured
in accordance with Clause 5;
"Permitted Assets" means:
(a)
in respect of the SPA Business, assets permitted to be held in the Security
Accounts under both the relevant Security Agreement and the SPA Retrocedant
Guidelines; or

(b)
in respect of the Non-SPA Business, assets permitted to be held under the
Non-SPA Retrocedant Guidelines;

"Potential Event of Default" means any event or circumstance which might
reasonably be expected to become an Event of Default;
"Premium" means together the SPA Premium and the Non-SPA Premium;
"Proceedings" has the meaning given to it in Clause 31.3;
"Process Agent" has the meaning given to it in Clause 32.1;
"Quarter" means a calendar quarter ending on one of 31 March, 30 June, 30
September or 31 December in any relevant year;
"Recapture Agreement Period" has the meaning given to it in Clause 5.4;
"Recapture Amount" means the sum of:
(a)
an amount equal to the Reserves in respect of the recaptured Retroceded
Policies, calculated as at the relevant Valuation Date; less

(b)
an amount equal to the aggregate Value as at the relevant Valuation Date, of the
assets deposited in or otherwise standing to the credit of all of the Relevant
Accounts, subject to Clause 5.7;

"Reinsured Event" means any and all risks reinsured by the Retrocedant pursuant
to the Retroceded Policies;
"Relevant Accounts" means the Security Accounts and/or the Funds-Withheld
Accounts as the context requires;
"Relevant Account Information" means the information in Part B of Schedule 2 to
be provided by the Retrocedant in respect of each Relevant Account and to be
reflected in the Relevant Account Report;
"Relevant Account Period" means each period from and including an Account Date
to, but excluding, the next following Account Date, save that on termination of
this Agreement the last Relevant Account Period shall be from and including the
Account

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Date falling in the immediately preceding Relevant Account Period to, but
excluding, the date of termination;
"Relevant Account Report" means the report in the form to be agreed to be
delivered pursuant to Clause 6.2, reflecting the Relevant Account Information in
respect of each Relevant Account;
"Relevant Agreement" has the meaning given to it in Clause 5.8.2;
"Relevant Date" means for the purpose of any calculation or the determination of
any right or liability, the date as at which such calculation is to be carried
out or as at which such right or liability is to be determined as specified in
this Agreement or, if such day is not a Business Day, the Business Day
immediately preceding such day;
"Replaced Assets" has the meaning given to it in Clause 8.15.1;
"Reporting Date" means the 10th Business Day of each Quarter and the last
"Reporting Date" shall be the first such date falling after termination of this
Agreement;
"Reserves" means the provisions the Retrocedant is or would be required to make
to cover its reinsurance liabilities arising under or in connection with its
obligations in respect of the Retroceded Policies following recapture pursuant
to Clause 5.3 of the business ceded to the Retrocessionaire, calculated in
accordance with Applicable Law and Regulation applying to reinsurers in the
United Kingdom or, if greater, such provisions calculated on the basis on which
the Retrocedant operates the SPA Business;
"Retroceded Policies" means, at any time, such of the reassurance and
retrocession treaties and agreements listed in Parts A and B of Schedule 1 as
are In-Force at that time;
"Retrocedant's Actuary" means the person appointed by the Retrocedant from time
to time to perform the function referred to in 4.3.13R of the Supervision Manual
of the Relevant Regulator Handbook of Rules and Guidance;
"Retrocessionaire Capital Account" means the account established pursuant to
Clause 14;
"Retrocessionaire Capital Account Assets" means the assets from time to time
credited to the Retrocessionaire Capital Account;
“Retrocessionaire Change of Authority” has the meaning given to it in Clause
5.9;
"Retrocessionaire Guidelines" means the investment guidelines in relation to the
management of the assets of the Retrocessionaire, as may be amended or modified
from time to time in accordance with Clause 10.6 and Schedule 4;
"Retrocessionaire IMA(s)" means the investment management agreement(s) entered
into from time to time between the Retrocessionaire and one or more
Retrocessionaire Managers pursuant to Clause 10.6 and Schedule 4, setting out
the terms on which the assets of the Retrocessionaire may be managed on behalf
of the Retrocessionaire in

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accordance with the Retrocessionaire Guidelines, in a form meeting the
requirements of the provisions of Schedule 4;
"Retrocessionaire Manager" means any investment manager appointed by the
Retrocessionaire in accordance with the provisions of Schedule 4 to manage its
assets;
"Retrocessionaire Uncured Breach" has the meaning given to it in paragraph 2.1.1
of Part B of Schedule 4;
"Retrocessionaire's Actuary" means the person appointed from time to time by the
Retrocessionaire to perform the function referred to in section 26 of the
Bermuda Insurance Act 1978 and the Guidance Note #9;
"Return Amount" means in respect of:
(a)
a Security Account, the amount (if any) by which the Balance of that Security
Account as of any Valuation Date is more than the Collateral Amount for that
Security Account as of such Valuation Date; or

(b)
the Funds-Withheld Accounts, the amount (if any) by which the aggregate Balance
of the Funds-Withheld Accounts as of any Valuation Date is more than the
Collateral Amount for the Funds-Withheld Accounts as of such Valuation Date;

"Return Notice" has the meaning given to it in Clause 8.4;
"SAC Act" means the Segregated Accounts Companies Act 2000 (as amended) of
Bermuda;
"Sale and Purchase Agreement" means the agreement between Holdco as "Purchaser"
and XL Insurance (Bermuda) Limited as "Seller", dated 1 May 2014;
"Security" means any mortgage, charge (whether fixed or floating, legal or
equitable) pledge, lien, assigned by way of security or other security interest
securing any obligation of any person.
"Security Accounts" means the accounts secured in favour of the Underlying
Cedants, established pursuant to the Security Agreements by the Retrocedant to
support the Retrocedant's obligations under the Retroceded Policies relating to
the SPA Business;
"Security Account Assets" means the assets from time to time deposited in or
otherwise standing to the credit of a Security Account;
"Security Agreements" means the security agreements which relate to the SPA
Business as listed in Part C of Schedule 1 and the ancillary documents relating
thereto as listed in Part D of Schedule 1;
"Segregated Account Matters" means any dispute, controversy or claim arising out
of or relating to (i) the validity and effectiveness of the establishment and
operation of the Company and/or the Retrocessionaire under the SAC Act (ii) the
application or

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interpretation of the SAC Act, or (iii) compliance with or the interpretation or
effect of Clause 13 (Segregated Accounts) of this Agreement.
"Service Provider" means GreyCastle Services Limited, a company incorporated
under the laws of England and Wales (registered no. 09019536), whose registered
office is at 20‑22 Bedford Row, London, WC1R 4JS;
"SIMA" means one or more sub-investment management agreement entered into from
time to time between XL GIL acting on behalf of the Retrocedant, the
Retrocessionaire and one or more XL External Managers pursuant to Clause 10.6
and Schedule 4, setting out the terms on which the Funds-Withheld Assets and the
Security Account Assets may be managed on behalf of the Retrocedant in
accordance with the Guidelines, in the agreed form, as revised from time to time
in accordance with the provisions of Schedule 4;
"SPA Business" means the Retroceded Policies identified in Part A of Schedule 1;
"SPA Premium" has the meaning given to it in Clause 3.1;
"SPA Retrocedant Guidelines" means the investment guidelines in the agreed form
in relation to the management of the Security Account Assets, as may be amended
from time to time in accordance with Clause 10.6 and Schedule 4;
"Substitution Notice" has the meaning given to it in Clause 8.14;
"Total Premium" has the meaning given to it in Clause 3.2.2;
"Transaction Documents" means together this Agreement, the Administration
Services Agreement, the SIMA(s), the Security Agreements, the Floating Charge,
the Guidelines, the Retrocessionaire IMA(s), the other XL Retrocession
Agreements, the Investor Support and Undertakings Agreement, the Constitutional
Documents, the Transitional Services Agreement and the Retrocessionaire
Guidelines;
"Transitional Services Agreement" has the meaning given in the Sale and Purchase
Agreement;
"Trigger Event Date" has the meaning given in the Investor Support and
Undertakings Agreement;
"UK Regulators" means the Prudential Regulation Authority and the Financial
Conduct Authority and any successors thereto;
"Uncured Breach" has the meaning given to it in paragraph 2.3.1 of Part A of
Schedule 4;
"Underlying Cedants" means the persons identified in the column headed
"Underlying Cedant" in the table in Schedule 1;
"USD" or "$" means the lawful currency of the United States of America;

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"Valuation Agent" means:
(a)
with respect to a Security Account, the "Valuation Agent" as defined in a
Security Agreement; and

(b)
for the purpose of Clause 4.2, the date of this Agreement;

(c)
with respect to the Funds-Withheld Accounts, the Retrocedant's Actuary;

"Valuation Basis" means:
(a)
in the case of a Security Account, the valuation methodology set out in the
Security Agreement applicable to such Security Account as applied by the
Retrocedant as at the date of this Agreement; and

(b)
in the case of the Funds-Withheld Accounts, the actuarial principles disclosed
from time to time to the Retrocessionaire and the Retrocessionaire's Actuary and
used by the Retrocedant as at the Relevant Date to value the assets backing the
Funds-Withheld Reserves which the Retrocedant is required to maintain for
regulatory purposes;

"Valuation Date" means:
(a)    Left intentionally blank
(a)
in respect of the calculation of the Recapture Amount the date of termination of
this Agreement; or

(b)
when determining if a Call Amount or Return Amount exists in respect of a
Security Account, a "Valuation Date" as defined in the relevant Security
Agreement; or

(c)
when determining if a Call Amount or a Return Amount exists in respect of a
Funds-Withheld Account, the last Business Day of June and December in each year;

"Value" means the value of any assets deposited in or otherwise standing to the
credit of a Relevant Account as at the Relevant Date calculated on the relevant
Valuation Basis;
"Working Capital Assets" means all cash or other liquid assets of the
Retrocessionaire (excluding amounts due to it from the Retrocedant pursuant to
Clause 3);
"XL External Manager" means any investment manager appointed by the Retrocedant
to manage the Funds-Withheld Assets and/or the Security Account Assets (as
applicable) in accordance with the provisions of Schedule 4;
"XL GIL" means XL Group Investments Ltd, a company incorporated in Bermuda
(registered no. EC29781) whose registered office is at O'Hara House, One
Bermudiana Road, Hamilton, HM08, Bermuda or an Affiliate or successor entity
thereof;

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"XL Group" means the Retrocedant and any company which is, on or at any time
after the date of this Agreement, a subsidiary or holding company of the
Retrocedant, or a subsidiary of a holding company of the Retrocedant;
"XL Life" means XL Life Ltd, a company incorporated under the laws of Bermuda
(registered no. EC24082) whose registered office is at O'Hara House, One
Bermudiana Road, Hamilton HM08, Bermuda;
"XL Re" means XL Re Ltd, a company incorporated under the laws of Bermuda
(registered no. EC21291) whose registered office is at O'Hara House, One
Bermudiana Road, Hamilton, HM08, Bermuda;
"XL Re Europe" means XL Re Europe SE (formerly known as, inter alia, XL Re
Europe Limited), a European company formed under Council Regulation (EC) No.
2157/2001 of 8 October 2001 (registered no. 423311) whose registered office is
at 8 St Stephen's Green, Dublin 2, Ireland;
"XL Retrocedants" means the Retrocedant, XL Re and XL Re Europe;
"XL Retrocession Agreements" means together, this Agreement, the XL Re
Retrocession Agreement and the XL Re Europe Retrocession Agreement;
"XL Re Europe Retrocession Agreement" means the retrocession agreement between
XL Re Europe, the Company and the Retrocessionaire dated the same date as this
Agreement;
"XL Re Retrocession Agreement" means the retrocession agreement between XL Re,
the Company and the Retrocessionaire dated the same date as this Agreement; and
"XL Services UK Limited" a company incorporated under the laws of England and
Wales (registered no. 02816304), whose registered office is at XL House, 70
Gracechurch Street, London EC3V 0XL, England.
1.1
In this Agreement, a reference to:

1.1.1
a "holding company" or "subsidiary" shall have the meaning given in Section 86
of the Bermuda Companies Act 1981 as enacted and amended from time to time. A
subsidiary and a subsidiary undertaking shall include any person the shares or
ownership interests in which are subject to security and where the legal title
to the shares or ownership interests so secured are registered in the name of
the secured party or its nominee pursuant to such security;

1.1.2
liability under, pursuant to or arising out of (or any analogous expression) any
agreement, contract, deed or other instrument includes a reference to contingent
liability under, pursuant to or arising out of (or any analogous expression)
that agreement, contract, deed or other instrument;

1.1.3
a document in the "agreed form" is a reference to a document in a form approved
by the Parties and for the purposes of identification initialled by or on behalf
of each Party and annexed hereto;

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1.1.4
a statutory provision (except where stated otherwise) includes a reference to
the statutory provision as modified or re enacted or both from time to time
whether before or after the date of this Agreement and any subordinate
legislation made under the statutory provision (as so modified or re enacted)
whether before or after the date of this Agreement except to the extent that any
modification or re-enactment made after the date of this Agreement would create,
increase or alter the liability of any party under this Agreement;

1.1.5
a "person" includes a reference to any individual, firm, company, corporation or
other body corporate, government, state or agency of a state or any joint
venture, association or partnership, works council or employee representative
body (whether or not having separate legal personality);

1.1.6
a person includes a reference to that person's successors and permitted assigns;

1.1.7
a "party" or "Party" includes a reference to that party's or Party's personal
representatives, successors and permitted assigns (including any person
resulting from or continuing after any amalgamation, merger, consolidation or
similar transaction in which a party or Party participates);

1.1.8
a clause, paragraph or schedule, unless the context otherwise requires, is a
reference to a clause or paragraph of, or schedule to, this Agreement;

1.1.9
any English legal term for any action, remedy, method of judicial proceeding,
legal document, legal status, court, official or any legal concept or thing
shall, in respect of any jurisdiction other than England, be deemed to include
what most nearly approximates in that jurisdiction to the English legal term and
to any English statute shall be construed so as to include equivalent or
analogous laws of any other jurisdiction;

1.1.10
a "company" shall be construed so as to include any company, corporation or
other body corporate, wherever and however incorporated or established;

1.1.11
writing shall include any modes of reproducing words in a legible and
non-transitory form;

1.1.12
the word "agreement," means this agreement as amended or supplemented, together
with all recitals and all Schedules attached hereto or incorporated by
reference, and the words "hereof," "herein," "hereto," "hereunder" and other
words of similar import shall refer to this agreement in its entirety and not to
any particular clause, paragraph or Schedule of this agreement;

1.1.13
times of the day is to London time; and

1.1.14
reference to "regulatory capital" means a reference to assets which are
admissible under Applicable Law and Regulation for the purpose of determining a
person's regulatory capital resources.

1.2
The ejusdem generis principle of construction shall not apply to this Agreement.
Accordingly, general words shall not be given a restrictive meaning by reason of
their

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being preceded or followed by words indicating a particular class of acts,
matters or things or by examples falling within the general words. Any phrase
introduced by the terms "other", "including", "include" and "in particular" or
any similar expression shall be construed as illustrative and shall not limit
the sense of the words preceding those terms.
1.3
References to the Relevant Regulator Handbook of Rules and Guidance, or any
other regulations or rules relating to the conduct of (re)insurance business, or
to any part thereof, are to be construed as references to such handbook, rules
or regulations, or to such part thereof, as amended and in force from time to
time or as the same may be replaced from time to time and any reference to any
provision of such handbook, rules or regulations, or to any part thereof, is to
be construed as a reference to the corresponding provision thereof from time to
time as adjusted by the effect of any transitional rules which may be applicable
in place thereof or in supplement thereto from time to time.

1.4
The headings in this Agreement do not affect its interpretation.

1.5
The Schedules form part of this Agreement and shall have the same force and
effect as if expressly set out in the body of this Agreement, and any reference
to this Agreement shall include the Schedules.

1.6
Words importing the singular include the plural and vice versa, and words
importing a gender include every gender.

2.
INSURING CLAUSE

2.1
Subject to the terms and conditions of this Agreement, with effect on and from
the Effective Date the Retrocedant shall cede to the Retrocessionaire and the
Retrocessionaire agrees to accept in return for the payment of the Premium in
accordance with Clause 3 the cession by way of 100 per cent. quota share
reinsurance of the Retrocedant's risks under and attaching to, relating to or
arising out of the Retroceded Policies, such that the Retrocessionaire will
reinsure and indemnify the Retrocedant in the amount of 100 per cent. of its Net
Retained Losses in respect of such Retroceded Policies.

2.2
Notwithstanding any other provision of this Agreement, it is agreed that the Net
Retained Losses of the Retrocedant shall include any Loss to the extent that it
relates to a liability or payment incurred in respect of a Reinsured Event
(whether death, the diagnosis of a critical illness or otherwise) which occurred
prior to, on, or after the Effective Date.

2.3
The Retrocessionaire shall discharge its obligations to the Retrocedant under
Clause 2.1 by making payments in accordance with Clause 8.6.

2.4
The Retrocessionaire shall pay, as may be paid thereon and unconditionally
follow the settlements (including ex gratia, "without prejudice" and any extra
contractual settlements) against the Retrocedant and the Retrocessionaire shall
be bound by settlements, or payments made by the Retrocedant irrespective of the
legal liability of the Retrocedant and shall not be entitled to argue in defence
or otherwise allege that the Retrocedant has failed to take all proper and
businesslike steps in making the relevant settlement and/or payment.

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2.5
The Retrocedant agrees to consult in good faith with the Retrocessionaire in
respect of any claim arising under any Retroceded Policy where the claim exceeds
GBP500,000.

2.6
The Retrocedant will inform the Retrocessionaire of any such claim within 14
days of receiving notification from the underlying cedant, and, in the event of
any disputes, will consult the Retrocessionaire with respect to the appointment
of lawyers and experts. The Retrocedant will take into account any comments of
the Retrocessionaire, but will not be bound to follow any request or suggestion
of the Retrocessionaire. The Retrocedant will handle all claims in a proper and
businesslike manner.

2.7
The sole remedy for any breach of Clauses 2.5 and 2.6 will be damages for any
loss proved; provided that any such claim would not operate as a defence
(including by way of setoff) against a claim in respect of the
Retrocessionaire’s obligations under Clause 2.1.

3.
RETROCESSION PREMIUM

3.1
The premium payable under this Agreement in respect of the SPA Business (the
"SPA Premium") is the aggregate of :

3.1.1
$2,869m; and

3.1.2
$4.7m, representing face value (expressed in USD) for the technical payable
balances on the agreed 31st December 2013 balance sheet, reduced by a payment by
the Retrocessionaire to the Retrocedant at face value (expressed in USD) for the
technical receivable balances on the agreed 31st December 2013 balance sheet.

3.2
The premium payable under this Agreement in respect of the Non-SPA Business (the
"Non-SPA Premium") is the aggregate of:

3.2.1
$179.4m; and

3.2.2
$4.2m, representing face value (expressed in USD) for the technical payable
balances on the agreed 31st December 2013 balance sheet, reduced by a payment by
the Retrocessionaire to the Retrocedant at face value (expressed in USD) for the
technical receivable balances on the agreed 31st December 2013 balance sheet.

3.3
The aggregate amount due in respect of the SPA Premium pursuant to Clause 3.1
and the Non-SPA Premium pursuant to Clause 3.2 (such aggregate, the “Total
Premium”) shall be paid on a funds withheld basis. The Retrocedant shall
establish a payable and the Retrocessionaire shall establish a receivable in
respect of the Total Premium.

3.4
The Total Premium shall be settled by the Retrocedant (i) offsetting against
such premium payable amounts due to the Retrocedant pursuant to Clause 2 of this
Agreement and (ii) paying to the Retrocessionaire any Return Amounts arising in
respect of the Relevant Accounts as determined pursuant to Clause 8.

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3.5
On the date hereof, in respect of both the payment to be made on a funds
withheld basis pursuant to Clause 3.2 and the Retrocedant's proportionate share
of the deemed contribution to the Funds Withheld Account as set out at Item E of
Schedule 12 to the Sale and Purchase Agreement, the Retrocedant shall transfer
the Initial Funds-Withheld Portfolio to the Funds-Withheld Accounts.

4.
TIME ON RISK ADJUSTMENT

4.1
To put the Parties in the position, as between themselves, that they would each
have been in if this Agreement had been entered into on the Effective Date, an
adjustment payment will be made in accordance with the provisions of Clause 4.2
below.

4.2
Within 5 Business Days of the determination of the Final Reconciliation Amount
Calculation Report pursuant to Clause 8.2 of the Sale and Purchase Agreement:

4.2.1
if (a) the sum of (i) the amount set out for the Retrocedant in "Line B – Total
Reconciliation Amount by Ceding Company" of the Final Reconciliation Amount
Calculation Report, (ii) the Total Premium and (iii) the Retrocedant's
proportionate share of the deemed contribution to the Funds Withheld Account as
set out at Item E of Schedule 12 to the Sale and Purchase Agreement exceeds
(b) the " XL Re (UK Branch) Completion Amount" (as defined in the letter
agreement, dated May 30, 2014, between XL Insurance (Bermuda) Ltd and GreyCastle
Holdings Ltd) as set out on the Final Reconciliation Amount Calculation Report,
the Retrocedant shall pay an amount equal to such excess to the
Retrocessionaire, together with simple interest on such amounts at a rate of
LIBOR plus two per cent (2%) per annum computed based on a 365-day year, from
and including the date of this Agreement, to, but excluding, the date of
payment; and

4.2.2
if (a) the sum of (i) the amount set out for the Retrocedant in "Line B – Total
Reconciliation Amount by Ceding Company" of the Final Reconciliation Amount
Calculation Report, (ii) the Total Premium and (iii) the Retrocedant's
proportionate share of the deemed contribution to the Funds Withheld Account as
set out at Item E of Schedule 12 to the Sale and Purchase Agreement is less than
(b)  the " XL Re (UK Branch) Completion Amount" (as defined in the letter
agreement, dated May 30, 2014, between XL Insurance (Bermuda) Ltd and GreyCastle
Holdings Ltd) as set out on the Final Reconciliation Amount Calculation Report,
the Retrocessionaire shall pay an amount equal to such shortfall to the
Retrocedant, together with simple interest on such amounts at a rate of LIBOR
plus two per cent (2%) per annum computed based on a 365-day year, from and
including the date of this Agreement, to, but excluding, the date of payment.

5.
EFFECTIVE DATE AND TERMINATION

5.1
The obligations to reinsure the Retrocedant under this Agreement shall have
effect during the Period of Risk only.

5.2
The Retrocedant shall be entitled to terminate this Agreement with immediate
effect, (such termination to take effect in accordance with Clause 5.3) by
notice in writing to

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the Retrocessionaire on or at any time after the occurrence of any of the
following (each an "Event of Default"):
5.2.1
an Insolvency Event occurring in respect of the Retrocessionaire, the Company or
Holdco;

5.2.2
the Company and/or the Retrocessionaire cease to be authorised by the BMA to
reinsure the business retroceded to the Retrocessionaire under this Agreement;

5.2.3
the regulatory capital of the Company and/or the Retrocessionaire is less than
100 per cent. of the Company or Retrocessionaire's Capital Requirements;

5.2.4
any steps are taken in respect of the Company which would reasonably be expected
to result in the Company's Centre of Main Interest changing from Bermuda;

5.2.5
the claims of the Retrocedant against the Retrocessionaire cease to rank at
least pari passu with the claims of the Retrocessionaire's unsecured or
unsubordinated reinsurance creditors, except for obligations mandatorily
preferred by Applicable Law and Regulations applying to the Retrocessionaire;

5.2.6
other than the non-payment of a Call Amount, the Retrocessionaire is in breach
of any payment obligation under this Agreement which is not remedied within 10
Business Days of it receiving written notice from the Retrocedant specifying the
breach and requiring it to be remedied;

5.2.7
any Call Amount Default Period continuing for three or more years;

5.2.8
a Change of Control occurs;

5.2.9
a material breach by the Retrocessionaire or the Company of any provision of the
SAC Act, the Insurance Act or of the Company's insurance licence which results
in the BMA indicating it will exercise its powers of intervention under Section
32 of the Insurance Act;

5.2.10
a breach by the Retrocessionaire of its obligations pursuant to Clause 11 which
is not remedied to the reasonable satisfaction of the Retrocedant within 10
Business Days of the Retrocedant giving written notice to the Retrocessionaire
specifying the breach and requiring it to be remedied;

5.2.11
a breach by the Retrocessionaire or the Company of the Constitutional Documents
of the Retrocessionaire, which is not remedied to the reasonable satisfaction of
the Retrocedant within 10 Business Days of the Retrocedant giving written notice
to the Retrocessionaire or the Company (as applicable) specifying the breach and
requiring it to be remedied; and

5.2.12
the Retrocession Agreement between XL Re and the Retrocessionaire, or the
Retrocession Agreement between XL Re Europe SE and the Retrocessionaire, each
entered into on or around the date hereof is terminated for any reason other
than the natural run-off or expiry of the policies retroceded thereunder.

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5.3
If written notice to terminate this Agreement is given in accordance with the
provisions of Clause 5.2:

5.3.1
upon receipt by the Retrocedant of assets of an aggregate Value equal to the
Recapture Amount payable pursuant to Clause 5.5, the Retrocedant shall
automatically recapture the reinsurance of all Retroceded Policies ceded by it
under this Agreement on the basis that: (i) the Premium has been fully settled;
and (ii) the Retrocessionaire's liability to reassure the Retrocedant in respect
of those Retroceded Policies shall cease irrevocably and no further payments
shall be payable by the Retrocessionaire as a result of the reassurance pursuant
to this Agreement (other than payments accrued as at the date of such payment);
and

5.3.2
the Retrocessionaire shall pay the Retrocedant the Recapture Amount in
accordance with Clause 5.5.

5.4
The Retrocedant's Actuary and the Retrocessionaire's Actuary shall seek to agree
the Recapture Amount but if they do not do so within 15 Business Days of a
notice being served to terminate this Agreement (the "Recapture Agreement
Period"), the basis of recapture or any dispute in relation to it or the
calculation of the Recapture Amount may be referred by the Retrocedant or the
Retrocessionaire to the Expert for resolution pursuant to Clause 30 no later
than 10 Business Days after the expiry of Recapture Agreement Period. If the
determination of the Recapture Amount is referred for resolution pursuant to
Clause 30, pending final agreement or determination the Recapture Amount shall
be paid on a provisional basis in accordance with Clause 5.5.2 on the basis of a
calculation performed by the Retrocedant's Actuary.

5.5
The Recapture Amount shall be paid as follows:

5.5.1
if the Recapture Amount is agreed within the Recapture Agreement Period, the
agreed Recapture Amount shall be paid by or on behalf of the Retrocessionaire
within 5 Business Days of agreement; or

5.5.2
if the Recapture Amount is not agreed within the Recapture Agreement Period, the
Recapture Amount as calculated by the Retrocedant's Actuary shall be paid by or
on behalf of the Retrocessionaire within 5 Business Days after the expiry of the
Recapture Agreement Period;

5.6
If the calculation of the Recapture Amount has been referred for resolution
pursuant to Clause 30, then the relevant Party will make a payment within 5
Business Days of agreement or settlement of the Recapture Amount pursuant to
Clause 30 (or Clause 31) as follows:

5.6.1
if the Difference is positive, the Retrocessionaire shall make or cause to be
made a payment of such amount to the Retrocedant; or

5.6.2
if the Difference is negative, the Retrocedant shall reimburse the
Retrocessionaire such amount.

5.7
For the purposes of calculating the Recapture Amount, the Parties agree that any
assets and associated investment income deposited by the Retrocedant or a member
of the XL

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Group in a Relevant Account to remedy any failure by the Retrocessionaire to pay
a Call Amount, shall not be treated as an asset of a Relevant Account;
5.8
Without prejudice to the Retrocessionaire's obligation to pay the full Recapture
Amount, in the event that:

5.8.1
a Cross-Agreement Recapture Event occurs; and

5.8.2
there are not sufficient Reserves (as defined in each XL Retrocession Agreement
under which a Recapture Amount becomes payable) as a result of the
Cross-Agreement Recapture Event (each, a "Relevant Agreement") to fund all such
Recapture Amounts,

the Retrocessionaire shall pay to each XL Retrocedant a pro rata amount of such
Reserves as are available to meet its obligations to pay Recapture Amounts, in
the proportion that the Recapture Amount owed to an XL Retrocedant under a
Relevant Agreement represents when compared to the aggregate of the Recapture
Amounts owed under all the Relevant Agreements.
5.9
In the event of a breach of the undertaking given in Clause 10.1.5 (provided
always that in any case the breach is a Retrocessionaire Uncured Breach) or if
the Retrocedant’s right to provide a Change of Authority Notice under Paragraph
2.4.1 of Part A of Schedule 4 is triggered, then in addition to any other
remedies provided in such Paragraph 2.4.1 or otherwise available (whether by
operation of law, equity, contract or otherwise), the Retrocedant may not
terminate this Agreement but may require that the assets of the Retrocessionaire
are managed by an investment manager nominated by XL GIL in its sole discretion
(acting reasonably), including the existing investment manager, with such
investment manager thereafter acting on instructions only from XL GIL (a
“Retrocessionaire Change of Authority”) and the Parties agree that the
associated Investment Management Costs will be payable in accordance with the
provisions of Clause 7.10.

5.10
In the event of termination the Retrocessionaire and the Company will comply
with the obligations in the Administration Services Agreement in relation to the
retention, disposal and/or return of information received by the
Retrocessionaire and/or the Company pursuant to or in connection with the
Transaction Documents.

5.11
Subject to Clauses 5.12 and 5.13 below, upon termination of this Agreement each
Party shall be released from any further obligations pursuant to this Agreement
but such termination shall not terminate any accrued rights under this
Agreement.

5.12
The provisions of this Agreement shall survive termination of this Agreement
until all amounts due and payable hereunder have been paid.

5.13
Clauses 1, 5, 9, 16, 17 and 19 to 33 shall survive termination of this
Agreement.

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6.
REPORTING INFORMATION

6.1
On each Reporting Date (or if such day is not a Business Day then on the
immediately following Business Day) the Retrocedant shall provide the
Retrocessionaire with a Client Account Report in the agreed form, setting out in
respect of each Currency Block the Client Account Report Information in respect
of the immediately preceding Client Account Reporting Period.

6.2
Within 10 Business Days of the Account Date (or if such day is not a Business
Day then on the immediately following Business Day) the Retrocedant shall
provide the Retrocessionaire with the Relevant Account Report in the agreed
form, setting out in respect of each Relevant Account, the Relevant Account
Information in respect of the immediately preceding Relevant Account Period.

7.
RELEVANT ACCOUNTS

7.1
The Retrocedant will maintain segregated portfolios of assets in connection with
the SPA Business, in accordance with the provisions of the Security Agreements
throughout the term of this Agreement.

7.2
The Retrocedant shall maintain assets in the Funds-Withheld Accounts in
connection with the Non-SPA Business, in accordance with the terms of this
Agreement.

7.3
Subject to the terms of this Agreement and in the case of the SPA Business, the
Security Agreements, all the assets and any investment income arising out of the
assets in a Relevant Account will be credited to the Relevant Account and all
losses (including investment losses), liabilities (including taxes), costs,
charges and expenses attributable to the assets in a Relevant Account will be
debited from the Relevant Account except for Investment Management Costs which
shall be dealt with pursuant to Clause 7.10.

7.4
All premiums received by the Retrocedant from the Underlying Cedants in respect
of the Non-SPA Business shall be paid into the relevant Funds-Withheld Account.

7.5
Losses incurred by the Retrocedant will be managed by the Retrocedant and shall
be paid or reimbursed to the Retrocedant from:

7.5.1
in the case of the SPA Business, out of the Security Account Assets selected by
the Retrocessionaire or its designated investment managers prior to the delivery
of a Change of Authority Notice (as defined in Schedule 4) or the Retrocedant or
its designated investment manager following the delivery of a Change of
Authority Notice to the extent such Losses are permitted to be paid from a
Security Account by a Security Agreement; and

7.5.2
in the case of all Losses not falling within Clause 7.5.1 and all other Losses,
out of the Funds-Withheld Assets selected by the Retrocessionaire or its
designated investment managers prior to the delivery of a Change of Authority
Notice or the Retrocedant or its designated investment manager following the
delivery of a Change of Authority Notice;

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7.6
The assets in the Relevant Accounts will be managed by the Retrocedant pursuant
to and in accordance with the SIMA(s) and the Guidelines, together with the
provisions set out in Clause 10.6 and Schedule 4;

7.7
A Relevant Account will be credited with all Call Amounts paid by the
Retrocessionaire and debited with all Return Amounts paid by the Retrocedant in
connection with that Relevant Account.

7.8
Any assets deposited by the Retrocedant or on its behalf by a member of the XL
Group in a Relevant Account to remedy a failure by the Retrocessionaire to pay
all or part of a Call Amount shall not be treated as assets of the Relevant
Account for any purpose (including for the purpose of calculating the Recapture
Amount as described in Clause 5.7) and all benefits and losses, including
investment gains and losses and taxes shall remain with the Retrocedant or the
relevant member of the XL Group.

7.9
For the avoidance of doubt, all legal and beneficial interest in the
Funds-Withheld Assets, the Security Account Assets, the Fund-Withheld Accounts
and the Security Accounts belongs to the Retrocedant and the Retrocessionaire
has no proprietary interest in such accounts nor in any such assets.

7.10
No later than 30 Business Days after each Account Date, the Retrocedant will
submit an invoice to the Retrocessionaire for all Investment Management Costs
that have been paid or are due and payable by the Retrocedant and/or XL GIL or
its Affiliates. The Retrocedant and/or XL GIL or its Affiliates may specify in
an invoice that all or part of the applicable Investment Management Costs are to
be paid by the Retrocessionaire to an Affiliate of the Retrocedant and/or XL
GIL, instead of to the Retrocedant and/or XL GIL or its Affiliates themselves.
The Retrocessionaire will settle all invoices submitted by the Retrocedant
and/or XL GIL or its Affiliates in cash within 30 days of receipt by the
Retrocessionaire. Without prejudice to the Retrocedant's right to terminate this
Agreement under Clause 5.2.6 for the non-payment of Investment Management Costs,
if the Retrocessionaire fails to settle an invoice in respect of Investment
Management Costs relating to:

7.10.1
the Funds-Withheld Accounts and/or the Funds-Withheld Assets; or

7.10.2
the management of the assets of the Retrocessionaire (following a
Retrocessionaire Change of Authority pursuant to Clause 5.9),

within the 30 day time period (or within the 10 Business Day cure period
permitted under Clause 5.2.6 if the Retrocedant has given written notice
pursuant to Clause 5.2.6), the Retrocedant may reimburse itself (or XL GIL or
its Affiliates as applicable) out of the Funds-Withheld Account.
8.
COLLATERAL OBLIGATIONS

8.1
The Retrocessionaire will maintain assets in the Relevant Accounts in an amount
equal to the applicable Collateral Amount. The Retrocessionaire shall fulfil
this obligation by paying all Call Amounts in accordance with this Clause 8 and
any other relevant provisions of this Agreement.

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8.2
Subject to Clause 8.11, the Retrocedant shall pay to the Retrocessionaire all
Return Amounts subject to and in accordance with this Clause 8.

8.3
After each relevant Valuation Date, the Retrocedant will procure that the
relevant Valuation Agent determines as soon as practicable whether or not a Call
Amount or a Return Amount exists in respect of a Relevant Account as at each
relevant Valuation Date (the "Determination").

8.4
If a Call Amount or a Return Amount is payable in respect of a Relevant Account,
the Retrocedant will notify the Retrocessionaire in writing within 5 Business
Days of the relevant Determination (a "Call Notice", or a "Return Notice" as
applicable).

8.5
A Call Notice or Return Notice delivered by the Retrocedant shall specify:

8.5.1
the Balance of the Relevant Account as at the close of business on the relevant
Valuation Date;

8.5.2
the Call Amount or Return Amount (as applicable);

8.5.3
the type of Permitted Assets the Retrocedant intends to transfer in the case of
a Return Amount;

8.5.4
the type of Permitted Assets the Retrocedant requires to have transferred in the
case of a Call Amount;

8.5.5
if a Call Amount is payable, the Relevant Account into which the
Retrocessionaire must pay the Call Amount;

8.5.6
subject to any confidentiality obligations by which the Retrocedant is bound,
such information which is available to the relevant Valuation Agent as may be
relevant to the calculation of the Call Amount or Return Amount (as applicable).

8.6
If a Call Amount is payable, the Retrocessionaire shall, at its own cost,
transfer to the Retrocedant Permitted Assets of the type specified in the Call
Notice, with a Value as at the Valuation Date at least equal to the Call Amount,
within 2 Business Days of receipt of a Call Notice from the Retrocedant provided
that the Retrocessionaire shall not be required to settle a Call Amount if doing
so would reduce the Working Capital Assets below $10m.

8.7
If a Return Amount is payable, the Retrocedant shall, subject to Clauses 8.8 and
8.11, and at the cost of the Retrocessionaire, transfer to the Retrocessionaire,
Permitted Assets selected by the Retrocessionaire or its designated investment
manager prior to the delivery of a Change of Authority Notice or the Retrocedant
or its designated investment manager following the delivery of a Change of
Authority Notice with a Value as at the Valuation Date at least equal to the
Return Amount, within 5 Business Days of the later of: (i) the date of a Return
Notice; or (ii) the date on which the Retrocedant received assets of a Value as
least equal to the Return Amount from the relevant Custodian.

8.8
If the value of the Retrocessionaire Capital Account Assets at the date of the
Return Notice is less than the Maximum Investor Capital Call Amount at that
date, the

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Retrocedant shall transfer cash to the value of the Return Amount to the
Retrocessionaire Capital Account within 5 Business Days of the date determined
in accordance with Clause 8.7.
8.9
If the Retrocessionaire fails to pay a Call Amount in accordance with Clause
8.6, the Retrocedant shall make such payment to the Relevant Account on behalf
of the Retrocessionaire. Such payment will not discharge the Retrocessionaire
from its obligation to pay the Call Amount, save that such Call Amount shall be
due and payable directly to the Retrocedant together with interest accrued in
accordance with Clause 8.10.

8.10
In the event the Retrocessionaire fails to pay all or a part of a Call Amount in
accordance with Clause 8.6, interest will accrue on the unpaid Call Amount (or
part thereof) together with any positive Collateral Fee PIK Amount in an amount
equal to the Collateral Fee for the period from the date the Call Amount became
due and payable (the "Due Date"), or, as applicable, the Collateral Fee Payment
Date that any Collateral Fee PIK Amount accrues, up to and including the date
such Call Amount or Collateral Fee Amount is actually paid to the Retrocedant. 
Any accrued Collateral Fee will be payable quarterly on each January 1, April 1,
July 1 and  October 1, or if such date is not a Business Day, the immediately
following Business Day, (each , a “Collateral Fee Payment Date”) in cash or, at
the sole option of the Retrocessionaire added quarterly (on each Collateral Fee
Payment Date) to the Collateral Fee PIK Amount.  The Retrocessionaire may, in
its sole discretion, repay any positive Collateral Fee PIK Amount in cash, on
any Business Day.

8.11
The Retrocedant's obligation to pay a Return Amount is subject to the
Retrocedant having actually received assets of a Value at least equal to the
Return Amount from the relevant Custodian pursuant to the terms of the relevant
Retroceded Policy or associated Security Agreement (if applicable), prior to
paying the Return Amount due under this Agreement.

8.12
The payment of a Return Amount by the Retrocedant to the Retrocessionaire will
be treated by the Parties as satisfaction of the relevant outstanding premium
receivable by the Retrocessionaire pursuant to Clause 3.

8.13
The Retrocessionaire may notify the Retrocedant that it wishes to challenge the
calculation of a Call Amount or Return Amount in respect of the Non-SPA Business
("Notice of Challenge") no later than 5 Business Days from receipt of a Call
Notice or Return Notice (as applicable). If the Retrocessionaire delivers a
Notice of Challenge within the permitted timeframe, the payment of the affected
Return Amount and Call Amount that was made in accordance with Clauses 8.6 and
8.7 (as applicable) will be deemed to have been made on a provisional basis and
be subject to the following:

8.13.1
if the Actuaries cannot agree on the disputed Call Amount or Return Amount (as
applicable) within 15 Business Days of a Notice of Challenge, either the
Retrocedant or the Retrocessionaire may refer the matter to the Expert for
resolution pursuant to Clause 30; and

8.13.2
upon determination by the Expert, the Retrocedant or the Retrocessionaire (or
such person on behalf of the Retrocessionaire) will make such payments to the

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other as necessary to put the Retrocedant and Retrocessionaire in the position
they would have been in had the affected payment been made on the basis of the
calculation by the Expert.
8.14
If at any time the Secured Account Assets credited to any Security Account cease
to comply with the requirements of the related Security Agreement (including the
investment restrictions set forth therein), the Retrocedant shall be entitled to
notify the Retrocessionaire in writing (a "Substitution Notice").

8.15
A Substitution Notice delivered by the Retrocedant shall specify:

8.15.1
the Secured Account Asset(s) to be substituted or replaced in order to bring the
Security Account into compliance with the requirements of the Security Agreement
relating to the applicable Secured Account (the “Replaced Assets”); and

8.15.2
the type of Permitted Assets the Retrocedant requires to have credited to the
Secured Account in substitution or replacement of such Replaced Asset.

8.16
Within 5 Business Days of the delivery of a Substitution Notice, the
Retrocessionaire shall, at its own cost, transfer to the Retrocedant, Permitted
Assets with a Value at least equal to the Value of the Replaced Assets and of a
type that, when credited to the Security Account in substitution or replacement
of the Replaced Assets, the Secured Account Assets credited to any Security
Account shall comply with the requirements of the related Security Agreement
(including the investment restrictions set forth therein). As promptly as
practicable following its receipt of such assets from the Retrocessionaire, the
Retrocedant may direct such assets to be credited to the applicable Security
Account and, at the cost of the Retrocessionaire, transfer to the
Retrocessionaire, the Replaced Assets released by the Custodian to the
Retrocedant therefrom.

9.
AUDIT RIGHTS

9.1
The Retrocedant shall submit to the Retrocessionaire and the Retrocessionaire
shall submit to the Retrocedant as and when asked by the other on reasonable
notice and in any event immediately following the termination of this Agreement
for any reason, information in sufficient detail to allow the Retrocessionaire
or the Retrocedant (as the case may be) to satisfy all Applicable Law and
Regulations to which they are subject in relation to the Retroceded Policies,
this Agreement or any other Transaction Document or the arrangements
contemplated by it and such additional information as it may reasonably require
in relation to the Retroceded Policies, this Agreement, any other Transaction
Document or the arrangements contemplated by any Transaction Document, including
to monitor compliance with the Retrocessionaire Guidelines and the Guidelines,
provided always that such information is reasonably in the relevant Party's
power, possession or control or may be obtained by it taking reasonable steps
and subject to any Applicable Law and Regulations and any obligations of
confidentiality owed to third parties.

9.2
Subject to any Applicable Law and Regulations and any confidentiality
obligations owed to third parties, during the term of this Agreement, the
Retrocedant and the Retrocessionaire shall be entitled on reasonable notice from
time to time during normal

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business hours at its own cost to inspect and audit at the offices of the
Retrocessionaire and the Retrocedant, respectively, and take copies of all
documents and records relevant to the performance by the Parties of this
Agreement.
9.3
The Parties agree to permit any regulatory authority in any jurisdiction that
has responsibility for the regulation or governance of another Party and its
representatives, to have such reasonable access to its premises and all records
kept in relation to this Agreement as may be required by such regulatory
authority.

10.
UNDERTAKINGS

10.1
The Retrocessionaire and the Company each give the following undertakings, which
shall apply throughout the Period of Risk:

10.1.1
if and to the extent permitted by Applicable Law and Regulation, it shall
promptly notify the Retrocedant of the occurrence of any Event of Default or
Potential Event of Default;

10.1.2
it shall use its reasonable endeavours to ensure that at all times its exercise
of its rights and performance of its obligations under this Agreement will not:

(a)
contravene its constitutive documents and, in addition, in the case of the
Retrocessionaire, its Constitutional Documents; or

(b)
contravene any Regulatory Requirement;

10.1.3
it will not transfer (whether by means of a scheme of arrangement or otherwise),
novate or, in the case of the Retrocessionaire, cede its obligations under this
Agreement with respect to the Retroceded Policies to another person without the
prior written consent of the Retrocedant, unless, in the case of the
Retrocessionaire ceding its obligations, the cession is in the ordinary course
of business and on terms which would not adversely affect the amount of
regulatory capital to be held by the Retrocedant or any other member of the XL
Group, or otherwise adversely affect the collateral position or counterparty
credit exposure of the Retrocedant or any member of the XL Group;

10.1.4
subject to Clause 10.5, it will seek the prior written consent of the
Retrocedant to a Change of Control;

10.1.5
it will procure that the investment assets of the Retrocessionaire are managed
in accordance with the Retrocessionaire Guidelines and the Retrocessionaire
IMA(s) together with the provisions set forth in Clause 10.6 and Schedule 4;

10.1.6
in the case of the Company, it will maintain its Centre of Main Interest in
Bermuda;

10.1.7
subject to Clause 10.3, in the case of the Company, it will not amalgamate,
merge, or consolidate with any other person nor issue or allot any securities or
any instruments convertible or exchangeable for securities in itself (including
any

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securities or instruments which grant rights in respect of the Retrocessionaire)
to any person, except with the prior written consent of the Retrocedant; and
10.1.8
it shall provide prior written notice to the Retrocedant at least 5 Business
Days before making a Distribution.

10.2
The Retrocessionaire gives the following undertakings, which shall apply
throughout the Period of Risk:

10.2.1
it will notify the Retrocedant in writing prior to any proposed material
outsourcing taking effect in respect of the Retroceded Policies;

10.2.2
subject to any Distributions permitted by this Agreement, it will retain assets
(as may change from time to time) of any Return Amount paid to the
Retrocessionaire by the Retrocedant in the segregated account comprising the
Retrocessionaire and use the assets in that segregated account only for the
purposes of this Agreement and any other XL Retrocession Agreement;

10.2.3
it will hold regulatory capital in respect of the business reinsured under this
Agreement in an amount at least equal to the Agreed Capital Level;

10.3
If the Company wishes to seek the consent of the Retrocedant pursuant to Clause
10.1.7, it shall promptly notify the Retrocedant in writing. After the tenth
anniversary of the date of this Agreement, the Retrocedant may only withhold its
consent to a request from the Company pursuant to Clause 10.1.7, when the
Retrocedant reasonably determines that such change could materially and
adversely affect:

10.3.1
the rights and obligations of any member of the XL Group under any contracts or
commitments between such person and the Retrocessionaire, the Company, Holdco or
the Investors or any of their respective Affiliates;

10.3.2
the credit risk of a member of the XL Group (including as a result of any
changes to the availability or the enforceability of the Investor Capital
Calls); or

10.3.3
the regulatory capital position of any member of the XL Group.

10.4
The Parties agree that the ceding of the Retrocessionaire's obligations to a
person by way of retrocession permitted pursuant to Clause 10.1.3 shall not be
regarded as a Change of Control and shall not require the prior written consent
of the Retrocedant.

10.5
The Parties agree that a Non-Lead Investor may trigger a Change of Control to
which the Retrocedant will not need to give its prior consent if:

10.5.1
the new controller has assumed all of that Non-Lead Investor's Interests;

10.5.2
the Retrocedant has the benefit of contractual rights which provide adequate
remedies if the new controller breaches its obligations in connection with the
Interests; and

10.5.3
the Retrocedant reasonably determines that such Change of Control would not
materially and adversely affect:

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(a)
the rights and obligations of any member of the XL Group under any contracts or
commitments between such person and the Retrocessionaire, the Company, the
Investors or any of their respective Affiliates;

(b)
the credit risk of a member of the XL Group (including as a result of any
changes to the availability or the enforceability of the Investor Capital
Calls); or

(c)
the regulatory capital position of any member of the XL Group.

10.6
The Parties will comply with the provisions in Schedule 4 with respect to the
management of the Security Account Assets and the Funds-Withheld Assets and the
assets of the Retrocessionaire.

11.
AGREED CAPITAL AND DIVIDENDS

11.1
The Retrocessionaire shall assess whether or not it holds BMA regulatory capital
in an amount at least equal to the Agreed Capital Level, at the end of each
Quarter.

11.2
The Retrocessionaire shall submit the results of its calculation performed
pursuant to Clause 11.1, together with all reasonable supporting information, to
the Retrocedant within 15 Business Days following the end of each Quarter
("Capital Notice").

11.3
The Retrocedant may notify the Retrocessionaire that it wishes to challenge a
Capital Notice no later than 10 Business Days from receipt of a Capital Notice
(a "Capital Notice Challenge"). The Retrocedant's Actuary and the
Retrocessionaire's Actuary shall seek to agree such Capital Notice Challenge but
if they do not do so within 15 Business Days of the date of the Capital Notice
Challenge the dispute shall be referred by either Actuary to the Expert for
resolution pursuant to Clause 30.

11.4
The Retrocessionaire undertakes:

11.4.1
not to declare or make a Distribution in any Quarter before the expiry of the 15
Business Day time period in Clause 11.2;

11.4.2
not to declare or make a Distribution at any time when the value of the
Retrocessionaire Capital Account Assets is less than the Maximum Investor
Capital Call Amount; and

11.4.3
to only declare or make a Distribution thereafter if, after such Distribution
has been made, the Retrocessionaire would still hold regulatory capital at least
equal to the Agreed Capital Level and the Retrocessionaire shall provide prior
written notice to the Retrocedant if it intends to make a Distribution under
this Clause 11.4.2.

11.5
If a challenge is made by the Retrocedant pursuant to Clause 11.3 the
Retrocessionaire agrees that no Distribution may be declared or made by it until
such dispute has been settled in accordance with Clauses 11.3, 30 or 31, as
applicable.

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11.6
For as long as a Call Amount remains due and payable by the Retrocessionaire,
the Retrocessionaire undertakes to the Retrocedant not to:

11.6.1
declare or make a Distribution;

11.6.2
incur any expenditure outside the ordinary course of business or in excess of
$500,000;

11.6.3
enter into any transactions or transactions with an Affiliate or related person
other than an Investor Capital Call;

11.6.4
write any new business,

in each case without the prior written consent of the Retrocedant.
11.7
In determining the amount of the Retrocessionaire's BMA regulatory capital for
the purposes of Clause 11, only the assets of the Retrocessionaire or amounts
receivable by the Retrocessionaire from the XL Retrocedants under the XL
Retrocession Agreements shall be included and in no event shall any
Retrocessionaire Capital Account Assets or any Closing Excess Assets be treated
as regulatory capital of the Retrocessionaire for the purposes of the
calculation.

12.
NEGATIVE PLEDGE

12.1
The Retrocedant confirms that as at the date of this Agreement there is not any
Security subsisting over any Security Account (except for the Security in favour
of the underlying cedants in respect of the Retroceded Polices, the Security
granted by the Retrocessionaire in favour of the cedants of the Retroceded
Policies and except for any Security arising from time to time in the ordinary
course of carrying out any of the Retroceded Policies, including as part of
treasury management, or relating to the investment of the assets in such
Security Account including liens in respect of unpaid fees or other similar
rights or entry into credit support, collateral, margining or other similar
arrangements).

12.2
The Retrocedant shall not:

12.2.1
create or permit to subsist any Security over the Funds-Withheld Accounts or any
Security Account (except for any Security over the Funds-Withheld Accounts or
the Security Accounts in existence as at the date hereof or arising from time to
time in the ordinary course of carrying out any of the Retroceded Policies,
including as part of treasury management, or relating to the investment of the
assets in the Relevant Accounts including liens in respect of unpaid fees or
other similar rights or entry into credit support, collateral, margining or
other similar arrangements); or

12.2.2
enter into any arrangement under which the money held in or benefit of the
Funds-Withheld Accounts or the Security Accounts may be applied, retained or
set-off except in the ordinary course of carrying out any of the Retroceded
Policies or relating to the investment of the assets in the Relevant Accounts or
as contemplated by this Agreement.

13.
SEGREGATED ACCOUNTS

13.1
The Company and the Retrocessionaire shall cause all of the funds and assets of
the

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Retrocessionaire to be held and kept separate and distinct from all other funds
and assets in the general account of the Company and any other segregated
account established by the Company, including by causing separate bank accounts
to be established and maintained by the Retrocessionaire and causing the funds
of the Retrocessionaire not to be commingled with any funds of the general
account of the Company or any other segregated account established by the
Company.
13.2
Unless otherwise agreed to in writing by the Retrocedant, the Company shall
continue to be registered as a segregated accounts company pursuant to the SAC
Act during the entire term of this Agreement;

13.3
Unless otherwise agreed in writing by the Retrocedant, the Company and the
Retrocessionaire (as applicable) shall abstain from amending or modifying: (i)
any provision of the Company's bye-laws in a manner that could reasonably be
expected to adversely affect the interests of the Retrocedant; or (ii) any
agreement comprising part of the Constitutional Documents of the
Retrocessionaire.

13.4
Except as otherwise consented to in writing by the Retrocedant, the
Retrocessionaire shall not, and the Company shall cause the Retrocessionaire not
to:

13.4.1
incur any liabilities or obligations (including borrowing or indebtedness) other
than liabilities and obligations arising under this Agreement and any
Transaction Documents to which it is a party or which are necessary in
connection with the Retrocessionaire’s performance of its obligations and
liabilities under such agreements;

13.4.2
subject to Clause 10.1.3, enter into any agreements of insurance or reinsurance
other than this Agreement and any other XL Retrocession Agreement;

13.4.3
conduct any business other than services necessary for the Retrocessionaire’s
performance of its obligations and liabilities under this Agreement and any
Transaction Document to which it is a party; or

13.4.4
enter into any transaction or agreement with any of the Company's Affiliates,
the general account of the Company or any other segregated account of the
Company.

14.
RETROCESSIONAIRE CAPITAL ACCOUNT

The Retrocessionaire shall establish a separate account to which shall be
credited cash and/or assets contributed to the Retrocessionaire pursuant to any
Investor Capital Call. Such cash and/or assets shall be invested only in direct
obligations of, or obligations fully guaranteed as to principal and interest by,
the United States or any agency or instrumentality thereof (provided such
obligations are backed by the full faith and credit of the United States). All
the assets and any investment income arising out of the assets in the
Retrocessionaire Capital Account will be credited to such account and all losses
and liabilities attributable to the assets in the Retrocessionaire Capital
Account will be debited from such account. Notwithstanding anything to the
contrary in this Agreement, the Retrocessionaire shall have no obligation to
apply amounts in the Retrocessionaire Capital Account to satisfy obligations
hereunder or otherwise pay amounts to any XL Retrocedant or any of their
Affiliates unless a Trigger Event Date has occurred and only

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in the amount of the corresponding Total Required Investor Call Amount (as
defined in the Investor and Support Undertakings Agreement). For the avoidance
of doubt, all determinations relating to the Retrocessionaire Guidelines,
including without limitation any determination of compliance with the
Retrocessionaire Guidelines shall be determined by reference to all of the
assets of the Retrocessionaire other than the assets in the Retrocessionaire
Capital Account.
15.
SET-OFF

Without prejudice to the provisions of Clause 7.10 and 8 providing for payment
of Call and Return Amounts, Investment Management Costs and Collateral Fees, the
Premium payable under Clause 3 shall be offset against all amounts Due from the
Retrocessionaire to the Retrocedent hereunder.
16.
CONFIDENTIALITY

16.1
In this Clause 16, "Confidential Information" means all confidential information
disclosed (whether in writing, orally or by another means and whether directly
or indirectly) by (or on behalf of) either the Retrocedant or the
Retrocessionaire or the Company (the "Disclosing Party") or any of its or their
Affiliates to another Party (the "Receiving Party") whether before or after the
date of this Agreement including information relating to the Disclosing Party's
or its customers' products, operations, processes, plans or intentions, product
information, know how, design rights, trade secrets, market opportunities and
business affairs.

16.2
The Receiving Party:

16.2.1
may not use Confidential Information for a purpose other than the performance of
its obligations or enforcement of its rights (including for the purposes of the
dispute resolution mechanisms in this Agreement) under this Agreement or another
Transaction Document to which it is a party;

16.2.2
may not disclose Confidential Information to a person except with the prior
written consent of the Disclosing Party or in accordance with Clauses 16.3 and
16.4; and

16.2.3
shall make every effort to prevent the use or disclosure of Confidential
Information.

16.3
The Receiving Party may disclose Confidential Information to any of its
Affiliates, directors, other officers, employees, professional advisers and sub
contractors (a "Recipient") to the extent that disclosure is reasonably
necessary for the purposes of this Agreement or any other Transaction Document
to which it is a party.

16.4
The Receiving Party shall ensure that a Recipient is made aware of and complies
with the Receiving Party's obligations of confidentiality under this Agreement
as if the Recipient was a party to this Agreement.

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16.5
Clauses 16.2 to 16.4 do not apply to Confidential Information which:

16.5.1
is at the date of this Agreement, or at any time after that date, becomes
publicly known other than by the Receiving Party's or Recipient's breach of this
Agreement;

16.5.2
can be shown by the Receiving Party to the Disclosing Party's reasonable
satisfaction to have been known by the Receiving Party before disclosure by the
Disclosing Party to the Receiving Party;

16.5.3
is required to be disclosed by law, by a rule of a listing authority or stock
exchange to which any Receiving Party is subject or submits or by a governmental
authority or other authority with relevant powers to which any Receiving Party
is subject or submits, whether or not the requirement has the force of law; or

16.5.4
is disclosed to auditors of a Receiving Party, or (as applicable) a member of
the XL Group, or a Buyer's Group Undertaking, or rating agencies provided that
such auditors or rating agencies are made aware of the provisions of this Clause
16.

16.6
The Retrocessionaire and the Retrocedant shall comply with any confidentiality
provisions contained in any of the Retroceded Policies.

17.
DATA PROTECTION

17.1
The parties acknowledge that, in connection with this Agreement, the Retrocedant
may disclose to the Retrocessionaire information relating to policyholders and
other individuals which is protected by the Data Protection Laws (the "Protected
Information").

17.2
The Retrocessionaire shall, and shall ensure that its contractors shall, comply
with the Data Protection Laws in relation to its and its contractors' processing
of the Protected Information disclosed to it by the Retrocedant.

17.3
Where this Agreement requires the Retrocedant to disclose Protected Information
to the Retrocessionaire, and that disclosure is regulated by a Data Protection
Law of a member state of the European Economic Area, the Retrocedant may meet
that requirement by disclosing that information to an establishment or agent of
the Retrocessionaire within the European Economic Area, as nominated by the
Retrocessionaire in writing from time to time. If, from time to time, the
Retrocessionaire has not nominated such an establishment or agent, the
Retrocedant is relieved from its obligation to disclose that information until
such an establishment or agent has been nominated and the Retrocedant has had a
reasonable opportunity to make the disclosure.

18.
CURRENCY

18.1
All payments and calculations under this Agreement shall be made in the currency
in which the underlying business or liability is denominated.

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18.2
Any amount to be converted from one currency into a second currency for the
purpose of this Agreement shall be converted into an equivalent amount at the
Relevant Date at the Conversion Rate prevailing at the Relevant Date.

19.
ANNOUNCEMENTS

19.1
Subject to Clauses 19.2 and 19.3, no Party shall, without the prior written
consent of the other Parties, make any announcement of this Agreement, the
transaction which is given effect by this Agreement, or any matter ancillary
thereto.

19.2
The Parties shall act reasonably in response to a request from any other Party
for permission to make any announcement of the transactions given effect by or
referred to in this Agreement or any matter ancillary thereto.

19.3
The restrictions in Clause 19.1 shall not apply:

19.3.1
to an announcement, communication or disclosure that is required to be made by
Applicable Law and Regulation (provided that, to the extent permitted by
Applicable Law and Regulation, the Party required to make the announcement,
communication or disclosure shall consult with the other Parties prior to such
disclosure and use reasonable endeavours to minimise the disclosure to such
information as is required by the Applicable Law and Regulation);

19.3.2
to any reference to the transaction given effect by this Agreement in a Party's
financial statements or regulatory returns or in disclosures to rating agencies;

19.3.3
to disclosures reasonably required in order to enforce a Party's rights under
this Agreement or another Transaction Document to which it is a party; and

19.3.4
to any reference to the transaction given effect by this Agreement (whether
alone or together with, or aggregated with, other transactions) by a Party in
any financial or other reports or presentations to investors provided that the
identity of the Parties is not disclosed in connection with such reference
without that other Party's prior written consent (not to be unreasonably
withheld or delayed).

20.
COSTS

Except where this Agreement provides otherwise, each Party shall pay its own
costs relating to the negotiation, preparation, execution and implementation by
it of this Agreement and of each document referred to herein.
21.
FURTHER ASSURANCE

Each Party agrees to perform (or procure the performance of) such further acts
and things, and execute and deliver (or procure the execution and delivery of)
such further documents, as may be required by Applicable Law and Regulation or
as the other Party may reasonably require to implement and/or give effect to
this Agreement and the transactions contemplated by it and for the purpose of
vesting in the other Party the full benefit of this Agreement.

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22.
ENTIRE AGREEMENT

22.1
This Agreement, the Transaction Documents and the Constitutional Documents of
the Retrocessionaire constitute the entire agreement and understanding, and
supersede any previous agreements between the Parties relating to the subject
matter of this Agreement.

22.2
In the event of any conflict between the provisions of this Agreement and the
provisions of any other document referred to in it, the provisions of this
Agreement will prevail.

22.3
Each Party acknowledges and represents that it has not relied on or been induced
to enter into this Agreement by a representation, warranty or undertaking
(whether contractual or otherwise) which is not expressly set out in this
Agreement.

22.4
A Party is not liable to another Party and will not have any remedy (in equity,
contract or tort (including negligence) under the Misrepresentation Act 1967 or
in any other way) for a representation, warranty or undertaking that is not
expressly set out in this Agreement.

22.5
The Retrocedant has no duty or obligation to make, whether in anticipation of
entering into this Agreement or otherwise, any disclosure, representation or
warranty.

22.6
The Retrocessionaire hereby waives any remedy it might otherwise have to avoid
this agreement by reason of any breach by the Retrocedant or any other person,
including an agent of the Retrocedant, of the duty of utmost good faith (which
does not apply to or in respect of this Agreement) or any duty or obligation to
make, whether in anticipation of this Agreement or otherwise, any disclosure or
representation.

22.7
The Parties agree that where the Retrocessionaire or the Company breaches any
provision of this Agreement, then damages may not be a sufficient remedy and the
Retrocedant shall be entitled to seek such legal or equitable remedies or relief
as are available to it, including injunctive relief (whether interim or final)
and specific performance. Further, the Retrocessionaire and the Company agree
that if the Retrocedant brings an action seeking an equitable remedy to enforce
the provisions of Clauses 12 of this Agreement, neither of them will oppose the
granting of such remedy, whether on the ground that there is or are suitable
alternative remedy(ies) or otherwise.

22.8
This Clause 22 shall not exclude any liability for, or remedy in respect of,
fraud.

23.
WAIVERS

23.1
Except where this Agreement provides otherwise, no failure or delay by any Party
in exercising any right or remedy provided by Applicable Law and Regulation
under or pursuant to this Agreement shall impair such right or remedy or operate
or be construed as a waiver or variation of it or preclude its exercise at any
subsequent time and no single or partial exercise of any such right or remedy
shall preclude any other or further exercise of it or the exercise of any other
right or remedy.

23.2
Except where this Agreement provides otherwise the rights and remedies contained
in this Agreement are cumulative and not exclusive of rights or remedies
provided by law.

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24.
CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

Save for the persons referred to in Part E of Schedule 4, a person who is not a
Party to this Agreement shall have no right under the Contracts (Rights of Third
Parties) Act 1999 to enforce any of its terms.
25.
SEVERABILITY

If any provision of this Agreement is held to be invalid or unenforceable, then
such provision shall (so far as it is invalid or unenforceable) be given no
effect and shall be deemed not to be included in this Agreement but without
invalidating any of the remaining provisions of this Agreement. The Parties
shall then use their reasonable endeavours to replace the invalid or
unenforceable provision by a valid and enforceable provision the effect of which
is as close as possible to the intended effect of the invalid or unenforceable
provision thereby replaced.
26.
VARIATION

26.1
No variation of this Agreement shall be valid unless it is in writing and signed
by or on behalf of each of the Parties. The expression "variation" shall include
any variation, supplement, deletion or replacement however effected.

26.2
Unless expressly agreed in writing by the Parties, no variation shall constitute
a general waiver of any provisions of this Agreement, nor shall it affect any
rights, obligations or liabilities under or pursuant to this Agreement which
have already accrued up to the date of variation, and the rights and obligations
of the Parties under or pursuant to this Agreement shall remain in full force
and effect, except and only to the extent that they are so varied.

27.
ASSIGNMENT AND SUBCONTRACTING

27.1
Other than in accordance with Clause 10.1.3, a Party may not novate, assign,
transfer or create any trust in respect of, or purport to novate, assign,
transfer or create any trust in respect of a right or obligation under this
Agreement without having first obtained the other Party's written consent or in
the case of the Retrocedant, without having first obtained the written consent
of the Company only.

28.
NOTICES

28.1
A notice or other communication under or in connection with this Agreement (a
"Notice") shall be:

28.1.1
in writing;

28.1.2
in the English language; and

28.1.3
delivered personally or sent by first class post prepaid recorded delivery (and
air mail if overseas) to the Party due to receive the Notice to the address set
out in Clause 28.3 or to an alternative address or person specified by that
Party by not

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less than seven days' written notice to the other party received before the
Notice was despatched.
28.2
Unless there is evidence that it was received earlier, a Notice is deemed given
if:

28.2.1
delivered personally, when left at the address referred to in Clause 28.3;

28.2.2
sent by mail, except air mail, 2 Business Days after posting it; and

28.2.3
sent by air mail, 6 Business Days after posting it.

28.3
The address referred to in Clause 28.1 is:

Name of Party
Address
Marked for the attention of
Retrocedant
O'Hara House,
One Bermudiana Road, Hamilton HM08, Bermuda

General Counsel
Retrocessionaire
O'Hara House,
One Bermudiana Road, Hamilton HM08, Bermuda

Company Secretary
Company
O'Hara House,
One Bermudiana Road, Hamilton HM08, Bermuda

Company Secretary

29.
GOVERNING LAW

This Agreement and any dispute, controversy or claim arising out of or relating
to this Agreement shall be governed by English law save only in respect to
Segregated Account Matters which shall be governed by Bermuda law.
30.
EXPERT RESOLUTION

30.1
Where, pursuant to Clauses 5.4, 8.13.1, 11.3 or Part C of Schedule 4 of this
Agreement a dispute is referred for Expert determination, the provisions of this
Clause 30 shall apply. The Expert shall be an independent actuary appointed in
accordance with this Clause 30 (the "Expert"). The Expert shall be jointly
appointed by the Actuaries or, failing agreement on such appointment, the
President for the time being of the UK Institute and Faculty of Actuaries) for
resolution.

30.2
In performing his obligations under Clause 30.1, the Expert shall act in good
faith and give due weight to the objects of this Agreement. The Expert shall act
as an expert and not an arbitrator and his decision shall (in the absence of
manifest error) be final and binding on the Parties.

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30.3
Each Party shall upon request provide the Expert with such information as is
within its possession or control and reasonably required by the Expert save if
to do so would breach any Applicable Law and Regulation.

30.4
The Expert shall deliver a final and binding award within 40 Business Days of
the date of his appointment.

30.5
The Parties expressly waive, to the extent permitted by law, any rights of
recourse to the courts they may otherwise have to challenge the Expert's
determination, other than in the case of manifest error.

30.6
The cost of the Expert shall be borne between the Retrocedant and the
Retrocessionaire in such proportions as shall be determined by the Expert.

30.7
If a dispute arises under this Agreement in relation to an issue which has been
raised but not yet determined under either of the other XL Retrocession
Agreements, the Parties agree that such dispute hereunder will be joined to and
conducted together with the dispute under such other XL Retrocession Agreement
and any agreement or determination so made shall be binding on all Parties to
this Agreement. A Party shall not be obliged to comply with this Clause 30.7
where such Party determines, acting reasonably, that due to differences in the
Applicable Law and Regulation under this Agreement and the “Applicable Law and
Regulation” under another XL Retrocession Agreement, complying with this Clause
30.7 would be illegal, invalid or unlawful. This Clause 30.7 shall cease to
apply in respect of any XL Retrocession Agreement on termination of that XL
Retrocession Agreement.

31.
JURISDICTION

31.1
Subject to Clause 30, the courts of England have exclusive jurisdiction to
settle any dispute arising from or connected with this Agreement (a "Dispute")
including a dispute regarding the existence, validity or termination of this
Agreement or the consequences of its nullity.

31.2
The Parties agree that the courts of England are the most appropriate and
convenient courts to settle any Dispute and, accordingly, that they will not
argue to the contrary.

31.3
Subject to Clause 32, the Parties agree that the documents which start any
proceedings relating to a Dispute ("Proceedings") and any other documents
required to be served in relation to those Proceedings may be served on a Party
in accordance with Clause 28. These documents may, however, be served in any
other manner allowed by law. This Clause 31.3 applies to all Proceedings
wherever started.

32.
PROCESS AGENT

32.1
Each party which is not a company incorporated in England and Wales shall at all
times maintain an agent for service of process in England. The Retrocessionaire
and the Company irrevocably appoint GreyCastle Services Limited whose registered
office is at 20-22 Bedford Row, London WC1R 4JS, England and the Retrocedant
irrevocably appoint XL Services UK Limited at its registered office from time to
time (the "Process Agent") as their agent for such purpose.

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32.2
Without prejudice to any other permitted mode of service, each Party agrees that
service of any claim form, notice or other document for the purpose of any
Proceedings begun in England shall be duly served upon it if served on the
Process Agent appointed by it in any manner permitted by the Civil Procedure
Rules, whether or not it is forwarded to the Party.

32.3
If for any reason the Process Agent appointed by any Party at any time ceases to
act as such, the Party shall promptly appoint another such agent and promptly
notify the other parties of the appointment and the new Process Agent's name and
address. If the Party concerned does not make such an appointment within 7
Business Days of such cessation, then any other Party may do so on its behalf
and shall notify the other Parties if it does so.

33.
DELAYS, ERRORS AND OMISSIONS

Any inadvertent delay or error, in complying or omission to comply with the
terms and conditions of this Agreement by one Party will not relieve any other
party hereto from any obligation which would attach to it hereunder if such
error, omission or delay had not been made, except to the extent that the
obligation cannot be performed by reason of the delay error or omission,
provided such error, omission or delay is rectified promptly upon discovery (and
at the expense of the Party that delays, errs or omits to act) . Nothing
contained in this Clause shall be held to impose obligations on any Party
greater than would have attached hereunder had such error or omission not
occurred.
34.
COUNTERPARTS

This Agreement may be executed in any number of counterparts and by the Parties
to it on separate counterparts, each of which is an original and all of which
together evidence the same agreement.

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RETROCESSION AGREEMENT BETWEEN
XL RE LTD (UK BRANCH) AND XL LIFE REINSURANCE (SAC) LTD. (FOR
ITSELF AND ACTING IN RESPECT OF ITS SEGREGATED ACCOUNT XL-1)
EXECUTION PAGE

Executed by the Parties

 
 
 
 
 
Signed by
)
/s/ Mark Twite
XL Re Ltd (UK Branch)
)
 
 
 Signature

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RETROCESSION AGREEMENT BETWEEN
XL RE LTD (UK BRANCH) AND XL LIFE REINSURANCE (SAC) LTD. (FOR
ITSELF AND ACTING IN RESPECT OF ITS SEGREGATED ACCOUNT XL-1)
EXECUTION PAGE

 
 
 
 
 
Signed by
)
/s/ Mary A. Hayward
XL Life Reinsurance (SAC) Ltd
)
(in respect of its segregated account XL-1)
)
 
 
 Signature

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RETROCESSION AGREEMENT BETWEEN
XL RE LTD (UK BRANCH) AND XL LIFE REINSURANCE (SAC) LTD. (FOR
ITSELF AND ACTING IN RESPECT OF ITS SEGREGATED ACCOUNT XL-1)
EXECUTION PAGE

 
 
 
 
 
Signed by
)
/s/ Mary A. Hayward
XL Life Reinsurance (SAC) Ltd
)
 
 
 Signature
 
 
 

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