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

                                    FORM 10-K

(Mark One)

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

      For the fiscal year ended December 31, 2002.

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the transition period           to            .
                               -----------  ------------

                         Commission file number 1-16089

                               TRENWICK GROUP LTD.
             (Exact name of registrant as specified in its charter)

           Bermuda                                              98-0232340
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

               LOM Building, 27 Reid Street, Hamilton HM11 Bermuda
               (Address of principal executive offices)   (Zip Code)

        Registrant's telephone number, including area code: 441-292-4985

           Securities registered pursuant to Section 12(b) of the Act:

                                                   Name of Each Exchange
          Title of Each Class                      on Which Registered
Common Shares, par value $.10 per share    Over-The-Counter Bulletin Board (OTC)

        Securities registered pursuant to Section 12(g) of the Act: None

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes |_| No |X|

      The aggregate market value on March 14, 2003 of the voting stock held by
non-affiliates of the registrant was $9,185,209.

      The number of shares outstanding of each of the issuer's classes of common
stock as of the close of the period covered by this report:

            Class                             Outstanding at March 14, 2003
            -----                             -----------------------------
Common Shares, $.10 par value                           36,740,834

Certain portions of the registrant's definitive proxy statement relating to its
annual general meeting of shareholders are incorporated by reference into Part
III of this report.

<PAGE>

                               TRENWICK GROUP LTD.

                                Table of Contents

                                                                          Page
                                                                         Number
                                                                         ------

                                     PART I

Item 1.  Business...........................................................3

Item 2.  Properties........................................................44

Item 3.  Legal Proceedings.................................................44

Item 4.  Submission of Matters to a Vote of Security Holders...............44

                                     PART II

Item 5.  Market for Corporation's Common Stock and Related Stockholder
           Matters.........................................................44

Item 6.  Selected Financial Data...........................................47

Item 7.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations.......................................47

Item 7a. Quantitative and Qualitative Disclosures About Market Risk........77

Item 8.  Financial Statements and Supplementary Data.......................86

Item 9.  Changes in and Disagreements with Accountants on
           Accounting and Financial Disclosure............................143

                                    PART III

Item 10.  Directors and Executive Officers................................143

Item 11.  Executive Compensation..........................................143

Item 12.  Security Ownership of Certain Beneficial Owners and
            Management....................................................143

Item 13.  Certain Relationships and Related Transactions..................144

Item 14.  Controls and Procedures.........................................144

                                     PART IV

Item 15.  Exhibits, Financial Statement Schedules and Reports on
            Form 8-K......................................................144


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<PAGE>

                           FORWARD-LOOKING STATEMENTS

Some of the statements under "Business," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
elsewhere in this Report may include forward-looking statements which reflect
our current views with respect to future events and financial performance. These
statements include forward-looking statements both with respect to us
specifically and the insurance and reinsurance sectors in general. Statements
which include the words "expect," "intend," "plan," "believe," "project,"
"anticipate," "will" and similar statements of a future or forward-looking
nature identify forward-looking statements for purposes of the federal
securities laws or otherwise.

All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that could
cause our actual results to differ materially from those indicated in these
statements. We believe that these factors include but are not limited to those
described under "Risk Factors" below and the following:

      -     Our ceasing to function as a going concern;

      -     actions by insurance regulators seizing or otherwise taking control
            of our insurance company subsidiaries or their assets;

      -     actions by our creditors or securities holders commencing
            liquidation or similar proceedings against us, our subsidiaries or
            their assets;

      -     greater frequency or severity of claims and loss activity, including
            as a result of natural or man-made catastrophic events, than our
            underwriting, reserving or investment practices anticipate based on
            historical experience or industry data;

      -     failure of our business strategy due to changes in current or future
            market conditions;

      -     increased competition on the basis of financial strength, pricing,
            capacity, coverage terms or other factors;

      -     our lack of experience in operating entities that are in runoff;

      -     the effects of acts of terrorism or war;

      -     developments in the world's financial and capital markets that
            adversely affect the performance of our investments;

      -     changes in regulation or tax laws applicable to us, our
            subsidiaries, brokers or customers;

      -     changes in the availability, cost or quality of reinsurance;

      -     changes in the distribution or placement of risks due to increased
            consolidation of insurance and reinsurance brokers;

      -     decreased demand for our insurance and reinsurance products;

      -     loss of additional key personnel, or consultants;

<PAGE>

      -     the effects of mergers, acquisitions and divestitures;

      -     changes in rating agency policies or practices;

      -     changes in legal theories, including trends that impact verdicts in
            insurance claims litigation;

      -     changes in accounting policies or practices;

      -     changes in general economic conditions, including inflation, foreign
            currency exchange rates, interest rates, and other factors.

The foregoing review of important factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary statements that are
included in this Report. We undertake no obligation to publicly update or review
any forward-looking statement, whether as a result of new information, future
developments or otherwise.

If one or more of these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may vary materially
from what we projected. Any forward-looking statements you read in this Report
reflect our current views with respect to future events and are subject to these
and other risks, uncertainties and assumptions relating to our operations,
results of operations, growth strategy and liquidity. All subsequent written and
oral forward-looking statements attributable to us or individuals acting on our
behalf are expressly qualified in their entirety by this paragraph. You should
specifically consider the factors identified in this Report which could cause
actual results to differ before making an investment decision.


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<PAGE>

                                     PART I

Item 1. Business

General Background

Trenwick Group Ltd. ("Trenwick") is a Bermuda-based specialty insurance and
reinsurance holding company with two principal businesses operating through its
subsidiaries located in the United States and the United Kingdom. Trenwick's
United States treaty reinsurance business ("Trenwick America Re") provides,
through an underwriting facility with Chubb Re, Inc. and its affiliate Federal
Insurance Company (together, "Chubb"), treaty reinsurance to insurers of
property and casualty risks. Trenwick's operations at Lloyd's of London
("Lloyd's") underwrite specialty property and casualty insurance as well as
treaty and facultative property and casualty reinsurance on a worldwide basis.

In 2002, Trenwick conducted several strategic reviews of its operations in light
of its capital constraints and determined that it was necessary for Trenwick to
reduce its operating leverage by reducing premium volumes, through either sales
or discontinuance of certain lines of business, to a level more commensurate
with its capital base and to concentrate its limited financial resources on its
core franchises and businesses, United States treaty reinsurance and its Lloyd's
operations, where it would be able to write insurance and reinsurance based on
direct or indirect financial support. Trenwick assessed its alternatives and
voluntarily placed into runoff its United States specialty program business
formerly operated through its subsidiary, Canterbury Financial Group, Inc.
("Canterbury") and its London-based specialty insurance and reinsurance company,
Trenwick International Limited ("Trenwick International"), and, in light of the
increasing capital requirements imposed by the market on catastrophe insurance
providers, sold the in-force property catastrophe reinsurance business of its
Bermuda subsidiary LaSalle Re Limited ("LaSalle Re"). Little or no new insurance
or reinsurance is presently being offered in these runoff operations.

As a result of a significant deterioration in Trenwick's financial condition,
more fully described in "Significant Developments" below, Trenwick hired
Greenhill & Co., LLC as its financial advisor to assist in the evaluation and
implementation of a possible restructuring of its outstanding indebtedness and
preferred equity as well as other strategic alternatives.

Trenwick was formed as a Bermuda company in 1999 to acquire two publicly held
companies, Trenwick Group Inc. and LaSalle Re Holdings Limited ("LaSalle Re
Holdings"), and the minority interest in LaSalle Re, a subsidiary of LaSalle Re
Holdings. That transaction, in which Trenwick issued common shares to acquire
LaSalle Re Holdings, Trenwick Group Inc. and the minority interest in LaSalle
Re, was completed on September 27, 2000 and was accounted for as a purchase by
LaSalle Re Holdings. Accordingly, in the financial statements, the assets and
liabilities, and the revenues and expenses of LaSalle Re Holdings were included
for all periods presented; the minority interest in common shares and minority
interest in net income of LaSalle Re were eliminated as of September 30, 2000
and from October 1, 2000, respectively, and the assets and liabilities, and the
revenues and expenses of Trenwick Group Inc. were included as of September 30,
2000 and from October 1, 2000, respectively. Trenwick Group Inc. had earlier
acquired another publicly held company, Chartwell Re Corporation, on October 27,
1999.

Significant Developments

During 2002 and the first quarter of 2003, a number of developments have
occurred that have significantly and negatively affected Trenwick's operations,
capital structure and the financial resources required to conduct its
businesses. Set forth below are brief descriptions of a number of these
developments as well as certain material transactions entered into by Trenwick
to enable it to continue to conduct business operations despite the adverse
developments. Investors and shareholders are cautioned


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<PAGE>

that Trenwick has had a number of significant adverse events which could make it
extremely difficult to continue in its current businesses, if at all, and they
should carefully review the "Risk Factors" and "Forward-Looking Statements"
sections, as well as other sections, of this Report.

Reserve Adjustments

Trenwick announced on October 25, 2002 that it had engaged independent actuaries
to conduct a review of reserves for unpaid claims and claims expenses at each of
Trenwick's operating subsidiaries. Trenwick increased its reserves for unpaid
claims and claims expenses in the fourth quarter of 2002 by $107 million, or
$2.90 per share, which followed reserve increases made by Trenwick earlier in
2002. The aggregate reserve increases for 2002 were $285.1 million, or $7.75 per
share. Both the fourth quarter and year to date 2002 reserve increases are net
of benefits related to reductions in the liability under the contingent interest
notes. The fourth quarter increase in Trenwick's reserves was based upon the
study conducted by independent actuarial consultants and additional work
performed during the quarter by Trenwick's internal actuaries. The increases in
reserves impact Trenwick's United States and Bermuda insurance subsidiaries and
Trenwick International. Trenwick's reserves at its Lloyd's operations, while
also analyzed, were not significantly affected by this reserve increase.
The reserve increases reflect a reassessment of Trenwick's reserves for unpaid
claims and claims expenses in light of recent reported loss activity trends
across its major business groups and principally impacts the 1998 to 2001
accident years. Included in the fourth quarter 2002 reserve increase was $20
million relating to Trenwick's exposure to asbestos and environmental
liabilities. Following this increase to Trenwick's asbestos and environmental
reserves, Trenwick's three year survival ratio (i.e., number of years that
existing reserves will last if the current level of average annual payments for
the last three years repeats itself indefinitely) for this type of exposure will
be approximately 13 years. See "--Unpaid Claims and Claims Expenses," below.

Deferred Income Tax Assets

Trenwick's United States and United Kingdom operations incurred financial
accounting losses in the years 1999 through 2002 and, in connection with such
losses, recorded as an asset up to $119.6 million and $96.8 million,
respectively, of net deferred income taxes (before application of a
valuation allowance). The net deferred income tax asset represented the future
tax benefit of the losses previously incurred by Trenwick's United States and
United Kingdom operations. Because of Trenwick's cumulative financial accounting
losses, in the absence of specific favorable factors, application of FASB
Statement No. 109 required Trenwick to establish during 2002 a 100% valuation
allowance against its deferred tax asset related to its United States and United
Kingdom operations. The establishment of a 100% valuation allowance against
Trenwick's deferred tax asset increased Trenwick's provision for income taxes
and net loss by $150.2 million, or $4.08 per share for the year ended December
31, 2002. The maintenance of a full valuation allowance against Trenwick's net
deferred tax asset through December 31, 2002 further increased Trenwick's
provision for income taxes and net loss by $65.1 million, or $1.77 per share.
Trenwick's management will continue to monitor its tax position and reassess the
need for a full valuation allowance on its deferred tax asset on a periodic
basis.

Potential Events of Default Under Senior Secured Credit Facility

Concurrently with the business combination involving LaSalle Re Holdings and
Trenwick Group Inc. in September of 2000, Trenwick America Corporation
("Trenwick America") and Trenwick Holdings Limited ("Trenwick Holdings"),
Trenwick's U.S. and U.K. holding companies, entered into an amended and restated
$490 million credit agreement with various lending institutions (the "Banks"),
which was guaranteed by LaSalle Re Holdings. The credit agreement consisted of
both a $260 million revolving credit facility and a $230 million letter of
credit facility. The revolving credit facility was subsequently


                                       4
<PAGE>

converted into a four-year term loan and repaid in full on June 17, 2002.
Additionally, on December 24, 2002, the credit agreement was amended to reduce
the letter of credit facility, which is utilized by Trenwick to support its
underwriting operations at Lloyd's, to the currently outstanding $182.5 million.
The letter of credit facility is scheduled to terminate on December 31, 2003,
although the letters of credit issued pursuant to the facility will not expire
until December 31, 2006.

Pursuant to a guaranty agreement entered into concurrently with the credit
agreement, Trenwick has guaranteed the obligations of Trenwick America and
Trenwick Holdings under the credit agreement. In April of 2002, Trenwick pledged
the capital stock of LaSalle Re Holdings, which was a guarantor of the
obligations under the credit agreement, and LaSalle Re as collateral to the
Banks. In December of 2002, Trenwick agreed to provide the Banks additional
security interests as described below.

On October 18, 2002, A.M. Best Company lowered the financial strength ratings of
Trenwick's operating subsidiaries below "A-". The lowered A.M. Best Company
ratings constituted an event of default under Trenwick's credit agreement. In
addition, increases in Trenwick's loss reserves and the establishment of a
Trenwick deferred tax asset valuation allowance in the third quarter of 2002
resulted in Trenwick violating the financial covenants in the credit agreement
requiring Trenwick to maintain a minimum tangible net worth and minimum
risk-based capital. On November 13, 2002, Trenwick, its subsidiaries and the
Banks executed a forbearance agreement with respect to the events of default
arising from Trenwick's lowered A.M. Best Company ratings and financial covenant
violations.

Subsequently, an amendment and waiver of default under the credit agreement and
amendment to the guaranty agreement were entered into on December 24, 2002 (the
"December Amendments"). The December Amendments extended the letter of credit
facility through December 31, 2003 to support Trenwick's underwriting operation
at Lloyd's for the 2003 year of account. To those Banks extending their letters
of credit, Trenwick agreed to pay a 5% per annum cash letter of credit fee,
issue pay-in-kind notes bearing interest at LIBOR plus 2.5% per annum to
evidence an additional 3.16% per annum letter of credit fee, issue warrants
equal to 10% of Trenwick's fully diluted equity capital, and pay 15% of the
profits earned by Trenwick's Lloyd's operations for the 2002 and 2003 Lloyd's
years of account. In addition, Trenwick, Trenwick America and Trenwick Holdings
agreed to provide the Banks a security interest in all of their respective
equity interests in, and the assets and property of, their direct and indirect
subsidiaries as additional collateral for the Banks, and to cause the
subsidiaries to provide a guaranty to the Banks, subject to applicable laws and
regulations and certain existing contractual rights of holders of other
indebtedness.

The December Amendments also prohibit Trenwick and its subsidiaries from
declaring or paying any dividends (including on Trenwick's common shares, the
Series A Preferred Shares of LaSalle Re Holdings and the capital securities
issued by Trenwick Capital Trust I). The December Amendments and the other
amendments and waivers entered into in the first quarter of 2003 waive certain
other defaults, add covenants further restricting the operation of Trenwick's
business, prohibit Trenwick from making certain payments without the Banks'
approval, prohibit Trenwick and its subsidiaries from selling or otherwise
disposing of any assets or property, require Trenwick to regularly report
certain financial information to the Banks, and adjust downward certain of the
financial covenants.

Pursuant to the December Amendments, Trenwick is required to collateralize with
cash, cash equivalents and marketable securities 60% of the outstanding letters
of credit by August 1, 2003. In addition, Trenwick is required to use its best
efforts to terminate the letters of credit by December 31, 2003. In order to do
so, the letters of credit would need to be replaced with other letters of credit
or collateral acceptable to Lloyd's. In the event Trenwick has not terminated
the letters of credit by December 31, 2003, it is required on such date to
collateralize with cash, cash equivalents and marketable securities the full
amount of the outstanding letters of credit. At this time, Trenwick does not
have sufficient available


                                       5
<PAGE>

liquidity to collateralize the letters of credit as required by the December
Amendments. Additionally, Trenwick does not believe that it will be able to
replace the letters of credit with other letters of credit or collateral
acceptable to Lloyd's. See Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operation - Liquidity and Capital Resources."

Since December, Trenwick has entered into additional amendments and
numerous waivers with the Banks providing for, among other things, waivers of
potential covenant defaults, further reductions in certain financial covenants,
additional financial reporting, approval of certain employee and other payments,
and extension of numerous deadlines imposed under the December Amendments.

If there is an event of default under the credit agreement, including as a
result of Trenwick failing to collateralize the letters of credit as described
above, or if there is an event of default under other outstanding indebtedness
of Trenwick or its subsidiaries, including under the senior notes, resulting in
a cross default under the credit agreement, Trenwick may be required to fully
and immediately collateralize the outstanding letters of credit under the terms
of the guaranty agreement. No liability for any such amounts has been reflected
in Trenwick's financial statements. If the potential future events of default
occur and are not waived, there is substantial doubt as to Trenwick's ability to
continue as a going concern and Trenwick and/or one or more of its subsidiaries
may be forced to seek protection from creditors through proceedings commenced in
Bermuda and other jurisdictions including the United States. In addition, at any
time one or more of the insurance regulatory authorities having jurisdiction
over Trenwick's insurance company operating subsidiaries may commence voluntary
or involuntary proceedings for the formal supervision, rehabilitation or
liquidation of such subsidiaries, or one or more of the creditors of Trenwick or
its subsidiaries may commence proceedings against Trenwick or its unregulated
subsidiaries seeking their liquidation.

Potential Event of Default under Senior Notes

Included in Trenwick's indebtedness at December 31, 2002 are senior notes with
an aggregate principal amount of $75 million which are due April 1, 2003.
Trenwick is engaged in continuing discussions with holders of the senior notes
with respect to a possible restructuring of these senior notes. Trenwick's
agreements entered into in connection with the renewal of its letter of credit
facility in December 2002 provided that Trenwick would replace, refinance or
restructure these senior notes by March 1, 2003. The banks participating in
Trenwick's letter of credit facility have provided to Trenwick a waiver of this
March 1, 2003 deadline as discussions with the senior note holders continue. At
this time, Trenwick does not have sufficient available liquidity to pay the
amount due on April 1, 2003 and is uncertain whether it will be able to complete
the restructuring by that date. If Trenwick is unable to restructure these
senior notes by April 1, 2003 and either the banks under the credit facility or
the senior noteholders determine to exercise the rights available to them or
take other action with respect to the assets of Trenwick, Trenwick and/or one or
more of its subsidiaries may be forced to seek protection from creditors through
proceedings commenced in Bermuda and other jurisdictions including the United
States. In addition, at any time, the insurance regulatory authorities having
jurisdiction over Trenwick's insurance company operating subsidiaries may
commence voluntary or involuntary proceedings for the formal supervision,
rehabilitation or liquidation of such subsidiaries, or one or more of the
creditors of Trenwick or its subsidiaries may commence proceedings against
Trenwick or its unregulated subsidiaries seeking their liquidation.

Going Concern Qualification

Trenwick's independent accountants, PricewaterhouseCoopers LLP, have stated in
their audit report dated March 31, 2003, with respect to Trenwick's financial
statements as of and for the twelve months ended December 31, 2002, that
substantial doubt exists as to Trenwick's ability to continue as a going
concern.


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<PAGE>

Recent Ratings Actions

Moody's Investors Service announced on January 31, 2003 that it had lowered the
senior debt rating of Trenwick from "Caa3" to "Ca", and had lowered the ratings
of the trust preferred securities of Trenwick America and the preferred stock of
LaSalle Re Holdings from "Ca" to "C", following Trenwick's announcement that it
would post a fourth quarter 2002 reserve charge of $107 million. Moody's
Investors Service noted that the $107 million reserve charge was significant in
relation to the $322 million book value reported by Trenwick at the end of the
third quarter of 2002 and also Trenwick's market capitalization, which is well
below that amount. Moody's Investors Service also noted that, in its opinion,
the $107 million charge further diminishes the value that creditors will be able
to extract from Trenwick in its restructuring efforts, and that currently
virtually all of Trenwick's financial assets are held by regulated insurance
subsidiaries, limiting resources available to meet debt and preferred stock
obligations.

Standard and Poor's Ratings Services announced on March 4, 2003 that it placed
its "CCC-" counterparty credit ratings on Trenwick, LaSalle Re Holdings and
Trenwick America on CreditWatch with negative implications because it believes
that Trenwick's ability to restructure its senior debt to keep it out of default
is remote. Standard & Poor's also announced on March 4, 2003 that it placed its
"CCC" counterparty credit and financial strength ratings on Trenwick America Re,
Dakota Specialty Insurance Company ("Dakota"), LaSalle Re, Trenwick
International and The Insurance Corporation of New York ("Inscorp") on
CreditWatch negative. In addition, Standard and Poor's withdrew its "CCC"
counterparty credit and financial strength ratings on Chartwell Insurance
Company due to its merger with Trenwick America Re.

On February 4, 2003, Fitch Ratings announced that it had lowered its long-term
rating and senior debt ratings on Trenwick and its subsidiaries to "C" from
"CC." Fitch reported that its ratings action followed Trenwick's announcement
that it was taking a $107 million reserve charge, and that it believed that
Trenwick's business prospects and financial flexibility are "very limited" and
that it would be unable to refinance its senior debt. Fitch also reported its
belief that Trenwick's ability to remain a going concern is heavily dependent on
financing by the letter of credit facility and that senior debt holders may be
forced to consider accepting some form of payment in kind arrangement.

With the exception of Trenwick America Re, which is rated "NR-4" (Rating
Withdrawn at Company's Request) each of Trenwick's operating insurance company
subsidiaries is classified "NR-3" (Rating Procedure Inapplicable) by A.M. Best
Company. All of Trenwick Managing Agents' managed syndicates are able to write
business utilizing the ratings of Lloyd's, which is rated "A-" (Excellent) by
A.M. Best Company and has an "A" financial strength rating from Standard &
Poor's. These ratings are based upon factors that may be of concern to policy or
contract holders, agents and intermediaries, but may not reflect the
considerations applicable to an equity investment in a reinsurance or insurance
company. A change in any such rating is at the discretion of the respective
rating agencies.

Suspension of Trading from New York Stock Exchange

On March 25, 2003, the common shares of Trenwick and the Series A Preferred
Shares of LaSalle Re Holdings were suspended from trading, pending application
to the Securities and Exchange Commission for delisting, by the New York Stock
Exchange ("NYSE") as a result of failure to meet the NYSE's minimum continued
listing criteria. On the same day, Trenwick was notified that its common shares
and the Series A Preferred Shares of LaSalle Re Holdings will be quoted on the
Over The Counter Bulletin Board ("OTC").


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By letter dated March 24, 2003, the Bermuda Monetary Authority ("BMA") issued
permission for the free transferability on an interim basis of the shares while
they are quoted on the OTC Bulletin Board. This permission is contingent on the
condition that the BMA is notified promptly of any instances in which Trenwick
or LaSalle Re Holdings become aware that a new shareholder has obtained 5% or
more of either company's shares, including background information on any such
new 5% shareholder.

In the absence of the permission granted by the BMA discussed in the previous
paragraph, as a consequence of the suspension of trading, all transfers of
shares involving holders of Trenwick's or LaSalle Re Holdings' securities would
be required to be approved by the BMA before they could be entered into
Trenwick's or LaSalle Re Holdings' share register. This procedure would only
apply to share transfers involving shareholders who hold shares in their own
name on Trenwick's or LaSalle Re Holdings' share register (a "record holder").
Shareholders who hold through nominees, brokers, or banks, which in turn have
accounts through other nominees, would not be affected by this approval
procedure unless one of the parties to the transfer becomes a record holder on
Trenwick's or LaSalle Re Holdings' share register or the number of shares held
by an existing record holder is increased or decreased by the transfer. If the
BMA's free transferability permission is rescinded, this pre-approval process
will cause a delay in share transfers.

Actions by Insurance Regulators

On December 3, 2002, Trenwick America Re entered into a "letter of
understanding" with the Connecticut Insurance Department pursuant to which
Trenwick America Reagreed that it would not take certain actions without the
prior written approval of the Connecticut Insurance Commissioner, or her
designee, including conducting business, disposing of any assets, settling any
intercompany balances or paying any dividends. For further discussion of the
Connecticut letter of understanding, see "Regulation - United States
Regulation."

Trenwick America Re's reported Risk-Based Capital ("RBC") was at the "Regulatory
Action Level Event" at December 31, 2002. At this level, Trenwick America Re was
required to submit a Comprehensive Plan of Action to the Connecticut Insurance
Department. Such a plan was submitted to the Connecticut Insurance Department on
January 23, 2003. In addition, in connection with the Regulatory Action Level
Event the Connecticut Insurance Department, at its discretion, is authorized to
take any action deemed necessary under the circumstances.

Inscorp's reported RBC was at the "Mandatory Control Level Event" at December
31, 2002. New York Insurance Law requires that New York domiciled insurers
report their risk-based capital based on a formula calculated by applying
factors to various asset, premium and reserve items. Recently, Inscorp has been
informed by the New York Insurance Department ("NYID") that it will be required
to submit a plan to cure the existing statutory capital impairment. If the NYID
is not satisfied that Inscorp has proposed a suitable plan to eliminate the
impairment by April 10, 2003, the Superintendent of the NYID may proceed, or
Trenwick may of its own volition determine that it is in its best interest for
the NYID to proceed against Inscorp pursuant to the provisions of Article 74 of
the New York Insurance Law, the statute authorizing supervision, conservation,
rehabilitation, liquidation and dissolution of insurers, including domestic
insurers.

Trenwick has been notified by the NYID that, in the NYID's view, approximately
$26 million in loans made to Trenwick America by Inscorp in 2002 were in
contravention of New York regulatory requirements. As a result, Inscorp and
Trenwick may be the subject of regulatory action brought by the NYID.


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<PAGE>

For a description of the RBC requirements applicable to Trenwick's United States
insurance company subsidiaries, see "--Regulation - Risk Based Capital."

The BMA and LaSalle Re, which is in runoff, have agreed that LaSalle Re's
insurance license be restricted so that it is not permitted to enter into any
new contracts of insurance or reinsurance without the prior written consent of
the BMA, effective January 1, 2003. See "--Regulation."

Chubb Facility

During the fourth quarter of 2002, Trenwick's subsidiary Trenwick America
Reinsurance Corporation ("Trenwick America Re") entered into an underwriting
facility with Chubb which permits Trenwick America Re to underwrite up to $400
million of United States reinsurance business on behalf of Chubb through the end
of January 2004. The underwriting facility is subject to cancellation
prospectively by either party at any time. Chubb will receive one-third and
Trenwick America Re will receive two-thirds of any profits generated by the
business, with the initial profit distribution from Chubb to Trenwick America Re
scheduled to begin in 2006. See "--Business Segment Information--Reinsurance
Segment--United States Treaty Reinsurance--Chubb Underwriting Facility."

Lloyd's Operations - Trenwick Managing Agents Limited

On October 4, 2002, Trenwick Managing Agents Limited (formerly Chartwell
Managing Agents Limited) ("Trenwick Managing Agents"), Trenwick's managing agent
at Lloyd's of London, entered into an agreement with National Indemnity Company,
a member of the Berkshire Hathaway group of insurance companies ("NICO"). This
agreement enabled Trenwick Managing Agents to increase the total premium
capacity of Syndicate 839, its primary managed syndicate at Lloyd's, by
(pound)141.25 million ($227.4 million) for the 2002 year of account. On November
4, 2002, Trenwick Managing Agents entered into a second agreement with NICO,
which was amended on December 23, 2002, to provide Syndicate 839 with premium
capacity of up to (pound)113.1 million ($182.1 million) via Syndicate 2750 for
the 2003 year of account. The 2003 year of account capital is principally being
applied to the aviation insurance segment of Syndicate 839's business.

Runoff Operations

Effective April 1, 2002, Trenwick sold the in-force property catastrophe
reinsurance business of its subsidiary, LaSalle Re, to Endurance Specialty
Insurance, Ltd. ("Endurance"). The sale was effected through a 100% quota share
reinsurance agreement. In addition, Endurance will have the right to renew
LaSalle Re's in-force business as it expires in return for a renewal fee payable
to LaSalle Re of 12.5% of business written. See "--Runoff Operations-Worldwide
Property Catastrophe Reinsurance" below.

On October 30, 2002, Trenwick announced that it had ceased underwriting
substantially all new insurance policies in its United States specialty program
business, which operated under the name Canterbury and through Trenwick America
Re's subsidiaries Inscorp, Dakota and Chartwell Insurance Company (merged with
and into Trenwick America Re effective December 31, 2002. Trenwick subsidiaries
will continue to administer and pay claims in connection with the insurance
policies previously underwritten through Canterbury. See "--Runoff
Operations-United States Specialty Program Insurance," below.

On December 8, 2002, Trenwick announced that Trenwick International, its London
based specialty insurance company, had ceased to underwrite new insurance,
effective November 29, 2002. A draft scheme of operations with respect to the
runoff of Trenwick International was presented to the Financial Services
Authority ("FSA") in the United Kingdom on December 31, 2002 and a final version
is srequired to be


                                       9
<PAGE>

presented to the FSA for approval by March 31, 2003. See "--International
Specialty Insurance and Facultative Reinsurance," below.

Segment Information

During the first quarter of 2002, Trenwick amended the basis in which operating
segments are reported. The continuing Lloyd's syndicates managed by Trenwick and
the International Specialty Insurance and Reinsurance operations were combined
into one operating segment and the United States based property and casualty
reinsurance and Bermuda based property catastrophe reinsurance operations were
combined into one segment called Reinsurance. These changes were made to conform
to changes in Trenwick's management and operational structure. For the years
ended December 31, 2002, 2001 and 2000, Trenwick has reported its specialty
property and casualty insurance and reinsurance business in three business
segments, Reinsurance, International operations and United States specialty
program insurance.

Trenwick's Reinsurance segment includes treaty reinsurance on United States
property and casualty risks and worldwide property catastrophe reinsurance.
United States treaty reinsurance is written principally through Trenwick America
Re, which is located in Stamford, Connecticut, and includes the runoff of
reinsurance business formerly written by Chartwell Insurance Company (which
merged with and into Trenwick America Re effective December 31, 2002) and
Inscorp. In addition, the Reinsurance segment includes the results of the Chubb
underwriting facility. The remainder of Trenwick's Reinsurance segment consists
of property catastrophe reinsurance written by LaSalle Re on a worldwide basis
until it ceased underwriting effective April 1, 2002. See "--Runoff
Operations-Worldwide Property Catastrophe Reinsurance (In Runoff)," below.

Trenwick's International operations segment includes Trenwick's Lloyd's
operations as well as United Kingdom specialty insurance and facultative
reinsurance. Trenwick's Lloyd's operations are conducted through its wholly
owned subsidiary, Trenwick Managing Agents, located in London, England, which
manages underwriting syndicates at Lloyd's, almost exclusively for the account
of Trenwick and LaSalle Re. The United Kingdom specialty insurance and
facultative reinsurance was principally written by Trenwick International, also
located in London, England, which wrote business on a worldwide basis until it
ceased underwriting new business effective November 29, 2002. During 2002,
renewals of certain lines of business previously underwritten by Trenwick
International, including, among others, general aviation and commercial
property, were underwritten by Trenwick's Lloyd's entities following downgrades
in Trenwick International's financial strength ratings by Standard & Poor's
Rating Services. See "--Runoff Operations- International Specialty Insurance and
Facultative Reinsurance (In Runoff)," below.

Trenwick's United States specialty program insurance segment was written
principally through its United States subsidiary, Canterbury Financial Group,
Inc., and its operating subsidiaries, Inscorp, Dakota and Chartwell Insurance
Company (merged with and into Trenwick America Re effective December 31, 2002).
Trenwick ceased underwriting substantially all United States specialty program
insurance effective October 30, 2002. See "--Runoff Operations-United States
Specialty Program Insurance (In Runoff)," below.

Excluded from the aforementioned segments are Trenwick's Lloyd's syndicates in
runoff and Excess and Casualty Reinsurance Association Pool ("ECRA Pool")
runoff, which includes insurance and reinsurance that was either sold or
non-renewed. The ECRA Pool was a New York State licensed insurance pool that
underwrote multi-line property and casualty business until it ceased
underwriting in 1983. The losses incurred by the ECRA Pool included asbestos and
environmental risks for those periods. Trenwick America Re participated in the
ECRA Pool during years 1978 to 1982, while Inscorp participated in the ECRA Pool
during years 1950 to 1967.


                                       10
<PAGE>

In this Report, United Kingdom pounds sterling (pound) have been converted to
United States dollars at various rates based on varying factors, including in
some cases the date of the transaction described.

Reinsurance Segment - United States Treaty Reinsurance - Chubb Underwriting
Facility

In order to be able to continue to offer reinsurance despite the weakness of its
financial condition and its lowered financial strength ratings, Trenwick America
Re entered into an underwriting facility with Chubb on October 25, 2002 under
which Trenwick America Re will cause, subject to Chubb's approval, all of its
new and renewing United States reinsurance business during the term of the
underwriting facility to be underwritten by Trenwick America Re as agent on
behalf of Chubb, which will issue the reinsurance. Chubb's approval may not be
unreasonably withheld. The underwriting facility permits Trenwick America Re to
underwrite up to $400 million of United States reinsurance business as agent on
behalf of Chubb through January 31, 2004. The underwriting facility does not
preclude Chubb from writing any business outside of the facility. As further
described below, the profit commission to Trenwick America Re, if any, will be
paid by Chubb beginning in the first quarter of 2006.

Pursuant to the underwriting facility, which was effective as of November 1,
2002, the parties will jointly adjust and settle any claims arising under the
business underwritten, provided that Chubb will retain final claim settling
authority. Trenwick America Re has agreed that during the term of the
underwriting facility Trenwick America Re will not underwrite on behalf of any
other third party without Chubb's approval. Chubb has entered into a
non-competition agreement with Trenwick America Re restricting Chubb from
renewing certain business underwritten through the underwriting facility for one
year following the termination of the underwriting facility. Either party may
terminate the underwriting facility prospectively at any time. Termination of
the facility or any modification thereof that is deemed by the Banks under
Trenwick's credit facility to be materially adverse constitutes an event of
default under the credit facility. All premiums collected from the underwriting
facility are required to be paid directly to Chubb.

Chubb will receive as a fronting fee either five percent of gross written
premium on two-thirds of the business underwritten through the underwriting
facility or $15 million whichever is greater. To date, Trenwick America Re has
paid $10 million of this amount to Chubb, and additional payments of $1.25
million are due to be paid by Trenwick America Re at the end of each calendar
quarter of 2003. Trenwick America Re is entitled to receive a monthly expense
reimbursement equal to 2.0% of the gross written premiums underwritten on behalf
of Chubb collected during the applicable month. The total expense reimbursement
payable to Trenwick America Re is subject to a cap of $6.5 million. The minimum
total expense reimbursement is $5.5 million unless the underwriting facility is
terminated prior to the expiration of its term, in which case it will be
prorated based on the amount of time the underwriting agreement was in effect.

Trenwick America Re also has agreed to reinsure Chubb for 100% of all losses in
excess of premiums collected less certain expenses. To secure its reinsurance
obligations to Chubb, Trenwick America Re has posted a $50 million security
deposit with Chubb. Trenwick America Re is required to pay additional amounts to
Chubb for the security deposit, so that the security deposit is equal to the
greater of $50 million or the amount of Trenwick America Re's reinsurance
obligations. Given the long term nature of the stop-loss reinsurance agreement,
the amount of the cash deposit may be greater than Trenwick America Re's
obligations under the stop-loss reinsurance agreement. The security deposit will
earn an investment credit at a rate equal to the three-year United States
Treasury bill as of the close of business on the first business day of the
applicable time period. The amount of the security deposit in excess of certain
decreasing amounts over time will be returned to Trenwick America Re on a
payment schedule beginning March 31, 2006, provided that at such times Trenwick
America Re has an A.M. Best rating of "A-" or better. On January 12, 2012,
regardless of whether Trenwick America Re has reacquired an "A-"


                                       11
<PAGE>

rating from A.M. Best, that portion of the security deposit that exceeds the
positive difference (if any) of Trenwick America Re's obligations minus the
amount in the experience fund, will be returned to Trenwick America Re.

An "event of default" by Trenwick America Re under the Chubb facility would
occur if creditors attach or take possession of any material amount of Trenwick
America Re's assets, or if Trenwick America Re voluntarily or involuntarily
enters into rehabilitation, dissolution, winding-up, liquidation, administration
or reorganization proceedings under applicable bankruptcy, insolvency or similar
law. Upon the occurrence of an event of default by Trenwick America Re, no
profit commission will be paid and no reductions in the amount of collateral
will be made until the event of default ceases, or January 1, 2012, whichever is
earlier. At that time, the profit commission payment schedule and collateral
reduction schedules will recommence at the point at which the event of default
occurred.

Since November 1, 2002, the effective date of the Chubb facility, Trenwick
America Re has written approximately $127 million in gross premiums under the
facility. To date, almost all of the bound premiums have been renewal business.

Trenwick America Re generally obtains all of its business through brokers and
reinsurance intermediaries which seek its participation on reinsurance being
placed for their customers. In writing reinsurance business, Trenwick America Re
does not target specific types of clients, classes of business or types of
reinsurance. Rather, it selects transactions based upon the quality of the
reinsured, the attractiveness of the reinsured's insurance rates and policy
conditions and the adequacy of the proposed reinsurance terms.

The major lines of reinsurance currently written by Trenwick America Re during
2002, 2001 and 2000 were accident and health, property, errors and omissions,
environmental liability and general liability. Together these lines accounted
for an aggregate of at least 71% of its net premiums written in each of 2002,
2001 and 2000. During these periods Trenwick America Re also wrote medical
malpractice, workers' compensation, products liability and automobile liability
lines of reinsurance. The business written under the Chubb facility has been and
is expected to be similar in nature to that written in prior years.

Trenwick through its U.S. reinsurance subsidiaries also wrote property
catastrophe pro rata reinsurance treaties. In these programs, Trenwick assumed a
specified proportion of the exposure under a portfolio of excess of loss
property catastrophe reinsurance contracts written by the ceding reinsurer and
received an equal proportion of the premium received by the cedent.

Three ceding companies generated a significant amount of the United States
treaty reinsurance business, accounting for 25%, 22% and 31% of Trenwick America
Re's gross premiums written in 2002, 2001 and 2000, respectively. During 2002,
XL America Group, Converium Zurich and Avemco Group accounted for 9%, 9% and 7%,
respectively, of Trenwick America Re's gross premiums written.

International Operations - Trenwick's Lloyd's Operations

Trenwick Managing Agents

Trenwick participates in the Lloyd's market principally through Trenwick
Managing Agents, which is a managing agent at Lloyd's, and through five Lloyd's
corporate members. Trenwick Managing Agents receives fees and profit commissions
in respect of the underwriting and administrative services it provides to the
Lloyd's underwriting syndicates that it manages. For the 2003 year of account,
Trenwick Managing Agents manages three syndicates (Syndicates 839, 2750 and 44)
with advance consent to underwrite total premium of up to (pound)400 million
($644 million), which is primarily supplied by Trenwick


                                       12
<PAGE>

and by NICO, as further described below in "--Recent Developments involving
Trenwick Managing Agents and Lloyd's Syndicates - Coming Into Line." Classes of
business covered by Trenwick Managing Agents' syndicates include aviation,
marine, property, non-marine liability and life.

On December 10, 2002, Trenwick, LaSalle Re and LaSalle Re Holdings entered into
an agreement pursuant to which Oak Dedicated Limited, Oak Dedicated Two Limited
and Oak Dedicated Three Limited, three corporate members at Lloyd's
(collectively, the "Oak Entities"), were contributed by Trenwick to LaSalle Re,
and certain indebtedness owed to Trenwick by the Oak Entities was forgiven. In
connection with the foregoing, LaSalle Re agreed to invest $81 million in the
Oak Entities, which together with the renewal of the letter of credit facility,
provides funds at Lloyd's which enabled Trenwick to underwrite at Lloyd's for
the 2003 year of account. The Oak Entities will receive 43% of the economic
interest (prior to the deduction of the Banks' letter of credit fees and profit
participation) in the 2003 year of account at Lloyd's. The Oak Entities will
also participate in the economic interest in the results of 2002 and prior years
of account.

The two other principal corporate members are Oak Dedicated Four Limited, which
is owned indirectly by Trenwick, and Acorn Corporate Capital Limited, which is
owned by Trenwick but whose economic interest has been assigned to NICO.

Recent Developments involving Trenwick Managing Agents and Lloyd's Syndicates -
Coming Into Line

On October 4, 2002, Trenwick Managing Agents entered into an agreement with NICO
which enabled Trenwick Managing Agents to increase the total premium capacity of
its Syndicate 839 at Lloyd's for the 2002 year of account. NICO provided
(pound)62.5 million ($99.3 million ) in premium capacity through (pound)25.0
million ($39.7 million) of additional Lloyd's funding and (pound)78.7 million
($125.2 million) in premium capacity through a qualifying quota share
reinsurance facility, both for the 2002 year of account. A qualifying quota
share reinsurance contract is an outward reinsurance arrangement placed by a
Lloyd's syndicate that has the effect of increasing the written premium income
capacity of that syndicate. The reinsurance contract is subject to certain
regulatory criteria and guidelines, including minimum standards for the rating,
net assets and jurisdiction of the reinsurer. In return for its capital support,
NICO will receive a 41.4% share of the net underwriting result of Syndicate 839
for the 2002 year of account before ceding commissions and profit sharing. Under
the terms of its capital support, NICO is not exposed to losses in prior years
of account.

On November 4, 2002, Trenwick Managing Agents entered into a second agreement
with NICO, which was amended on December 23, 2002 and which enabled Syndicate
839 to have an authorized premium capacity of (pound)328.1 million ($528.2
million), before qualifying quota share, for the 2003 year of account. Under the
terms of the amended December 2002 agreement, NICO has agreed to provide
(pound)75.6 million ($120.1 million) in premium capacity for the 2003 year of
account, by increasing its additional funding to (pound)49.8 million ($79.1
million). Of the premium capacity, (pound)62.5 million ($99.3 million) is being
applied to the aviation insurance line of Syndicate 839's business and
(pound)13.1 million ($20.8 million) is being applied to most of the remaining
property and casualty insurance and reinsurance lines. The amended agreement
also provides Trenwick Managing Agents an option for the premium capacity being
supplied by NICO for the aviation line of Syndicate 839 to be increased to
(pound)100 million ($158.9 million), for which NICO will be required to deposit
further additional funding at Lloyd's. Exercise of the option is contingent upon
certain conditions having been satisfied at the time of the exercise of the
option, including the retention of certain key employees, the obtaining of
independent broker verification as to the size of the aviation market, and the
approval of final contract wording. NICO will receive shares of the net
underwriting results from each of these lines of Syndicate 839's business in
proportion to the premium capacity provided. Trenwick paid NICO non-refundable
fees totaling (pound)3.1 million ($4.9 million) in connection with NICO's
commitment to provide capital for the 2003 year of account.


                                       13
<PAGE>

In connection with the December Amendments, Trenwick has agreed to pay 15% of
the profits earned on the 2002 and 2003 Lloyd's years of account to the
financial institutions extending their letters of credit. Refer to Note 9 to the
Consolidated Financial Statements for a detailed description of the letter of
credit facility supporting Trenwick's Lloyd's operations.

Certain Other Information Regarding Lloyd's Syndicates

Lloyd's is an internationally recognized insurance market place that has been
operating in England for over 300 years pursuant to legislation and custom. The
following is a general description of certain fundamental principles upon which
business is conducted at Lloyd's by Trenwick's subsidiaries and other
participants in the Lloyd's market.

Capital Support. The capital required to support a corporate member's
underwriting on a syndicate is determined by Lloyd's and is based on the
application of a risk based capital (RBC) model. The variables within the RBC
model are dependent on various criteria as applied to each Lloyd's syndicate and
corporate member. There are four main elements to the current RBC framework
which, when considered together, determine the level of capital required to
support underwriting. These are:

      o     the performance of each category of business assessed by risk code;

      o     a credit which is given for the diversity of the business contained
            within the syndicate;

      o     Lloyd's assessment of management performance; and

      o     the underwriting history of the corporate member.

Relationship between members and managing agents. Members conduct their business
as sole traders or corporate entities, grouped into annual ventures known as
syndicates, each of which is managed by a managing agent which may manage one or
more syndicates. At the end of each year the syndicate is dissolved and a new
syndicate is formed for the following year, although members in existing
syndicates have a priority for participating as members in the next following
year. Accordingly, the members participating on a syndicate may change from year
to year. In the conduct of the syndicate's business, the managing agent acts for
each member under a separate agency agreement. The syndicate itself is not a
legal entity. Members of a syndicate are not in partnership, and no member has
joint liability with any other member of a syndicate for the risks underwritten
through that syndicate. Each member of the syndicate is responsible only for the
proportion of each risk written on his behalf and if an individual, such member
may have unlimited liability for that business to the full extent of his assets,
although no new members with unlimited liability are permitted. Each corporate
member has limited liability for that business.

Actual acceptance of risk is undertaken either by the active underwriter of each
syndicate or his underwriting deputies. The managing agent determines the
underwriting policy of, and appoints and supervises the active underwriter of,
each of its managed syndicates and supplies administrative and accounting
services for the managed syndicate. The members themselves generally take no
active part in the conduct of the business. That conduct is, by requirement of
Lloyd's, delegated exclusively to the managing agent.

The managing agent will agree and/or settle claims made against the syndicates
and establish systems to monitor and control the premium income earned by the
syndicate to see that members' premium limits are not exceeded. The managing
agent will also determine and carry into effect the syndicate's reinsurance


                                       14
<PAGE>

program and determine the premium for and effect the reinsurance required for
the syndicate to close each year of account (see below).

Year of Account. Lloyd's has its origin in marine insurance which, because of
the length of voyages, led to the development of the current three-year
accounting system whereby premiums, losses and expenses are accumulated over
three years before the result of a particular underwriting year's trading is
calculated.

Under the three-year system, members' underwriting results are stated by "year
of account". Each year of account is a one-year venture that, as a general rule,
is fully accounted for and settled at the end of a 36-month period. As a result,
syndicates writing insurance in Lloyd's 2003 year of account will not be
"closed" for purposes of determining profit or loss participation until
reinsurance to close has been effected after December 31, 2005. Since December
31, 1994, the year of account to which a policy is allocated has been determined
by the inception date of the policy.

Reinsurance to close. At the close of a year of account, members' underwriting
liabilities with regard to the year are usually reinsured under a contract known
as reinsurance to close, or "RITC". Until the RITC is effected (currently at the
earliest, at the end of the third year of the account, i.e. two years after the
end of the relevant underwriting year) no profits in respect of the relevant
year of account can be distributed to members.

Through the payment of a premium for the RITC, a syndicate member's liabilities
in respect of risks allocated to the relevant year of account and not discharged
in full (including liabilities in respect of RITC of the preceding years of
account) are reinsured without limit in time or amount into a succeeding,
usually the next, underwriting year of account of the same syndicate; they may
also, on occasion, be reinsured by another syndicate.

Run-off account. A run-off account is a year of account that has not been closed
by RITC in the usual way. This may happen for a number of reasons, but primarily
from uncertainty as to future levels of liability and a consequent inability to
fix a fair premium for the RITC. In these circumstances, closure of the year of
account may take a number of years, during which, without Lloyd's consent, there
can be no release of the members' funds at Lloyd's nor of profits arising from
the underwriting or investments of that syndicate.

Premium Trust Fund. Each member's premiums are held in Premium Trust Funds
("PTF") and invested in assets until the close of the year of account. All
investment income from funds held in the PTF is similarly retained in the PTF
and may be reinvested during the course of the year of account. As stated above,
a year of account normally closes after the end of the third year. Funds
representing a members' underwriting profits arising in respect of a particular
year's underwriting on a syndicate will not normally be released from the PTF to
the member until the relevant year has been closed by RITC and Lloyd's has
confirmed the members' overall underwriting position as solvent. If a corporate
member becomes insolvent, underwriting claims can still be met to the extent of
the assets held in the members' PTF, as these funds are not available to its
general creditors.

Funds at Lloyd's. Under its Byelaws, Lloyd's has power to prescribe the amount
of security to be provided by a member in respect of its underwriting business
at Lloyd's. This security (which is additional to the amounts held under the
control of managing agents in a member's PTF) comprises a member's funds at
Lloyd's. These funds are held in accordance with the terms of prescribed form
Lloyd's Deposit Trust Deeds. The minimum required level of funds at Lloyd's is
reviewed by Lloyd's prior to the commencement of each year of account.


                                       15
<PAGE>

Lloyd's determines the investment criteria applicable to funds held within a
member's funds at Lloyd's, but a member is able to select the investment for
those funds within the established criteria. In addition to or in substitution
for depositing cash and/or securities as funds at Lloyd's, members are able to
provide Lloyd's, among other things, with letters of credit, bank guarantees or
a covenant and charge. The level of funds at Lloyd's fixes the member's maximum
overall premium limit ("OPL") and it may be necessary during any account year to
arrange additional funds at Lloyd's to increase OPL, or to maintain OPL when
such funds have been depleted by losses. All such funds at Lloyd's are subject
to trust arrangements designed to ensure that they are available to meet the
relevant member's Lloyd's losses and expenses.

The FSA requires Lloyd's to maintain net central assets which are adequate to
cover the aggregate of certain variable solvency margins, which relate to the
value of each member's PTF and each member's funds at Lloyd's. If at any time a
corporate member's funds at Lloyd's have fallen by more than 10 percent the
member will be obliged to notify Lloyd's, and Lloyd's may then give such
directions as it sees fit, including directing the member to reduce the overall
level of its underwriting business.

For solvency purposes, if a member's closed year losses, run-off account
deficiencies and cash calls (see below) on open years of account are not paid in
full, they must be provided for in addition to the member's funds at Lloyd's
required to support underwriting for succeeding years of account. To the extent
that a member's funds at Lloyd's are used to cover these provisions with the
effect that the member's funds at Lloyd's ratio is no longer satisfied, the
member's OPL will be correspondingly reduced for the next year of account.

Marketing

Each of Trenwick's continuing underwriting business segments generally obtains
its business through insurance and reinsurance brokers which represent the
ceding company and clients in negotiations for the purchase of insurance or
reinsurance. The process of effecting a brokered placement typically begins when
a client or ceding company enlists the aid of a broker in structuring an
insurance or reinsurance program. Often the various parties will consult with
one or more lead underwriters as to the pricing and contract terms of the
protection being sought. Once the terms quoted by the lead underwriter have been
approved, the broker will offer participation to qualified insurers or
reinsurers until the program is fully subscribed at terms agreed to by all
parties.

Trenwick pays such intermediaries or brokers commissions representing negotiated
percentages of the premium it writes. These commissions constitute part of
Trenwick's total acquisition costs and are included in its underwriting
expenses. Under certain limited circumstances, selected administrators have the
authority to bind a portion of Trenwick business. These administrators are
subject to periodic financial and operational reviews. Trenwick does not commit
in advance to accept any portion of the business that brokers submit to it.
Business from any company, whether new or renewal, is subject to acceptance by
Trenwick

During 2002, five brokers generated 42% of Trenwick's gross premiums written, of
which Marsh and McLennan accounted for 15%, Aon Reinsurance Agency accounted
for 15%, Heath Lambert accounted for 5%, Willis Faber accounted for 4% and
Reinsurance Alternatives accounted for 3%. During 2001, Aon Reinsurance Agency
accounted for 19%, Marsh and McLennan accounted for 16%, Reinsurance
Alternatives accounted for 8%, Heath Lambert accounted for 6%, and Benfield
Blanch accounted for 2% of those gross written premiums. During the 2000 year,
Marsh and McLennan provided 13% of the gross written premiums reflected in
Trenwick's consolidated financial statements, and Aon Reinsurance Agency
provided 18%.


                                       16
<PAGE>

Underwriting

Trenwick's underwriting philosophy emphasizes a transactional approach to
underwriting in which any insurance or reinsurance transaction for any line of
property or casualty business is considered separately on its own merits. The
underwriter's primary objective is to assess the potential for an underwriting
profit for each submission. The risk assessment process undertaken by Trenwick's
underwriters generally involves a comprehensive analysis of historical data,
when available, and estimates of future potential losses which may not be
evident in the historical data. The factors which Trenwick considers include the
type of risk, details of the underlying insurance coverage provided, adequacy of
pricing using actuarial analysis and the terms and conditions. With respect to
its United States operations, which comprises fewer but significantly larger
accounts, Trenwick frequently conducts underwriting and claims audits of ceding
companies to assist it in evaluating the information submitted by the ceding
companies, before agreeing to participate in a reinsurance transaction, as well
as during the period the reinsurance is in effect.

Trenwick has established formal underwriting policy standards for both United
States and international operations. This process involves pre-binding reviews
of individual material transactions by its senior underwriting staff.
Underwriting policies for insurance and reinsurance transactions are
supplemented by conducting periodic internal audits of each underwriting
department to ensure compliance with underwriting policies and procedures.

Competition

The Significant Developments and other items described in this report on Form
10-K as well as its significantly weakened financial condition have had a
materially adverse effect on Trenwick's ability to effectively compete. In the
United States, Trenwick is only writing new business through the Chubb facility.
Without the Chubb facility, or a similar relationship with another highly rated
third party insurer, Trenwick likely would be unable to write any new or renewal
business through its U.S. insurance company subsidiaries. In the U.K., Trenwick
Managing Agents' managed syndicates at Lloyd's enjoy the benefit of the ratings
of Lloyd's, which is rated "A-" (Excellent) by A.M. Best Company and has an "A"
financial strength rating from Standard & Poor's.

Claims Administration

Claims are managed by Trenwick's professional claims staff whose
responsibilities include the review of initial loss reports, creation of claim
files, determination of whether further investigation is required, establishment
and adjustment of case reserves and payment of claims. In addition, the claims
staff conducts comprehensive claims audits of both specific claims and overall
claims procedures at the offices of selected brokers, managing agents and ceding
companies. In certain instances, a claims audit may be performed prior to
assuming reinsurance business as part of a comprehensive risk evaluation
process. In reviewing claims, Trenwick's claim staff uses their own judgment as
well as advice from lawyers and loss adjusters where appropriate.

Geographic Information

Trenwick seeks to diversify its insurance and reinsurance exposures across
geographic zones in order to optimize its spread of risk.

The following table presents Trenwick's gross premiums written as included in
its consolidated financial statements for the years ended December 31, 2002,
2001 and 2000 allocated to the geographic region in which the risks reside:


                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                   2002          2001          2000
                                                ----------    ----------     --------
Gross premiums written:                        (amounts in thousands of U.S. dollars)
<S>                                               <C>           <C>          <C>
United States                                     $992,061      $797,262     $205,819
United Kingdom                                     248,251       317,895      115,273
Europe, excluding United Kingdom                   127,645       133,762       20,429
Australia, New Zealand and Far East                 42,160        31,578       13,934
Other                                              164,405       171,758       73,189
                                                ----------    ----------     --------
Gross premiums written                          $1,574,522    $1,452,255     $428,644
                                                ==========    ==========     ========
</TABLE>

Runoff Operations

In 2002, the operations of LaSalle Re, Trenwick International and the United
States specialty program business were placed into runoff. Trenwick's objective
is to maximize the economic value of the runoff through effective claims
settlement, commutation of assumed obligations where appropriate, collection of
reinsurance recoverables and effective cash and investment management. The
overall financial condition of each of the runoff operations will determine
Trenwick's ability to successfully accomplish this goal. Trenwick expects that
it will manage each runoff subsidiary's outstanding liabilities until their
natural expiration, although it may explore other strategic alternatives to
assure that the interests of policyholders and ceding companies are protected,
while maximizing the potential for return. From time to time Trenwick may also
seek the advice of outside experts and retain consultants to assist in these
efforts.

Worldwide Property Catastrophe Reinsurance (In Runoff)

Effective April 1, 2002, Trenwick sold the in-force property catastrophe
reinsurance business of its subsidiary, LaSalle Re, to Endurance after it was
determined that market conditions made it unlikely that LaSalle Re would be able
to successfully compete in this market. The sale was effected through a 100%
quota share reinsurance agreement. Endurance paid Trenwick a ceding commission
of 25% of premiums ceded under the quota share agreement and Trenwick will
receive additional profit sharing of 50% if the losses relating to the business
do not exceed a loss ratio of 45%. In addition, Endurance will have the right to
renew LaSalle's in-force business as it expires in exchange for a 12.5%
commission on the business renewed. Included in the results for the twelve
months ended December 31, 2002 are $11.5 million in ceding commissions earned on
the quota share with Endurance, as well as $6.0 million in amortization of
acquisition costs on the related assumed business. LaSalle Re's continuing
insurance underwriting activities arise solely as a result of its ownership of
the Oak Entities, which are corporate members at Lloyd's.

In connection with this transaction, Trenwick recorded the following
non-recurring revenues and expenses during the twelve months ended December 31,
2002 (expressed in thousands of United States dollars):

 Minimum proceeds related to sale of renewal rights                  $  8,000
 Accelerated amortization of reinsurance contracts not transferred
     in sale                                                          (20,949)
 Legal expenses and investment banking fees                            (4,370)
 Severance and related expenses                                        (2,814)
                                                                     --------
 Net loss on sale of LaSalle's in-force reinsurance business         $(20,133)
                                                                     ========

Catastrophe reinsurance contracts cover unpredictable events such as hurricanes,
windstorms, hailstorms, earthquakes, fires, industrial explosions, freezes,
riots, floods and other man-made or natural disasters. These contracts are
written on an excess of loss and a pro rata basis. The largest portion of
Trenwick's


                                       18
<PAGE>

property catastrophe business historically consisted of excess of loss
contracts. Property catastrophe excess of loss reinsurance provides coverage
when total losses and loss expenses from a single occurrence of a covered peril
under a portfolio of primary insurance contracts exceed the attachment point
specified in the reinsurance contract with the primary insurer. A majority of
LaSalle Re's claims in runoff relate to losses incurred from the September 11,
2001 terrorist attacks.

International Specialty Insurance and Facultative Reinsurance (In Runoff)

On December 8, 2002, Trenwick announced that Trenwick International had ceased
to underwrite new business, effective November 29, 2002. A draft plan of runoff
for Trenwick International was presented to the FSA on December 31, 2002 and a
final version is required to be presented to the FSA for approval on or before
March 31, 2003. Trenwick International will continue to administer and pay
claims in connection with the insurance policies previously underwritten by
Trenwick International. For further discussion of the regulation of Trenwick
International, see "--Regulation - United Kingdom Regulation - Trenwick
International."

The principal lines of business underwritten by Trenwick International in 2002,
prior to entering runoff on November 29, 2002, included property, engineering
and extended warranty latent defects, liability, credit and bonds, general
aviation, and property and cargo written in its Paris branch. In 2002,
approximately 80% of Trenwick International's gross premiums were written
directly as insurance. Since October 1, 2002, general aviation and Paris
property have been underwritten by Trenwick's Lloyd's underwriting entities.
Since November 22, 2002, Paris cargo has been underwritten by Trenwick's Lloyd's
underwriting entities. Since January 1, 2003, commercial property has been
underwritten by Trenwick's Lloyd's underwriting entities.

Prior to 2002, treaty, professional indemnity and financial institutions
business were underwritten at Trenwick International. Effective January 1, 2002,
these classes of business have been underwritten by Trenwick's Lloyd's
underwriting entities. Following the acquisition of Trenwick International by
Trenwick in 1998, Trenwick and Trenwick America Re provided Trenwick
International with various financial support in order to retain its financial
strength rating from Standard & Poor's Rating Services, including a whole
account excess of loss reinsurance contract provided by Trenwick America Re to
Trenwick International. Since the establishment of the excess of loss
reinsurance contract, Trenwick International ceded aggregate losses to Trenwick
America Re of (pound)43.7 million ($62.9 million). In December 2002, Trenwick
America Re made a payment of (pound)28.4 million ($45.7 million) to commute its
liabilities under the excess of loss reinsurance contract with Trenwick
International. The commutation was approved by Trenwick International's
regulator, the FSA, and by Trenwick America Re's regulators in Connecticut.

Trenwick has provided a guarantee for the policyholders of Trenwick
International in respect of all policies written since February 27, 1998 which
entitles Trenwick International to funds (on demand) to pay claims as and when
they fall due in the event that Trenwick International is unable to pay its
claims. Trenwick can terminate the guarantee on 30 days' notice or if Trenwick
and Trenwick International are no longer under common control, but termination
is prospective and does not negate liabilities already incurred during the
period of the guarantee.

United States Specialty Program Insurance (In Runoff)

Trenwick announced on October 30, 2002 that it would cease underwriting new
United States specialty program insurance business effective immediately. The
specialty property and casualty sector is a segment of the property and casualty
insurance industry that underwrites risks that are generally more complicated or
specialized than those of traditional insureds. Operating under the Canterbury
name on an admitted and non-admitted basis through Trenwick America Re's
subsidiaries, Inscorp, Dakota and


                                       19
<PAGE>

Chartwell Insurance Company (merged with and into Trenwick America Re effective
December 31, 2002), Trenwick underwrote on a primary basis United States
property and casualty insurance primarily through specialty managing general
agents, which managed specialty programs pursuant to underwriting guidelines
established from time to time. Examples of these programs include commercial
multi-peril policies on fire resistive triple-A construction condominiums,
small artisan contractors, personal lines insurance for mobile homeowners
including optional earthquake, workers' compensation policies for small to
medium sized employers of lower hazard classification, and professional
liability and contractors' pollution liability coverages. At the time that the
property and specialty program insurance business through Canterbury was
discontinued, there were approximately 18 managing agents. Trenwick and third
party administrators will continue to administer and pay claims in connection
with the insurance policies previously underwritten under the program. In
addition, Trenwick is working with its specialty program administrators to
attempt to facilitate appropriate transitions for their existing books of
insurance business to other carriers. In accordance with its existing
obligations under certain programs and in some cases to provide smooth
transition to a new carrier, during the first six months of 2003 limited new and
renewal underwriting authority has been granted to selected managing general
agents, and a limited number of policies will be renewed by the Canterbury
Financial Group for up to 12 months.

Unpaid Claims and Claims Expenses

General

Insurers and reinsurers establish claims and claims expense liabilities
representing estimates of future amounts needed to pay claims and related
expenses with respect to insured events which have occurred. Claims and claims
expense liabilities have two components: case liabilities, which are liabilities
for reported claims, and incurred but not reported, or "IBNR" liabilities, which
are liabilities for claims not yet reported but which are assumed to have
occurred. Significant periods of time may elapse between the occurrence of an
insured claim, the reporting of the claim to the insurer and subsequent
reporting of the claim to the reinsurer, the insurer's payment of that claim,
and later payments by the reinsurer to the insurer.

Trenwick first establishes its case liabilities for a reported claim when it
receives notice of the claim. It is Trenwick's general policy in the case of
reinsurance to establish liabilities for reported claims in an amount equal to
the greater of the liability recommended by the ceding company or the claim as
estimated by Trenwick's claims personnel. In the case of insurance, it is
Trenwick's general policy to establish liability for reported claims in an
amount equal to the claim amount reported by the managing general agent. In the
case of reinsurance Trenwick periodically conducts investigations to determine
if the amount reserved by the ceding company is appropriate or should be
adjusted. During the claim settlement period, which may be many years,
additional facts regarding individual claims may become known. As additional
facts become known, it may become necessary to refine and adjust upward or
downward the estimated liabilities on a claim, and even then the ultimate net
liabilities may differ from the revised estimates.

Actuarial Methods

Forecasting of reserves for future losses is based on historical experience and
future assumptions. As a result, reserves are inherently subjective and may
fluctuate based on actual future experience and changes to current or future
trends in the legal, social or economic environment.

Trenwick utilizes several actuarial evaluation methods including the two most
common methods of actuarial evaluation used within the insurance industry, the
Bornhuetter-Ferguson method and the loss


                                       20
<PAGE>

development method. The Bornhuetter-Ferguson method involves the application of
selected loss ratios to Trenwick's earned premiums to determine estimates of
ultimate expected unpaid claims and claims expenses for each underwriting year.
Multiplying expected losses by underwriting year by a selected loss reporting
pattern gives an estimate of reported and unreported IBNR losses. When the IBNR
is added to the loss and loss adjustment expense amounts with respect to claims
that have been reported to date, an estimated ultimate expected loss results.
Trenwick believes that this method provides a more stable estimate of IBNR that
is insulated from wide variations in reported losses. In contrast, the loss
development method extrapolates the current value of reported losses to ultimate
expected losses by using selected reporting patterns of losses over time. The
selected reporting patterns are based on historical information (organized into
loss development triangles) and are adjusted to reflect the changing
characteristics of the book of business written by Trenwick.

Trenwick announced on October 25, 2002 that it had engaged independent actuaries
to conduct a review of reserves for unpaid claims and claims expenses at each of
Trenwick's operating subsidiaries. Following the independent actuarial review,
Trenwick announced on January 30, 2003 that it would increase its reserves for
losses in the fourth quarter of 2002 by $107 million, or $2.90 per share (net of
benefits related to reductions in the liability under the contingent interest
notes). The increases in Trenwick's reserves were based upon the study conducted
by the independent actuarial consultants and additional work performed by
Trenwick's internal actuaries as well as subjective analysis, by Trenwick's
management and represent management's best estimate of ultimate expected claims
liabilities. The increases in reserves impact Trenwick's United States operating
subsidiaries and Trenwick International, in the UK. Trenwick's reserves at its
Lloyd's operation, while also analyzed, were not significantly affected by this
reserve increase. The reserve increase reflects a reassessment of Trenwick's
loss reserves in light of recent reported loss activity trends across its major
business groups and principally impacts the 1998 to 2001 accident years.
Included in the reserve increase was $20 million relating to Trenwick's exposure
to asbestos and environmental liabilities. Following this increase to Trenwick's
asbestos and environmental reserves, Trenwick's three year survival ratio (i.e.,
number of years that existing reserves will last if the current level of average
annual payments for the last three years repeats itself indefinitely) for this
type of exposure will be approximately 13 years.

Trenwick and its subsidiaries have provided capital to its Lloyd's corporate
members, which support the underwriting capacity of the Lloyd's syndicates
managed by Trenwick Managing Agents. Claim liabilities for this business are
established using methods similar to those used by Trenwick for its operating
insurance company subsidiaries. Each of the past several years, Trenwick
Managing Agents has engaged an independent actuarial consulting firm to review
the claim liabilities and prepare an actuarial opinion for each of its non-life
syndicates, including the actuarial opinion required by Lloyd's solvency
regulations. These opinions, which are prepared solely for the use of Lloyd's
regulators and are only to be relied upon by Trenwick Managing Agents, assist
its syndicates in establishing appropriate liability estimates for both the
reinsurance to close and the open years of account. A similar process is
conducted for Trenwick Managing Agents' life syndicate by another independent
actuarial consulting firm.

Trenwick's actuarial staff performs quarterly reserve reviews for its operating
insurance company subsidiaries, with the exception noted above for Trenwick
Managing Agents. These reviews incorporate the latest reported loss experience
to Trenwick, the updating of historical loss development patterns, and other
appropriate adjustments for unusual trends or events.

Trenwick's claim liabilities are carried at management's best estimate of the
ultimate expected claim liabilities and claim adjustment expense, generally
without any discount to reflect the time value of money in accordance with both
statutory accounting practices and United States GAAP. Certain workers'
compensation indemnity claim liabilities of $4.7 million at December 31, 2002
are discounted using an interest rate of 3.5%.


                                       21
<PAGE>

Loss Development Analysis

The following table presents the development of Trenwick's net liabilities for
unpaid claims and claims expenses for each of the ten years ended December 31,
2002. The top line of the table shows the net liabilities for unpaid claims and
claims expenses at the balance sheet date for each of the indicated years. This
reflects the net estimated amounts of claims and claims expenses for claims
arising in that year and in all prior years that are unpaid at the balance sheet
date, including claims that had been incurred but not yet reported to Trenwick.
The upper portion of the table shows the net cumulative subsequently paid
amounts as of successive years with respect to that liability. The middle
portion of the table shows the net re-estimated amount of the previously
recorded net liabilities for unpaid claims and claims expenses based on
experience as of the end of each succeeding year. The estimates change as more
information becomes known about the frequency and severity of claims for
individual years. A redundancy (deficiency) exists when the net re-estimated
liability at each December 31 is less (greater) than the prior net liability
estimate. The net cumulative redundancy (deficiency) depicted in the table for
any particular calendar year represents the aggregate change in the initial net
estimates over all subsequent calendar years.

The lower portion of the table presents a reconciliation of the net unpaid
claims and claims expenses as of the end of the year with the related gross
unpaid claims and claims expenses as of December 31, 1992 through 2002.
Additionally, the table presents a reconciliation of the gross re-estimated
unpaid claims and claims expenses as of the end of the latest re-estimation
year, with separate disclosure of the related re-estimated reinsurance
recoverable on unpaid claims and claims expenses. The gross cumulative
redundancy depicted in the table for the calendar years 1992 through 2002
represents the aggregate change in the initial gross estimates over all
subsequent calendar years.

LaSalle Re Holdings was determined to be the acquiror for accounting purposes in
the Trenwick/LaSalle business combination, and therefore the financial
statements of Trenwick include the results of LaSalle Re Holdings only prior to
the date of the business combination (September 27, 2000). Due to the
significance of the addition of Trenwick Group Inc.'s liabilities to Trenwick's
balance sheet, the following table has been restated to include Trenwick Group
Inc. and its subsidiaries as if the Trenwick/LaSalle business combination had
occurred on January 1, 1992. Trenwick Group Inc. acquired Chartwell Re
Corporation on October 27, 1999. The unpaid claims and claims expense
information for Chartwell Re Corporation and its subsidiaries has been included
in the table commencing in 1999.


                                       22
<PAGE>

                               TRENWICK GROUP LTD.
                DEVELOPMENT OF UNPAID CLAIMS AND CLAIMS EXPENSES
       (monetary amounts expressed in thousands of United States dollars)

<TABLE>
<CAPTION>
                                               2002         2001         2000         1999           1998         1997
                                           -----------------------------------------------------------------------------
<S>                                        <C>          <C>          <C>          <C>              <C>          <C>
Unpaid claims and claims expenses          $2,039,463   $1,621,970   $1,375,156   $ 1,380,012      $452,584     $424,538

Cumulative amount of
    liability paid through:
    One year later                                           537,420      439,799      500,282      190,081      139,523
    Two years later                                                       867,367      861,948      309,919      246,372
    Three years later                                                                1,127,240      367,256      322,391
    Four years later                                                                                391,714      342,373
    Five years later                                                                                             356,378
    Six years later
    Seven years later
    Eight years later
    Nine years later
    Ten years later

Reserve re-estimated as of:
    One year later                                         1,925,349    1,495,929    1,443,481      512,723      453,988
    Two years later                                                     1,731,766    1,516,551      508,667      472,037
    Three years later                                                                1,668,055      506,779      461,344
    Four years later                                                                                507,915      448,978
    Five years later                                                                                             448,087
    Six years later
    Seven years later
    Eight years later
    Nine years later
    Ten years later

Cumulative redundancy/(deficiency)
    Amount of original reserve                              (303,379)    (356,610)    (288,043)     (55,331)     (23,549)
    Percentage                                                -18.70%      -25.93%      -20.87%      -12.23%       -5.55%
    Gross liability, end of year                           3,012,925    2,375,124    2,154,491      646,827      563,574
    Reinsurance recoverable                                1,390,955      999,968      774,479      194,243      139,036
    Net liability, end of year                             1,621,970    1,375,156    1,380,012      452,584      424,538

    Gross re-estimated liability - latest                  3,426,208    2,904,663    2,633,955      734,464      592,550
    Re-estimated recoverable - latest                      1,500,859    1,172,897      965,900      226,549      144,463
    Net re-estimated liability - latest                    1,925,349    1,731,766    1,668,055      507,915      448,087

    Gross cumulative                                        (413,283)    (529,539)    (479,464)     (87,637)     (28,976)
    redundancy/(deficiency)

<CAPTION>

                                                1996         1995         1994         1993         1992
                                              -------------------------------------------------------------
<S>                                           <C>          <C>          <C>          <C>          <C>
Unpaid claims and claims expenses             $432,868     $387,888     $325,097     $268,091     $266,685

Cumulative amount of
    liability paid through:
    One year later                             115,368      101,007       80,834       52,300       52,260
    Two years later                            201,997      175,907      112,242       90,382       93,312
    Three years later                          260,322      222,079      155,252       89,445      118,345
    Four years later                           295,231      251,842      179,835      112,119      111,174
    Five years later                           308,120      266,584      193,587      124,096      125,847
    Six years later                            316,945      274,809      200,569      134,535      133,502
    Seven years later                                       281,519      207,303      139,920      139,779
    Eight years later                                                    213,647      146,073      143,415
    Nine years later                                                                  151,612      148,720
    Ten years later                                                                                153,221

Reserve re-estimated as of:
    One year later                             424,574      398,906      333,910      267,644      255,379
    Two years later                            428,520      389,736      321,318      263,473      255,379
    Three years later                          438,272      388,831      313,182      246,367      252,458
    Four years later                           417,340      388,388      306,053      241,478      236,009
    Five years later                           404,862      370,275      306,533      229,742      230,488
    Six years later                            399,276      360,201      291,458      230,819      222,094
    Seven years later                                       354,633      284,503      218,450      223,468
    Eight years later                                                    281,565      214,453      212,492
    Nine years later                                                                  212,146      210,282
    Ten years later                                                                                208,341

Cumulative redundancy/(deficiency)
    Amount of original reserve                  33,592       33,255       43,532       55,945       58,344
    Percentage                                    7.76%        8.57%       13.39%       20.87%       21.88%
    Gross liability, end of year               513,158      472,761      420,387      354,582      351,895
    Reinsurance recoverable                     80,290       84,873       95,290       86,491       85,210
    Net liability, end of year                 432,868      387,888      325,097      268,091      266,685

    Gross re-estimated liability - latest      479,342      438,193      354,140      274,894      269,964
    Re-estimated recoverable - latest           80,066       83,560       72,575       62,748       61,623
    Net re-estimated liability - latest        399,276      354,633      281,565      212,146      208,341

    Gross cumulative                            33,816       34,568       66,247       79,688       81,931
    redundancy/(deficiency)
</TABLE>


                                       23
<PAGE>

In evaluating the information in the table above, it should be noted that each
amount includes the effects of all changes in amounts for prior periods. For
example, if a claim determined in 1999 to be $150 million was first reserved in
1994 at $100 million, the $50 million deficiency (actual claim minus original
estimate) would be included in the gross cumulative redundancy (deficiency) in
each of the years 1994-2001 shown on the preceding page. This table does not
present accident or policy year development data. Conditions and trends that
have affected the development of liability in the past may not necessarily occur
in the future. Accordingly, it may not be appropriate to extrapolate future
redundancies or deficiencies based on this table.

Net unpaid claims and claims expenses at December 31, 2002, 2001 and 2000
include reserves from all the business units of Trenwick. In particular reserves
have indicated deficiencies of $303.4 million, $356.6 million and $288.0 million
for year-end 2001, 2000 and 1999 reserves respectively. These deficiencies were
across all business units and approximately 87% of the year-end 2001 deficiency
related to claims occurring between 1998 and 2001 and the deficiency was spread
across multiple lines of business. A similar pattern exists for the year end
2000 and 1999 reserves. The period from 1998 to 2001 represents a period of weak
insurance and reinsurance pricing and the actual loss results for business
written during that period have turned out to be significantly worse than
originally estimated by Trenwick when it originally wrote the business and
subsequently re-estimated reserves for this business.

Trenwick's business consists primarily of relatively short-tail specialty
insurance business and reinsurance business. In a significant portion of its
specialty insurance business, the occurrence of losses may not be indicative of
future trends, as losses in this business are susceptible to significant changes
in both frequency and severity. Trenwick's reinsurance business consists of
partial participation with others, in various reinsurance agreements with
individual insurance companies. As such, claim count information is not always
available to reinsurers. Trenwick generally responds to the dollar amount of
losses reported by ceding companiesduring any calendar year.

In 2002, re-estimation of loss results was based upon additional information
obtained in 2002. As a result, reserve deficiencies increased due to significant
changes in reserving assumptions made during 2002, which included:

      o     An increase in certain loss ratio assumptions used in reserve
            calculations, generally because of higher than expected reported
            loss activity to date on recent accident years;

      o     Changes in loss development patterns based on the most recent
            historical experience;

      o     A claim count / average severity analysis for the liability book of
            business at Trenwick International resulting from changes in the
            legal environment in the United Kingdom which have significantly
            affected the number and severity of claims for this business;

      o     An increase of September 11, 2001 loss estimates of $27.4 million,
            the majority of which are at LaSalle Re, based on a detailed review
            of the contracts exposed to September 11, 2001 losses, the analysis
            of ceding companies of their estimated exposure to September 11,
            2001 losses, and a review of this analysis by LaSalle Re's
            underwriters. For purposes of these loss estimates, Trenwick has
            assumed that the property loss on September 11, 2001 was one
            occurrence, however, Trenwick's loss estimates would not be
            materially different if the September 11, 2001 property loss were
            determined to be two occurrences; and

      o     An increase of United States asbestos and environmental loss
            reserves of $20 million in the fourth quarter because of continued
            expansion of claims and litigation in this area.

Trenwick's actuaries derive a central estimate of loss reserves by business unit
utilizing the reserving methodology judged to be the most appropriate for the
unit and line of business. A range of plus or minus 5% is judgmentally defined
about the central estimate reserve estimate as representing a "reasonable" range


                                      -24-
<PAGE>

for lower or higher outcomes. Trenwick, after reviewing the results of the
actuarial reserve reviews, then determines its best-estimate within the range.
For year-end 2002, the range of net reserve (indications in $ millions) was as
follows:

                  Low Range Indication                           $1,935
                  Central Indication                             $2,045
                  High Range Indication                          $2,156
                  Actual Net Reserve                             $2,039
                  Difference Central less Actual                     $6

The $6 million difference between Indicated and Actual net reserves at year end
2002 arises from judgments made by management to reduce estimates of September
11, 2001 losses by $2 million at LaSalle Re because of the low level of reported
September 11, 2001 loss activity during 2002 and a different assessment by $4
million on the results for accident year 2002 United States reinsurance
business.

As previously described, Trenwick engaged an independent actuary to conduct a
review of reserves for unpaid claims and claims expenses at each of Trenwick's
operating subsidiaries. The results of this study, together with work performed
by Trenwick's internal actuaries, was used to establish management's best
estimate of ultimate expected claims liabilities at December 31, 2002.
Trenwick's internal actuarial assessments of reserves materially differed from
those of the external actuaries in two areas, Trenwick's United States asbestos
and environmental reserves and Trenwick International's United Kingdom reserves.
For Trenwick's remaining reserves, the difference between the independent
actuaries' and internal actuaries' indications were not significant.

United States Asbestos & Environmental ("A&E") Reserves:

The study completed by the independent actuary on A&E reserves indicated that
there was significant uncertainty in the estimates beyond those normally
encountered in actuarial circumstances. The range of estimates established for
these reserves were also significantly wider than the 5% used by Trenwick's
internal actuaries in establishing a reasonable range of lower and higher
outcomes. In making its reserve estimate, management considered that the
addition of $20 million to Inscorp's A&E reserves resulted in a three-year
survival ratio of 12.9, which is higher than the property and casualty insurance
industry ratio at year-end 2001 as reported by A.M. Best and which Trenwick
believes is consistent with levels of companies booking A&E adjustments in 2002.
Annual A&E payments at Inscorp have declined over the last three years, being
$9.7 million, $6.4 million and $5.0 million for 2000, 2001 and 2002,
respectively.

The NYID required that an independent actuary provide a reserve statement of
opinion for Inscorp with respect to its reserves for the year ended December 31.
2002. Inscorp's independent actuary has issued a reserve opinion concluding that
Inscorp's loss reserves, excluding A&E related liabilities, make a reasonable
provision for all unpaid loss and loss expenses obligations of Inscorp. With
respect to the A&E reserves of Inscorp, the independent actuary stated that he
had not determined that the company's reserves were unreasonable, but that due
to certain risk factors, a reserve for the company's A&E claims cannot be
reasonably estimated at this time. The particular risk factors cited by the
independent actuary included:

      o     Significant recent changes in the asbestos environment, including a
            significant increase in the number of asbestos-related claims being
            made against defendants;

      o     Defendant bankruptcies;

      o     Dramatic settlement amounts;

      o     The increased number of plaintiff attorneys specializing in asbestos
            claims; and

      o     The spread of litigation to peripheral defendants.

The independent actuary noted that, given the low surplus level of Inscorp and
the magnitude of its liabilities arising from A&E claims relative to its surplus
level, he had limited the scope of his opinion to exclude A&E liabilities.


                                      -25-
<PAGE>

Trenwick's unpaid claims and claims expense liability at December 31, 2002 and
2001 includes an estimate of Trenwick's ultimate liability for A&E claims of
$112.0 million and $91.1 million, respectively, comprising gross liabilities for
unpaid claims and claims expenses of $145.0 million and $118.7 million,
respectively, net of reinsurance recoverable on unpaid claims and claims
expenses of $33.0 million and $27.6 million.

Trenwick International - United Kingdom Liability:

Management also did not accept the results of the study completed by the
independent actuaries relating to U.K. liability business underwritten by
Trenwick International. The difference in liability reserve estimates resulted
from a different assessment in the expected average size of claim given the
recent changes in the legal environment that have occurred in the United
Kingdom. Trenwick International's management has sought and used the advice of
outside experts in the United Kingdom legal environment and others in arriving
at its conclusion to utilize the results of its own internal analysis.

Management believes that claim and claim expense liabilities are adequate.
However, the process of estimating claims and claim expense liabilities is
inherently imprecise and involves an evaluation of many variables, including
potentially unpredictable social and economic conditions. Accordingly, there can
be no assurance that Trenwick's ultimate liability will not vary significantly
from amounts reserved. The inherent uncertainties of estimating such liabilities
are greater for reinsurers than for primary insurers, primarily due to the
longer-term reporting nature of the reinsurance business, the diversity of
development patterns among different types of reinsurance, the necessary
reliance on ceding companies for information regarding reported claims and
differing reserving practices utilized by various ceding companies. Other items
that have been considered in determining year-end reserves but which may develop
differently than currently estimated include:

      o     September 11, 2001 related claims, particularly with respect to
            catastrophe coverage underwritten in LaSalle Re;

      o     United Kingdom liability claims;

      o     Claims against insured financial services companies for certain
            types of practices including alleged misallocations of shares in
            initial public offerings;

      o     Directors and Officers liability insurance in the United States;

      o     Ultimate losses on business underwritten in the last four years, as
            reserve estimates are inherently more uncertain on recent business,
            where reported loss activity is still low relative to ultimate
            losses;

      o     Claims liabilities also include provisions for latent injury or
            toxic tort claims that cannot be estimated with traditional
            reserving techniques. Due to inconsistent court decisions in federal
            and state jurisdictions and the wide variation among insureds with
            respect to underlying facts and coverage, uncertainty exists with
            respect to these claims as to liabilities of ceding companies and,
            consequently, reinsurance coverage; and

      o     Reinsurance collectibility - Trenwick reviews and monitors its
            reinsurance recoverables from its reinsurers and makes provision for
            uncollectible reinsurance as appropriate. However, given the
            magnitude of reinsurance recoverables, $1.8 billion at year-end
            2002, Trenwick has a significant exposure to collectibility issues.

The uncertainties in and the risk factors associated with the claims reserves at
year-end 2002 are similar to the uncertainties at prior year-ends. However,
given the deterioration in Trenwick's financial condition and significant
reduction in the net worth of its operating insurance company subsidiaries in
the past two years, Trenwick is now less financially equipped to handle these
uncertainties should there be adverse development in the loss reserves.
Consequently, there can be no assurance as to the adequacy of reserves, and the
risk of future developments, both favorable and unfavorable, exists.

Reinsurance and Retrocessional Agreements

Trenwick enters into reinsurance and retrocessional agreements to reduce its net
liability on individual risks, protect against catastrophic losses and maintain
acceptable loss ratios.


                                      -26-
<PAGE>

Trenwick America Re has various retrocessional facilities, all of which are on a
treaty basis. These retrocessional facilities include three treaties for its
treaty property business, which protect it against multiple claims arising out
of a single occurrence or event. As a result of these facilities, Trenwick
America Re's maximum retention generally does not exceed $7.75 million per
occurrence on property catastrophe business. From 1989 to 1999, Trenwick America
Re purchased aggregate excess of loss ratio treaties from several reinsurers.
These facilities provided Trenwick America Re with a layer of protection against
adverse results from its domestic casualty business in excess of specified loss
ratios on an accident year basis. Trenwick America Re did not purchase an
aggregate excess of loss ratio treaty after 1999.

Trenwick Managing Agents, as part of its business strategy, has historically
purchased a significant amount of reinsurance for the Lloyd's syndicates it
manages. Reinsurance is generally purchased to protect the syndicates against
extraordinary loss or loss involving one or more underwriting classes. The
amount purchased is determined with reference to the syndicates' aggregate
exposure and potential loss scenarios.

In 2002, LaSalle Re purchased two excess of loss programs that provided coverage
of $20 million in excess of the first $30 million of losses per occurrence and
$5 million in excess of the first $50 million of losses per occurrence both of
which, as of April 1, 2002, were retroceded as part of the sale of LaSalle Re's
in-force reinsurance business. A third excess of loss program, which provided
coverage of $25 million in excess of the first $100 million of losses per
occurrence for a four year period with a yearly aggregate limit of $50 million
and a contract aggregate limit of $150 million, was commuted by LaSalle Re in
December 2002.

In 2001, LaSalle Re purchased three excess of loss programs which provide
coverage of $20 million in excess of the first $30 million of losses per
occurrence, $5 million in excess of the first $50 million of losses per
occurrence and $25 million in excess of the first $75 million of losses per
occurrence.

LaSalle Re had purchased an excess of loss program which provides coverage of
$75.0 million in excess of the first $75.0 million of losses per occurrence for
a first loss event and $60.0 million excess of $75.0 million per occurrence on
the second loss event and $52.5 million excess of $125.0 million per occurrence
on the third loss event over a three-year period ended December 31, 2001 subject
to a maximum aggregate recovery of $187.5 million. This contract was cancelled
effective December 31, 2000.

LaSalle Re has also purchased other non-proportional excess of loss protections,
which provide for the recovery of losses from reinsurers in excess of certain
retentions that are related to the magnitude of market losses.

Trenwick International, as is customary with companies operating in the London
market, purchased large amounts of reinsurance. Reinsurance and retrocessional
coverage was customized for each class of business. During 1998, following an
increase in its share capital, Trenwick International increased its retention of
business by reducing the amount of reinsurance it buys, principally proportional
reinsurance treaties with its former parent.

Reinsurance was purchased that was specifically tailored to each of the
specialty programs underwritten by the insurance subsidiaries of Canterbury
Financial Group Inc.

In connection with the acquisition of Chartwell Re Corporation ("Chartwell") by
Trenwick in 1999, Chartwell's insurance company subsidiaries purchased an
aggregate excess of loss reinsurance agreement providing up to $100 million in
coverage against unanticipated increases in Chartwell's reserves for business
written on or before October 27, 1999, the date of completion of the acquisition
of Chartwell. Within the $100 million maximum, the protection was limited to
$100 million for increased reserves attributable to Chartwell's Lloyd's
operations, $25 million for increased reserves attributable to catastrophe and
year 2000 losses and $50 million for increased reserves attributable to asbestos
and environmental coverage losses. The aggregate excess of loss reinsurance
agreement is not cancelable by the reinsurers, London Life and Scandinavian Re,
and their obligations have been secured by a trust account. The


                                      -27-
<PAGE>

premium paid for this aggregate excess of loss reinsurance agreement was $56
million, and the $100 million coverage limit was exhausted during the 2000 year.

Trenwick remains liable with respect to insurance and reinsurance ceded in the
event that the reinsurer or retrocessionaire is unable to meet its obligations.
All reinsurers and retrocessionaires must be formally approved by the operating
company's security committee. The evaluation process involves financial analysis
of current audited financial data and comparative analysis of such data in
accordance with guidelines established by Trenwick. Business is not conducted
with reinsurers or retrocessionaires who are not currently approved by the
security committee.

Of Trenwick's $1.8 billion in reinsurance recoverable balances as of December
31, 2002, $1.0 billion relates to Trenwick Managing Agents' insurance
underwriting operations at Lloyd's, which rely heavily on reinsurance in its
insurance underwriting, particularly for the aviation business it underwrites.
Approximately $221.2 million of this balance comes directly from the aviation
losses from the September 11, 2001 terrorist attacks. Of LaSalle Re's $40.1
million in reinsurance recoverable balances, $25.0 million relates to the
September 11, 2001 terrorist attacks. Trenwick's United States specialty program
insurance segment has $225.5 million in reinsurance recoverable balances.
Finally, $173.2 million of the total relates to finite reinsurance coverage and
$333.1 million relates to operational reinsurance for Trenwick America Re
($242.5 million) and Trenwick International ($90.6 million).

Tables that set forth the distribution of Trenwick's reinsurance recoverable
balances, net, by source, type and credit quality rating follow:

<TABLE>
<CAPTION>
                                                        Total        Finite      Operational
                                                     -----------   -----------   -----------
<S>                                                  <C>           <C>           <C>
U.S. treaty reinsurance                              $   432,770   $   173,197   $   259,573
Worldwide property catastrophe reinsurance                40,102            --        40,102
   Total Reinsurance                                     472,872       173,197       299,675
Lloyd's syndicates                                     1,093,101            --     1,093,101
International specialty insurance and reinsurance         91,893            --        91,893
   Total international operations                      1,184,994            --     1,184,994
U.S. specialty program insurance                         225,514            --       225,514
                                                     -----------   -----------   -----------
Total before allowance for uncollectible balances      1,883,380       173,197     1,710,183
Allowance for uncollectible balances                      80,369            --        80,369
                                                     -----------   -----------   -----------
Total                                                $ 1,803,011   $   173,197   $ 1,629,814
                                                     ===========   ===========   ===========

<CAPTION>

                                                     Operational   Paid Losses   Unpaid Losses
                                                     -----------   -----------   -------------
<S>                                                  <C>           <C>           <C>
U.S. treaty reinsurance                              $   259,573   $    68,073   $   191,500
Worldwide property catastrophe reinsurance                40,102            --        40,102
   Total Reinsurance                                     299,675        68,073       231,602
Lloyd's syndicates                                     1,093,101       143,926       949,175
International specialty insurance and reinsurance         91,893        41,091        50,802
   Total international operations                      1,184,994       185,017       999,977
U.S. specialty program insurance                         225,514        39,715       185,799
                                                     -----------   -----------   -----------
Total before allowance for uncollectible balances      1,710,183       292,805     1,417,378
Allowance for uncollectible balances                      80,369        37,194        43,175
                                                     -----------   -----------   -----------
Total                                                $ 1,629,814   $   255,611   $ 1,374,203
                                                     ===========   ===========   ===========
</TABLE>


                                      -28-
<PAGE>

<TABLE>
<CAPTION>
                                                                                   % of 61
                                                       Number         Total        Largest
                                                     -----------   -----------   -----------
<S>                                                           <C>  <C>                  <C>
Collateralized or AAA                                          9   $    64,493           4.1%
AA+ to AA-                                                    14       470,164          30.0%
A++ to A-                                                     18       618,349          39.4%
                                                     -----------   -----------   -----------
Total collateralized or A- or better                          41     1,153,006          73.5%
BBB+ to BBB-                                                   4       166,038          10.5%
Not rated                                                     14       234,620          15.0%
In rehabilitation                                              2        14,983           1.0%
                                                     -----------   -----------   -----------
Total - 61 largest                                            61     1,568,647           100%
                                                     ===========   ===========   ===========
All others                                                             141,536
                                                                   -----------
Totals before allowance for uncollectible balances                   1,710,183
Allowance for uncollectible balances                                    80,369
                                                                   -----------
Total                                                              $ 1,629,814
                                                                   ===========
</TABLE>

The finite reinsurance balances of $173.2 million as of December 31, 2002
are due from five reinsurers and are collateralized, both with funds held and
letters of credit. The operational reinsurance balances of $1.6 billion are for
paid losses ($255.6 million, or 16%) and unpaid losses, including both incurred
reported losses and incurred but not reported losses ($1,374.2 million, or 84%).
Allowances for uncollectible balances of $80.4 million have been recorded,
including $37.2 million on paid losses (13% of the paid losses) and $43.2
million on unpaid losses (3% of the unpaid losses). In the ordinary course of
business, losses are paid to insureds prior to any recovery on reinsurance.

The operational reinsurance balances are recoverable from a broadly diversified
group of companies with 61 reinsurers comprising 96% of the total of $1.6
billion as of December 31, 2002. Of these 61 reinsurers, 74% are rated A- or
better by Standard & Poor's, or A.M. Best if no Standard & Poor's rating is
available. The decrease from prior years in the percentage of Trenwick's
reinsurers which are rated "A-" or higher reflects a significant number of
downgrades by the rating agencies of insurance and reinsurance companies in
recent years.

Investments

The Investment Committee of Trenwick's Board of Directors oversees investments
and sets procedures and guidelines for investment strategy. Trenwick's internal
staff manage these investments and utilize the services of investment advisers,
using an investment strategy which focuses on capital preservation and income
predictability. This strategy also requires that the risks associated with these
objectives are properly managed. Accordingly, Trenwick emphasizes investment
grade debt investments. At year end 2002, 82% of Trenwick's investments in debt
securities were rated Aa or better, and Trenwick has taken steps in the fourth
quarter of 2002 to improve the quality of its investments and to enhance the
liquidity of its portfolio, which to some extent may result in a decline in
yield.

Trenwick's investment strategy permits an allocation for equity securities. At
year end 2002, less than 1% of Trenwick's total investments and cash were
invested in common and preferred equities. The primary risk associated with
these securities is the exposure to daily market fluctuations.

The investments of each of Trenwick's insurance company subsidiaries must comply
with the respective insurance laws of the jurisdiction of domicile of that
insurance company, and of the other jurisdictions in which it is licensed or
authorized. These laws prescribe the kind, quality and concentration of
investments which may be made by insurance companies. In general, these laws
permit investments, within specified limits and subject to certain
qualifications, in federal, state and municipal obligations, corporate bonds,
preferred and common stock, real estate mortgages and real estate. These laws
generally penalize high concentrations of riskier types of assets and high
exposures to certain types of issuers.

Trenwick invests in three types of structured securities: collateralized
mortgage obligations ("CMOs"), mortgage-backed securities not backed by United
States government agencies ("Non-agency MBS") and


                                      -29-
<PAGE>

asset-backed securities ("ABS"), each accounting for 0.9%, 12.0% and 3.7%,
respectively, of Trenwick's debt security investments at year end 2002.

CMOs consist of planned amortization classes ("PACs") which have been
constructed with a certain amount of call protection and CMOs that have lost
their PAC protection (sometimes called "broken" or "busted" PACs), due to actual
prepayments being significantly higher or lower than originally forecast. These
agency backed CMOs are not subject to credit risk, as all holdings are backed
indirectly or directly by the federal government or one of its agencies. The
material risk inherent to holding these CMOs is prepayment risk, which relates
to the timing of cash flows that result from amortization, whether it
accelerated, because of lower interest rates and is therefore higher than
expected prepayments, or decelerated, because of higher interest rates and is
therefore lower than expected prepayments. Changes in principal repayments could
negatively affect investment income due to the timing of the reinvested funds.

Non-agency MBSs are constructed primarily from the securitization of mortgages
on commercial or residential real estate and, lacking any agency backing, are
inherently subject to credit risk. They also have an element of prepayment risk
that is contingent on the structure of each security and its underlying
collateral.

The asset-backed securities owned by Trenwick have primarily credit card and
home equity receivables as collateral and are subject also to credit risk. These
securities have less cash flow uncertainty than Non-agency MBS and CMO issues
because the issuer has the ability to add in new collateral should the
asset-backed security experience faster prepayments, or in the event of default
on the underlying collateral.

Trenwick also invests in agency pass-through securities that account for 4.1% of
Trenwick's portfolio at December 31, 2002. As with CMOs, these securities are
subject to prepayment risk.

Trenwick holds debt securities and cash in a number of currencies. At year end
2002, approximately 71% and 24%, respectively, of Trenwick's debt securities and
cash were held in United States dollars and United Kingdom sterling, and the
remainder in eleven other currencies.

The tables below set forth the distribution of Trenwick's debt securities at
year end 2002 by type, average maturity and quality rating.

                            Debt Security Investments
            (Amounts expressed in thousands of United States dollars)

<TABLE>
<CAPTION>
                                              Average
                                              Maturity       Fair
                                              in Years      Value         Cost
                                             ----------   ----------   ----------
<S>                                                 <C>   <C>          <C>
Type
U.S. and U.K. federal government
   securities, including agencies                   1.6   $  732,485   $  721,553
Other foreign government securities                 0.7       95,316       94,387
U.S. municipal government securities                4.2        4,544        3,974
Mortgage and other asset-backed securities          6.2      277,728      269,604
Corporate and other debt securities                 5.9      382,761      390,695
                                                          ----------   ----------
Total debt securities                               3.4   $1,492,834   $1,480,213
                                                          ==========   ==========
</TABLE>


                                      -30-
<PAGE>

<TABLE>
<CAPTION>
                                                Investment Grade              Non-investment Grade
                                                --------------------------    --------------------------
Quality                                         Fair Value        Cost        Fair Value        Cost
                                                -----------    -----------    -----------    -----------
<S>                                             <C>            <C>            <C>            <C>
U.S. and U.K. federal government
    securities, including agencies              $   732,485    $   721,553    $        --    $        --
Other foreign government securities                  95,316         94,387             --             --
U.S. municipal government securities                  4,544          3,974             --             --
Mortgage and other asset-backed securities          277,728        269,604             --             --
Corporate and other debt securities                 293,181        281,444         89,580        109,251
                                                -----------    -----------    -----------    -----------
Total investment grade and
   non-investment grade debt securities         $ 1,403,254    $ 1,370,962    $    89,580    $   109,251
                                                ===========    ===========    ===========    ===========
Percentage of total debt securities                    94.0%          92.6%           6.0%           7.4%
                                                ===========    ===========    ===========    ===========

                                                -----------    -----------    -----------    -----------
Investment Grade Quality (fair value)           Aaa            Aa             A              Baa
                                                -----------    -----------    -----------    -----------
U.S. and U.K. federal government
  securities, including agencies                $   732,485    $        --    $        --    $        --
Other foreign government securities                  91,763             --          3,553             --
U.S. municipal government securities                  4,544             --             --             --
Mortgage and other asset-backed securities          236,858         33,441          3,415          4,014
Corporate and other debt securities                  52,299         77,559         89,597         73,726
                                                -----------    -----------    -----------    -----------
  Total investment grade debt securities        $ 1,117,949    $   111,000    $    96,565    $    77,740
                                                ===========    ===========    ===========    ===========
Percentage of total debt securities                    74.9%           7.4%           6.5%           5.2%
                                                ===========    ===========    ===========    ===========

                                                -----------    -----------    -----------    -----------
Non-investment Grade Quality (fair value)       Ba             B              Caa/Ca         Unrated
                                                -----------    -----------    -----------    -----------
Mortgage and other asset-backed securities      $        --    $        --    $        --    $        --
Corporate and other debt securities                  47,796         41,390            358             36
                                                -----------    -----------    -----------    -----------
Total non-investment grade debt securities      $    47,796    $    41,390    $      358     $        36
                                                ===========    ===========    ===========    ===========
Percentage of total debt securities                     3.2%           2.8%           0.0%           0.0%
                                                ===========    ===========    ===========    ===========
</TABLE>

Quality ratings are as assigned by Moody's Investor Services, Inc. for all
except certain mortgage-backed securities not backed by United States government
agencies and certain asset-backed securities. Quarterly ratings for these other
securities are as assigned by Fitch Investors Services and Standard and Poor's.
Ratings are generally assigned upon the issuance of the securities, subject to
revision on the basis of majority evaluations certificates of deposit of $20,000
with a Moody's rating of "P-1" have been included with "Aaa" securities. Unrated
securities are in default and have been written-down from their original cost
basis.

Regulation

Trenwick and its insurance and reinsurance company subsidiaries are subject to
regulatory oversight under the insurance statutes and regulations of the
jurisdictions in which they conduct business, including all states of the United
States, Bermuda and the United Kingdom. These regulations vary from jurisdiction
to jurisdiction and are generally designed to protect ceding insurance companies
and policyholders by regulating Trenwick's financial integrity and solvency in
its business transactions and operations. Many of the insurance statutes and
regulations applicable to Trenwick's subsidiaries relate to reporting and enable
regulators to closely monitor Trenwick's performance. Typical required reports
include information concerning Trenwick's capital structure, ownership,
financial condition, and general business operations.

Because Trenwick, Trenwick America and Trenwick Holdings are holding companies,
their principal sources of funds consist of permissible dividends, tax
allocation payments and other statutorily permissible payments from their
respective regulated operating insurance company subsidiaries, each of which is
subject to oversight and regulatory supervision by insurance regulators in its
jurisdiction of domicile. As a result of recent losses incurred by these
operating insurance company subsidiaries, their cash distribution capacities
have been significantly reduced. Each insurance regulatory body, including those
of Bermuda, New York, Connecticut, North Dakota, the United Kingdom and Lloyd's,
may act independently with


                                      -31-
<PAGE>

respect to the company or companies domiciled in its jurisdiction. To the extent
that any such regulator takes action with respect to an insurance company
domiciled in its jurisdiction, such as the commencement of voluntary or
involuntary proceedings for the formal supervision, conservation, rehabilitation
or liquidation of such company, such action could adversely impact the ability
of Trenwick to continue to function, or could precipitate other actions by other
insurance regulators with respect to the particular Trenwick company or
companies under their primary jurisdiction. Additionally, although the financial
statements contained in this Report are set forth on a consolidated basis, the
actual assets and liabilities shown in the financial statements are held by the
insurance company subsidiaries and generally will not be available to satisfy
the obligations of other companies within the Trenwick group of companies.
Insurance regulators may also review certain payments made to Trenwick by its
insurance company subsidiaries, such as payments for administrative services,
and could attempt to seek return of such payments to the insurance company
subsidiaries.

United States Regulation

Trenwick's United States operations are subject to extensive regulation under
state statutes that delegate regulatory, supervisory and administrative powers
to state insurance commissioners. The extent of regulation varies from state to
state, but generally has its source in statutes that delegate regulatory,
supervisory and administrative authority to a department of insurance in each
state. Among other things, state insurance commissioners regulate insurer
solvency standards, insurer licensing, authorized investments, premium rates,
restrictions on the size of risks that may be insured under a single policy,
loss and expense reserves and provisions for unearned premiums, deposits of
securities for the benefit of policyholders, policy form approval, and market
conduct regulation, including the use of credit information in underwriting and
other underwriting and claims practices. State insurance departments also
conduct periodic examinations of the affairs of insurance companies and require
the filing of annual and other reports relating to the financial condition of
companies and other matters. In general, regulated insurers must file all rates
for directly underwritten insurance with the insurance department of each state
in which they operate on an admitted basis; however, reinsurance generally is
not subject to rate regulation.

Under the insurance laws of their respective states of domicile, Trenwick's
United States subsidiaries are required to maintain minimum levels of capital
and surplus as regards policyholders. The failure of an insurer to maintain the
required surplus level can result in commencement by the insurer's domestic
state's insurance department of voluntary or involuntary proceedings for the
supervision, conservation, rehabilitation or liquidation of the insurer, for the
benefit of policyholders and creditors of the insurer, and the general public.

On December 3, 2002, Trenwick America Re entered into a "letter of
understanding" with the Connecticut Department of Insurance pursuant to which
Trenwick America Re agreed that it would not take any of the following actions
without the prior written approval of the Connecticut Insurance Commissioner or
her designee:

      o     Dispose of, convey or encumber any of its assets or business in
            force;

      o     Withdraw any of its bank accounts except in the ordinary course of
            business;

      o     Settle any intercompany balances;

      o     Lend any of its funds;

      o     Transfer any of its property;

      o     Make any new investments other than cash equivalents;

      o     Incur any debt, obligation or liability, except liabilities in the
            ordinary course of business;

      o     Make any material change in management;

      o     Make any material change in its operations;

      o     Move any books and records from its office in Stamford, Connecticut;

      o     Pay any dividends, ordinary or extraordinary;


                                      -32-
<PAGE>

      o     Enter into any unaffiliated insurance or reinsurance contracts that
            would constitute new or renewal business, or any unaffiliated
            commutation agreements or settlement agreements in excess of $1
            million not in the ordinary course of business; or

      o     Enter into affiliated transactions of any nature.

Senior management of Trenwick America Re has also agreed to meet with the
Connecticut Insurance Department, in person or by conference call, with such
frequency as may be deemed necessary by the Connecticut Insurance Commissioner
or her designee, to provide updates on the status of Trenwick and any changes in
the status of Trenwick America Re. Trenwick America Re is also required to
provide to the Connecticut Insurance Department a monthly financial statement
consisting of a balance sheet and income statement on the 15th day of each month
as of the prior month end. The above described terms will remain in effect until
such time as the Connecticut Insurance Commissioner deems that they are no
longer necessary or issues an order that supercedes the letter of understanding.

On January 24, 2003, Trenwick met with the Connecticut Department of Insurance
to present preliminary 2002 financial statements of the regulated entities and
provided the Connecticut Department of Insurance with an overview of Trenwick's
proposed restructuring plan. Trenwick also discussed with the Connecticut
Department of Insurance the reserve charges taken for the fourth quarter of 2002
and provided a detailed review of the independent actuarial analysis and
Trenwick's adjustments thereto. For a description of the independent actuarial
analysis, see "--Unpaid Claims and Claims Expenses-- Actuarial Methods," above.

On January 29, 2003, Trenwick met with the New York Insurance Department (the
"NYID") and had similar discussions to those with the Connecticut Department of
Insurance on January 24, 2003 described above. Trenwick received a letter from
the NYID dated March 11, 2003 in which the NYID noted that the surplus to
policyholders of Trenwick's New York domiciled insurance subsidiary, Inscorp, as
of December 31, 2002 was $18.3 million and therefore was impaired in the amount
of $16.7 million, based on the statutory requirement that it maintain a minimum
surplus to policyholders of at least $35 million. In the letter, the NYID
notified Inscorp that the surplus impairment must be corrected within 30 days,
and directed it to advise the NYID within 30 days as to the steps management
will take to remove the impairment and comply with the minimum surplus
requirement. If the NYID is not satisfied that Inscorp has eliminated the
impairment by April 10, 2003, the Superintendent of the NYID may proceed against
Inscorp pursuant to the provisions of Article 74 of the New York Insurance Law,
the statute authorizing supervision, rehabilitation, conservation, liquidation
and dissolution of insurers, including domestic insurers.

Trenwick has been notified by the NYID that, in the NYID's view, approximately
$26 million in loans made to Trenwick America by Inscorp in 2002 were in
contravention of New York regulatory requirements. As a result, Inscorp and
Trenwick may be the subject of regulatory action brought by the NYID.

To date, the State of Florida has suspended the underwriting authority of
Inscorp and Trenwick America Re to write any further business. In addition, the
State of Colorado has recently suspended Inscorp's underwriting authority. It is
anticipated that other states will suspend the underwriting authority of the
various insurance companies.

Trenwick's United States insurance subsidiaries are subject to guaranty fund
laws which can result in assessments, up to prescribed limits, for losses
incurred by policyholders as a result of the impairment or insolvency of
unaffiliated insurance companies. Typically, an insurance company is subject to
the guaranty fund laws of the states in which it conducts insurance business;
however, Trenwick's United States insurance subsidiaries that conduct business
on a surplus lines basis in a particular state are generally exempt from that
state's guaranty fund laws. Trenwick does not expect the amount of any such
guaranty fund assessments to be paid by Trenwick, if any, in 2003 to be
material.

National Association of Insurance Commissioners ("NAIC")

The National Association of Insurance Commissioners, or NAIC, is an organization
which assists state insurance supervisory officials in the United States to
achieve insurance regulatory objectives, including the maintenance and
improvement of state regulation. From time to time various regulatory and
legislative changes have been proposed for the insurance and reinsurance
industry. Among the proposals that have in the past been or are at present being
considered are the possible introduction of federal regulation in addition to,
or in lieu of, the current system of state regulation of insurers, and proposals
in various state legislatures (some of which proposals have been enacted) to
conform portions of their insurance laws and


                                      -33-
<PAGE>

regulations to various model acts adopted by the NAIC. Trenwick is unable to
predict what effect, if any, these developments may have on its operations and
financial condition.

In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles, which is intended to standardize regulatory accounting and reporting
for the insurance industry. Codification provides guidance for areas where
statutory accounting has been silent and changes current statutory accounting in
some areas. However, statutory accounting principles will continue to be
established by individual state laws and permitted practices. Effective January
1, 2001, the states of Connecticut (domicile of Trenwick America Re), and North
Dakota (domicile of Dakota Specialty Insurance Company) adopted codification.
New York (domicile of Inscorp and ReCor Insurance Company Inc.) adopted
codification as well as certain prescribed accounting practices that differ from
codification.

Risk Based Capital

The NAIC has adopted Risk-Based Capital, or RBC, requirements for property and
casualty insurance companies to evaluate the adequacy of statutory capital and
surplus in relation to investment and insurance risks such as asset quality,
asset and liability matching, loss reserve adequacy and other business factors.
RBC is generally calculated and reported to the regulatory authorities with an
insurance company's annual regulatory filings on or before March 1 of each year.
The RBC calculation yields a ratio of the total adjusted statutory capital of an
insurance company to the minimum level of statutory required capital as
calculated under the provisions of the RBC model. The RBC calculation takes into
account: (1) asset risk, (2) credit risk, (3) underwriting risk, and (4) all
other relevant risks including the insurance company's current underwriting
activities. The Model Act of the NAIC provides four levels of regulatory
activity if the RBC ratio yielded by the calculation falls below specified
minimums. At each of four successively lower RBC ratios specified by statute,
increasing regulatory action may be required. The four levels are: (1) Company
Action Level Event, (2) Regulatory Action Level Event, (3) Authorized Control
Level Event, and (4) Mandatory Control Level Event.

Trenwick's significant reserve increases in the fourth quarter of 2002 have had
an adverse impact on the RBC ratings of its principal domestic insurance company
subsidiaries.

Trenwick America Re's RBC was at the "Regulatory Action Level Event" for the
year ended December 31, 2002. At this level, the regulated entity is required to
submit a Comprehensive Plan of Action to the regulatory body. Such a plan was
submitted to the Connecticut Department of Insurance on January 23, 2003. In
addition, the Connecticut Department of Insurance, at its discretion, is also
able to take any action deemed necessary under the circumstances.

Inscorp's reported RBC was at the "Mandatory Control Level Event" for the year
ended December 31, 2002. As described above in "--Regulation-United States
Regulation", Inscorp has been informed by the New York Insurance Department that
it will be required to submit a plan to cure the existing statutory capital
impairment. Inscorp has ceased underwriting new business and is in ongoing
communication with the New York Insurance Department concerning its operations
and continued permitted activities.

Holding Company Regulation

Trenwick is subject to regulation under the insurance holding company statutes
of various states, including Connecticut, New York and North Dakota, the
domicile states of its United States insurance companies.


                                      -34-
<PAGE>

The insurance holding company laws and regulations vary from state to state, but
generally require an insurance holding company, and insurers and reinsurers that
are subsidiaries of an insurance holding company, to register with the state
regulatory authorities and to file with those authorities certain reports
including information concerning their capital structure, ownership, financial
condition, affiliate transactions and general business operations.

State laws also require prior notice or regulatory agency approval of direct or
indirect changes in control or deemed control of an insurer, reinsurer or its
holding company and of certain significant intercorporate transfers of assets
within the holding company structure. Significant transactions between a
domestic insurer and an affiliated company may require prior approval under the
holding company statutes, including service and tax allocation agreements, loans
and extensions of credit, reinsurance agreements, and dividends that exceed
certain percentages. The acquisition of securities representing or convertible
into more than 10% of the voting power of the securities of Trenwick by an
investor would be subject to prior approval by the Connecticut, New York and
North Dakota insurance commissioners. Such investor would also be required to
file certain notices and reports with the insurance commissioners prior to such
acquisition.

Bermuda Regulation

LaSalle Re and LaSalle Re Corporate Capital Ltd. are regulated by the Insurance
Act 1978 of Bermuda, as amended, and related regulations (the "Insurance Act"),
which provides that no person shall carry on an insurance business in or from
within Bermuda unless registered as an insurer under the Insurance Act by the
Supervisor of Insurance (the "Supervisor"), acting on the recommendation of the
Bermuda Monetary Authority (the "BMA"). Under the Insurance Act, insurance
business includes reinsurance business. The BMA, in deciding whether to
recommend registration, has broad discretion to act as it thinks fit in the
public interest. The Supervisor and the BMA are required by the Insurance Act to
determine whether the applicant is a fit and proper body to be engaged in the
insurance business and, in particular, whether it has, or has available to it,
adequate knowledge and expertise. The continued registration of an applicant as
an insurer is subject to its complying with the terms of its registration and
such other conditions as the Minister of Finance may impose from time to time.
The day to day supervision of insurers is the responsibility of the BMA.

The Insurance Act also imposes on Bermuda insurance companies solvency and
liquidity standards and auditing and reporting requirements and grants to the
Supervisor powers to supervise, investigate, require information and the
production of documents and intervene in the affairs of insurance companies.
Although LaSalle Re Corporate Capital Ltd. is governed by the Insurance Act, it
is exempted from complying with most of the filings required to be made by
insurance companies by section 57 of the Insurance Act.

The Insurance Act distinguishes between insurers carrying on long-term business
and insurers carrying on general business. There are four classifications of
insurers carrying on general business, with Class 4 insurers subject to the
strictest regulation. LaSalle Re is registered as a Class 4 insurer in Bermuda
and is regulated as such under the Insurance Act.

LaSalle Re is in runoff and the BMA has placed restrictions on its continued
operations including that it may not enter into any new contracts of insurance
or reinsurance without the BMA's prior written approval, effective as of January
1, 2003, and that it must at all times meet and maintain relevant solvency
margins, liquidity and other ratios applicable under Bermuda law at all times
that it carries on insurance business.

Cancellation of Insurer's Registration


                                      -35-
<PAGE>

An insurer's registration may be canceled by the Supervisor on certain grounds
specified in the Insurance Act, including failure of the insurer to comply with
its obligations under the Insurance Act or if, in the opinion of the Supervisor
and the BMA, after consultation with the Insurance Advisory Committee (the
"IAC"), the insurer has not been carrying on business in accordance with sound
insurance principles.

The IAC, along with related sub-committees, which are appointed by the Minster
of Finance, advises the Supervisor and the BMA on matters connected with the
discharge of their functions and supervises and reviews the law and practice of
insurance in Bermuda, including reviews of accounting and administrative
procedures. In addition, the IAC may advise the Supervisor and the BMA on any
matter relating to the development of the insurance industry in Bermuda.

Principal Representative

An insurer is required to maintain a principal office in Bermuda and to appoint
and maintain a principal representative in Bermuda to oversee the insurer's
business and to report to the BMA and the Supervisor in connection with specific
events. For the purpose of the Insurance Act, LaSalle Re's principal office is
its executive offices in Hamilton, Bermuda, and LaSalle Re's principal
representative is Peter Woolf. Without a reason acceptable to the BMA, an
insurer may not terminate the appointment of its principal representative, and
the principal representative may not cease to act as such, unless 30 days'
notice in writing to BMA is given of the intention to do so. It is the duty of
the principal representative, within 30 days of reaching the view that there is
a likelihood that the insurer will become insolvent or that a reportable "event"
has, to the principal representative's knowledge, occurred or is believed to
have occurred, to make a report in writing to the BMA setting forth all the
particulars of the case that are available to the principal representative. For
example, the failure by the insurer to comply substantially with a condition
imposed upon the insurer by the Supervisor relating to a solvency margin or a
liquidity or other ratio would be a reportable "event."

Independent Approved Auditor

Every registered insurer must appoint an independent auditor who will audit and
report annually on the statutory financial statements and the statutory
financial return of the insurer, both of which, in the case of LaSalle Re, are
required to be filed annually with the BMA. LaSalle Re's independent auditor
must be approved by the BMA and may be the same person or firm that audits
Trenwick's consolidated financial statements and reports for presentation to its
shareholders. LaSalle Re's independent auditor is PricewaterhouseCoopers LLP.

Loss Reserve Specialist

As a registered Class 4 insurer, LaSalle Re is required to submit an opinion of
its approved loss reserve specialist with its statutory financial return in
respect of its losses and loss expenses provisions. The loss reserve specialist,
who will normally be a qualified casualty actuary, must be approved by the BMA.
Robert Giambo has been approved to act as LaSalle Re's loss reserve specialist.

Statutory Financial Statements

LaSalle Re must prepare annual statutory financial statements. The Insurance Act
prescribes rules for the preparation and substance of these statutory financial
statements, which include, in statutory form, a balance sheet, an income
statement, a statement of capital and surplus and notes thereto. The insurer is
required to give detailed information and analyses regarding premiums, claims,
reinsurance and investments. The statutory financial statements are not prepared
in accordance with U.S. GAAP and are distinct from the financial statements
prepared for presentation to the insurer's shareholders under the Companies Act,
which financial statements will be prepared in accordance with U.S. GAAP. As a
general business insurer, LaSalle Re is required to submit the annual statutory
financial statements as part of the


                                      -36-
<PAGE>

annual statutory financial return. The statutory financial statements and the
statutory financial return do not form part of the public records maintained by
BMA.

Annual Statutory Financial Return

LaSalle Re is required to file with the BMA a statutory financial return no
later than four months after its financial year end unless specifically extended
upon application to the BMA. The statutory financial return for a Class 4
insurer includes, among other matters, a report of the approved independent
auditor on the statutory financial statements of the insurer, solvency
certificates, the statutory financial statements, the opinion of the loss
reserve specialist and a schedule of reinsurance ceded. The solvency
certificates must be signed by the principal representative and at least two
directors of the insurer certifying that the minimum solvency margin has been
met and whether the insurer complied with the conditions attached to its
certificate of registration. The independent approved auditor is required to
state whether, in its opinion, it was reasonable for the directors to make these
certifications. If an insurer's accounts have been audited for any purpose other
than compliance with the Insurance Act, a statement to that effect must be filed
with the statutory financial return.

Minimum Solvency Margin and Restrictions on Dividends and Distributions

Under the Insurance Act, the value of the general business assets of a Class 4
insurer, such as LaSalle Re, must exceed the amount of its general business
liabilities by an amount greater than the prescribed minimum solvency margin.

      LaSalle Re:

      1.    is required, with respect to its general business, to maintain a
            minimum solvency margin equal to the greatest of:

            a.    $100,000,000;

            b.    50% of net premiums written (being gross premiums written less
                  any premiums ceded by LaSalle Re, but LaSalle Re may not
                  deduct more than 25% of gross premiums when computing net
                  premiums written); and

            c.    15% of net losses and loss expense reserves;

      2.    is prohibited from declaring or paying any dividends during any
            financial year if it is in breach of its minimum solvency margin or
            minimum liquidity ratio or if the declaration or payment of such
            dividends would cause it to fail to meet such margin or ratio (and
            if it has failed to meet its minimum solvency margin or minimum
            liquidity ratio on the last day of any financial year, LaSalle Re
            will be prohibited, without the approval of the BMA, from declaring
            or paying any dividends during the next financial year);

      3.    is prohibited from declaring or paying in any financial year
            dividends of more than 25% of its total statutory capital and
            surplus (as shown on its previous financial year's statutory balance
            sheet) unless if files with the BMA, (at least seven days before
            payment of such dividends) an affidavit stating that it will
            continue to meet the required margins;


                                      -37-
<PAGE>

      4.    is prohibited, without the approval of the Supervisor, from reducing
            by 15% or more its total statutory capital as set out in its
            previous year's financial statements, and any application for such
            approval must include an affidavit stating that it will continue to
            meet the required margins; and

      5.    is required, at any time it fails to meet its solvency margin,
            within 30 days (45 days where total statutory capital and surplus
            falls to $75 million or less) after becoming aware of that failure
            or having reason to believe that such failure has occurred, to file
            with the BMA a written report containing certain information.

Additionally, under the Companies Act, each of Trenwick and LaSalle Re may only
declare or pay a dividend if it has no reasonable grounds for believing that it
is, or would after the payment be, unable to pay its liabilities as they become
due, or if the realizable value of its assets would not be less than the
aggregate of its liabilities and its issued share capital and share premium
accounts.

Minimum Liquidity Ratio

The Insurance Act provides a minimum liquidity ratio for general business
insurers, like LaSalle Re. An insurer engaged in general business is required to
maintain the value of its relevant assets at not less than 75% of the amount of
its relevant liabilities. Relevant assets include, but are not limited to, cash
and time deposits, quoted investments, unquoted bonds and debentures, first
liens on real estate, investment income due and accrued, accounts and premiums
receivable and reinsurance balances receivable. There are certain categories of
assets which, unless specifically permitted by the BMA, do not qualify as
relevant assets, such as unquoted equity securities, investments in and advances
to affiliates, and real estate and collateral loans. The relevant liabilities
are total general business insurance reserves and total other liabilities less
deferred income tax and sundry liabilities (by interpretation, those not
specifically defined).

Supervision, Investigation and Intervention

The BMA may appoint an inspector with extensive powers to investigate the
affairs of LaSalle Re if the BMA believes that such an investigation is in the
best interests of its policyholders or persons who may become policyholders. In
order to verify or supplement information otherwise provided to the BMA, the BMA
may direct LaSalle Re to produce documents or information relating to matters
connected with its business. If it appears to the BMA that there is a risk of
LaSalle Re becoming insolvent, or that LaSalle Re is in breach of the Insurance
Act or any conditions imposed upon its registration, the BMA may, among other
things, direct LaSalle Re (i) not to take on any new insurance business; (ii)
not to vary any insurance contract if the effect would be to increase its
liabilities; (iii) not to make certain investments; (iv) to liquidate certain
investments; (v) to maintain in, or transfer to the custody of, a specified
bank, certain assets; (vi) not to declare or pay any dividends or other
distributions or to restrict the making of such payments and/or (vii) to limit
LaSalle Re's premium income.

Disclosure of Information

In addition to powers under the Insurance Act to investigate the affairs of an
insurer, the BMA may require certain information from an insurer (or certain
other persons) to be produced to them. Further, the BMA has been given powers to
assist other regulatory authorities, including foreign insurance regulatory
authorities, with their investigations involving insurance and reinsurance
companies in Bermuda but subject to restrictions. For example, the BMA must be
satisfied that the assistance being requested is in connection


                                      -38-
<PAGE>

with the discharge of regulatory responsibilities of the foreign regulatory
authority. Further, the BMA must consider whether cooperation is in the public
interest. The grounds for disclosure are limited and the Insurance Act provides
sanctions for breach of the statutory duty of confidentiality.

Transfer of Securities of Trenwick and LaSalle Re Holdings

The BMA must give specific permission for all issues and transfers of securities
of Bermuda companies involving persons who are not resident of Bermuda, unless
the company's securities are listed on an Appointed Stock Exchange as defined in
the Companies Act 1981.

On March 25, 2003, the common shares of Trenwick and the Series A Preferred
Shares of LaSalle Re Holdings were suspended from trading, pending application
to the Securities and Exchange Commission for delisting, by the NYSE as a result
of failure to meet the NYSE's minimum continued listing criteria. On the same
day, Trenwick was notified that its common shares and the Series A Preferred
Shares of LaSalle Re Holdings will be quoted on the OTC Bulletin Board.

By letter dated March 24, 2003, the BMA issued permission for the free
transferability on an interim basis of Trenwick's and LaSalle Re Holdings'
shares while they are quoted on the OTC Bulletin Board. This permission is
contingent on the condition that the BMA is notified promptly of any instances
in which Trenwick or LaSalle Re Holdings become aware that a new shareholder has
obtained 5% or more of either company's shares, including background information
on any such new 5% shareholder.

In the absence of the permission granted by the BMA discussed in the previous
paragraph, as a consequence of the suspension of trading, all transfers of
shares involving holders of Trenwick's or LaSalle Re Holdings' securities would
be required to be approved by the BMA before they could be entered into
Trenwick's or LaSalle Re Holdings' share register. This procedure would only
apply to share transfers involving shareholders who hold shares in their own
name on Trenwick's or LaSalle Re Holdings' share register (a "record holder").
Shareholders who hold through nominees, brokers, or banks, which in turn have
accounts through other nominees, would not be affected by this approval
procedure unless one of the parties to the transfer becomes a record holder on
Trenwick's or LaSalle Re Holdings' share register or the number of shares held
by an existing record holder is increased or decreased by the transfer. If the
BMA's free transferability permission is rescinded, this pre-approval process
will cause a delay in share transfers.

United Kingdom Regulation

On December 1, 2001, the Financial Services and Markets Act (the "FSMA")
established the Financial Services Authority (the "FSA") as the primary
regulator responsible for regulating the financial services industry with
respect to the carrying on of "regulated activities" including insurance and
reinsurance in the U.K. It is a criminal offense for any person to engage in a
regulated activity in the U.K. unless that person is authorized by the FSA to
carry on that regulated activity. Both Trenwick International and Trenwick's
Lloyd's operations are directly or indirectly regulated by the FSA.

The FSA has been granted broad authorization and intervention powers as it
relates to the operations of all insurers operating in the U.K., including (i)
periodic financial reporting requirements, (ii) supervision of management
through an "approved persons" regime which requires that certain "controlled
functions" within a regulated entity must be performed by individuals approved
by the FSA, (iii) various margin of solvency and related requirements for the
regulated entity and its parent company, (iv) reporting requirements relating to
all material related party transactions including certain intra group
transactions, (v) indirect restriction on dividend payments, (vi) formal
inspections and monitoring of regulated entities and regular formal interviews
of management, (vii) prior notification and approval by the FSA of the
acquisition of "control" including the direct or indirect acquisition of 10% or
more of the voting shares of the regulated entity or its parent companies and
(viii) enforcement of disciplinary measures including


                                      -39-
<PAGE>

criminal prosecution where it deems appropriate. In addition, the FSA is
currently seeking to strengthen its requirements for senior management
arrangements and systems and controls of insurance and reinsurance companies
under its jurisdiction and intends to place an increased emphasis on risk
identification and management in relation to the prudential regulation of
insurance and reinsurance business in the U.K. For example, the FSA is currently
in consultation on a number of proposals, including the regulation of the sale
of general insurance, insurance mediation and proposals aimed at ensuring
adequate diversification of an insurer's or reinsurer's exposures to any credit
risk of its reinsurers.

Lloyd's Operations

Under the FSMA, Lloyd's itself is subject to the full range of supervisory and
disciplinary sanctions of the FSA. The Council of Lloyd's is permitted, subject
to the ultimate authority of the FSA, to continue its day to day supervisory
functions at Lloyd's, although the FSA may intervene directly or through Lloyd's
and either body may initiate investigative and disciplinary proceedings. In
addition, Lloyd's is required to notify the FSA of any matter that is likely to
be of material concern to the FSA concerning Lloyd's operations as well as those
of its constituent parties.

Both Trenwick Managing Agents and Trenwick's dedicated Lloyd's underwriting
entities, as a Lloyd's managing agent and Lloyd's corporate members,
respectively, are subject to regulation and/or supervision by the Council of
Lloyd's. Lloyd's operates under a self-regulatory regime arising under the
Lloyd's Act 1982 and the FSMA and has the power to set, interpret and change the
rules which govern the operation of the Lloyd's market. Lloyd's prescribes, in
respect of its managing agents and corporate members, certain minimum standards
relating to their management and control, solvency and various other
requirements. In addition, Lloyd's imposes restrictions against persons becoming
controllers and major shareholders of managing agents and corporate members
without the consent of Lloyd's first having been obtained.

Trenwick Managing Agents has been granted a Scope of Permission Notice by the
FSA to carry out a regulated activity - `Managing the capacity of a Lloyd's
syndicate as a managing agent of Lloyd's'. As a regulated firm, Trenwick
Managing Agents is required to comply with the Rules made by the FSA, the
Lloyd's Acts passed by UK Parliament and Lloyd's Byelaws. These regulations
confer powers on the regulators to revoke the Scope of Permission Notice, which
could result in Trenwick Managing Agents being required to cease underwriting at
Lloyd's.

The FSA has begun to more closely monitor the activities of Lloyd's managing
agents. In February 2003, the FSA began to carry out risk assessments of
managing agents, looking at the potential exposure to the Lloyd's Central Fund.
In addition, the FSA has indicated its intention to become more directly
involved in monitoring both the performance of specific Lloyd's syndicates and
the financial strength of the Lloyd's market as a whole and, in that connection,
it is anticipated that there will be changes to Lloyd's regulatory reporting
among other things. Moreover, internal reforms proposed at Lloyd's are likely to
be adopted including moving to a franchise structure whereby the syndicates will
act as franchisees of Lloyd's, establishment of a new Franchise Board to govern
Lloyd's adoption of a one year accounting system in lieu of the three year
accounting system and elimination of new unlimited liability members. These and
other amendments are expected to be proposed in the amendments to the Lloyd's
Acts to modernize its governance structure and to remove unnecessary business
restrictions.

Trenwick International - Runoff

Trenwick International will remain a regulated insurer in the U.K. subject to
the FSA while it conducts the runoff of its existing insurance business. Under
FSA regulation, Trenwick International has consulted with the FSA and is
required to provide further documentation to the FSA on or before March 31,
2003, including a final draft runoff plan comprised of a proposed scheme of
operations and an explanation of how and to what extent all liabilities to
policyholders will be met in full as they fall due. The FSA has broad authority
to regulate the future operations of Trenwick International pursuant to its
existing supervisory and enforcement authority. The FSA is requiring monthly and
in some instances weekly reporting as it closely


                                      -40-
<PAGE>

monitors the runoff activities, remaining assets and solvency margin of Trenwick
International in order to ensure an orderly, solvent runoff. Although it has not
indicated any specific intention to do so, the FSA may impose additional
conditions on the operations of Trenwick International in runoff if it deems
this to be appropriate for the protection of policyholders. The FSA has
indicated its concern that Trenwick International may have violated its
regulations with respect to the minimum margin of solvency, and Trenwick is
engaged in ongoing discussions with the FSA concerning the applicable margin.
The FSA also has broad authority to review related party transactions and has
approved the release of Trenwick America Re from all obligations under a
stop-loss reinsurance agreement with Trenwick International in consideration of
a commutation payment of (pound)28.4 million ($45.7 million) made in December
2002.

Although Trenwick believes that there are sufficient reserves within Trenwick
International to provide for a solvent and orderly runoff over time, there are
many uncertainties in such analysis and there can be no assurance that a solvent
runoff can be achieved, that there will be any excess capital available to
Trenwick with respect to Trenwick International or that the FSA will consent to
the scheme of operations in lieu of insolvency, in which event the FSA may
pursue other remedies against Trenwick International. The FSA also has requested
Trenwick to provide additional financial support to Trenwick International.
Finally, Trenwick on its own volition or at the request of the FSA, could seek
to pursue other alternatives with respect to Trenwick International including
the sale of all or a portion of Trenwick International, which transaction would
require the prior approval of the FSA.

Dividends

Trenwick paid a dividend of $0.04 per common share in each of the first three
quarters of 2002, in each of the four quarters of 2001 and in the fourth quarter
of 2000. Trenwick Group Inc. paid a quarterly dividend of $0.26 per common share
in the first three quarters of 2000. LaSalle Re paid a quarterly dividend of
$0.55 per share on its Series A preferred shares in each of the first three
quarters of 2002 and in each of the four quarters of 2001 and 2000.

In concert with other actions being taken in the fourth quarter of 2002, on
November 7, 2002, Trenwick's Board of Directors announced that it had elected to
suspend, with immediate effect and for an indefinite period, dividends payable
on Trenwick's common and preferred shares. In December 2002, Trenwick's credit
facility was amended to prohibit the payment of dividends. On November 9, 2002,
Trenwick also ceased payment of dividends on the capital securities of Trenwick
America. See Note 9 to the Notes to the Consolidated Financial Statements.

Because Trenwick's operations are conducted through its operating subsidiaries,
it is dependent upon the ability of its operating subsidiaries to transfer
funds, principally in the form of cash dividends, tax and expense reimbursements
and other statutorily permissible payments. In addition to general legal
restrictions on payments of dividends and other distributions to shareholders
applicable to all corporations, Trenwick's insurance subsidiaries are subject to
further regulations that, among other things, restrict the amount of dividends
and other distributions that may be paid to their parent corporations.

Under the applicable provisions of the insurance holding company laws of
Connecticut, the state of domicile of Trenwick America Re, such companies may
only pay dividends without the approval of the applicable state insurance
regulator, if such dividends, together with other dividends paid within the
preceding twelve months, are less than the greater of (i) 10% of the insurer's
policyholders' surplus as of the end of the prior calendar year or (ii) the
insurer's statutory net income, excluding realized capital gains, for the prior
calendar year. As a further restriction, the maximum amount of dividends which
may be paid is limited to the insurer's earned surplus, also known as its
unassigned funds. Any dividend in excess of the amount determined pursuant to
the foregoing formula would be characterized as an "extraordinary dividend"
requiring the prior approval of the state insurance regulator. Under the "letter
of understanding" entered into between Trenwick America Re and the Connecticut
Department of Insurance on December 3, 2002, Trenwick America Re is not
permitted to pay any dividends, ordinary or extraordinary, without the


                                      -41-
<PAGE>

prior written approval of the Connecticut Insurance Commissioner or her
designee. See "--Regulation--United States Regulation."

Under New York law, which is applicable to Inscorp and ReCor Insurance Company
Inc., the maximum ordinary dividend payable in any twelve month period without
the approval of the New York Insurance Department is the lesser of (i) 10% of
policyholders surplus as shown on the company's last annual statement or any
more recent quarterly statement or (ii) the company's adjusted net investment
income. Adjusted net investment income is defined as net investment income for
the twelve months preceding the declaration of the dividend plus the excess, if
any, of net investment income over dividends declared or distributed during the
period commencing thirty-six months prior to the declaration or distribution of
the current dividend and ending twelve months prior thereto. In any case, New
York law permits the payment of an ordinary dividend by an insurer or reinsurer
only out of earned surplus.

Under the applicable provisions of the insurance holding company laws of North
Dakota, the state of domicile of Dakota Specialty Insurance Company, payment of
dividends in any year without prior regulatory approval is limited to the
greater of (i) 100% of statutory net income excluding realized capital gains for
the previous year, or (ii) 10% of the insurer's policyholder's surplus,
excluding surplus arising from unrealized appreciation on investments or other
assets.

The maximum dividend permitted by law may not be indicative of an insurer's
actual ability to pay dividends, which may be constrained by business and other
regulatory considerations, such as the impact of dividends on surplus, which
could affect an insurer's ratings or competitive position, the amount of
premiums that can be written and the ability to pay future dividends.
Furthermore, beyond the limits described above, insurance regulatory authorities
often have the discretion to limit the payment of dividends by insurance
companies domiciled in their jurisdictions.

During 2002, 2001 and 2000, Trenwick America Re paid cash dividends of $17.4
million, $53.3 million and $19.3 million, respectively. Inscorp paid $10.0
million of cash dividends in 2001; it did not pay any dividends in 2002 or 2000.
Trenwick's other United States insurance subsidiaries did not pay any dividends
in 2002, 2001 or 2000.

Under The Companies Act 1981 of Bermuda, LaSalle Re Holdings, LaSalle Re and
LaSalle Re Corporate Capital Ltd. are prohibited from declaring or paying a
dividend or making a distribution out of contributed surplus and retained
earnings if there are reasonable grounds for believing that (i) such company is,
or would after the payment be, unable to pay its liabilities as they come due or
(ii) the realizable value of such company's assets would thereby be less than
the aggregate of its liabilities and shareholders' equity. In addition, The
Insurance Act 1978, as amended, of Bermuda would prohibit the payment of a
dividend by LaSalle Re or LaSalle Re Corporate Capital Ltd. if the payment of
such dividend would result in either company no longer meeting its minimum
solvency margin or minimum liquidity ratio. As a registered Class 4 insurer,
LaSalle Re is required to maintain a minimum solvency margin equal to the
greatest of (1) $100 million, (2) 50% of its net premiums written (without
deducting more than 25% of gross premiums written when computing net premiums
written) and (3) 15% of its loss and other certain insurance reserves. The
minimum liquidity ratio requires LaSalle Re and LaSalle Re Corporate Capital
Ltd. to maintain the value of their respective relevant assets at not less than
75% of the amount of their respective relevant liabilities.

Under the applicable laws of the United Kingdom, Trenwick's U.K. subsidiaries
may make shareholder distributions only from accumulated realized profits, net
of accumulated realized losses. In addition, under the U.K. Interim Prudential
Sourcebook, Trenwick International is not permitted to make any distribution
that would reduce its net assets below the required minimum margin of solvency
which, as determined under the FSA's rules, is approximately (pound)24.0 million
($38.8 million) as of December 31, 2002. Trenwick International must also notify
the FSA of any proposal to declare or pay a dividend on any of its share
capital. Under Lloyd's regulations, Trenwick Managing Agents is not permitted to
make any distribution that would cause its assets to fall below any of Trenwick
Managing Agents' share capital, minimum net

                                      -42-
<PAGE>

current asset margin or minimum net asset margin. As of December 31, 2002, the
highest of the three tests required Trenwick Managing Agents to maintain
approximately (pound)0.8 million ($1.3 million) of capital.

Trenwick, Trenwick America and LaSalle Re Holdings are each prohibited from
paying common stock dividends as a result of the deferral of dividend payments
on the Series B Preferred Shares, the capital securities of Trenwick America,
and the Series A Preferred Shares.

Investment Limitations

Connecticut, New York and North Dakota laws and regulations govern the types and
amounts of investments which are permissible for Trenwick's United States
insurance subsidiaries. These rules are designated to ensure the safety and
liquidity of the insurers' investment portfolio. In general, these rules permit
insurers to purchase only investments which are interest bearing, interest
accruing, entitled to dividends or otherwise income earning and not then in
default in any respect, and the insurer must be entitled to receive for its
exclusive account and benefit the interest or income accruing thereon. No
security or investment is eligible for purchase at a price above its fair value
or market value. In addition, these rules require investments by Trenwick to be
diversified. The FSA governs the types and amounts of investments which are
permissible for insurers in the United Kingdom, including Trenwick
International. Likewise, Lloyd's regulations govern the types and amounts of
investments that are permissible for Trenwick Managing Agents to make with the
assets of the Lloyd's syndicates that it manages. These laws penalize high
concentrations of riskier types of assets and high exposures to certain types of
issuers. Trenwick believes that it is in compliance in all material respects
with all applicable investment laws.

United States Financial Services Reform

In 1999, new United States federal legislation was passed which implemented
fundamental changes in the regulation of the financial services industry in the
United States. The new law permits mergers that combine commercial banks,
insurers and securities firms under one holding company, a "financial holding
company." Bank holding companies and other entities that qualify and elect to be
treated as a financial holding company may engage in activities, and acquire
companies engaged in activities that are "financial" in nature or "incidental"
or "complementary" to such financial activities. These financial activities
include acting as principal, agent or broker in the underwriting and sale of
life, property, casualty and other forms of insurance and annuities.

Until the passage of this new legislation, the Bank Holding Company Act of 1956,
as amended, had restricted banks from being affiliated with insurers. The
ability of banks to affiliate with insurers may materially affect Trenwick
America Re's product lines by substantially increasing the number, size and
financial strength of potential competitors.

United States Taxation

Under current Bermuda law, no income, withholding or capital gains taxes are
imposed upon Trenwick and its Bermuda subsidiaries. Trenwick and its Bermuda
subsidiaries have received an undertaking from the Minister of Finance in
Bermuda that, in the event of any taxes being imposed, Trenwick and its Bermuda
subsidiaries will be exempt from taxation in Bermuda until March 2016.
Trenwick's United States subsidiaries carry on business in, and are subject to
taxation in, the United States. Trenwick and its Bermuda subsidiaries believe
that they have operated and will continue to operate their business in a manner
that will not cause its Bermuda subsidiaries to generate income treated as
effectively connected with the conduct of a trade or business within the United
States. On this basis, Trenwick does not expect that its Bermuda subsidiaries
will be required to pay United States corporate income taxes other than
withholding taxes on certain investment income and premium excise taxes. If
Trenwick's Bermuda subsidiaries were subject to United States income tax, there
could be a material adverse effect on Trenwick's financial condition, results of
operations or cash flows.


                                      -43-
<PAGE>

Employees

At December 31, 2002, Trenwick employed a total of five, 139 and 241 persons in
its Bermuda, United States and other international operations, respectively.
Trenwick has no employees represented by a labor union and believes that its
employee relations are good.

Item 2.  Properties

Trenwick's corporate headquarters and LaSalle Re's operations are located in
approximately 3,900 square feet of leased office space in Hamilton, Bermuda.
Trenwick's United States operations are located in approximately 46,000 total
square feet of leased office space at Stamford, Connecticut. Trenwick
International and Trenwick Managing Agents lease approximately 29,000 square
feet of space in London, England and Trenwick International also leases 875
square feet of office space in Paris, France. Management believes Trenwick's
current office space is adequate for its needs.

Item 3.  Legal Proceedings

On July 1, 2002, Trenwick commenced an arbitration proceeding seeking $55
million in damages and other relief against European Reinsurance Company of
Zurich, a subsidiary of Swiss Reinsurance Company. The claims arose out of what
Trenwick believed was European Re's failure to meet its obligations under a
catastrophe equity put agreement, which entitled Trenwick to raise up to $55
million of equity through the issuance of convertible preferred shares to
European Re in the event there was a qualifying catastrophic event or events
occurring prior to January 1, 2002. The terrorist attacks of September 11, 2001
constituted a qualifying catastrophic event and Trenwick delivered notice of
exercise of the catastrophe equity put on March 28, 2002.

On September 6, 2002, Trenwick and European Re settled the outstanding
arbitration with European Re purchasing 550,000 of Trenwick's Series B
Cumulative Convertible Perpetual Preferred Shares with a liquidation preference
of $100 per share for an aggregate purchase price of $40 million. For a
description of the preferred shares issued by Trenwick in connection with the
settlement of the arbitration between Trenwick and European Re, see Note 9 of
the Notes to the Consolidated Financial Statements and Item 7--"Management's
Discussion and Analysis of Financial Conditions and Results of Operations--
Catastrophe Equity Put."

In addition, Trenwick is party to various legal proceedings generally arising in
the normal course of its business. Trenwick does not believe that the eventual
outcome of any such proceeding will have a material effect on its financial
condition or business. Trenwick's subsidiaries are regularly engaged in the
investigation and the defense of claims arising out of the conduct of their
business.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of shareholders of Trenwick during the
fourth calendar quarter of 2002.

                                     PART II

Item 5. Market for Corporation's Common Stock and Related Stockholder Matters

On March 25, 2003, the common shares of Trenwick and the Series A Preferred
Shares of LaSalle Re Holdings were suspended from trading by the New York Stock
Exchange ("NYSE") as a result of failure to meet the NYSE's minimum continued
listing criteria. On the same day, Trenwick was notified that its common shares
and the Series A Preferred Shares of LaSalle Re Holdings will be quoted on the
Over The Counter Bulletin Board ("OTC").


                                      -44-
<PAGE>

By letter dated March 24, 2003, the Bermuda Monetary Authority issued permission
for the free transferability on an interim basis of the shares of Trenwick and
LaSalle Re Holdings while they are traded on the OTC Bulletin Board on the
condition that the BMA is notified promptly of all instances in which Trenwick
or LaSalle Re Holdings becomes aware that a new shareholder has obtained 5% or
more of its shares. In these instances, the BMA also indicated that it expects
to be provided with background information on the new 5% holder.

As of September 28, 2000, Trenwick common shares commenced trading on the New
York Stock Exchange under the ticker symbol TWK. Prior to such date, LaSalle Re
Holdings traded on the New York Stock Exchange under the ticker symbol LSH. The
following table sets forth for the periods presented below, the high and low
sales price of the LaSalle Re Holdings common shares as reported by the New York
Stock Exchange through September 27, 2000 and of Trenwick as reported by the New
York Stock Exchange from September 28, 2000 through December 31, 2002. On March
14, 2003, the last reported sales price of Trenwick common shares on the New
York Stock Exchange was $0.25 per share.

                                              High                 Low

2002 Year
Quarter ended March 31, 2002                $10.85               $6.79
Quarter ended June 30, 2002                  $9.48               $6.05
Quarter ended September 30, 2002             $7.75               $3.15
Quarter ended December 31, 2002              $5.25               $0.43

2001 Year
Quarter ended March 31, 2001                $25.60              $18.25
Quarter ended June 30, 2001                 $23.69              $18.34
Quarter ended September 30, 2001            $23.16               $5.50
Quarter ended December 31, 2001             $11.05               $6.50

2000 Year
Quarter ended March 31, 2000                $16.38              $11.31
Quarter ended June 30, 2000                 $15.50              $12.25
Quarter ended September 30, 2000            $19.44              $13.69
Quarter ended December 31, 2000             $27.13              $14.75

There were approximately 382 holders of record and in excess of 6,900 beneficial
owners of Trenwick common shares as of March 14, 2003.

Trenwick paid a quarterly dividend of $0.04 per common share in each of the
first three quarters of 2002, in each calendar quarter of 2001 and the fourth
quarter of 2000. LaSalle Re Holdings did not pay any dividends on its common
shares in 2000. LaSalle Re Holdings paid a quarterly dividend of $0.55 per share
on its Series A preferred shares in each of the first three quarters of 2002,
all four quarters of 2001 and the first three quarters of 2000. Trenwick Group
Inc. paid a quarterly dividend of $0.26 per share of common stock in the first
three quarters of 2000.

In concert with other actions being taken in the fourth quarter of 2002, on
November 7, 2002, Trenwick's Board of Directors announced that it had elected to
suspend, with immediate effect and for an indefinite period, dividends payable
on Trenwick's common shares. As described above in Item 1, "Business -
Regulation - Dividends," the declaration and payment of future dividends is also
subject to legal, regulatory and other restrictions. Under the "letter of
understanding" entered into between Trenwick America Re and the Connecticut
Department of Insurance on December 3, 2002, Trenwick America Re is not
permitted to pay any dividends, ordinary or extraordinary, without the prior
written approval of the Connecticut Insurance Commissioner or her designee. In
addition, Trenwick is prohibited from declaring or paying any dividends on its
outstanding common and preferred shares or the shares of its subsidiaries.


                                      -45-
<PAGE>

For a description of the restrictions on Trenwick's ability to pay dividends,
reference is made to Item 1, "Business - Regulation - Dividends."

Item 6. Selected Financial Data


                                      -46-
<PAGE>

                               TRENWICK GROUP LTD.
                                FIVE YEAR SUMMARY
                 Years Ended December 31, 2002, 2001 and 2000 and
                     Years Ended September 30, 1999 and 1998
          (Amounts expressed in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                   2002             2001            2000          1999          1998
                               -----------      -----------      ----------     ---------      --------
<S>                            <C>              <C>              <C>            <C>            <C>
Income Statement Data
Net premiums written           $   991,501      $   970,318      $  302,632     $ 110,819      $147,501
Net investment income              105,038          129,114          58,715        33,847        34,288
Net income (loss) available
   common shareholders            (386,099)        (154,397)          4,528        (9,397)       45,243
GAAP combined ratio                  126.7%           132.6%          111.7%        130.1%         82.2%
        Per Share Data
Net income (loss) per
   common share:
Basic earnings (loss) per
   common share                $    (10.49)     $     (4.19)     $     0.21     $   (0.60)     $   2.99
Diluted earnings (loss)
per common share                    (10.49)           (4.19)           0.21         (0.60)         2.68
Dividends per common share             .12             0.16            0.04          1.13          3.00
Book value per common share           2.11            13.52           17.79         19.69         23.39

Balance Sheet Data
Total Assets                   $ 5,277,982      $ 4,928,555      $4,229,496     $ 736,107      $757,290
Total investments and cash       2,315,918        2,316,114       2,240,580       556,976       606,757
Unpaid claims and
   claims expenses               3,718,124        3,032,748       2,408,926       146,552        97,942
Indebtedness                        76,498          291,263         286,805            --            --
Minority interest                  143,320          143,119         151,770        93,055       105,569
Common shareholders' equity         77,470          498,326         652,187       307,197       355,053
Common shares outstanding           36,802           36,845          36,665        15,600        15,179
</TABLE>

Amounts for 2002, 2001 and 2000 reflect the results of Trenwick Group Inc. and
its subsidiaries, accounted for as a purchase, from September 27, 2000, the
date of the acquisition.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion highlights material factors affecting Trenwick Group
Ltd.'s results of operations for the three years ended December 31, 2002, 2001
and 2000. This discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto of Trenwick Group Ltd. for
the years ended December 31, 2002, 2001 and 2000 contained in this annual report
on Form 10-K.


                                      -47-
<PAGE>

Trenwick Group Ltd. discloses operating and non-operating income as well as
underwriting income to enable the reader to understand how management evaluates
Trenwick Group Ltd.'s results of operations. These disclosures are not defined
under accounting principles generally accepted in the United States of America;
accordingly the use of these disclosures may not be comparable to other
registrants.

Overview

Trenwick Group Ltd. ("Trenwick") is a Bermuda-based specialty insurance and
reinsurance holding company with two principal businesses operating through its
subsidiaries located in the United States and the United Kingdom. Trenwick's
United States treaty reinsurance business provides, through an underwriting
facility with Chubb Re, Inc. and its affiliate Federal Insurance Company
(together, "Chubb"), treaty reinsurance to insurers of property and casualty
risks. Trenwick's operations at Lloyd's of London ("Lloyd's") underwrite
specialty property and casualty insurance as well as treaty and facultative
property and casualty reinsurance on a worldwide basis.

In 2002, Trenwick conducted several strategic reviews of its operations in light
of its capital constraints and determined that it was necessary for Trenwick to
reduce its operating leverage by reducing premium volumes, through either sales
or discontinuance of certain lines of business, to a level more commensurate
with its capital base and to concentrate its limited financial resources on its
core franchises and businesses, United States treaty reinsurance and its Lloyd's
operations, where it would be able to write insurance and reinsurance based on
direct or indirect financial support. Trenwick assessed in alternatives and
voluntarily placed into runoff its United States specialty program business
formerly operated through its subsidiary, Canterbury Financial Group, Inc.
("Canterbury") and its London-based specialty insurance and reinsurance company,
Trenwick International Limited ("Trenwick International"), and, in light of the
increasing capital requirements imposed by the market on catastrophe insurance
providers, sold the in-force property catastrophe reinsurance business of its
Bermuda subsidiary LaSalle Re Limited ("LaSalle Re"). Little or no new insurance
or reinsurance is presently being offered in these runoff operations.

As a result of a significant deterioration in Trenwick's financial condition,
more fully described in "Significant Developments" below, Trenwick hired
Greenhill & Co., LLC as its financial advisor to assist in the evaluation and
implementation of a possible restructuring of its outstanding indebtedness and
preferred equity as well as other strategic alternatives.

Trenwick was formed as a Bermuda company in 1999 to acquire two publicly held
companies, Trenwick Group Inc. and LaSalle Re Holdings Limited ("LaSalle Re
Holdings"), and the minority interest in LaSalle Re, a subsidiary of LaSalle Re
Holdings. That transaction, in which Trenwick issued common shares to acquire
LaSalle Re Holdings, Trenwick Group Inc. and the minority interest in LaSalle
Re, was completed on September 27, 2000 and was accounted for as a purchase by
LaSalle Re Holdings. Accordingly, in the financial statements, the assets and
liabilities, and the revenues and expenses of LaSalle Re Holdings were included
for all periods presented; the minority interest in common shares and minority
interest in net income of LaSalle Re were eliminated as of September 30, 2000
and from October 1, 2000, respectively, and the assets and liabilities, and the
revenues and expenses of Trenwick Group Inc. were included as of September 30,
2000 and from October 1, 2000, respectively. Trenwick Group Inc. had earlier
acquired another publicly held company, Chartwell Re Corporation, on October 27,
1999.

Significant Developments

During 2002 and the first quarter of 2003, a number of developments have
occurred that have significantly and negatively affected Trenwick's operations,
capital structure and the financial resources required to conduct its
businesses. Set forth below are brief descriptions of a number of these
developments as well as certain material transactions entered into by Trenwick
to enable it to continue to conduct business operations despite the adverse
developments. Investors and shareholders are cautioned that Trenwick has had a
number of significant adverse events which could make it extremely difficult to
continue in its


                                      -48-
<PAGE>

current businesses, if at all, and they should carefully review the "Risk
Factors" and "Forward-Looking Statements" sections, as well as other sections,
of this Report.

Reserve Adjustments

Trenwick announced on October 25, 2002 that it had engaged independent actuaries
to conduct a review of reserves for unpaid claims and claims expenses at each of
Trenwick's operating subsidiaries. Trenwick increased its reserves for unpaid
claims and claims expenses in the fourth quarter of 2002 by $107 million, or
$2.90 per share, which followed reserve increases made by Trenwick earlier in
2002. The aggregate reserve increases for 2002 were $285.1 million, or $7.75 per
share. Both the fourth quarter and year to date 2002 reserve increases are net
of benefits related to reductions in the liability under the contingent interest
notes. The fourth quarter increase in Trenwick's reserves was based upon the
study conducted by independent actuarial consultants and additional work
performed during the quarter by Trenwick's internal actuaries. The increases in
reserves impact Trenwick's United States and Bermuda insurance subsidiaries and
Trenwick International. Trenwick's reserves at its Lloyd's operation, while also
analyzed, were not significantly affected by this reserve increase. The reserve
increases reflect a reassessment of Trenwick's reserves for unpaid claims and
claims expenses in light of recent reported loss activity trends across its
major business groups and principally impacts the 1998 to 2001 accident years.
Included in the fourth quarter 2002 reserve increase was $20 million relating to
Trenwick's exposure to asbestos and environmental liabilities. Following this
increase to Trenwick's asbestos and environmental reserves, Trenwick's three
year survival ratio (i.e., number of years that existing reserves will last if
the current level of average annual payments for the last three years repeats
itself indefinitely) for this type of exposure will be approximately 13 years.
See Item 1- "Business--Unpaid Claims and Claims Expenses," below.

Deferred Income Tax Assets

Trenwick's United States and United Kingdom operations incurred financial
accounting losses in the years 1999 through 2002 and, in connection with such
losses, recorded as an asset up to $119.6 million and $96.8 million,
respectively, of net deferred income taxes (before application of a valuation
allowance). The net deferred income tax asset represented the future tax benefit
of the losses previously incurred by Trenwick's United States and United Kingdom
operations. Because of Trenwick's cumulative financial accounting losses, in the
absence of specific favorable factors, application of FASB Statement No. 109
required Trenwick to establish during 2002 a 100% valuation allowance against
its deferred tax asset related to its United States and United Kingdom
operations. The establishment of a 100% valuation allowance against Trenwick's
deferred tax asset increased Trenwick's provision for income taxes and net loss
by $150.2 million, or $4.08 per share for the year ended December 31, 2002. The
maintenance of a full valuation allowance against Trenwick's net deferred tax
asset through December 31, 2002 further increased Trenwick's provision for
income taxes and net loss by $65.1 million, or $1.77 per share. Trenwick's
management will continue to monitor its tax position and reassess the need for a
full valuation allowance on its deferred tax asset on a periodic basis.

Potential Events of Default under Senior Secured Credit Facility

Concurrently with the business combination involving LaSalle Re Holdings and
Trenwick Group Inc. in September of 2000, Trenwick America Corporation
("Trenwick America") and Trenwick Holdings Limited ("Trenwick Holdings"),
Trenwick's U.S. and U.K. holding companies, entered into an amended and restated
$490 million credit agreement with various lending institutions (the "Banks"),
which was guaranteed by LaSalle Re Holdings. The credit agreement consisted of
both a $260 million revolving credit facility and a $230 million letter of
credit facility. The revolving credit facility was subsequently converted into a
four-year term loan and repaid in full on June 17, 2002. Additionally, on
December 24, 2002, the credit agreement was amended to reduce the letter of
credit facility, which is utilized by Trenwick to support its underwriting
operations at Lloyd's, to the currently outstanding $182.5 million. The letter
of credit facility is scheduled to terminate on December 31, 2003, although the
letters of credit issued pursuant to the facility will not expire until December
31, 2006.


                                      -49-
<PAGE>

Pursuant to a guaranty agreement entered into concurrently with the credit
agreement, Trenwick has guaranteed the obligations of Trenwick America and
Trenwick Holdings under the credit agreement. In April of 2002, Trenwick pledged
the capital stock of LaSalle Re Holdings, which was a guarantor of the
obligations under the credit agreement, and LaSalle Re as collateral to the
Banks. In December of 2002, Trenwick agreed to provide the Banks additional
security interests as described below.

On October 18, 2002, A.M. Best Company lowered the financial strength ratings of
Trenwick's operating subsidiaries below A-. The lowered A.M. Best Company
ratings constituted an event of default under Trenwick's credit agreement. In
addition, increases in Trenwick's loss reserves and the establishment of a
Trenwick deferred tax asset reserve in the third quarter of 2002 resulted in
Trenwick violating the financial covenants in the credit agreement requiring
Trenwick to maintain a minimum tangible net worth and minimum risk-based
capital. On November 13, 2002, Trenwick, its subsidiaries and the Banks executed
a forbearance agreement with respect to the events of default arising from
Trenwick's lowered A.M. Best Company ratings and financial covenant violations.

Subsequently, an amendment and waiver of default under the credit agreement and
amendment to the guaranty agreement were entered into on December 24, 2002 (the
"December Amendments"). The December Amendments extended the letter of credit
facility through December 31, 2003 to support Trenwick's underwriting operation
at Lloyd's for the 2003 year of account. To those Banks extending their letters
of credit, Trenwick agreed to pay a 5% per annum cash letter of credit fee,
issue pay-in-kind notes bearing interest at LIBOR plus 2.5% per annum to
evidence an additional 3.16% per annum letter of credit fee, issue warrants
equal to 10% of Trenwick's fully diluted equity capital, and pay 15% of the
profits earned by Trenwick's Lloyd's operations for the 2002 and 2003 Lloyd's
years of account. In addition, Trenwick, Trenwick America and Trenwick Holdings
agreed to provide the Banks a security interest in all of their respective
equity interests in, and the assets and property of, their direct and indirect
subsidiaries as additional collateral for the Banks, and to cause the
subsidiaries to provide a guaranty to the Banks, subject to applicable laws and
regulations and certain existing contractual rights of holders of other
indebtedness.

The December Amendments also prohibit Trenwick and its subsidiaries from
declaring or paying any dividends (including on Trenwick's common shares, the
Series A Preferred Shares of LaSalle Re Holdings and the capital securities
issued by Trenwick Capital Trust I). The December Amendments and the other
amendments and waivers entered into in the first quarter of 2003 waive certain
other defaults, add covenants further restricting the operation of Trenwick's
business, prohibit Trenwick from making certain payments without the Banks'
approval, prohibit Trenwick and its subsidiaries from selling or otherwise
disposing of any assets or property, require Trenwick to regularly report
certain financial information to the Banks, and adjust downward certain of the
financial covenants.

Pursuant to the December Amendments, Trenwick is required to collateralize with
cash, cash equivalents and marketable securities 60% of the outstanding letters
of credit by August 1, 2003. In addition, Trenwick is required to use its best
efforts to terminate the letters of credit by December 31, 2003. In order to do
so, the letters of credit would need to be replaced with other letters of credit
or collateral acceptable to Lloyd's. In the event Trenwick has not terminated
the letters of credit by December 31, 2003, it is required on such date to
collateralize with cash, cash equivalents and marketable securities the full
amount of the outstanding letters of credit. At this time, Trenwick does not
have sufficient available liquidity to collateralize the letters of credit as
required by the December Amendments. Additionally, Trenwick does not believe
that it will be able to replace the letters of credit with other letters of
credit or collateral acceptable to Lloyd's. See Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operation -
Liquidity and Capital Resources."

Since December, Trenwick has entered into additional amendments and numerous
waivers with the Banks providing for, among other things, waivers of potential
covenant defaults, further reductions in certain financial covenants, additional
financial reporting, approval of certain employee and other payments, and
extension of numerous deadlines imposed under the December Amendments.


                                      -50-
<PAGE>

If there is an event of default under the credit agreement, including as a
result of Trenwick failing to collateralize the letters of credit as described
above, or if there is an event of default under other outstanding indebtedness
of Trenwick or its subsidiaries, including under the senior notes, resulting in
a cross default under the credit agreement, Trenwick may be required to fully
and immediately collateralize the outstanding letters of credit under the terms
of the guaranty agreement. No liability for any such amounts has been reflected
in Trenwick's financial statements. If the potential future events of default
occur and are not waived, there is substantial doubt as to Trenwick's ability to
continue as a going concern and Trenwick and/or one or more of its subsidiaries
may be forced to seek protection from creditors through proceedings commenced in
Bermuda and other jurisdictions including the United States. In addition, at any
time one or more of the insurance regulatory authorities having jurisdiction
over Trenwick's insurance company operating subsidiaries may commence voluntary
or involuntary proceedings for the formal supervision, rehabilitation or
liquidation of such subsidiaries, or one or more of the creditors of Trenwick or
its subsidiaries may commence proceedings against Trenwick or its unregulated
subsidiaries seeking their liquidation.

Potential Event of Default under Senior Notes

Included in Trenwick's indebtedness at December 31, 2002 are senior notes with
an aggregate principal amount of $75 million which are due April 1, 2003.
Trenwick is engaged in continuing discussions with holders of the senior notes
with respect to a possible restructuring of these senior notes. Trenwick's
agreements entered into in connection with the renewal of its letter of credit
facility in December 2002 provided that Trenwick would replace, refinance or
restructure these senior notes by March 1, 2003. The banks participating in
Trenwick's letter of credit facility have provided to Trenwick a waiver of this
March 1, 2003 deadline as discussions with the senior note holders continue. At
this time, Trenwick does not have sufficient available liquidity to pay the
amount due on April 1, 2003 and is uncertain whether it will be able to complete
the restructuring by that date. If Trenwick is unable to restructure these
senior notes by April 1, 2003 and either the banks under the credit facility or
the senior noteholders determine to exercise the rights available to them or
take other action with respect to the assets of Trenwick, Trenwick and/or one or
more of its subsidiaries may be forced to seek protection from creditors through
proceedings commenced in Bermuda and other jurisdictions including the United
States. In addition, at any time, the insurance regulatory authorities having
jurisdiction over Trenwick's insurance company operating subsidiaries may
commence voluntary or involuntary proceedings for the formal supervision,
rehabilitation or liquidation of such subsidiaries, or one or more of the
creditors of Trenwick or its subsidiaries may commence proceedings against
Trenwick or its unregulated subsidiaries seeking their liquidation.

Going Concern Qualification

The accompanying financial statements have been prepared assuming Trenwick will
continue as a going concern. As discussed in Note 9 to the financial statements,
Trenwick is currently required to repay certain senior notes by April 1, 2003
and collateralize with cash or cash equivalents 60% of the outstanding letters
of credit under its senior credit facility by August 1, 2003. At this time,
Trenwick does not have sufficient available liquidity to collateralize the
letters of credit or repay the senior notes. As discussed in Note 14 to the
financial statements, certain insurance subsidiaries of Trenwick do not meet
risk based capital levels or levels of surplus required by various insurance
regulations to which they are subject. These matters raise substantial doubt
about Trenwick's ability to continue as a going concern. Management's plans and
other circumstances in regard to these matters are also described in Note 9 to
the financial statements. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

Recent Ratings Actions

Moody's Investors Service announced on January 31, 2003 that it had lowered the
senior debt rating of Trenwick from "Caa3" to "Ca", and had lowered the ratings
of the trust preferred securities of Trenwick America and the preferred stock of
LaSalle Holdings from "Ca" to "C", following Trenwick's


                                      -51-
<PAGE>

announcement that it would post a fourth quarter 2002 reserve charge of $107
million. Moody's Investors Service noted that the $107 million reserve charge
was significant in relation to the $322 million book value reported by Trenwick
at the end of the third quarter of 2002 and also Trenwick's market
capitalization, which is well below that amount. Moody's Investors Service also
noted that, in its opinion, the $107 million charge further diminishes the value
that creditors will be able to extract from Trenwick in its restructuring
efforts, and that currently virtually all of Trenwick's financial assets are
held by regulated insurance subsidiaries, limiting resources available to meet
debt and preferred stock obligations.

Standard and Poor's Ratings Services announced on March 4, 2003 that it placed
its "CCC-" counterparty credit ratings on Trenwick Group Ltd., LaSalle Re
Holdings and Trenwick America on CreditWatch with negative implications because
it believes that Trenwick's ability to restructure its senior debt to keep it
out of default is remote. Standard & Poor's also announced on March 4, 2003 that
it placed its "CCC" counterparty credit and financial strength ratings on
Trenwick America Reinsurance Corporation ("Trenwick America Re") Dakota
Specialty Insurance Company ("Dakota"), LaSalle Re, Trenwick International and
The Insurance Corporation of New York ("Inscorp") on CreditWatch negative. In
addition, Standard and Poor's withdrew its "CCC" counterparty credit and
financial strength ratings on Chartwell Insurance Company due to its merger with
Trenwick America Re.

On February 4, 2003, Fitch Ratings announced that it had lowered its long-term
rating and senior debt ratings on Trenwick and its subsidiaries to "C" from
"CC." Fitch reported that its ratings action followed Trenwick's announcement
that it was taking a $107 million reserve charge, and that it believed that
Trenwick's business prospects and financial flexibility are "very limited" and
that it would be unable to refinance its senior debt. Fitch also reported its
belief that Trenwick's ability to remain a going concern is heavily dependent on
financing by the letter of credit facility and that senior debt holders may be
forced to consider accepting some form of payment in kind arrangement.

With the exception of Trenwick America Re, which is rated "NR-4" (Rating
Withdrawn at Company's Request), each of Trenwick's operating insurance company
subsidiaries is classified "NR-3" (Rating Procedure Inapplicable) by A.M. Best
Company. All of Trenwick Managing Agents' managed syndicates are able to write
business utilizing the ratings of Lloyd's, which is rated "A-" (Excellent) by
A.M. Best Company and has an "A" financial strength rating from Standard &
Poor's. These ratings are based upon factors that may be of concern to policy or
contract holders, agents and intermediaries, but may not reflect the
considerations applicable to an equity investment in a reinsurance or insurance
company. A change in any such rating is at the discretion of the respective
rating agencies.

Suspension of Trading from New York Stock Exchange

On March 25, 2003, the common shares of Trenwick and the Series A Preferred
Shares of LaSalle Re Holdings were suspended from trading, pending application
to the Securities and Exchange Commission for delisting, by the New York Stock
Exchange ("NYSE") as a result of failure to meet the NYSE's minimum continued
listing criteria. On the same day, Trenwick was notified that its common shares
and the Series A Preferred Shares of LaSalle Re Holdings will be quoted on the
Over The Counter Bulletin Board ("OTC").

By letter dated March 24, 2003, the Bermuda Monetary Authority ("BMA") issued
permission for the free transferability on an interim basis of the shares while
they are quoted on the OTC Bulletin Board. This permission is contingent on the
condition that the BMA is notified promptly of any instances in which Trenwick
or LaSalle Re Holdings become aware that a new shareholder has obtained 5% or
more of either company's shares, including background information on any such
new 5% shareholder.

In the absence of the permission granted by the BMA discussed in the previous
paragraph, as a consequence of the suspension of trading, all transfers of
shares involving holders of Trenwick's or LaSalle Re Holdings' securities would
be required to be approved by the BMA before they could be entered into
Trenwick's or LaSalle Re Holdings' share register. This procedure would only
apply to share transfers


                                      -52-
<PAGE>

involving shareholders who hold shares in their own name on Trenwick's or
LaSalle Re Holdings' share register (a "record holder"). Shareholders who hold
through nominees, brokers, or banks, which in turn have accounts through other
nominees, would not be affected by this approval procedure unless one of the
parties to the transfer becomes a record holder on Trenwick's or LaSalle Re
Holdings' share register or the number of shares held by an existing record
holder is increased or decreased by the transfer. If the BMA's free
transferability permission is rescinded, this pre-approval process will cause a
delay in share transfers.

Actions by Insurance Regulators

On December 3, 2002, Trenwick America Re entered into a "letter of
understanding" with the Connecticut Insurance Department pursuant to which
Trenwick America Re agreed that it would not take certain actions without the
prior written approval of the Connecticut Insurance Commissioner, including
disposing of any assets, settling any intercompany balances or paying any
dividends. For further discussion of the Connecticut letter of understanding,
see Item 1 - "Business-Regulation - United States Regulation."

Trenwick America Re's reported Risk-Based Capital ("RBC") was at the "Regulatory
Action Level Event" at December 31, 2002. At this level, Trenwick America Re was
required to submit a Comprehensive Plan of Action to the Connecticut Insurance
Department. Such a plan was submitted to the Connecticut Insurance Department on
January 23, 2003. In addition, in connection with the Regulatory Action Level
Event the Connecticut Insurance Department, at its discretion, is authorized to
take any action deemed necessary under the circumstances.

Inscorp's reported RBC was at the "Mandatory Control Level Event" at December
31, 2002. New York Insurance Law requires that New York domiciled insurers
report their risk-based capital based on a formula calculated by applying
factors to various asset, premium and reserve items. Recently, Inscorp has been
informed by the New York Insurance Department ("NYID") that it will be required
to submit a plan to cure the existing statutory capital impairment. If the NYID
is not satisfied that Inscorp has proposed a suitable plan to eliminate the
impairment by April 10, 2003, the Superintendent of the NYID may proceed against
Inscorp pursuant to the provisions of Article 74 of the New York Insurance Law,
the statute authorizing supervision, conservation, rehabilitation, liquidation
and dissolution of insurers, including domestic insurers.

Trenwick has been notified by the NYID that, in the NYID's view, approximately
$26 million in loans made to Trenwick America by Inscorp in 2002 were in
contravention of New York regulatory requirements. As a result, Inscorp and
Trenwick may be the subject of regulatory action brought by the NYID.

For a description of the RBC requirements applicable to Trenwick's United States
insurance company subsidiaries, see Item 1- "Business--Regulation - Risk Based
Capital."

The BMA and LaSalle Re, which is in runoff, have agreed that LaSalle Re's
insurance license be restricted so that it is not permitted to enter into any
new contracts of insurance or reinsurance without the prior written consent of
the BMA, effective January 1, 2003.

Chubb Facility

During the fourth quarter of 2002, Trenwick's subsidiary Trenwick America Re
entered into an underwriting facility with Chubb which permits Trenwick America
Re to underwrite up to $400 million of United States reinsurance business on
behalf of Chubb through the end of January 2004. The underwriting facility is
subject to cancellation prospectively by either party at any time. Chubb will
receive one-third and Trenwick America Re will receive two-thirds of any profits
generated by the business, with the initial profit distribution from Chubb to
Trenwick America Re scheduled to begin in 2006.


                                      -53-
<PAGE>

Lloyd's Operations - Trenwick Managing Agents Limited

On October 4, 2002, Trenwick Managing Agents Limited (formerly Chartwell
Managing Agents Limited) ("Trenwick Managing Agents"), Trenwick's managing agent
at Lloyd's of London, entered into an agreement with National Indemnity Company,
a member of the Berkshire Hathaway group of insurance companies ("NICO"). This
agreement enabled Trenwick Managing Agents to increase the total premium
capacity of Syndicate 839, its primary managed syndicate at Lloyd's, by
(pound)141.25 million ($227.4 million) for the 2002 year of account. On November
4, 2002, Trenwick Managing Agents entered into a second agreement with NICO,
which was amended on December 23, 2002, to provide Syndicate 839 with premium
capacity of up to (pound)113.1 million ($182.1 million) via Syndicate 2750 for
the 2003 year of account. The 2003 year of account capital is principally being
applied to the aviation insurance segment of Syndicate 839's business.

Runoff Operations

Effective April 1, 2002, Trenwick sold the in-force property catastrophe
reinsurance business of its subsidiary, LaSalle Re, to Endurance Specialty
Insurance, Ltd. ("Endurance"). The sale was effected through a 100% quota share
reinsurance agreement. In addition, Endurance will have the right to renew
LaSalle Re's in-force business as it expires in return for a renewal fee payable
to LaSalle Re of 12.5% of business written.

On October 30, 2002, Trenwick announced that it had ceased underwriting
substantially all new insurance policies in its United States specialty program
business, which operated under the name Canterbury and through Trenwick America
Re's subsidiaries Inscorp, Dakota and Chartwell Insurance Company. Trenwick
subsidiaries will continue to administer and pay claims in connection with the
insurance policies previously underwritten through Canterbury. See Item 1-
"Business--Runoff Operations-United States Specialty Program Insurance."

On December 8, 2002, Trenwick announced that Trenwick International, its London
based specialty insurance company, had ceased to underwrite new insurance,
effective November 29, 2002. A draft scheme of operations with respect to the
runoff of Trenwick International was presented to the Financial Services
Authority ("FSA") in the U.K. on December 31, 2002 and a final version will be
presented to the FSA for approval by March 31, 2003. See Item 1-
"Business--International Specialty Insurance and Facultative Reinsurance."

Business Segments

During the first quarter of 2002, Trenwick amended the basis in which operating
segments are reported. The continuing Lloyd's syndicates managed by Trenwick and
the International Specialty Insurance and Reinsurance operations were combined
into one operating segment and the U.S. based property and casualty reinsurance
and Bermuda based property catastrophe reinsurance operations were combined into
one segment called Reinsurance. These changes were made to conform to changes in
Trenwick's management and operational structure. For the years ended December
31, 2002, 2001 and 2000, Trenwick reported its specialty insurance and
reinsurance business in the following three business segments which are
described in further detail below:

o     Reinsurance

o     International operations; and

o     United States specialty program insurance.

Trenwick's Reinsurance segment includes treaty reinsurance on United States
property and casualty risks as well as worldwide property catastrophe
reinsurance. U.S. treaty reinsurance is written principally through Trenwick
America Re which is located in Stamford, Connecticut and includes the runoff of
reinsurance business formerly written by Chartwell Insurance Company (merged
with and into Trenwick


                                      -54-
<PAGE>

America Re effective December 31, 2002) and Inscorp. In addition, the
reinsurance segment includes the results of the Chubb underwriting facility. The
remainder of Trenwick's reinsurance segment consists of property catastrophe
reinsurance written by LaSalle Re on a worldwide basis until it ceased
underwriting effective April 1, 2002 when it sold its in force property
catastrophe reinsurance business to Endurance.

The International operations segment includes Trenwick's Lloyd's operations as
well as U.K. specialty insurance and treaty and facultative reinsurance.
Trenwick's Lloyd's operations are conducted through Trenwick Managing Agents
located in London, England, which manages underwriting syndicates at Lloyd's,
principally for Trenwick's own account. The U.K. specialty insurance and treaty
and facultative reinsurance was principally written by Trenwick International
Ltd., also located in London, England, which wrote business on a worldwide basis
until it ceased underwriting effective December 8, 2002. During 2002, renewals
of certain lines of business previously underwritten by Trenwick International
including, among others, general aviation and commercial property, were
underwritten by Trenwick's Lloyd's operations following downgrades in Trenwick
International's financial strength ratings by Standard & Poor's.

Trenwick's United States specialty program insurance segment was written
principally through its U.S. subsidiary, Canterbury Financial Group, Inc. and
its operating subsidiaries, Inscorp, Dakota and Chartwell Insurance Company
(merged with and into Trenwick America Re effective December 31, 2002). Trenwick
ceased underwriting U.S. specialty program insurance effective October 30, 2002,
therefore this segment will be substantially limited to run off activities in
2003.

Excluded from the aforementioned segments are Trenwick's Lloyd's syndicates in
runoff and Excess and Casualty Reinsurance Association Pool ("ECRA Pool")
runoff, which includes insurance and reinsurance that was either sold or
non-renewed. The ECRA Pool was a New York state licensed pool that underwrote
multi-line property and casualty business until it ceased underwriting in 1983.
Trenwick America Re participated in the ECRA pool during years 1978 to 1982,
while Inscorp participated in the ECRA pool during years 1950 to 1967.

Results of Operations - Years Ended December 31, 2002 and 2001

(monetary amounts in tables expressed in thousands)

In addition to providing net income (loss) information, when comparing the
results of operations for the years ended December 31, 2002 and 2001, Trenwick
has also provided operating income (loss) and underwriting income (loss) as
management believes they are both meaningful measures of Trenwick's results.
Operating income (loss) differs from net income (loss) under accounting
principles generally accepted in the United States of America, sometimes
referred to as U.S. GAAP, and does not replace net income (loss) as the GAAP
measure of our results of operations. In arriving at operating income (loss), we
start with GAAP net income (loss) and exclude net realized investment gains and
losses, as well as non-recurring charges because i) net realized investment
gains and losses are unpredictable and not necessarily indicative of current or
future results and ii) charges such as reorganization expenses and the
cumulative effect of changes in accounting principles are non-recurring in
nature and are also not necessarily indicative of future results of operations.
Underwriting income (loss), also a non-GAAP financial measure, is net premiums
earned less claims and claims expenses incurred, acquisition costs and
underwriting expenses.


                                      -55-
<PAGE>

<TABLE>
<CAPTION>
                                                          2002          2001        Change
                                                       ---------     ---------     ---------
<S>                                                    <C>           <C>           <C>
Underwriting loss                                      $(260,447)    $(289,981)    $  29,534
Net investment income                                    105,038       129,114       (24,076)
Interest expense and dividends on
   preferred stock of subsidiaries                       (36,016)      (39,142)        3,126
General and administrative expenses                      (14,084)      (15,926)        1,842
Other income, net                                          4,448         3,389         1,059
Foreign currency losses                                   (8,875)       (2,452)       (6,423)
                                                       ---------     ---------     ---------
Pretax operating loss                                   (209,936)     (214,998)        5,062
Applicable income taxes (benefit)                        132,594       (56,896)      189,490
                                                       ---------     ---------     ---------
Operating loss                                          (342,530)     (158,102)     (184,428)
Net realized investment gains, net of
   income taxes                                           35,776         8,520        27,256
Loss on sale of LaSalle's in-force property
   catastrophe reinsurance business                      (20,133)           --       (20,133)
Reorganization expenses                                  (16,175)       (4,815)      (11,360)
Cumulative effect of change in accounting principle      (41,653)           --       (41,653)
                                                       ---------     ---------     ---------

Net loss                                               $(384,715)    $(154,397)    $(230,318)
                                                       =========     =========     =========
</TABLE>

The operating loss of $342.5 million in 2002 represented a $184.4 million
greater loss than the operating loss of $158.1 million recorded in 2001. The
operating losses in 2002 and 2001 include an aggregate of $303.4 million and
$110.9 million of loss reserve increases, respectively, as a result of adverse
development of prior years' losses. In addition, the operating loss in 2001
includes an aggregate of $122.2 million in catastrophe losses. The establishment
of deferred tax valuation allowances contributed $150.2 million to the operating
loss in 2002. The $384.7 million net loss in 2002 compared to the $154.4 million
net loss in 2001 was the result of the net operating losses combined with (i) an
extraordinary item, the writedown of goodwill resulting from the
Trenwick/LaSalle business combination, recorded as a cumulative effect of a
change in accounting principles, (ii) the loss recorded on the sale of a portion
of Trenwick's business and (iii) increased reorganization expenses recorded in
2002. These items were offset in part by realized investment gains. The
non-operating items are discussed in further detail under the caption
"Non-Operating Income and Expenses."

Underwriting Income (Loss)

<TABLE>
<CAPTION>
                                                   2002             2001          Change
                                               -----------      -----------      --------
<S>                                            <C>              <C>              <C>
Net premiums earned                            $   978,905      $   889,506      $ 89,399
                                               -----------      -----------      --------

Claims and claims expenses incurred               (881,535)        (827,405)      (54,130)
Acquisition costs and underwriting expenses       (357,817)        (352,082)       (5,735)
                                               -----------      -----------      --------
Total expenses                                  (1,239,352)      (1,179,487)      (59,865)
                                               -----------      -----------      --------
Net underwriting loss                          $  (260,447)     $  (289,981)     $ 29,534
                                               ===========      ===========      ========

Loss ratio                                            90.1%            93.0%         (2.9)%
Underwriting expense ratio                            36.6%            39.6%         (3.0)%
Combined ratio                                       126.7%           132.6%         (5.9)%
</TABLE>

The underwriting loss of $260.4 million in 2002 represented a $29.5 million
improvement compared to the underwriting loss of $290.0 million in 2001. The
2002 underwriting loss included $303.4 million of reserve strengthening as a
result of prior years' reserve development, while the underwriting results for
2001 included catastrophe losses of $122.2 million and additions to unpaid
claims and claims expenses of $110.9 million as a result of prior years' reserve
development. Claims and claims expenses incurred in both 2002 and 2001 are
discussed further under the caption "Claims and Claims Expenses."

The decrease in the combined ratio in 2002 compared to 2001, is primarily a
result of the increase in net premiums earned in 2002 over 2001 combined with
the improved market conditions in 2002.

Premiums Written

Gross premiums written for 2002 were $1.6 billion compared to $1.5 billion for
2001 an increase of $0.1 billion or 8.4%. Details of gross premiums written are
provided below:


                                      -56-
<PAGE>

<TABLE>
<CAPTION>
                                                 2002            2001
                                                 Year            Year          Change
                                              -----------     -----------    -----------
<S>                                           <C>             <C>            <C>
U.S. treaty reinsurance                       $   402,597     $   339,257    $    63,340
Worldwide property catastrophe reinsurance         75,335         138,173        (62,838)
                                              -----------     -----------    -----------
    Total reinsurance                             477,932         477,430            502
Lloyd's syndicates continuing,                    541,341         443,977         97,364
International specialty insurance                 154,449         234,966        (80,517)
                                              -----------     -----------    -----------
    Total international operations                695,790         678,943         16,847
U.S. specialty program insurance                  401,491         291,433        110,058
Lloyd's syndicates and ECRA pool runoff              (691)          4,449         (5,140)
                                              -----------     -----------    -----------
Gross premiums written                        $ 1,574,522     $ 1,452,255    $   122,267
                                              ===========     ===========    ===========
</TABLE>

Trenwick's U.S. treaty reinsurance gross premium writings in 2002 increased
$63.3 million, or 18.7% over 2001, primarily as a result of increasing rates on
renewal treaties. The 45.5% reduction in worldwide property catastrophe gross
written premiums is due to the sale of LaSalle Re's in-force reinsurance as of
April 1, 2002.

Gross written premiums by Trenwick's continuing Lloyd's syndicates increased by
$97.4 million, or 21.9% in 2002 when compared to 2001. This increase can be
attributed to both the addition of the treaty, professional indemnity and
financial institutions business formerly written by Trenwick International
Limited, which accounted for $44.2 million of the increase, as well as rate
increases on renewed lines of business, particularly aviation.

During the year ended December 31, 2002, gross premium writings by Trenwick's
U.S. specialty program insurance segment increased by $110.1 million over 2001
as a result of increased volume on two of its larger programs combined with the
addition of ten new programs during 2002. Effective October 25, 2002, Trenwick
ceased underwriting substantially all new United States specialty program
insurance.

Premiums Earned

                                       2002            2001          Change
                                   -----------     -----------     -----------
Gross premiums written             $ 1,574,522     $ 1,452,255     $   122,267
Change in gross unearned premiums      (74,616)       (130,260)         55,644
                                   -----------     -----------     -----------
Gross premiums earned                1,499,906       1,321,995         177,911
                                   -----------     -----------     -----------

Gross premiums ceded                  (583,021)       (481,937)       (101,084)
Change in ceded unearned premiums       62,020          49,448          12,572
                                   -----------     -----------     -----------
Ceded premiums earned                 (521,001)       (432,489)        (88,512)
                                   -----------     -----------     -----------
Net premiums earned                $   978,905     $   889,506     $    89,399
                                   ===========     ===========     ===========

Gross premiums ceded for 2002 were $583.0 million compared to $481.9 million for
2001. The increase in gross premiums ceded of $101.1 million was due primarily
to the increase in gross written premiums by Trenwick's Lloyd's syndicates and
U.S. specialty program insurance, both of which rely heavily on reinsurance for
the business they underwrite. Included in gross premiums ceded during the year
ended December 31, 2001 are approximately $25.2 million incurred to reinstate
various reinsurance protections in Trenwick's property catastrophe business and
to purchase back-up reinsurance covers for its aviation business at Lloyd's both
as a result of the September 11, 2001 terrorist attacks.

Net premiums earned for 2002 were $978.9 million compared to $889.5 million for
2001. The increase in net premiums earned is commensurate with the increase in
net premiums written.

Claims and Claims Expenses

Trenwick's net unpaid claims and claims expenses of $2.0 billion and $1.6
billion at December 31, 2002 and 2001, respectively, include amounts approved
for payment but unpaid at the balance sheet date as well as the net estimated
amounts of claims and claim expenses for claims arising in 2002 and 2001 and in
all


                                      -57-
<PAGE>

prior years that are unpaid as of the balance sheet date, including claims that
have been incurred but not yet reported to Trenwick. Claims and claims expenses
incurred during the year ended December 31, 2002 were $881.5 million, an
increase of $54.1 million compared to claims and claims expenses of $827.4
million for the year ended December 31, 2001, which includes adverse development
across all business units of $303.4 million and $120.8 million, respectively.
The increase in claims and claims expenses incurred in 2002 resulted mainly from
the $303.4 million of loss reserve strengthening recorded. Of this amount,
approximately $27.4 million related to adverse development on losses stemming
from the September 11, 2001 terrorist attacks. The remaining $276.0 million of
loss reserve increases are a result of the reassessment of reserve levels, a
culmination of work completed by both Trenwick's internal actuaries and
independent actuarial consultants in all of Trenwick's businesses, described in
detail below. Of the reserve increases recorded, approximately $169.4 million,
or 61.4%, relates to Trenwick's U.S. treaty reinsurance operations and
principally impacts the most recent accident years, 1999 to 2001, where
deterioration has occurred across all lines of business, most significantly in
the general liability and asbestos and environmental lines of business.
Trenwick's U.S. specialty program insurance, now in runoff, contributed
approximately $45.5 million, or 16.5% of the reserve increases recorded in 2002.
This deterioration was concentrated in a small number of programs and related
primarily to general liability business. Of the remaining reserve increases
recorded, $51.6 million emanated from Trenwick's international liability
business written through Trenwick International, now in runoff. The last
significant component of the increases on prior years' reserves for unpaid
claims and claims expenses was recorded by Trenwick Managing Agents, which
contributed $30.8 million of the reserve increases. These increases related
primarily to the financial institutions and professional indemnity lines of
business written through Trenwick's Lloyd's syndicates. These reserve increases
were off set in part by a decrease in reserves for prior years claims at LaSalle
Re of $15.4 million.

As a result of deterioration in loss reserve indications during the first nine
months of 2002, Trenwick engaged external actuarial consultants during the
fourth quarter to assist management in reviewing reserves for December 31, 2002.
Based on the results of our external and internal actuarial studies, significant
reserve adjustments of $106.6 million were made during the fourth quarter of
2002.

With respect to the year end 2001 deficiency, approximately 87% related to
claims occurring between 1998 and 2001 and was spread across multiple lines of
business. The period from 1998 to 2001 represents a period of weak insurance and
reinsurance pricing and the actual loss results for business written during that
period have turned out to be significantly worse than originally estimated by
Trenwick when it originally wrote the business and subsequently re-estimated
reserves for this business.

Trenwick's unpaid claims and claims expense liability at December 31, 2002 and
2001 includes an estimate of Trenwick's ultimate liability for asbestos and
environmental claims of $112.0 million and $91.0 million, respectively,
comprising gross liabilities for unpaid claims and claims expenses of $145.0
million and $118.7 million, respectively, net of reinsurance recoverable on
unpaid claims and claims expenses of $33.0 million and $27.6 million. The
balance sheet prior to the Trenwick/LaSalle business combination did not include
liabilities for asbestos and environmental reserves, as LaSalle Re Holdings'
business did not provide for such coverage.

Claims and claims expenses incurred during the year ended December 31, 2001
included $122.2 million of catastrophe losses, which includes losses resulting
from the September 11, 2001 terrorist attacks of $98.2 million. The principal
losses related to aviation risks underwritten by Trenwick's operations at
Lloyd's and property and related risks, including business interruption
underwritten by LaSalle Re. Trenwick's estimate of its losses from aviation
risks from the September 11, 2001 terrorist attacks is based on two maximum
losses and two partial losses. Estimates of Trenwick's property and related
losses are based on an assessment of individual policies which it has determined
have exposure to the September 11, 2001 terrorist attacks. This assessment
included market share analysis, probable maximum loss analysis, independent risk
modeling analysis and cedant loss estimates. Combined with the reinstatement
premiums incurred as previously discussed, Trenwick incurred a total of $123.4
million in underwriting losses in 2001 in connection with the September 11, 2001
terrorist attacks.


                                      -58-
<PAGE>

Trenwick's 2001 results also included other catastrophe losses totaling $24
million. The largest of these losses was tropical storm Allison and storms
affecting the Midwest United States amounting to $10.5 million and the November
12, 2001 American Airlines crash in Queens, New York of $7.8 million.

Trenwick strengthened its prior year loss reserves in 2001 by $110.9 million.
This reserve strengthening includes $15.7 million related to U.S. casualty
treaty reinsurance business, which was underwritten prior to 2001 and $11.5
million related to prior participation in the ECRA Pool. In addition, $13.9
million of the loss reserve strengthening related to U.S. specialty program
insurance segment. Also included in the reserve strengthening was $20.4 million
relating principally to directors and officers liability business written by
Trenwick's Lloyd'ssyndicates. Lastly, the reserve strengthening included $48.3
million stemming from deterioration in discontinued businesses and reviews of
the property insurance and liability business lines of Trenwick International.

Acquisition Costs and Underwriting Expenses

                                          2002           2001          Change
                                        --------       --------       --------
Policy acquisition costs                $267,913       $273,066       $ (5,153)
Underwriting expenses                     89,904         79,016         10,888
                                        --------       --------       --------
Total acquisition costs and
   underwriting expenses                $357,817       $352,082       $  5,735
                                        ========       ========       ========

Expense ratio                               36.6%          39.6%          (3.0)%
                                        ========       ========       ========

Policy acquisition costs which consist primarily of commissions and brokerage
expenses and underwriting expenses for 2002 increased by $5.7 million compared
to 2001. The increase was primarily attributable to the increase in premiums
written during 2002 offset in part by a decrease in policy acquisition costs at
LaSalle Re as a result of the sale of the in-force business to Endurance.
Acquisition costs and underwriting expenses as a percentage of net premiums
earned, or the expense ratio, were 36.6% for the 2002 year compared to 39.6% for
the 2001 year. The decrease in the expense ratio occurred principally as a
result of improved terms and conditions in the insurance market.

Underwriting expenses for the year ended December 31, 2002 as a percentage of
earned premium increased to 9.2%, as compared to 8.9% for the same period in
2001, a result of an increase in premium levies from Lloyd's in 2002.

Net Investment Income

<TABLE>
<CAPTION>
                                        2002             2001             Change
                                     -----------      -----------      -----------
<S>                                  <C>              <C>              <C>
Average invested assets              $ 2,288,329      $ 2,250,261      $   (38,068)
Average annualized yields                    5.2%             6.3%            (1.1)%
                                     -----------      -----------      -----------
Investment income - portfolio            119,498          141,959          (22,461)
Investment income - non-portfolio             17            2,601           (2,584)
Investment expenses                      (14,477)         (15,446)             969
                                     -----------      -----------      -----------
Net investment income                $   105,038      $   129,114      $    24,076
                                     ===========      ===========      ===========
</TABLE>

Net investment income for 2002 was $105.0 million compared to $129.1 million for
2001. The principal reason for the decrease in net investment income in 2002 was
the decrease in market yields over the course of 2002 combined with a decrease
in the investment portfolio for a portion of 2002 as a result of the repayment
of Trenwick's term loan facility during the second quarter of 2002. Investment
expenses for both the years ended December 31, 2002 and 2001 includes interest
expense on funds withheld of $9.8 and $11.3 million, respectively, under the
terms of stop loss reinsurance agreements purchased by Trenwick America Re prior
to 2000. As a result of significant gains realized on Trenwick's investment
portfolio in the fourth quarter of 2002 (refer to "Non-operating Income and
Expenses" below), Trenwick anticipates a reduction in future investment income.


                                      -59-
<PAGE>

Interest Expense and Subsidiary Preferred Share Dividends

Interest expense and subsidiary preferred share dividends was $36.0 million for
2002, a decrease of $3.1 million from 2001. The decrease resulted from the
repayment of Trenwick's term loan facility during the second quarter of 2002,
offset in part by an increase in fees related to maintaining letters of credit
to support Trenwick's operations at Lloyd's.

Foreign Currency Gains (Losses)

Trenwick recorded foreign currency losses of $8.9 million for 2002, compared to
foreign currency losses of $2.5 million for 2001. The increase in foreign
exchange losses during the year ended December 31, 2002 compared to the year
ended December 31, 2001 was primarily associated with an intercompany stop loss
treaty denominated in British pounds. The foreign exchange loss in 2002, which
was not eliminated in consolidation, resulted from a higher level of loss
reserves ceded under the intercompany stop loss agreement in 2002 relative to
2001, coupled with an increase in the U.S. dollar to British pounds exchange
rate from 2001 to 2002. The intercompany stop loss treaty was commuted effective
December 31, 2002.

Non-Operating Income and Expenses

Net realized gains on investments, net of applicable income taxes, were $35.8
million during 2002, compared to $8.5 million for 2001. The gains in both years
were a result of actions taken to reposition the investment portfolio into
higher quality, shorter duration fixed income securities.

During the year ended December 31, 2002, Trenwick recorded a loss on the sale of
LaSalle Re's in-force property catastrophe reinsurance business to Endurance of
$20.1 million. The loss includes non-recurring revenues of $8.0 million related
to the sale of renewal rights, offset by $28.1 million of non-recurring
expenses, which consists of accelerated amortization of reinsurance contracts
not transferred in the sale, as well as legal expenses, investment banking fees
and severance and related costs.

Reorganization expenses incurred in 2002 and 2001 were $16.2 million and $4.8
million, respectively. Both the 2002 and 2001 expenses include non-recurring
severance costs; additionally the 2002 amount includes other non-recurring costs
related to Trenwick's decision to cease underwriting U.S. specialty program
insurance and U.K. specialty market insurance through Trenwick International
Limited.

Trenwick adopted Statement of Financial Accounting Standards No. 142 effective
January 1, 2002. This new statement suspended systematic goodwill amortization
and required Trenwick's Bermuda holding company, LaSalle Re Holdings, to credit
the negative goodwill balance of $11.6 million to operations as of January 1,
2002 as a cumulative effect of an accounting change. The statement also required
that the remaining goodwill balance be tested for impairment under either market
value or cash flow tests. Trenwick conducted both market value and cash flow
tests and, as a result, recorded a $53.2 million write off of all of Trenwick's
remaining goodwill. These transactions increased Trenwick's net loss in 2002 by
a net amount of $41.7 million and were recorded as a cumulative effect of change
in accounting principle.

Results of Operations - Years Ended December 31, 2001 and 2000

(monetary amounts in tables expressed in thousands)

In addition to providing net income (loss) information, when comparing the
results of operations for the years ended December 31, 2001 and 2000, Trenwick
has also provided operating income (loss) and underwriting income (loss) as
management believes they are both meaningful measures of Trenwick's results.
Operating income (loss) differs from net income (loss) under accounting
principles generally accepted in the United States of America, sometimes
referred to as U.S. GAAP, and does not replace net income (loss) as the GAAP
measure of our results of operations. In arriving at operating income (loss), we
start with GAAP net income (loss) and exclude net realized investment gains and
losses, as well as non-recurring charges because i) net realized investment
gains and losses are unpredictable and not necessarily indicative of current or
future results and ii) charges such as reorganization expenses and the
cumulative effect of changes in accounting principles are non-recurring in
nature and are also not necessarily indicative


                                      -60-
<PAGE>

of future results of operations. Underwriting income (loss), also a non-GAAP
financial measure, is net premiums earned less claims and claims expenses
incurred, acquisition costs and underwriting expenses.

LaSalle Re Holdings was the accounting acquiror in the Trenwick/LaSalle business
combination, which was completed on September 27, 2000. Therefore, the results
of operations for the 2000 year do not include the results of Trenwick Group
Inc. prior to the date of the combination, and as such, the 2001 and 2000
results lack comparability.

<TABLE>
<CAPTION>
                                                  2001          2000
                                                  Year          Year           Change
                                                ---------     ---------     ---------
<S>                                             <C>           <C>           <C>
Underwriting loss                               $(289,981)    $ (35,452)    $(254,529)
Net investment income                             129,114        58,715        70,399
Interest expense and dividends on
   preferred stock of subsidiaries                (39,142)      (11,775)      (27,367)
General and administrative expenses               (15,926)       (5,897)      (10,029)
Other income, net                                   3,389         1,477         1,912
Foreign currency losses                            (2,452)       (1,015)       (1,437)
                                                ---------     ---------     ---------
Pretax operating income (loss)                   (214,998)        6,053      (221,051)
Applicable income taxes (benefit)                 (56,896)       (6,187)      (50,709)
                                                ---------     ---------     ---------
Operating income (loss)                          (158,102)       12,240      (170,342)
Minority interest in operating (income)
   loss of subsidiary                                  --        (1,297)        1,297
Net realized investment gains (losses),
   net of minority interest and income taxes        8,520        (1,040)        9,560
Reorganization costs                               (4,815)         (452)       (4,363)
                                                ---------     ---------     ---------
Net income (loss)                               $(154,397)    $   9,451     $(163,848)
                                                =========     =========     =========
</TABLE>

The operating loss of $158.1 million in 2001 represented a $170.3 million
decrease from the operating income of $12.2 million recorded in 2000. This
decline was principally the result of catastrophe losses resulting from the
September 11, 2001 terrorist attacks and reserve strengthening. The $154.4
million net loss in 2001 compared to the $9.5 million in net income in 2000 was
the result of the net operating losses offset in part by realized investment
gains which are discussed under the caption "Non-Operating Income and Expenses."

Underwriting Income (Loss)

The underwriting result for 2000 included the results of LaSalle Re Holdings
alone for the first nine months of 2000 and the combined results of LaSalle Re
Holdings and Trenwick Group Inc. for the fourth quarter of 2000.

<TABLE>
<CAPTION>
                                                 2001            2000
                                                 Year            Year           Change
                                              -----------     -----------     -----------
<S>                                           <C>             <C>             <C>
Net premiums earned                           $   889,506     $   302,749     $   586,757
                                              -----------     -----------     -----------

Claims and claims expenses incurred              (827,405)       (227,707)       (599,698)
Acquisition costs and underwriting expenses      (352,082)       (110,494)       (241,588)
                                              -----------     -----------     -----------
Total expenses                                 (1,179,487)       (338,201)       (841,286)
                                              -----------     -----------     -----------
Net underwriting loss                         $  (289,981)    $   (35,452)    $  (254,529)
                                              ===========     ===========     ===========

Loss ratio                                           93.0%           75.2%           17.8%
Underwriting expense ratio                           39.6%           36.5%            3.1%
Combined ratio                                      132.6%          111.7%           20.9%
</TABLE>

The underwriting loss of $290.0 million in 2001 represented a $254.5 million
increase compared to the underwriting loss of $35.5 million in 2000. The
underwriting results for 2001 included catastrophe losses


                                      -61-
<PAGE>

of $158.0 million and additions to loss reserves of $120.9 million, which is
further discussed under the caption "Claims and Claims Expenses." The
underwriting loss in 2000 included both catastrophe losses of $6.5 million and
additions to prior years' reserves of $20.4 million on business underwritten by
LaSalle Re, together with underwriting losses of $28.4 million associated with
Trenwick Group Inc. business acquired through the Trenwick/LaSalle business
combination.

The increase in the combined ratio in 2001 compared to 2000 resulted from the
significant increase in the loss ratio due to the unusual level of catastrophic
losses and reserve strengthening in 2001.

Premiums Written

Gross premiums written for 2001 were $1.5 billion compared to $428.6 million for
2000 an increase of $1.0 billion or 239%. Details of gross premiums written are
provided below:

<TABLE>
<CAPTION>
                                                        2001           2000
                                                        Year           Year          Change
                                                     -----------    -----------    -----------
<S>                                                  <C>            <C>            <C>
U.S. treaty reinsurance                              $   339,257    $    92,703    $   246,554
Worldwide property catastrophe reinsurance               138,173        101,026         37,147
                                                     -----------    -----------    -----------
    Total reinsurance                                    477,430        193,729        283,701
Lloyd's syndicates continuing                            443,977        121,279        322,698
International specialty insurance and reinsurance        234,966         51,145        183,821
                                                     -----------    -----------    -----------
   Total international operations                        678,943        172,424        506,519
U.S. specialty program insurance                         291,433         44,221        247,212
Lloyd's syndicates and ECRA pool runoff                    4,449         18,270        (13,821)
                                                     -----------    -----------    -----------
Gross premiums written                               $ 1,452,255    $   428,644    $ 1,023,611
                                                     ===========    ===========    ===========
</TABLE>

The increase in worldwide property catastrophe reinsurance gross premium
writings for 2001 compared to 2000 resulted primarily from an increase in new
property catastrophe business and reinstatement premiums of $25.2 million
following the catastrophe losses from the September 11, 2001 terrorist attacks.

The increase in Lloyd's syndicates continuing gross written premiums for 2001
compared to 2000 was due to the addition of Trenwick Group Inc.'s Lloyd's
operations managed by Trenwick Managing Agents from the Trenwick/LaSalle
business combination. A majority of the Lloyd's syndicate gross written premiums
in 2000 represent the fourth quarter bookings of business managed by Trenwick
Managing Agents. The majority of Lloyd's business underwritten by LaSalle Re
Holdings prior to the combination with Trenwick Group Inc. was not renewed as of
December 31, 2000 and have been classified as runoff. Additionally, results of
operations from Lloyd's syndicates which were sold by Trenwick Group Inc. in
1999 have also been classified as runoff.

U.S. treaty reinsurance, international specialty insurance and reinsurance and
U.S. specialty program insurance gross premiums written increased from $92.7
million, $51.1 million and $44.2 million, respectively, for 2000 to $339.3
million, $235.0 million and $291.4 million, respectively, for 2001. Trenwick did
not underwrite these businesses prior to the Trenwick/LaSalle business
combination in September of 2000.

Premiums Earned

                                        2001          2000
                                        Year          Year           Change
                                     -----------   -----------     -----------
Gross premiums written               $ 1,452,255   $   428,644     $ 1,023,611
Change in gross unearned premiums       (130,260)      (10,006)       (120,254)
                                     -----------   -----------     -----------
Gross premiums earned                  1,321,995       418,638         903,357
                                     -----------   -----------     -----------

Gross premiums ceded                    (481,937)     (126,012)       (355,925)
Change in ceded unearned premiums         49,448        10,123          39,325
                                     -----------   -----------     -----------
Ceded premiums earned                   (432,489)     (115,889)       (316,600)
                                     -----------   -----------     -----------
Net premiums earned                  $   889,506   $   302,749     $   586,757
                                     ===========   ===========     ===========


                                      -62-
<PAGE>

Gross premiums ceded for 2001 were $481.9 million compared to $126.0 million for
2000. The increase in gross premiums ceded of $355.9 million was due primarily
to cessions relating to business acquired in the Trenwick/LaSalle business
combination and reinstatement premiums. Businesses acquired in the
Trenwick/LaSalle business combination included Lloyd's syndicates, international
specialty insurance and reinsurance and U.S. specialty program insurance, all of
which have significantly larger reinsurance and retrocessional programs than
LaSalle Re.

Net premiums earned for 2001 were $889.5 million compared to $302.7 million for
2000. The increase in net premiums earned is commensurate with the increase in
net premiums written.

Claims and Claims Expenses

Claims and claims expenses for 2001 were $827.4 million, an increase of $599.7
million compared to claims and claims expenses of $227.7 million for 2000. The
increase in claims and claims expenses in 2001 resulted from an increase in
business acquired in the Trenwick/LaSalle business combination in September
2000, a significant increase in catastrophe losses, in particular losses
stemming from the September 11, 2001 terrorist attacks and reserve
strengthening.

Claims and claims expenses incurred during the year ended December 31, 2001
included $122.2 million of catastrophe losses, which includes losses resulting
from the September 11, 2001 terrorist attacks of $98.2 million. The losses from
the September 11, 2001 terrorist attacks recorded during 2001 included an
estimated $366.3 million before reinsurance recoverable of approximately $268.1
million. The principal losses related to aviation risks underwritten by
Trenwick's operations at Lloyd's and property and related risks, including
business interruption, underwritten by LaSalle Re.

Trenwick's estimate of its losses from aviation risks from the September 11,
2001 terrorist attacks are based on two maximum losses and two partial losses.
Estimates of its property and related losses is based on an assessment of
individual policies which Trenwick has determined have exposure to the World
Trade Center loss. This assessment included market share analysis, probable
maximum loss analysis, independent risk modeling analysis and cedant loss
estimates.

Trenwick's 2001 results also included other catastrophe losses totaling $24
million. The largest of these losses was tropical storm Allison and storms
affecting the Midwest United States amounting to $10.5 million and the November
12, 2001 American Airlines crash in Queens, New York of $7.8 million.

Trenwick strengthened its prior year loss reserves in 2001 by $110.9 million.
This reserve strengthening includes $15.7 million related to U.S. casualty
treaty reinsurance business, which was underwritten prior to 2001 and $11.5
million related to prior participation in the ECRA Pool. In addition, $13.9
million of the loss reserve strengthening related to the U.S. specialty program
insurance segment. Also included in the reserve strengthening was $20.4 million
relating principally to directors and officers liability business written by
Trenwick's Lloyd's syndicates. Lastly, the reserve strengthening included $48.3
million stemming from deterioration in discontinued businesses and reviews of
the property insurance and liability business lines of Trenwick International.

LaSalle Re's claims and claims expenses incurred in the 2000 year included $6.5
million of catastrophe losses relating to U.K. floods and an increase of $20.4
million in prior period occurrences, principally losses relating to two storms,
Martin and Anatol, which hit Europe in late December 1999.


                                      -63-
<PAGE>

Acquisition Costs and Underwriting Expenses

                                               2001         2000
                                               Year         Year        Change
                                             --------     --------     --------
Policy acquisition costs                     $273,066     $ 78,603     $194,463
Underwriting expenses                          79,016       31,891       47,125
                                             --------     --------     --------
Total acquisition costs and
   underwriting expenses                     $352,082     $110,494     $241,588
                                             ========     ========     ========

Expense ratio                                    39.6%        36.5%         3.1%
                                             ========     ========     ========

Policy acquisition costs and underwriting expenses for 2001 increased by $241.6
million compared to 2000. Similar to claims and claims expenses, the increase
was attributable to expenses incurred on business acquired in the
Trenwick/LaSalle business combination. Acquisition costs and underwriting
expenses as a percentage of net premiums earned, or the expense ratio, were
39.6% for the 2001 year compared to 36.5% for the 2000 year. The increase in the
expense ratio occurred principally because of an increase in policy acquisition
costs in 2001 relating to casualty business. A majority of the premium writings
resulting from the Trenwick/LaSalle business combination was casualty business.
This business, which consisted of both treaty insurance and reinsurance,
generally has a higher policy acquisition cost ratio than property catastrophe
business.

Underwriting expenses for the 2001 year as a percentage of earned premium was
8.9%, decrease from 10.5% for 2000, a result of the inclusion of a full year of
Trenwick Group Inc.'s premiums in 2001.

Net Investment Income

<TABLE>
<CAPTION>
                                                2001             2000
                                                Year             Year            Change
                                             -----------      -----------      -----------
<S>                                          <C>              <C>              <C>
Average invested assets                      $ 2,250,261      $   979,468      $ 1,270,793
Average annualized yields                            6.3%             6.2%             0.1%
                                             -----------      -----------      -----------
Investment income - portfolio                    141,959           60,727           81,232
Investment income - non-portfolio                  2,601            2,805             (204)
Investment expenses                              (15,446)          (4,817)         (10,629)
                                             -----------      -----------      -----------
Net investment income                        $   129,114      $    58,715      $    70,399
                                             ===========      ===========      ===========
</TABLE>

Net investment income for 2001 was $129.1 million compared to $58.7 million for
2000. The principal reason for the increase in net investment income in 2001 was
the increase in invested assets resulting from the Trenwick/LaSalle business
combination. Investment expense for 2001 includes interest expense on funds
withheld of $11.3 million under the terms of stop loss reinsurance agreements
purchased by Trenwick America Re prior to 2000. The balance of the increase in
investment expense in 2001 results from the increase in Trenwick's invested
assets under management following the Trenwick/LaSalle business combination.

Interest Expense and Subsidiary Preferred Share Dividends

Interest expense and subsidiary preferred share dividends was $39.1 million for
2001, an increase of $27.4 million from the 2000 fiscal year. The increase
resulted from the increase in debt outstanding as a result of the Trenwick Group
Inc. debt assumed by Trenwick's subsidiaries in the Trenwick/LaSalle business
combination.

Foreign currency gains (losses)

Trenwick recorded foreign currency losses of $2.5 million for 2001, compared to
$1.0 million for 2000 due to the decline in the value of European currencies in
2001 and 2000, principally the British pound sterling, against the US dollar.


                                      -64-
<PAGE>

Non-Operating Income and Expenses

Minority interest represents the minority interest in common shares of LaSalle
Re held by third party investors prior to the Trenwick/LaSalle business
combination on September 27, 2000. Net income attributed to the minority
interest was calculated as 23.5% of net income in 2000 prior to the
Trenwick/LaSalle business combination.

Net realized gains on investments, net of minority interest and income taxes,
were $8.5 million during 2001, compared to net realized losses of $1.0 million
for 2000. Both the losses and gains were made as a result of security sales
executed pursuant to an investment policy designed to protect the total returns
on the portfolio. The 2001 amount is net of $3.4 million of realized losses on
investments to recognize declines in value that were other than temporary.

Reorganization costs incurred in 2001 and 2000 were $4.8 million and $0.5
million, respectively. The 2001 costs primarily relate to non-recurring
severance costs, and the 2000 costs represent non-recurring expenses related to
the Trenwick/LaSalle business combination.

Investments

Trenwick's investment objective is to fund policyholder and other liabilities in
a manner that enhances shareholder value, subject to appropriate risk
constraints. Trenwick seeks to meet this investment objective through a mix of
investments that reflect the characteristics of the liabilities they support;
diversify the types of investment risks by interest rate, liquidity, credit and
equity price risk; and achieve asset diversification by investment type,
industry, issuer and geographic location. Trenwick regularly projects duration
and cash flow characteristics of its liabilities and makes appropriate
adjustments in its investment portfolios. At December 31, 2002, Trenwick had
investments, cash and cash equivalents of $2.3 billion, consistent with the
balance at December 31, 2001. All debt and equity investments are classified as
available for sale and reported at fair value with the unrealized gain or loss,
net of income taxes, reported in other comprehensive income. During 2002, the
net unrealized gain on Trenwick's debt and equity investments decreased by $28.8
million principally as a result of the gains realized on investment sales during
the year offset in part by the declining interest rate environment in 2002.

Trenwick's investments in debt securities consisted primarily of investment
grade securities, with 82% having a quality rating of Aa or better at December
31, 2002. High yield, or non-investment grade debt securities carrying a rating
of below BBB-/Baa3 along with unrated securities, represented approximately 6%
of the portfolio at December 31, 2002. The following table provides an aging of
the unrealized losses on Trenwick's investment in debt securities at December
31, 2002.

The aging of unrealized investment losses and fair value of the related
investments at December 31, 2002 are summarized, by stated maturity, as follows:

                                                         Gross
                                                      Unrealized
                                       Fair Value        Loss
                                       -----------    -----------
             0-6 months                $   128,803    $    (3,281)
             7-12 months                    45,442         (3,571)
             Greater than 12 months         39,323         (3,717)
                                       -----------    -----------
               Total                   $   213,568    $   (10,569)
                                       ===========    ===========

The foregoing data is presented based upon the stated maturities of the
securities. Actual maturities may defer for some securities because borrowers
may have the right to call or prepay obligations with or without prepayment
penalties.


                                      -65-
<PAGE>

None of these unrealized losses were determined to be other than temporarily
impaired and therefore no impairment has been recognized at year end 2002. In
the event that circumstances surrounding the potential impairment of these
investments change and management concludes the losses are other than temporary,
there could be a material impact on the earnings of Trenwick.

The average maturity of Trenwick's debt securities at December 31, 2002 was 3.4
years compared to 4.8 years at December 31, 2001. The shortening of the average
maturity during 2002 resulted from the sale of longer maturity securities and
the decline in the expected maturity of mortgage backed securities resulting
from declining interest rates.

During the first quarter of 2001, Trenwick sold almost all of its equity
securities and reinvested the proceeds in debt securities to increase operating
earnings and decrease the volatility of unrealized investment gains and losses.
Trenwick also liquidated the remainder of its tax advantaged municipal
government portfolio in early 2001 to increase its taxable yield. Both of these
actions were taken to maximize Trenwick's taxable income.

Trenwick has not invested in derivative financial instruments such as futures,
forward contracts, swaps, options or other financial instruments with similar
characteristics such as interest rate caps or floors and fixed-rate loan
commitments. Trenwick's portfolio includes market sensitive instruments, such as
mortgage-backed and asset-backed securities, which amounted to approximately
$277.7 million at December 31, 2002 or 12.0% of cash and invested assets. There
are various categories of mortgage-backed and asset-backed securities that are
subject to different degrees of risk from changes in interest rates and, for
those mortgage-backed and asset-backed securities that are not agency-backed,
defaults. Approximately 58% of Trenwick's mortgage-backed securities holdings
were backed by government agencies, such as GNMA, FNMA and FHLMC, at December
31, 2002, and approximately 97% of asset-backed securities holdings were AAA-
rated at December 31, 2002. The principal risks inherent in holding
mortgage-backed and asset-backed securities are prepayment and extension risks
related to significant decreases and increases in interest rates, resulting in
the repayment of principal from the underlying mortgages either earlier or later
than originally anticipated.

Deferred Income Tax Assets

Trenwick's U.S. and U.K. operations incurred financial accounting losses in 1999
through the end of 2002 and in connection with such losses, recorded as an asset
up to $119.6 million and $96.8 million, respectively, of net deferred income
taxes (before application of a valuation allowance). The net deferred income tax
asset represented the future tax benefit of the losses previously incurred by
Trenwick's U.S. and U.K. operations. Because of Trenwick's cumulative financial
accounting losses, in the absence of specific favorable factors, application of
FASB Statement No. 109 required Trenwick to establish a 100% valuation allowance
against its deferred tax asset related to its U.S. and U.K. operations during
2002. The initial establishment of a 100% valuation allowance against Trenwick's
deferred tax asset during 2002 increased Trenwick's provision for income taxes
and net loss by $150.2 million or $4.08 per share. The maintenance of a full
valuation allowance against Trenwick's net deferred tax asset through December
31, 2002 further increased Trenwick's provision for income taxes and net loss by
$65.1 million. Trenwick management will continue to monitor its tax position and
reassess the need for a valuation allowance on its deferred tax asset on a
periodic basis.

Liquidity and Capital Resources

Cash Flows

Trenwick is a holding company whose principal assets are its investments in the
common stock of its operating subsidiaries. As a holding company, Trenwick's
principal source of ongoing funding consists of permissible dividends, tax
allocation payments and other statutorily permissible payments from its
operating subsidiaries. Trenwick's principal use of cash has been operating
expenses and dividends paid to


                                      -66-
<PAGE>

its shareholders. Trenwick America Corporation ("Trenwick America") and Trenwick
Holdings Limited, Trenwick's U.S. and U.K. holding companies, have utilized cash
in order to service their respective debt obligations; LaSalle Re Holdings has
used cash to pay dividends on its preferred shares. Trenwick's operating
subsidiaries receive cash from premiums, investment income and proceeds from
sales and maturities of portfolio investments. They utilize cash to pay claims,
purchase their own reinsurance protections, meet operating and capital expenses
and purchase investment securities.

Trenwick and its insurance and reinsurance company subsidiaries are subject to
regulatory oversight under the insurance statutes and regulations of the
jurisdictions in which they conduct business, including all states of the United
States, Bermuda and the United Kingdom. These regulations vary from jurisdiction
to jurisdiction and are generally designed to protect ceding insurance companies
and policyholders by regulating Trenwick's financial integrity and solvency in
its business transactions and operations. Many of the insurance statutes and
regulations applicable to Trenwick's subsidiaries relate to reporting and enable
regulators to closely monitor Trenwick's performance. Typical required reports
include information concerning Trenwick's capital structure, ownership,
financial condition, and general business operations.

On December 3, 2002 Trenwick America Re entered into a "letter of understanding"
with the Connecticut Department of Insurance pursuant to which, among other
things, Trenwick America Re is prohibited from paying any dividends, ordinary or
extraordinary, without the prior written approval of the Connecticut Department
of Insurance.

On November 29, 2002, Trenwick announced that it had elected to suspend, with
immediate effect and for an indefinite period of time, dividends or
distributions payable on its outstanding common and convertible preferred
shares, the preferred shares of LaSalle Re Holdings, and on the capital
securities of Trenwick's U.S. capital trust.

Cash provided by Trenwick's operating activities in 2002 was $106.6 million
compared to $63.2 million in 2001 and cash used in operating activities of $16.7
million in 2000. The increase in cash flow from operations can be mainly
attributed to the growth in premium writings in Trenwick's U.S. and U.K.
operations. Additionally, catastrophe loss payments in LaSalle following the
events of September 11, 2001 were not significant in 2002. Loss payments from
this event are expected to be significant in 2003 and 2004. The liability
portion of aviation losses arising from the events of September 11, 2001 are
expected to be paid over an extended period. The increases over 2000 cash flows
from operations can be attributed to the inclusion in 2002 and 2001 of the full
year results of Trenwick following the Trenwick/LaSalle business combination.
Trenwick expects that cash flow from operations will decrease significantly in
future years.

Cash for financing activities in 2002 included $195.2 million related to the
repayment of Trenwick's term loan facility, offset in part by $40.0 million in
proceeds from the issuance of Trenwick's Series B Cumulative Convertible
Perpetual Preferred Shares to European Reinsurance Company of Zurich, a
subsidiary of Swiss Reinsurance Company.

Dividends Paid

Trenwick paid a dividend of $0.04 per common share in each of the first three
quarters of 2002, in each of the four quarters of 2001 and in the fourth quarter
of 2000. Trenwick Group Inc. paid a quarterly dividend of $.26 per common share
in the first three quarters of 2000. LaSalle Re Holdings paid a quarterly
dividend of $.55 per share on its Series A preferred shares in each of the first
three quarters of 2002 and in each of the four quarters of both 2001 and 2000.
On November 29, 2002, Trenwick announced that it had suspended Trenwick's common
share dividend and LaSalle Re Holdings' preferred stock dividend with immediate
effect and for an indefinite period.


                                      -67-
<PAGE>

Financings, Financing Capacity and Capitalization

Trenwick's total debt to capital ratio (indebtedness divided by the sum of
indebtedness, minority interest, convertible preferred stock and shareholders'
equity) was 22.7% on December 31, 2002 and 31.2% on December 31, 2001. The
decrease is primarily due to the repayment of Trenwick's term loan facility in
2002, offset in part by the decrease in shareholders' equity.

Trenwick's financing obligations generally include debt and lease payment
obligations. At December 31, 2002, annual principal payments required by
Trenwick, through 2007, relating to these financing obligations are as follows
(monetary amounts in tables expressed in thousands of United States dollars):

<TABLE>
<CAPTION>
                                                         Payments Due by Period
                                           ----------------------------------------------------
Contractual                                Less than        1-3           4-5         After 5
Obligations                    Total         1 Year        Years         Years         Years
                             ----------    ----------    ----------    ----------    ----------
<S>                          <C>           <C>           <C>           <C>           <C>
Indebtedness and minority
   Interest                  $  162,350    $   75,000    $       --    $    1,000    $   86,350
Operating leases                 16,757         5,669         6,889         3,498           701
Total contractual cash
                             ----------    ----------    ----------    ----------    ----------
   Obligations               $  179,107    $   80,669    $    6,889    $    4,498    $   87,051
                             ==========    ==========    ==========    ==========    ==========
</TABLE>

Trenwick's other commercial commitments principally consist of a secured letter
of credit facility under which letters of credit totaling $91.0 million at year
end 2002 have been issued in favor of ceding insurance companies to secure
LaSalle Re's obligations under various reinsurance contracts. In connection with
the support of three Lloyd's syndicates, LaSalle Re has posted letters of credit
in the amount of $13.9 million at year-end 2002. At year-end 2002, $120.7
million of debt securities were pledged as collateral for these letters of
credit. To the extent that liabilities at Lloyd's are paid in the ordinary
course of business, the standby letters of credit included in the table below
will not be drawn upon and will expire without creating a liability to Trenwick.
The amounts and expiration of Trenwick's other commercial commitments are as
follows (monetary amounts in table expressed in thousands of United States
dollars):

<TABLE>
<CAPTION>
                                                               Expiration Periods
                                           ----------------------------------------------------
Other Commercial                           Less than        1-3           4-5         After 5
Commitments                    Total         1 Year        Years         Years         Years
                             ----------    ----------    ----------    ----------    ----------
<S>                          <C>           <C>           <C>           <C>           <C>
Lines of credit              $    4,428    $    4,428    $       --    $       --    $       --
Standby letters of credit       288,151         3,753        87,951       196,447            --
                             ----------    ----------    ----------    ----------    ----------
Total commercial
   Commitments               $  292,579    $    8,181    $   87,951    $  196,447    $       --
                             ==========    ==========    ==========    ==========    ==========
</TABLE>

Trenwick does not have any material off-balance sheet arrangements, trading
activities involving non-exchange traded contracts accounted for at fair value
or relationships with persons or entities that derive benefits from a
non-independent relationship with Trenwick or its related parties.

Concurrently with the business combination involving LaSalle Re Holdings and
Trenwick Group Inc. in September of 2000, Trenwick America Corporation
("Trenwick America") and Trenwick Holdings Limited ("Trenwick Holdings"),
Trenwick's U.S. and U.K. holding companies, entered into an amended and restated
$490 million credit agreement with various lending institutions (the "Banks"),
which was guaranteed by LaSalle Re Holdings. The credit agreement consisted of
both a $260 million revolving credit facility and a $230 million letter of
credit facility. The revolving credit facility was subsequently converted into a
four-year term loan and repaid in full on June 17, 2002. Additionally, on
December 24, 2002, the credit agreement was amended to reduce the letter of
credit facility, which is utilized by Trenwick to support its underwriting
operations at Lloyd's, to the currently outstanding $182.5 million. The letter
of


                                      -68-
<PAGE>

credit facility is scheduled to terminate on December 31, 2003, although the
letters of credit issued pursuant to the facility will not expire until December
31, 2006.

Pursuant to a guaranty agreement entered into concurrently with the credit
agreement, Trenwick has guaranteed the obligations of Trenwick America and
Trenwick Holdings under the credit agreement. In April of 2002, Trenwick pledged
the capital stock of LaSalle Re Holdings, which was a guarantor of the
obligations under the credit agreement, and LaSalle Re as collateral to the
Banks. In December of 2002, Trenwick agreed to provide the Banks additional
security interests as described below.

On October 18, 2002, A.M. Best Company lowered the financial strength ratings of
Trenwick's operating subsidiaries below A-. The lowered A.M. Best Company
ratings constituted an event of default under Trenwick's credit agreement. In
addition, increases in Trenwick's loss reserves and the establishment of a
Trenwick deferred tax asset reserve in the third quarter of 2002 resulted in
Trenwick violating the financial covenants in the credit agreement requiring
Trenwick to maintain a minimum tangible net worth and minimum risk-based
capital. On November 13, 2002, Trenwick, its subsidiaries and the Banks executed
a forbearance agreement with respect to the events of default arising from
Trenwick's lowered A.M. Best Company ratings and financial covenant violations.

Subsequently, an amendment and waiver of default under the credit agreement and
amendment to the guaranty agreement were entered into on December 24, 2002 (the
"December Amendments"). The December Amendments extended the letter of credit
facility through December 31, 2003 to support Trenwick's underwriting operation
at Lloyd's for the 2003 year of account. To those Banks extending their letters
of credit, Trenwick agreed to pay a 5% per annum cash letter of credit fee,
issue pay-in-kind notes bearing interest at LIBOR plus 2.5% per annum to
evidence an additional 3.16% per annum letter of credit fee, issue warrants
equal to 10% of Trenwick's fully diluted equity capital, and pay 15% of the
profits earned by Trenwick's Lloyd's operations for the 2002 and 2003 Lloyd's
years of account. In addition, Trenwick, Trenwick America and Trenwick Holdings
agreed to provide the Banks a security interest in all of their respective
equity interests in, and the assets and property of, their direct and indirect
subsidiaries as additional collateral for the Banks, and to cause the
subsidiaries to provide a guaranty to the Banks, subject to applicable laws and
regulations and certain existing contractual rights of holders of other
indebtedness.

The December Amendments also prohibit Trenwick and its subsidiaries from
declaring or paying any dividends (including on Trenwick's common shares, the
Series A Preferred Shares of LaSalle Re Holdings and the capital securities
issued by Trenwick Capital Trust I). The December Amendments and the other
amendments and waivers entered into in the first quarter of 2003 waive certain
other defaults, add covenants further restricting the operation of Trenwick's
business, prohibit Trenwick from making certain payments without the Banks'
approval, prohibit Trenwick and its subsidiaries from selling or otherwise
disposing of any assets or property, require Trenwick to regularly report
certain financial information to the Banks, and adjust downward certain of the
financial covenants.

Pursuant to the December Amendments, Trenwick is required to collateralize with
cash, cash equivalents and marketable securities 60% of the outstanding letters
of credit by August 1, 2003. In addition, Trenwick is required to use its best
efforts to terminate the letters of credit by December 31, 2003. In order to do
so, the letters of credit would need to be replaced with other letters of credit
or collateral acceptable to Lloyd's. In the event Trenwick has not terminated
the letters of credit by December 31, 2003, it is required on such date to
collateralize with cash, cash equivalents and marketable securities the full
amount of the outstanding letters of credit. At this time, Trenwick does not
have sufficient available liquidity to collateralize the letters of credit as
required by the December Amendments. Additionally, Trenwick does not believe
that it will be able to replace the letters of credit with other letters of
credit or collateral acceptable to Lloyd's.

Since December, Trenwick has entered into three additional amendments and
numerous waivers with the Banks providing for, among other things, waivers of
potential covenant defaults, further reductions in certain financial covenants,
additional financial reporting, approval of certain employee and other payments,
and extension of numerous deadlines imposed under the December Amendments.


                                      -69-
<PAGE>

If there is an event of default under the credit agreement, including as a
result of Trenwick failing to collateralize the letters of credit as described
above, or if there is an event of default under other outstanding indebtedness
of Trenwick or its subsidiaries, including under the senior notes, resulting in
a cross default under the credit agreement, Trenwick may be required to fully
and immediately collateralize the outstanding letters of credit under the terms
of the guaranty agreement. No liability for any such amounts has been reflected
in Trenwick's financial statements for any future event of default. If the
potential future events of default occur and are not waived, there is
substantial doubt as to Trenwick's ability to continue as a going concern and
Trenwick and/or one or more of its subsidiaries may be forced to seek protection
from creditors through proceedings commenced in Bermuda and other jurisdictions
including the United States. In addition, at any time one or more of the
insurance regulatory authorities having jurisdiction over Trenwick's insurance
company operating subsidiaries may commence voluntary or involuntary proceedings
for the formal supervision, rehabilitation or liquidation of such subsidiaries,
or one or more of the creditors of Trenwick or its subsidiaries may commence
proceedings against Trenwick or its unregulated subsidiaries seeking their
liquidation.

In connection with the Trenwick/LaSalle business combination, Trenwick America
assumed, effective September 27, 2000, Trenwick Group Inc.'s obligations with
respect to $75 million aggregate principal amount of 6.70% Senior Notes, which
are due April 1, 2003. They are unsecured obligations and rank senior in right
of payment to all existing and future subordinated indebtedness of Trenwick
America. Interest on the notes is payable semi-annually at a rate of 6.7%.
Effective November 29, 2002, Trenwick America suspended payment of interest on
these obligations, however interest continues to be charged to operations.
Trenwick anticipates that it will be unable to make the principal payment due on
April 1, 2003 and has entered into discussions with the senior note holders
concerning a proposed restructuring or amendment of the senior notes to extend
the maturity thereof. There can be no assurance that an agreement will be
reached by April 1, 2003. If such agreement cannot be reached, the Company will
be in default under the terms of the senior notes. Additionally, even if the
senior notes are restructured, Trenwick expects that, in order to repay the
principal amount of the senior notes, it will be required to seek additional
financing, engage in asset sales, subsidiary dividends or similar transactions.
There can be no assurance that Trenwick will be successful in such efforts.

Trenwick America also assumed, effective September 27, 2000, Trenwick Group
Inc.'s $113.4 million 8.82% Junior Subordinated Deferrable Interest Debentures
held by Trenwick Capital Trust I (the "Trust") in respect of the $110 million
in 8.82% Subordinated Capital Income Securities issued by the Trust. Under the
terms of the debentures, Trenwick America is not restricted from incurring
indebtedness, but is subject to limits on its ability to incur secured
indebtedness for borrowed money.

Upon consummation of the acquisition of Chartwell Re Corporation ("Chartwell
Re") in 1999, Trenwick Group Inc. became the successor obligor under Chartwell
Re's Contingent Interest Notes due June 30, 2006. Effective September 27, 2000,
Trenwick America assumed Trenwick Group Inc.'s obligations under the contingent
interest notes in connection with the Trenwick/LaSalle business combination. The
contingent interest notes were issued in an aggregate principal amount of $1
million, which accrues interest at a rate of 8% per annum, compounded annually.
The interest is not payable until the maturity or earlier redemption of the
contingent interest notes. In addition, the contingent interest notes entitle
their holders to receive at maturity, in proportion to the principal amount of
the contingent interest notes held by them, an aggregate of from $0 up to $55
million in contingent interest. The amount of contingent interest payable under
the contingent interest notes is dependent upon the level of unpaid claims and
claims expenses related to business written by Trenwick's subsidiary, Inscorp,
prior to 1996. The contingent interest notes mature on June 30, 2006.

During the years ended December 31, 2002 and 2001 Trenwick recorded $18.3
million and $9.9 million, respectively, of adverse development related to the
subject business. As a result, the carrying value of the contingent interest
notes at December 31, 2002 has been reduced to the minimum principal value of $1
million plus accrued interest, which is the present value of the amount expected
to be paid at maturity. The


                                      -70-
<PAGE>

contingent interest notes will continue to accrue interest at a rate of 8% per
year. The contingent interest notes contain covenants which relate to the
maintenance of certain records and limitations on certain indebtedness. At
December 31, 2002, Trenwick was in compliance with these covenants.

Trenwick's ability to refinance its existing debt obligations or raise
additional capital is dependent upon several factors, including financial
conditions with respect to both the equity and debt markets and the ratings of
its securities as established by the rating agencies. As a result of the
continued deterioration of Trenwick's financial condition, its senior debt
ratings have been downgraded by Standard & Poor's Corporation to CCC- and by
Moody's Investors Service to Ca. Trenwick's ability to refinance its outstanding
debt obligations, as well as the cost of such borrowings, has been materially
adversely affected by these ratings downgrades.

Series B Convertible Preferred Stock

On September 27, 2000, Trenwick assumed the benefits and obligations of LaSalle
Re Limited under a $100 million catastrophe equity put option. The catastrophe
equity put option was amended and restated as of January 1, 2001 and amended as
of January 25, 2002. As amended, the catastrophe equity put option enabled
Trenwick to raise up to $55 million of equity, through the issue of convertible
preferred shares to European Reinsurance Company of Zurich ("European Re"), a
subsidiary of Swiss Reinsurance Company, in the event there was a qualifying
catastrophic event or events occurring prior to January 1, 2002.

As a result of the terrorist attacks of September 11, 2001, LaSalle Re incurred
in excess of $140 million in catastrophe losses as defined under the catastrophe
equity put option agreement and Trenwick delivered notice of exercise of the
catastrophe equity put on March 28, 2002. On July 1, 2002, Trenwick commenced an
arbitration proceeding seeking $55 million in damages and other relief against
European Re. The claims arose out of European Re's failure to meet its
obligations under the catastrophe equity put. On September 6, 2002, the
catastrophe equity put option was amended and restated and the pending
arbitration proceedings were terminated. Under the terms of the second restated
agreement, European Re purchased 550,000 of Trenwick's Series B Cumulative
Perpetual Preferred Shares (the "Series B Shares") with a liquidation preference
of $100 per share for an aggregate purchase price of $40 million. The Series B
Shares bear cumulative dividends, payable quarterly in arrears, based upon the
Series B Shares' Standard & Poor's rating at LIBOR plus a margin determined in
accordance with the following schedule:

                     Standard & Poor's Rating           LIBOR Margin

                BBB- or above                                  3.75%
                BB+                                            4.25%
                BB                                             4.50%
                BB-                                            4.75%
                Below BB-                                      6.00%

These factors adjust upward by 0.25% on the third anniversary if the securities
are still unrated, and upward by 0.50% on the fifth anniversary if they are
still unrated. Also, if the Standard & Poor's rating is below BBB- on the fifth
anniversary, the factors adjust upward by an additional 0.50%. The maximum
adjustment based upon these circumstances is 0.75%. At December 31, 2002, the
Series B Shares were rated D by Standard & Poor's.

The Series B Shares are convertible into common shares of Trenwick after five
years or upon the occurrence of certain events or the failure of Trenwick to
maintain certain levels of capital. As of December 31, 2002, the Series B Shares
would be settled with approximately 12.2 million common shares upon conversion.


                                      -71-
<PAGE>

Common Share Transactions

In November 2000, Trenwick's Board of Directors authorized the repurchase of one
million common shares. Trenwick did not repurchase any of its common shares in
2002, 2001 or 2000 other than 18,646 and 18,162 shares repurchased in connection
with the vesting of restricted shares in 2002 and 2001, respectively.

Trenwick issued 48,464, 209,954 and 1,405 common shares in 2002, 2001 and 2000,
respectively, pursuant to employee compensation, direct compensation, stock
purchase and stock option plans and on exercises of warrants. In the year ended
December 31, 2000, prior to the Trenwick/LaSalle business combination, LaSalle
Re Holdings issued 22,167 common shares under employee compensation, stock
purchase and stock option plans.

Restrictions on Certain Payments within Trenwick

Because Trenwick's operations are conducted through its operating subsidiaries,
Trenwick is dependent upon the ability of its operating subsidiaries to transfer
funds, principally in the form of cash dividends, tax reimbursements and other
statutorily permissible payments. In addition to general legal restrictions on
payments of dividends and other distributions to shareholders applicable to all
corporations, Trenwick's insurance subsidiaries are subject to insurance laws
and regulations in the jurisdictions in which they operate that, among other
things, restrict the amount of dividends and other distributions that may be
paid to their parent corporations without prior approval by the insurance
regulatory authorities. As previously discussed, the December Amendments to
Trenwick's letter of credit facility prohibit Trenwick and its subsidiaries from
declaring or paying any dividends (including on Trenwick's common and preferred
shares, the preferred shares of LaSalle Re Holdings and the capital securities
issued by Trenwick Capital Trust I). The amendments also prohibit Trenwick from
making certain payments without the Banks' approval.

On December 3, 2002, Trenwick America Re entered into a "letter of
understanding" with the Connecticut Department of Insurance pursuant to which,
among other things, Trenwick America Re is prohibited from paying any dividends,
ordinary or extraordinary, without the prior written approval of the Connecticut
Insurance Commissioner or her designee. On November 29, 2002, Trenwick announced
that it had elected to suspend, with immediate effect and for an indefinite
period of time, dividends or distributions payable on its outstanding common and
convertible preferred shares, preferred shares of LaSalle Re Holdings, and on
the capital securities of Trenwick Capital Trust I. Since the ability of
Trenwick to meet both its operating needs in the short term as well as its
obligations in the long-term is dependent upon such factors as market changes,
insurance regulatory changes and economic conditions, no assurance can be given
that the available net cash flow will be sufficient to meet its operating needs.

Reinsurance

Reinsurance agreements provide for recovery of a portion of certain claims and
claims expenses from reinsurers. Trenwick enters into reinsurance and
retrocessional agreements to reduce its net liability on individual risks,
protect against catastrophic losses and maintain acceptable loss ratios.
Trenwick remains liable in the event that the reinsurer is unable to meet its
obligation; however, Trenwick holds partial collateral under several of these
agreements in order to mitigate the risk. Letters of credit, trust accounts and
funds withheld in the aggregate amount of $294.6 million (including interest)
have been arranged in favor of Trenwick collateralizing reinsurance recoverables
with respect to certain retrocessionaires.

Trenwick America Re has various retrocessional facilities, all of which are on a
treaty basis. These retrocessional facilities include three treaties for its
treaty property business, which protect it against multiple claims arising out
of a single occurrence or event. As a result of these facilities, Trenwick


                                      -72-
<PAGE>

America Re's maximum retention generally does not exceed $7.75 million per
occurrence on property catastrophe business. From 1989 to 1999, Trenwick America
Re purchased aggregate excess of loss ratio treaties from several reinsurers.
These facilities provided Trenwick America Re with a layer of protection against
adverse results from its domestic casualty business in excess of specified loss
ratios on an accident year basis. Trenwick America Re did not purchase an
aggregate excess of loss ratio treaty after 1999.

Trenwick Managing Agents, as part of its business strategy, has historically
purchased a significant amount of reinsurance for the Lloyd's syndicates it
manages. Reinsurance is generally purchased to protect the syndicates against
extraordinary loss or loss involving one or more underwriting classes. The
amount purchased is determined with reference to the syndicates' aggregate
exposure and potential loss scenarios.

In 2002, LaSalle Re purchased two excess of loss programs that provided coverage
of $20 million in excess of the first $30 million of losses per occurrence and
$5 million in excess of the first $50 million of losses per occurrence both of
which, as of April 1, 2002, were retroceded as part of the sale of LaSalle Re's
in-force reinsurance business. A third excess of loss program, which provided
coverage of $25 million in excess of the first $100 million of losses per
occurrence for a four year period with a yearly aggregate limit of $50 million
and a contract aggregate limit of $150 million, was commuted by LaSalle Re in
December 2002.

In 2001, LaSalle Re purchased three excess of loss programs which provide
coverage of $20 million in excess of the first $30 million of losses per
occurrence, $5 million in excess of the first $50 million of losses per
occurrence and $25 million in excess of the first $75 million of losses per
occurrence.

LaSalle Re had purchased an excess of loss program which provides coverage of
$75.0 million in excess of the first $75.0 million of losses per occurrence for
a first loss event and $60.0 million excess of $75.0 million per occurrence on
the second loss event and $52.5 million excess of $125.0 million per occurrence
on the third loss event over a three-year period ended December 31, 2001 subject
to a maximum aggregate recovery of $187.5 million. This contract was cancelled
effective December 31, 2000.

LaSalle Re has also purchased other non-proportional excess of loss protections,
which provide for the recovery of losses from reinsurers in excess of certain
retentions that are related to the magnitude of market losses.

Trenwick International, as is customary with companies operating in the London
market, purchased large amounts of reinsurance. Reinsurance and retrocessional
coverage was customized for each class of business. During 1998, following an
increase in its share capital, Trenwick International increased its retention of
business by reducing the amount of reinsurance it buys, principally proportional
reinsurance treaties with its former parent.

Reinsurance was purchased that was specifically tailored to each of the
specialty programs underwritten by the insurance subsidiaries of Canterbury
Financial Group Inc.

In connection with the acquisition of Chartwell Re Corporation ("Chartwell") by
Trenwick in 1999, Chartwell's insurance company subsidiaries purchased an
aggregate excess of loss reinsurance agreement providing up to $100 million in
coverage against unanticipated increases in Chartwell's reserves for business
written on or before October 27, 1999, the date of completion of the acquisition
of Chartwell. Within the $100 million maximum, the protection was limited to
$100 million for increased reserves attributable to Chartwell's Lloyd's
operations, $25 million for increased reserves attributable to catastrophe and
year 2000 losses and $50 million for increased reserves attributable to asbestos
and environmental coverage losses. The aggregate excess of loss reinsurance
agreement is not cancelable by the reinsurers, London Life and Scandinavian Re,
and their obligations have been secured by a trust account. The premium paid for
this aggregate excess of loss reinsurance agreement was $56 million, and the
$100 million coverage limit was exhausted during the 2000 year.


                                      -73-
<PAGE>

Trenwick remains liable with respect to insurance and reinsurance ceded in the
event that the reinsurer or retrocessionaire is unable to meet its obligations.
All reinsurers and retrocessionaires must be formally approved by the operating
company's security committee. The evaluation process involves financial analysis
of current audited financial data and comparative analysis of such data in
accordance with guidelines established by Trenwick. Business is not conducted
with reinsurers or retrocessionaires who are not currently approved by the
security committee.

Of Trenwick's $1.8 billion in reinsurance recoverable balances as of December
31, 2002, $1.0 billion relates to Trenwick Managing Agents' insurance
underwriting operations at Lloyd's, which rely heavily on reinsurance in its
insurance underwriting, particularly for the aviation business it underwrites.
Approximately $221.2 million of this balance comes directly from the aviation
losses from the September 11, 2001 terrorist attacks. Of LaSalle Re's $40.1
million in reinsurance recoverable balances, $25.0 million relates to the
September 11, 2001 terrorist attacks. Trenwick's United States specialty program
insurance segment has $225.5 million in reinsurance recoverable balances.
Finally, $173.2 million of the total relates to finite reinsurance coverage and
$333.1 million relates to operational reinsurance for Trenwick America Re
($242.5 million) and Trenwick International ($90.6 million).

The finite reinsurance balances of $173.2 million as of December 31, 2002, net
are due from five reinsurers and are collateralized, both with funds held and
letters of credit. The operational reinsurance balances of $1.6 billion are for
paid losses ($255.6 million, or 16%) and unpaid losses, including both incurred
reported losses and incurred but not reported losses ($1,374.2 million, or 84%).
Allowances for uncollectible balances of $80.4 million have been recorded,
including $37.2 million on paid losses (13% of the paid losses) and $43.2
million on unpaid losses (3% of the unpaid losses). In the ordinary course of
business, losses are paid to insureds prior to any recovery on reinsurance.

The operational reinsurance balances are recoverable from a broadly diversified
group of companies with 61 reinsurers comprising 96% of the total of $1.6
billion as of December 31, 2002. Of these 61 reinsurers, 74% are rated A- or
better by Standard & Poor's, or A.M. Best if no Standard & Poor's rating is
available. The decrease from prior years in the percentage of Trenwick's
reinsurers which are rated A- or higher reflects a significant number of
downgrades by the rating agencies of insurance and reinsurance companies in
recent years.

Critical Accounting Policies

The accounting policies described below are those Trenwick considers critical in
preparing its consolidated financial statements. These policies include
significant estimates made by management using information available at the time
the estimates are made. However, as described below, these estimates could
change materially if different information or assumptions were used. The
descriptions below are summarized and have been simplified for clarity. A more
detailed description of the significant accounting policies used by Trenwick in
preparing its financial statements is included in the Notes to the Consolidated
Financial Statements and the note references are included below.

Unpaid Claims and Claims Expenses

Claims and claims expenses are recorded as incurred, at management's best
estimate, in order to match claims and claims expense costs with premiums over
the contract periods. The amount provided for unpaid claims and claims expenses
consists of any unpaid reported claims and claims expenses and estimates for
incurred but not reported claims and claims expenses, net of estimated salvage
and subrogation. The estimates for claims and claims expenses incurred but not
reported were developed based on historical claims and claims expense experience
and an actuarial evaluation of expected claims and claims expense experience.
Workers' compensation indemnity liabilities that are considered fixed and
determinable are discounted using an interest rate of 3.5%. Reserves for unpaid
claims and claims expenses, by their very


                                      -74-
<PAGE>

nature, do not represent an exact calculation of the liability and, while
Trenwick has established reserves equal to the current best estimate of ultimate
losses, there remains a likelihood that further changes in such claim estimates,
either upward or downward, will occur in the future. Adjustments to previously
reported reserves for unpaid claims and claims expenses are considered changes
in estimates for accounting purposes and are reflected in the income statement
in the period in which the adjustment becomes known.

Unpaid claims and claims expenses are recorded based on actuarial estimates of
losses inherent in that period's claims, including losses for which claims have
not yet been reported. Estimates of unpaid claims and claims expenses rely on
actuarial observations of ultimate loss experience for similar historical
events. Historical insurance industry experience indicates that a high degree of
inherent variability exists in assessing the ultimate amount of losses under
short-duration property and casualty contracts. This inherent variability is
particularly significant for liability-related exposures, including latent
claims issues (such as asbestos and environmental related coverage disputes),
because of the extended period of time, often many years, that transpires
between when a given claim event occurs and the ultimate full settlement of such
claim. This situation is then further exacerbated for reinsurance entities (as
opposed to primary insurers) due to coverage often being provided on an
"excess-of-loss" basis and the resulting lags in receiving current claims data.
Additionally, the uncertainty is increased as a result of the diversity of
development patterns among different types of reinsurance and the necessary
reliance on ceding companies for information regarding reported claims and
differing reserving practices among ceding companies. Other items that have been
considered in determining year-end reserves but may develop differently than
currently estimated include:

      o     September 11, 2001 related claims, particularly with respect to
            catastrophe coverage underwritten in LaSalle Re;

      o     United Kingdom liability claims;

      o     Claims against insured financial services companies for certain
            types of practices including alleged misallocations of shares in
            initial public offerings;

      o     Directors and Officers liability insurance in the United States;

      o     Ultimate losses on business underwritten in the last four years, as
            reserve estimates are inherently more uncertain on recent business,
            where reported loss activity is still low relative to ultimate
            losses;

      o     Claims liabilities also include provisions for latent injury or
            toxic tort claims that cannot be estimated with traditional
            reserving techniques. Due to inconsistent court decisions in federal
            and state jurisdictions and the wide variation among insureds with
            respect to underlying facts and coverage, uncertainty exists with
            respect to these claims as to liabilities of ceding companies and,
            consequently, reinsurance coverage;

      o     Reinsurance collectibility - Trenwick reviews and monitors its
            reinsurance recoverables from its reinsurers and makes provision for
            uncollectible reinsurance as appropriate. However, given the
            magnitude of reinsurance recoverables, $1.8 billion at year-end
            2002, Trenwick has a significant exposure to collectibility issues.

Trenwick's management continually evaluates the potential for changes in unpaid
claims and claims expenses to adjust recorded reserves and to proactively modify
underwriting criteria and product offerings. In recent periods and continuing
throughout 2002, the level of reported claims activity related to prior year
loss events, particularly for liability-related exposures underwritten in 1997
through 2001, has been significantly higher than anticipated. Full consideration
of these trends was incorporated into a comprehensive reserve study completed in
the fourth quarter of 2002. Insurance reserves, by their very nature, do not
represent an exact calculation of liability and, while Trenwick has established
reserves equal to the current best estimate of ultimate losses, there remains a
likelihood that further changes in such loss estimates, either upward or
downward, will occur in the future.

Management believes that Trenwick's claim and claim expense liabilities are
adequate. However, the process of estimating claims and claim expense
liabilities is inherently imprecise and involves an


                                      -75-
<PAGE>

evaluation of many variables, including potentially unpredictable social and
economic conditions. Accordingly, there can be no assurance that Trenwick's
ultimate liability will not vary significantly from amounts reserved. The
uncertainties in and the risk factors associated with the claims reserves at
December 31, 2002 are similar to the uncertainties at prior year ends. However,
given Trenwick's current surplus levels, it is now less financially equipped to
handle these uncertainties should there be adverse development in the loss
reserves. Reserves for Trenwick's participation in Lloyd's syndicates through
its Lloyd's corporate members are included in the year end reserves. Part of the
reserve represents reinsurance to close balances brought forward to the open
years of account (for example, 1996 reinsured into the 1997 open year. Favorable
or unfavorable development of the prior year's reserves can influence the
results of the open years of 1999, 2000 and 2001.

Reinsurance Recoverable Balances

Trenwick purchases reinsurance to reduce its exposure on individual risks,
catastrophic losses and other large losses. Trenwick estimates the amount of
uncollectible receivables from its reinsurers each period and establishes an
allowance for uncollectible amounts. The amount of the allowance is based on the
age of unpaid amounts, information about the creditworthiness of Trenwick's
reinsurers, and other relevant information. Estimates of uncollectible
reinsurance amounts are reviewed quarterly, and changes are recorded in the
period they become known. A significant change in the level of uncollectible
reinsurance amounts would have a significant effect on Trenwick's results of
operations and financial position. Also see Note 7 of Notes to the Consolidated
Financial Statements.

Investments

Investments are classified as available for sale and recorded at fair value, and
unrealized investment gains and losses are reflected in shareholders' equity.
Investment income is recorded when earned, and capital gains and losses are
recognized when investments are sold. Investments are reviewed periodically to
determine if they have suffered an impairment of value that is considered other
than temporary. If investments are determined to be impaired, a capital loss is
recognized at the date of determination.

Testing for impairment of investments also requires significant management
judgment. The identification of potentially impaired investments, the
determination of their fair value and the assessment of whether any decline in
value is other than temporary are the key judgment elements. The discovery of
new information and the passage of time can significantly change these
judgments. Revisions of impairment judgments are made when new information
becomes known, and any resulting impairment adjustments are made at that time.
The current economic environment and recent volatility of securities markets
increase the difficulty of determining fair value and assessing investment
impairment. The same influences tend to increase the risk of potentially
impaired assets.

Trenwick seeks to match the maturities of invested assets with the payment of
expected liabilities. By doing this, Trenwick attempts to make cash available as
payments become due. If a significant mismatch of the maturities of assets and
liabilities were to occur and Trenwick had to liquidate investments prior to
their maturity, it may incur realized losses and the effect on Trenwick's
results of operations could be significant. Also see Note 8 of Notes to the
Consolidated Financial Statements.

Deferred Income Taxes

Deferred income tax assets and liabilities are computed based on temporary
differences between financial statement and income tax bases of assets and
liabilities using enacted income tax rates in effect for the year in which the
differences are expected to reverse. FASB Statement No. 109 requires a valuation
allowance to be recorded when it is more likely than not that some or all of the
deferred tax assets will not be realized. Due to Trenwick's cumulative losses
generated in recent years and uncertainties as to the amount of taxable income
to be generated in future years, as of December 31, 2002, Trenwick could not
support the future realizability of its net deferred tax asset. The effects of
this determination on Trenwick's results from


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operations are significant. As of December 31, 2002, Trenwick had increased its
valuation allowance by $215.3 million, so as to record a valuation allowance for
the full amount of its net deferred tax asset. Trenwick's Bermuda operations are
not subject to income tax. Also see Note 10 of Notes to be Consolidated
Financial Statements.

Quantitative and Qualitative Disclosure About Market Risk

The following sections address the significant market risks associated with
Trenwick's business activities as of December 31, 2002 and 2001. Trenwick's
primary market risk exposures are:

o     foreign currency exchange risk, in particular the U.S. dollar to the
      British pound sterling;

o     interest rate risk on fixed and variable rate U.S. dollar and British
      pound sterling denominated short and long-term instruments; and

o     equity price risk.

With respect to Trenwick's investment portfolio, the risk management strategy is
to place its investments with high credit quality issuers and to limit the
amount of credit exposure with respect to particular ratings categories and any
one issuer. Trenwick selects investments with characteristics such as duration,
yield, currency and liquidity to reflect the underlying characteristics of
related estimated claim liabilities.

As of December 31, 2002, Trenwick's exposure to high yield investments was
minimal. While these investments are more susceptible to credit risk, their
total market value represents less than 4% of total investments and cash, and
therefore management believes that the exposure to credit risk is not material.
Trenwick has no derivatives and its investments do not contain terms that may
result in potential losses due to leverage.

The borrowings of Trenwick are summarized in Note 9 to the financial statements,
and under the caption "Financings, Financing Capacity and Capitalization" in
this Management's Discussion and Analysis of Financial Condition and Results of
Operations.

Foreign Currency Exchange Rate Risk

Foreign currency risk is the risk that Trenwick will incur economic losses due
to adverse changes in foreign currency exchange rates. This risk arises from
Trenwick's international operations and securities denominated in foreign
currencies. Trenwick generally conducts its international businesses through
foreign operating entities which generally maintain assets and liabilities in
local currencies, substantially limiting exchange rate risk to net assets
denominated in the foreign currency. Trenwick's foreign currency denominated net
assets are principally in British pounds sterling. At December 31, 2002 and
December 31, 2001, Trenwick's net assets of foreign subsidiaries was
approximately $45 million and $(44) million, respectively. Foreign debt
securities and foreign cash on deposit were $17 million and $5 million,
respectively, at December 31, 2002.

Trenwick's reinsurance, international insurance and Lloyd's operations all have
exposures to movements in various currencies around the world (particularly the
British pound sterling, the Euro and the Canadian dollar) as such businesses are
denominated in those currencies. Therefore, changes in currency exchange rates
affect Trenwick's balance sheet, statement of operations and statement of cash
flows. This exposure is somewhat mitigated by the fact that premiums received
are invested in the same currency portfolios, to partially offset related unpaid
claims and claims expense liabilities denominated in the same currency.

Management estimates that a 10% immediate unfavorable change in each of the
foreign currency exchange rates to which Trenwick is exposed as of December 31,
2002 would have decreased the fair value of Trenwick's foreign denominated net
assets by approximately $6 million, which was comprised primarily of exposure to
the British pound sterling. At December 31, 2001, the same 10% shift in foreign
currency exchange rates would have resulted in a potential loss in fair value of
approximately $4 million.


                                      -77-
<PAGE>

Interest Rate Risk

Trenwick's fixed maturity investments and indebtedness are subject to interest
rate risk. Increases and decreases in prevailing interest rates generally
translate into decreases and increases in the fair value of fixed maturity
investments and the interest payable on Trenwick's outstanding variable rate
debt. Additionally, the fair value of interest rate sensitive instruments may be
affected by the creditworthiness of the issuer, a prepayment option, relative
values of alternative investments, liquidity of the investment and other general
market conditions.

Trenwick monitors its sensitivity to interest rate risk by evaluating the change
in its financial assets and liabilities relative to hypothetical increases and
decreases in interest rates. It is assumed that the changes occur immediately
and uniformly to each category of instrument containing interest rate risks.
Significant variations in market interest rates could produce changes in the
timing of repayments due to prepayment options available. The fair value of such
instruments could be affected and therefore actual results might differ from
those reflected in this summary.

A 100 basis point increase in market interest rates would have resulted in an
estimated pre-tax loss in the fair value of these instruments of $21.0 million
and $60.2 million at December 31, 2002 and December 31, 2001, respectively.
Similarly, a 100 basis point decrease in market interest rates would have
resulted in an estimated pre-tax gain in the fair value of these instruments of
$19.0 million and $56.0 million at December 31, 2002 and December 31, 2001,
respectively.

Equity Price Risk

The carrying values of investments subject to equity price risks are based on
quoted market prices or management's estimates of fair value as of the balance
sheet date. Market prices are subject to fluctuation and, consequently, the
amount realized in the subsequent sale of an investment may significantly differ
from the reported market value. Fluctuation in the market price of a security
may result from perceived changes in the underlying economic characteristics of
the investee, the relative price of alternative investments and general market
conditions. Furthermore, amounts realized in the sale of a particular security
may be affected by the relative quantity of the security being sold.

Trenwick's equity portfolio at December 31, 2002, totaled $9 million of common
equity investments. Trenwick's potential exposure on equity securities is
estimated in terms of an immediate 10% drop in equity prices across all equity
securities holdings from those prevailing at December 31, 2002 which would have
resulted in a $1 million loss. An immediate 10% drop in equity prices across all
equity securities holdings from those prevailing at December 31, 2001 would have
resulted in a $2 million loss.

The fair value estimates shown are based on the composition of the equity
security portfolio at year-end and these exposures will change as a result of
ongoing portfolio activities in response to management's assessment of changing
market conditions and available investment opportunities.

The above analyses do not take into account any correlation among foreign
currency exchange rates, or any correlation among various markets (i.e., the
fixed income markets and foreign exchange and equity markets). Trenwick's actual
experience may differ from the results noted above due to the correlation
assumptions utilized, or if events occur that were not included in the
methodology, such as significant liquidity or market events. The selection of
the amount of increases or decreases in currency exchange rates, interest rates
and equity values in the above analyses should not be construed as a prediction
of future market events, but rather, to illustrate the potential impact of such
events.

Effects of Inflation

The potential exists, after a catastrophe loss, for the development of
inflationary pressures in a local


                                      -78-
<PAGE>

economy. The effects of inflation are considered in pricing and in estimating
reserves for unpaid claims and claim expenses. The actual effects of inflation
on Trenwick's results cannot be accurately known until claims are ultimately
settled.

Accounting Standards

Effective January 1, 2002, Trenwick adopted a new Financial Accounting Standards
Board statement which amended the accounting for goodwill and other intangible
assets. This new statement suspended systematic goodwill amortization and
required Trenwick's Bermuda holding company, LaSalle Re Holdings to credit the
negative goodwill balance of $11.6 million to operations as of January 1, 2002
as a cumulative effect of an accounting change. The statement also required that
the remaining goodwill balance be tested for impairment under either market
value or cash flow tests. Trenwick conducted both market value and cash flow
tests and, as a result, recorded a $53.2 million write off of all of Trenwick's
remaining goodwill as a cumulative effect of an accounting change as of January
1, 2002.

In January 2003, the FASB issued Interpretation No. ("FIN") 46, Consolidation of
Variable Interest Entities, which Trenwick intends to adopt on July 1, 2003. FIN
46's consolidation criteria are based on analysis of risks and rewards, not
control, and represent a significant and complex modification of previous
accounting principles. FIN 46 represents an accounting change, not a change in
the underlying economics of asset sales. Under its provisions, certain assets
previously sold to special purpose entities (SPE's) could be consolidated and,
if consolidated, any assets and liabilities now on the books related to those
SPE's would be removed. Because Trenwick has not traditionally engaged in the
types of securitization vehicles within the scope of FIN 46, management does not
believe adoption of the interpretation will impact future results.

                           FUTURE BUSINESS OPERATIONS

The future operations of Trenwick and its financial results are likely to differ
materially from those of 2002 and prior years as Trenwick may be required to
dispose of one or all of its operating units in order to satisfy its obligations
to creditors and regulatory requirements. In addition, under the terms of
Trenwick's agreements with the Banks, and particularly under the December
Amendments, Trenwick and its subsidiaries are subject to financial and
operational restrictions which limit Trenwick's flexibility to pursue business
and strategic alternatives. These restrictions will apply so long as Trenwick
and its subsidiaries have unpaid reimbursement obligations to the Banks with
respect to the letters of credit.

The result of the foregoing is that the future operations of Trenwick, at least
in the next several years, are likely to consist substantially of the sale or
management in runoff of some or all of its existing insurance and reinsurance
businesses including administration of claims, regulatory reporting, settlement
of reinsurance agreements (including commutations thereof where appropriate),
cash and investment management and related matters. The costs involved in such
operations are likely to differ significantly from those of prior years, where a
significant portion of the operating costs related to underwriting, marketing
and securing reinsurance for new business. The reimbursement of costs as they
relate directly to the insurance entities themselves will be subject to review
by regulatory authorities which may challenge these costs or impose other
restrictions with respect to the runoff including the provision of an acceptable
runoff plan. Adverse loss developments or weakness in reinsurance recoveries,
among other factors, could significantly and negatively impact the success of
any runoff. It is unlikely that any amounts will be available to the creditors
or equity holders of the direct and indirect parent companies of any regulated
insurance subsidiary of Trenwick until such time as the regulator having
jurisdiction over such subsidiary has been assured of the solvency of such
entity, which may require several years if achievable at all. It is possible
that one or more of Trenwick's insurance company subsidiaries may be placed
under the control of the regulatory body with jurisdiction over such entity,
voluntarily or involuntarily, through rehabilitation, liquidation or other
proceedings.


                                      -79-
<PAGE>

                                  RISK FACTORS

You should carefully consider the risks described below regarding us and our
common shares. The risks and uncertainties described below are not the only ones
we face. There may be additional risks and uncertainties. If any of the
following risks actually occur or continue to occur, our business, financial
condition or results of operations could be materially and adversely affected
and the trading price of our common shares could decline further.

Our auditors have expressed doubt as to our ability to continue as a going
concern.

Our independent accountants, PricewaterhouseCoopers LLP, have stated, in their
audit report with respect to our financial statements as at and for the twelve
months ended December 31, 2002, that substantial doubt exists as to our ability
to continue as a going concern.

Trading of our common shares and the Series A Preferred Shares of LaSalle Re
Holdings has been suspended by the New York Stock Exchange.

The New York Stock Exchange has suspended for trading, pending application to
the Securities and Exchange Commission, our common shares and the Series A
Preferred Shares of our subsidiary LaSalle Re Holdings for failure to meet the
New York Stock Exchange's minimum listing requirements. Our common shares and
the Series A Preferred Shares of LaSalle Re Holdings were quoted on the
Over-The-Counter (OTC) Bulletin Board beginning on Tuesday, March 25, 2003.

In light of the significant developments and other factors referred to in this
Report, which have materially and adversely impacted Trenwick, its operations
and its future prospects as well as the amount of indebtedness versus the
capital base of Trenwick, it is unlikely that the common shares of Trenwick will
realize significant value in the near term, if at all. As a result, it is
possible that a market will not continue in the common shares of Trenwick, in
which case the liquidity of the securities may be severely limited.

We are unable to pay dividends and will continue to be unable to do so for the
foreseeable future.

In connection with other actions being taken in the fourth quarter of 2002, on
November 7, 2002, our Board of Directors elected to suspend the payment of
dividends to holders of our common shares effective immediately and for an
indefinite period of time. In addition, our credit agreement has been amended to
prohibit us from paying dividends without the approval of our lenders, and we
are prohibited from paying dividends as the result of the deferral of dividend
payments on our Series A Preferred Shares, Series B Preferred Shares and the
capital securities of Trenwick America. We do not expect to be able to pay
dividends to holders of our common shares for the foreseeable future.

If potential events of default under our credit facility are not cured or waived
by our lenders, there is substantial doubt as to our ability to continue as a
going concern.

We currently have outstanding $182.5 million of letters of credit issued by the
banks under our credit facility. We are obligated to reimburse the banks for any
amounts drawn on these letters of credit, and for related fees and expenses. No
amounts have been drawn on the letters of credit to date. The banks have
provided us with several waivers of potential defaults and extensions of
deadlines under the credit facility, but we presently do not have the liquidity
necessary to satisfy the banks by the deadlines that have been imposed. If the
potential events of default occur and are not waived, there is substantial doubt
as to our ability to continue as a going concern. In addition, we have entered
into many covenants in the senior credit facility and related agreements that
limit our ability to take certain actions without the consent of the banks,
including our ability to borrow money, to make particular types of investments
or other restricted payments (including dividend payments), to sell our assets,
or to merge or consolidate. These restrictions significantly limit our financial
and operational flexibility.


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<PAGE>

We are unable to repay $75 million in senior notes outstanding which are due
April 1, 2003, and are required to replace, refinance or restructure these notes
by that date.

We are engaged in continuing discussions with the holders of our senior notes
regarding a restructuring of our senior notes. At this time we do not have
sufficient liquidity to pay the principal amount of $75 million due on April 1,
2003, and we do not believe that we will be able to replace, refinance or
restructure the notes by this date. If we are unable to secure a waiver or
extension of this deadline, and either the banks under our credit facility or
the senior noteholders determine to exercise the rights available to them upon
this failure, we and/or one or more of our subsidiaries may be forced to seek
protection from creditors through proceedings commenced in Bermuda and other
jurisdictions including the United States.

We have issued convertible preferred shares that may result in substantial
dilution to existing common shareholders and/or a change in control of the
Company. We do not have the ability to control settlement of these convertible
preferred shares.

As a result of the September 11, 2001 terrorist attacks, LaSalle Re incurred
large catastrophe losses that enabled Trenwick to exercise its rights under a
catastrophe equity put option with European Reinsurance Company of Zurich, a
subsidiary of Swiss Reinsurance Company ("European Re"). In this transaction, we
issued Series B Shares to European Re for a purchase price of $40 million. These
Series B Shares are convertible into our common shares upon the occurrence of
certain events, including our failure to maintain a net worth (as defined) under
generally accepted accounting principles of $225 million. Our net worth is below
$225 million, and in the event that it remains below that amount through April
19, 2003, European Re will be able to convert the Series B Shares into common
shares upon not less than 60 days' notice to us, and substantial dilution to
existing common shareholders will occur. In addition, depending on the
conversion ratio of preferred shares to common shares, which is based upon the
trading price of our common shares and the book value and number of shares
converted, this conversion could result in European Re obtaining control of our
company subject to compliance with applicable insurance regulation.

We are a holding company and substantially all of our assets are held in our
insurance company subsidiaries. These assets are generally unavailable to pay
the debts of the holding company and there is substantial uncertainty as to
whether we will ultimately receive any value from our insurance company
subsidiaries.

We are a holding company with no material assets other than the stock of our
operating subsidiaries. Our ability to meet our debt and securities obligations
and our ability to pay dividends to our shareholders will be dependent on the
earnings and cash flows of our subsidiaries and the ability of the subsidiaries
to pay dividends or to advance or repay funds to us. Payment of dividends and
advances and repayments from our operating insurance company subsidiaries are
regulated by state and foreign insurance laws and regulatory restrictions,
including minimum solvency and liquidity thresholds. We are required to maintain
specified minimum levels of capital and surplus and risk-based capital at our
U.S. insurance subsidiaries, which could restrict their ability to pay us
dividends, even if the dividends were permitted by relevant insurance laws and
regulations. We do not expect the majority of our operating subsidiaries will be
able to pay dividends or advance or repay any funds to us in the foreseeable
future, which would prevent us from making payments on our debt or securities
obligations.

We are in discussions with insurance regulators concerning capital impairment
and other issues relating to our insurance company subsidiaries, and these
regulators may institute supervision, rehabilitation, conservation or
liquidation proceedings with respect to these subsidiaries.

We have been engaged in discussions with the insurance regulators of the
jurisdictions in which our United States and Bermuda insurance company
subsidiaries are domiciled, and with the FSA in the United Kingdom. We have been
required to restrict our Connecticut insurance company subsidiary from taking
certain actions such as paying dividends or disposing of assets, and we have
been required to submit a plan of action to eliminate the statutory capital
impairment at our New York insurance company subsidiary. The New York Insurance
Department ("NYID") has indicated that the NYID would expect to impose


                                      -81-
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restrictions on our New York insurance company subsidiary that are at a minimum
similar to those imposed by the Connecticut Insurance Department on our
Connecticut subsidiary. Trenwick has also been notified by the NYID that, in the
NYID's view, approximately $26 million in loans made to Trenwick America by
Inscorp in 2002 were in contravention of New York regulatory requirements. As a
result, Inscorp and Trenwick may be the subject of regulatory action brought by
the NYID. In addition, the Bermuda Monetary Authority has restricted the license
of our Bermuda insurance company subsidiary to prohibit it from writing any new
business without its prior written approval. Each of these regulators, as well
as regulators in the United Kingdom and the State of North Dakota, may act
independently of one another with respect to the insurance company domiciled in
its jurisdiction. Any action by an insurance regulator, such as the commencement
of voluntary or involuntary supervision, rehabilitation, conservation or
liquidation proceedings with respect to one of these companies, could
precipitate additional actions by the other insurance regulators. In the event
of any such proceedings, it is unlikely that the assets of the insurance
companies will be available to satisfy each others' liabilities, or the
liabilities of Trenwick.

Our insurance company subsidiaries are no longer rated by A.M. Best Company.

Ratings have become an increasingly important factor in establishing the
competitive position of insurance companies. As a result of recent events, our
insurance company subsidiaries are no longer rated by A.M. Best. These ratings
reflect A.M. Best's opinion of an insurance company's financial strength,
operating performance, strategic position and ability to meet its obligations to
policyholders. The lack of ratings will adversely affect our ability to market
our insurance and reinsurance products and will have a significant and adverse
effect on our future prospects for growth and profitability.

We are writing substantially all of our United States business as agent for a
highly rated unaffiliated insurance company under an arrangement that is
terminable at will. If this arrangement is terminated, we may be unable to find
a replacement carrier and would have no ongoing business in the United States.

The Chubb underwriting facility, under which Trenwick America Re is acting as
agent for Chubb, represents virtually all of our ongoing United States business.
The facility is terminable at will by either party, and there can be no
assurance that upon its expiration it will be renewed, or that we would be able
to enter into similar arrangements with another highly rated carrier were the
Chubb facility to terminate. In addition, the facility is structured in such a
way that we will not derive any profit commissions from it until 2006, if at
all.

Our financial strength ratings have been significantly downgraded by Standard &
Poor's, Moody's Investor Services and Fitch.

Our senior debt and other ratings have been downgraded significantly by Standard
& Poor's, Moody's Investor Services and Fitch, to "CCC-", "Ca" and "C",
respectively. These ratings generally reflect the ratings services' views that
our business prospects and financial flexibility are very limited and their
substantial doubt as to our ability to restructure our senior debt. In addition,
these downgrades significantly and negatively affect our ability to raise
capital and to negotiate favorable terms in restructuring our debt.

Several of the business lines from which we historically derived a significant
portion of our revenue have ceased to write new business and are in runoff.

We have placed three of our operating businesses, worldwide property catastrophe
reinsurance, international specialty insurance and reinsurance and United States
specialty program insurance, into runoff. Little or no new business is being
written in these lines. These three lines provided approximately 40% of our
gross premiums written in 2002. Our objective is to maximize the economic value
of the runoff through effective claims settlement, commutation of assumed
obligations where appropriate, collection of reinsurance recoverables and
effective cash management. While it is possible that some positive economic
value may result over time from the runoff of these operations, we do not expect
them to contribute


                                      -82-
<PAGE>

significantly to our revenue or results of operations and there are significant
uncertainties that could if realized adversely affect our ability to continue a
solvent runoff of these operations.

Our ability to attract and retain key management personnel has been negatively
affected.

We have experienced the loss of several senior executive officers in the last
nine months. A number of executives positions at Trenwick, including our Acting
Chief Executive Officer, are now being filled by consultants under short term
arrangements. Our ability to operate our business has been, and will continue to
be, dependent on our ability to retain the services of our existing key senior
executive officers and to attract and retain additional qualified personnel in
the future as employees and consultants. The loss of the services of any of our
key executive officers or the inability to hire and retain other highly
qualified personnel in the future could adversely affect our ability to conduct
our business. Our financial situation and that of our subsidiaries has made it
and likely will continue to make it difficult to retain key employees.

Our reinsurers may not satisfy their obligations to us.

Our business model relied to a large extent on reinsurance to reduce our
underwriting risk. As of December 31, 2002, our reinsurance recoverable balance
was approximately $1.8 billion. Our subsidiaries are subject to credit risk with
respect to their reinsurers because the transfer of risk to a reinsurer does not
relieve the insurers of their liability to the insureds. In addition, reinsurers
may be unwilling to pay our insurance company subsidiaries even though they have
the financial resources and are contractually obligated to do so. Unfavorable
arbitration decisions or the failure of one or more of the reinsurers to honor
their obligations or make timely payments would impact our subsidiaries' cash
flow and could cause us to incur significant losses. In the event of the
rehabilitation, supervision, conservation or liquidation of any of our insurance
company subsidiaries, we may not be able to influence the outcome of the
collectibility of reinsurance recoverables, in that it will be the
responsibility of the regulators supervising such proceedings.

If actual claims exceed our loss reserves, our financial results could be
significantly adversely affected.

In the fourth quarter of 2002 we increased our loss reserves for unpaid claims
and claims expenses by $107 million, which followed other reserve increases
earlier in 2002. The reserve increases reflect a reassessment of our reserves in
light of recent reported loss activity trends across our major business groups.

Our results of operations and financial condition depend upon our ability to
assess accurately the potential losses associated with the risks that we insure
and reinsure. To the extent actual claims continue to exceed our expectations,
we will be required to immediately recognize the less favorable experience. This
could cause a material increase in our liabilities and a reduction in our
profitability, including an operating loss and reduction of capital.

We establish loss reserves to cover our estimated liability for the payment of
all losses and loss expenses incurred with respect to premiums earned on the
policies that we write. We utilize actuarial models as well as historical
insurance industry loss development patterns to establish appropriate loss
reserves, as well as estimates of future trends in claims severity, frequency
and other factors. Establishing an appropriate level of loss reserves is an
inherently uncertain process. Accordingly, actual claims and claim expenses paid
will likely deviate, perhaps substantially, from the reserve estimates reflected
in our consolidated financial statements.

If our loss reserves are determined to be inadequate, we will be required to
increase loss reserves at the time of such determination with a corresponding
reduction in our net income or increase our net loss in the period in which the
deficiency is rectified. It is possible that claims in respect of events that
have occurred could exceed our loss reserves and have a material adverse effect
on our results of operations or our financial condition in general.

The effects of emerging claim and coverage issues on our business are uncertain.


                                      -83-
<PAGE>

As industry practices and legal, judicial, social and other environmental
conditions change, unexpected and unintended issues related to claims and
coverage may emerge. These issues may adversely affect our business by either
extending coverage beyond our underwriting intent or by increasing the number or
size of claims. In some instances, these changes may not become apparent until
some time after we have issued insurance or reinsurance contracts that are
affected by the changes. As a result, the full extent of liability under our
insurance or reinsurance contracts may not be known for many years after a
contract is issued.

The regulatory system under which we operate, and potential changes thereto,
could have a material adverse effect on our business.

Our insurance and reinsurance subsidiaries may not be able to obtain or maintain
necessary licenses, permits, authorizations or accreditations in locales where
we currently engage in business, or may be able to do so only at significant
cost. In addition, we may not be able to comply fully with, or obtain
appropriate exemptions from, the wide variety of laws and regulations applicable
to insurance or reinsurance companies or holding companies. As a result of the
events of the past several months, we are presently in discussions with, or
subject to orders issued by, insurance regulators in all of the jurisdictions in
which we and our insurance company subsidiaries are domiciled. Our inability to
comply with or to obtain appropriate authorizations and/or exemptions under any
applicable laws, regulations or orders could result in further restrictions on
our ability to do business and could subject us to fines and other sanctions
including the ceasing of our ongoing operations.

Recent events may result in political, regulatory and industry initiatives which
could adversely affect our business.

The supply of insurance and reinsurance coverage has decreased due to withdrawal
of capacity and substantial reductions in capital resulting from, among other
things, the terrorist attacks of September 11, 2001. This tightening of supply
may result in governmental intervention in the insurance and reinsurance
markets, both in the United States and worldwide. For example, on November 26,
2002, the Terrorism Risk Insurance Act was enacted to ensure the availability of
insurance coverage for terrorist acts in the United States. This law requires
insurers writing certain lines of property and casualty insurance to offer
coverage against certain acts of terrorism causing damage within the United
States or to U.S. flagged vessels or aircraft. In return, the law requires the
federal government to indemnify such insurers for 90% of insured losses
resulting from covered acts of terrorism, subject to a premium-based deductible.
The law expires automatically at the end of 2005. Currently there is a great
deal of uncertainty as to what effect the law will have on the insurance
industry. We are currently unable to predict the extent to which the foregoing
and other new initiatives may affect the demand for our products or the risks
which may be available for us to consider underwriting. At the same time,
threats of further terrorist attacks and the military initiatives and political
unrest in the Middle East and Asia have adversely affected general economic,
market and political conditions, increasing many of the risks associated with
the insurance markets worldwide.

The insurance and reinsurance business is historically cyclical, and we expect
to experience periods with excess underwriting capacity and unfavorable premium
rates.

Historically, insurers and reinsurers have experienced significant fluctuations
in operating results due to competition, frequency of occurrence or severity of
catastrophic events, levels of capacity, general economic conditions and other
factors. The supply of insurance and reinsurance is related to prevailing
prices, the level of insured losses and the level of industry surplus which, in
turn, may fluctuate in response to changes in rates of return on investments
being earned in the insurance and reinsurance industry. As a result, the
insurance and reinsurance business historically has been a cyclical industry
characterized by periods of intense price competition due to excessive
underwriting capacity as well as periods when shortages of capacity permitted
favorable premium levels. Although premium levels for many products have
increased in recent months, the supply of insurance and reinsurance may
increase, either by capital provided by new entrants or by the commitment of
additional capital by existing insurers or reinsurers, which may cause prices to
decrease. Any of these factors could lead to a significant reduction in premium
rates, less favorable policy terms and fewer submissions for our underwriting
services. In addition to these


                                      -84-
<PAGE>

considerations, changes in the frequency and severity of losses suffered by
insureds and insurers may affect the cycles of the insurance and reinsurance
business significantly, and we expect to experience the effects of such
cyclicality. Applicable insurance laws may make it difficult to effect a change
of control of our company.

Before a person can acquire control of a U.S. insurance company, prior written
approval must be obtained from the insurance commissioner of the state where the
domestic insurer is domiciled. Prior to granting approval of an application to
acquire control of a domestic insurer, the state insurance commissioner will
consider such factors as the financial strength of the applicant, the integrity
and management of the applicant's board of directors and executive officers, the
acquiror's plans for the management of the applicant's board of directors and
executive officers, the acquiror's plans for the future operations of the
domestic insurer and any anti-competitive results that may arise from the
consummation of the acquisition of control. Generally, state statutes provide
that control over a domestic insurer is presumed to exist if any person,
directly or indirectly, owns, controls, holds with the power to vote, or holds
proxies representing, 10% or more of the voting securities of the domestic
insurer. Because a person acquiring 10% or more of our common shares would
indirectly control the same percentage of the stock of our U.S. insurance
company, the insurance change of control laws of Connecticut, New York and North
Dakota would likely apply to such a transaction.

U.S. persons who own our common shares may have more difficulty in protecting
their interests than U.S. persons who are shareholders of a U.S. corporation.

The Bermuda Companies Act, which applies to us, differs in certain material
respects from laws generally applicable to U.S. corporations and their
shareholders. Set forth below is a summary of certain significant provisions of
the Companies Act which includes, where relevant, information on modifications
thereto adopted pursuant to our bye-laws, applicable to us, which differ in
certain respects from provisions of Delaware corporate law. Because the
following statements are summaries, they do not discuss all aspects of Bermuda
law that may be relevant to us and our shareholders.

Interested Directors. Under Bermuda law and our bye-laws, a transaction entered
into by us, in which a director has an interest, will not be voidable by us, and
such director will not be liable to us for any profit realized pursuant to such
transaction, provided the nature of the interest is disclosed at the first
opportunity at a meeting of directors, or in writing to the directors. In
addition, our bye-laws allow a director to be taken into account in determining
whether a quorum is present and to vote on a transaction in which that director
has an interest following a declaration of the interest pursuant to the
Companies Act provided that the director is not disqualified from doing so by
the chairman of the meeting. Under Delaware law, such transaction would not be
voidable if:

      o     The material facts as to such interested director's relationship or
            interests were disclosed or were known to the board of directors and
            the board of directors in good faith authorized the transaction by
            the affirmative vote of a majority of the disinterested directors;

      o     Such material facts were disclosed or were known to the shareholders
            entitled to vote on such transaction and the transaction was
            specifically approved in good faith by vote of the majority of
            shares entitled to vote thereon; or

      o     The transaction was fair as to the corporation as of the time it was
            authorized, approved or ratified.

Certain Transactions with Significant Shareholders. As a Bermuda company, we may
enter into certain business transactions with our significant shareholders,
including asset sales, in which a significant shareholder receives, or could
receive, a financial benefit that is greater than that received, or to be
received, by other shareholders with prior approval from our board of directors
but without obtaining prior approval from our shareholders.

Shareholders' Suits. The rights of shareholders under Bermuda law are not as
extensive as the rights of shareholders in many U.S. jurisdictions. Class
ctions and derivative actions are generally not available to


                                      -85-
<PAGE>

shareholders under the laws of Bermuda. However, the Bermuda courts ordinarily
would be expected to follow English case law precedent, which would permit a
shareholder to commence an action in the name of the company to remedy a wrong
done to the company where an act is alleged to be beyond the corporate power of
the company, is illegal or would result in the violation of our memorandum of
association or bye-laws. Furthermore, courts would review acts that are alleged
to constitute a fraud against the minority shareholders or where an act requires
the approval of a greater percentage of our shareholders than actually approved
it. The winning party in such an action generally would be able to recover a
portion of attorneys' fees incurred in connection with such action. Our bye-laws
provide that shareholders waive all claims or rights of action that they might
have, individually or in the right of the company, against any director or
officer for any act or failure to act in the performance of such director's or
officer's duties, except with respect to any fraud or dishonesty of such
director or officer.

Indemnification of Directors and Officers. Under Bermuda law and our bye-laws,
we may indemnify our directors, officers or any other person appointed to a
committee of the board of directors (and their respective heirs, executors or
administrators) to the full extent permitted by law against all actions, costs,
charges, liabilities, loss, damage or expense incurred or sustained by such
person by reason of any act done, concurred in or omitted in the conduct of our
business or in the discharge of his/her duties; provided that such
indemnification shall not extend to any matter in which any of such persons is
found, in a final judgment or decree not subject to appeal, to have committed
fraud or dishonesty.

Trenwick is a Bermuda company and it may be difficult for you to enforce
judgments against it or its directors and executive officers.

We are incorporated pursuant to the laws of Bermuda and our business is based in
Bermuda. In addition, certain of our current and former directors and officers
may reside outside the United States, and all or a substantial portion of our
assets and the assets of such persons are located in jurisdictions outside the
United States. As such, it may be difficult or impossible to effect service of
process within the United States upon us or those persons or to recover against
us or them on judgments of U.S. courts, including judgments predicated upon
civil liability provisions of the U.S. federal securities laws. Further, no
claim may be brought in Bermuda against us or our directors and officers in the
first instance for violation of U.S. federal securities laws because these laws
have no extraterritorial jurisdiction under Bermuda law and do not have force of
law in Bermuda. A Bermuda court may, however, impose civil liability on us or
our directors and officers if the facts alleged in a complaint constitute or
give rise to a cause of action under Bermuda law.

Further, there is no treaty in effect between the United States and Bermuda
providing for the enforcement of judgments of U.S. courts, and there are grounds
upon which Bermuda courts may not enforce judgments of U.S. courts. Because
judgments of U.S. courts are not automatically enforceable in Bermuda, it may be
difficult for you to recover against us based upon such judgments.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

This information called for by this item can be found in this Annual Report on
Form 10-K under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Quantitative and Qualitative Disclosure
About Market Risk" and is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data


                                      -86-
<PAGE>

                        Report of Independent Accountants

To the Board of Directors and
Shareholders of Trenwick Group Ltd.:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15 (a) 1 on page 144, present fairly, in all material
respects, the financial position of Trenwick Group Ltd. and its subsidiaries at
December 31, 2002 and December 31, 2001, and the results of their operations and
cash flows for each of the three years in the period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States.
In addition, in our opinion, the financial statement schedules listed in the
index appearing under Item 15 (a) 2 on page 144, present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedules are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 9 to the financial
statements, the Company is currently required to repay certain senior notes by
April 1, 2003 and collateralize with cash or cash equivalents, 60% of the
outstanding letters of credit under its senior credit facility by August 1,
2003. At this time, the Company does not have sufficient available liquidity to
repay the senior notes or collateralize the letters of credit. As discussed in
Note 14 to the financial statements, certain insurance subsidiaries of the
Company do not meet risk based capital levels or levels of surplus required by
various insurance regulations to which they are subject. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans and other circumstances in regard to these matters are also
described in Note 9 to the financial statements. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.

As discussed in Note 15 to the financial statements, the Company changed its
method of accounting for goodwill in 2002.

PricewaterhouseCoopers LLP
New York, New York
March 31, 2003


                                      -87-
<PAGE>


                               Trenwick Group Ltd.
                           Consolidated Balance Sheet
       (Amounts expressed in thousands, except share and per share data)

                           December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                                               2002            2001
                                                                           -----------     -----------
<S>                                                                        <C>             <C>
ASSETS:
Debt securities available for sale, at fair value                          $ 1,492,834     $ 1,960,600
Equity securities, at fair value                                                 8,849          24,164
Cash and cash equivalents                                                      814,235         331,350
Accrued investment income                                                       19,223          38,278
Premiums receivable                                                            519,866         535,281
Reinsurance recoverable balances, net                                        1,803,011       1,411,469
Prepaid reinsurance premiums                                                   262,802         197,169
Deferred policy acquisition costs                                              127,200         115,870
Net deferred income taxes                                                           --         139,926
Goodwill                                                                            --          41,653
Security deposit held by Chubb                                                  50,207              --
Other assets                                                                   179,755         132,795
                                                                           -----------     -----------
Total assets                                                               $ 5,277,982     $ 4,928,555
                                                                           ===========     ===========

LIABILITIES:
Unpaid claims and claims expenses                                          $ 3,718,124     $ 3,032,748
Unearned premium income                                                        721,624         612,290
Reinsurance balances payable                                                   374,397         225,255
Indebtedness                                                                    76,498         291,263
Other liabilities                                                              126,549         125,554
                                                                           -----------     -----------
Total liabilities                                                            5,017,192       4,287,110
                                                                           -----------     -----------

MINORITY INTEREST:
Mandatorily redeemable preferred capital securities of subsidiary
 trust holding solely junior subordinated debentures of U.S. subsidiary         68,320          68,119
Minority interest in preferred shares of LaSalle Re Holdings Limited            75,000          75,000
                                                                           -----------     -----------
Total minority interest                                                        143,320         143,119
                                                                           -----------     -----------

CONVERTIBLE PREFERRED STOCK                                                     40,000              --

COMMON SHAREHOLDERS' EQUITY:
Common shares, $0.10 par value, 36,801,545
 and 36,845,141 shares issued and outstanding                                    3,680           3,685
Additional paid in capital                                                     576,567         578,018
Deferred compensation under share award plans                                   (2,615)         (4,766)
Retained earnings (accumulated deficit)                                       (492,343)       (101,830)
Accumulated other comprehensive income                                          (7,819)         23,219
                                                                           -----------     -----------
Total common shareholders' equity                                               77,470         498,326
                                                                           -----------     -----------
Total liabilities, minority interest and shareholders' equity              $ 5,277,982     $ 4,928,555
                                                                           ===========     ===========
</TABLE>

The accompanying notes are an integral part of these statements.


                                      -88-
<PAGE>

                               Trenwick Group Ltd.
          Consolidated Statement of Operations and Comprehensive Income
             (Amounts expressed in thousands, except per share data)
                  Years Ended December 31, 2002, 2001 and 2000,

<TABLE>
<CAPTION>
                                                                       2002            2001            2000
                                                                   -----------     -----------     -----------
<S>                                                                <C>             <C>             <C>
 REVENUES:
 Net premiums earned                                               $   978,905     $   889,506     $   302,749
 Net investment income                                                 105,038         129,114          58,715
 Net realized investment gains (losses)                                 48,044           8,796          (1,386)
 Other income                                                            4,448           3,389           1,477
                                                                   -----------     -----------     -----------
 Total revenues                                                      1,136,435       1,030,805         361,555
                                                                   -----------     -----------     -----------
 EXPENSES:
 Claims and claims expenses incurred                                   881,535         827,405         227,707
 Policy acquisition costs                                              267,913         273,066          78,603
 Underwriting expenses                                                 107,543          79,016          31,891
 General and administrative expenses                                    14,354          21,926           6,349
 Loss on sale of LaSalle's in-force reinsurance business                20,133              --              --
 Interest expense and subsidiary preferred share dividends              36,016          39,142          11,775
 Foreign currency losses                                                 8,875           2,452           1,015
                                                                   -----------     -----------     -----------
 Total expenses                                                      1,336,369       1,243,007         357,340
                                                                   -----------     -----------     -----------
 Income (loss) before income taxes, other minority interest
         and cumulative effect of change in accounting principle      (199,934)       (212,202)          4,215
 Other minority interest in subsidiary net income                           --              --             839
                                                                   -----------     -----------     -----------
 Income (loss) before income taxes and cumulative
   effect of change in accounting principle                           (199,934)       (212,202)          3,376
 Applicable income taxes (benefit)                                     143,128         (57,805)         (6,075)
                                                                   -----------     -----------     -----------
 Net income (loss) before cumulative effect of
   change in accounting principle                                     (343,062)       (154,397)          9,451
 Cumulative effect of change in accounting principle                   (41,653)             --              --
                                                                   -----------     -----------     -----------
  Net income (loss)                                                   (384,715)       (154,397)          9,451
  Preferred share dividends                                              1,384              --           4,923
                                                                   -----------     -----------     -----------
  Net income (loss) available to common shareholders               $  (386,099)    $  (154,397)    $     4,528
                                                                   ===========     ===========     ===========
 EARNINGS PER COMMON SHARE:
 Basic and diluted earnings (loss) per share                       $    (10.49)    $     (4.19)    $      0.21
                                                                   ===========     ===========     ===========
 COMPREHENSIVE INCOME (LOSS):
 Net income (loss)                                                 $  (384,715)    $  (154,397)    $     9,451
                                                                   -----------     -----------     -----------
 Other comprehensive income (loss):
    Net unrealized investment gains (losses)                           (26,584)         10,299          26,956
    Foreign currency translation adjustments                            (4,455)         (4,374)         (1,253)
                                                                   -----------     -----------     -----------
    Total other comprehensive income (loss)                            (31,039)          5,925          25,703
                                                                   -----------     -----------     -----------
 Comprehensive income (loss)                                       $  (415,754)    $  (148,472)    $    35,154
                                                                   ===========     ===========     ===========
</TABLE>

The accompanying notes are an integral part of these statements.


                                      -89-
<PAGE>

                               Trenwick Group Ltd.
                      Consolidated Statement of Cash Flows
                        (Amounts expressed in thousands)
                  Years Ended December 31, 2002, 2001 and 2000,

<TABLE>
<CAPTION>
                                                         2002            2001            2000
                                                     -----------     -----------     -----------
<S>                                                  <C>             <C>             <C>
OPERATING ACTIVITIES:
Premiums collected, net of acquisition costs         $ 1,396,647     $ 1,037,848     $   294,874
Ceded premiums paid, net of acquisition costs           (516,613)       (311,272)       (101,519)
Claims and claims expenses paid                       (1,136,422)       (865,288)       (266,991)
Claims and claims expenses recovered                     381,987         182,453          66,270
Underwriting expenses paid                              (116,705)        (91,304)        (50,837)
Net investment income received                           134,425         147,822          57,176
Other income received, net of other expenses paid         (1,398)          1,891          (2,671)
General and administrative expenses paid                 (19,500)        (22,707)         (3,002)
Interest expense and subsidiary
  preferred share dividends paid                         (20,290)        (33,565)        (10,280)
Income taxes recovered                                     4,510          17,349             278
                                                     -----------     -----------     -----------
Cash from (for) operating activities                     106,641          63,227         (16,702)
                                                     -----------     -----------     -----------
INVESTING ACTIVITIES:
Debt securities sales                                  1,736,677       1,062,125         393,235
Debt securities maturities                               982,435         284,017          92,596
Equity securities sales                                   16,421          99,359          29,337
Debt securities purchases                             (2,153,343)     (1,469,136)       (370,680)
Equity securities purchases                                 (166)         (2,597)        (29,270)
Cash acquired in business combination                         --              --         188,917
Security deposit paid to Chubb                           (50,000)             --              --
Effect on cash of exchange rate translation               17,664          (4,372)          2,239
Other investing activities                                (6,533)         (8,475)           (867)
                                                     -----------     -----------     -----------
Cash from (for) investing activities                     543,155         (39,079)        305,507
                                                     -----------     -----------     -----------
FINANCING ACTIVITIES:
Indebtedness proceeds                                         --          14,000          24,000
Indebtedness issuance costs paid                          (1,942)         (1,474)         (1,834)
Indebtedness repayment                                  (200,252)           (647)             --
Capital securities purchases                                  --          (8,462)         (9,902)
Common share sales proceeds                                  157             418             460
Share and option repurchases                                (161)           (397)         (3,176)
Equity put option premium payments                            --          (1,319)           (825)
Preferred share dividends paid                              (298)             --          (4,923)
Issuance of convertible preferred shares                  40,000              --              --
Common share dividends paid                               (4,415)         (5,918)         (1,468)
                                                     -----------     -----------     -----------
Cash from (for) financing activities                    (166,911)         (3,799)          2,332
                                                     -----------     -----------     -----------
Change in cash and cash equivalents                      482,885          20,349         291,137
Cash and cash equivalents, beginning of period           331,350         311,001          19,864
                                                     -----------     -----------     -----------
Cash and cash equivalents, end of period             $   814,235     $   331,350     $   311,001
                                                     ===========     ===========     ===========
</TABLE>

The accompanying notes are an integral part of these statements.


                                      -90-
<PAGE>

                               Trenwick Group Ltd.
            Consolidated Statement of Changes in Shareholders' Equity
               (Amounts expressed in thousands, except share data)
                 Years Ended December 31, 2002, 2001 and 2000,

<TABLE>
<CAPTION>
                                                             2002          2001          2000
                                                          ---------     ---------     ---------
<S>                                                       <C>           <C>           <C>
Shareholders' equity, beginning of period                 $ 498,326     $ 652,187     $ 361,960

Preferred and common shares and and
 additional paid in capital:
Common shares sold under employee and
 director stock purchase plan                                   157           174           247
Common shares repurchased                                      (161)         (397)           --
Restricted common shares canceled                            (1,451)         (619)          (64)
Compensation recognized under employee plans                     --           405           247
Equity put option cost recognized,
 net of applicable minority interest                             --        (1,319)         (742)
Common shares issued in business combination                     --            --       343,005
Preferred shares reclassified to minority
 interest in business combination                                --            --       (75,000)
Minority interest change                                         --            --          (684)
Common shares issued on exercise of
 options and warrants                                            --           243           143
Common shares issued under director
 and employee compensation plan                                  --            29             7
Restricted common shares awarded                                 --         4,119            --
Deferred compensation under share award plan
Compensation expense recognized,
  net of applicable minority interest                           795         1,394           597
Restricted common shares canceled                             1,357           619            64
Compensation deferred, net of
  applicable minority interest                                   --        (4,119)       (2,803)
Minority interest change                                         --            --             2
Minority interest acquired in business combination               --            --           (73)

Retained earnings (accumulated deficit):
Net income (loss)                                          (384,715)     (154,397)        9,451
Common share dividends declared                              (4,415)       (5,918)       (1,468)
Shares repurchased on exercise of share options                  --            --        (2,439)
Dividends on convertible preferred stock                     (1,384)           --            --
Preferred share dividends declared
  prior to business combination                                  --            --        (4,923)
Minority interest change                                         --            --          (176)

Accumulated other comprehensive income:
Other comprehensive income (loss)                           (31,039)        5,925        25,703
Minority interest change                                         --            --            24
Minority interest acquired in business combination               --            --          (891)
                                                          ---------     ---------     ---------
Common shareholders' equity, end of period                $  77,470     $ 498,326     $ 652,187
                                                          =========     =========     =========
</TABLE>


                                      -91-
<PAGE>

The accompanying notes are an integral part of these statements.


                                      -92-
<PAGE>

                               TRENWICK GROUP LTD.
                   Notes to Consolidated Financial Statements
        (Amounts expressed in thousands, except share and per share data)
                  Years Ended December 31, 2002, 2001 and 2000,

Note 1 Organization and Basis of Presentation

      Organization

      Trenwick Group Ltd. ("Trenwick") was formed as a holding company in
      Bermuda to acquire two publicly held companies and the minority interest
      in a subsidiary of one of those companies. That transaction, in which
      Trenwick issued common shares to acquire LaSalle Re Holdings Limited
      ("LaSalle Re Holdings"), Trenwick Group Inc. and the minority interest in
      LaSalle Re Limited ("LaSalle Re"), was completed on September 27, 2000.
      Trenwick Group Inc. had earlier acquired another publicly held company,
      Chartwell Re Corporation ("Chartwell"), on October 27, 1999 (the
      "Trenwick/Chartwell business combination"). More details of the
      Trenwick/LaSalle business combination are disclosed in Note 2.

      Trenwick's principal subsidiaries underwrite specialty insurance and
      reinsurance. More details on business segments and geographic information
      are disclosed in Note 6.

      Basis of Presentation

      These financial statements include the accounts of Trenwick and its
      subsidiaries after elimination of significant intercompany accounts and
      transactions. Trenwick's subsidiary, Trenwick Managing Agents, acts as a
      managing agent at Lloyd's for syndicates to which capital is primarily
      provided by Trenwick through its wholly owned subsidiaries. Trenwick does
      not hold an ownership interest in the Lloyd's syndicates it manages,
      however due to the fact that Trenwick manages the operations of the
      syndicates to which it provides capital and therefore has the ability to
      exert significant influence over the results of operations, Trenwick
      includes in its financial statements the assets and liabilities and
      revenues and expenses of the Lloyd's syndicates which Trenwick Managing
      Agents manages in proportion to the percent of capital provided by
      Trenwick through its wholly owned subsidiaries (i.e., for the 2002 year of
      account, Trenwick through its wholly owned subsidiaries provided 100% of
      the capital to syndicate 839 and therefore consolidated 100% of the
      syndicates' assets, liabilities, and results of operations). Certain items
      in prior years' financial statements have been reclassified to conform to
      the current presentation.

      These financial statements were prepared in conformity with accounting
      principles that are generally accepted in the United States of America,
      sometimes referred to as U.S. GAAP. In preparing these financial
      statements, management is required to make estimates and assumptions that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements,
      as well as the reported amounts of revenues and expenses during the
      reporting periods. Actual amounts may differ from these estimates.

      The accompanying financial statements have been prepared assuming Trenwick
      will continue as a going concern. As discussed in Note 9 to the financial
      statements, Trenwick is currently required to repay certain senior notes
      by April 1, 2003 and collateralize, with cash or cash equivalents, 60% of
      the outstanding letters of credit under its senior credit facility by
      August 1, 2003. At this time, Trenwick does not have sufficient available
      liquidity to collateralize the letters of credit or repay the senior
      notes. As discussed in Note 14 to the financial statements, certain
      insurance subsidiaries of Trenwick do not meet


                                      93
<PAGE>

      risk based capital levels or levels of surplus required by various
      insurance regulations to which they are subject. These matters raise
      substantial doubt about Trenwick's ability to continue as a going concern.
      Management's plans and other circumstances in regard to these matters are
      also described in Note 9 to the financial statements. The financial
      statements do not include any adjustments that might result from the
      outcome of these uncertainties.

      The assets and liabilities of operations whose functional currency is
      other than the United States dollar are translated at the rates of
      exchange at the balance sheet dates. Revenues and expenses of these
      operations are translated at the average exchange rates during each
      period. The effects of these translation adjustments, net of applicable
      income taxes, are recorded as a cumulative translation adjustment within
      other comprehensive income. Transaction gains and losses on currencies
      other than the United States dollar are included in operations.
      Disclosures included in the Notes to the Consolidated Financial Statements
      denominated in United Kingdom pounds sterling (pound) have been converted
      to United States dollars at various rates based upon various factors,
      including in some cases the date of the transaction described.

      The business combination between LaSalle Re Holdings and Trenwick Group
      Inc. has been treated as a purchase by LaSalle Re Holdings of Trenwick
      Group Inc. and of the minority interest in LaSalle Re. Accordingly, in
      these financial statements, the minority interest in net income of LaSalle
      Re has been eliminated from October 1, 2000, and the revenues and expenses
      of Trenwick Group Inc. are included from October 1, 2000.

      Other significant accounting policies are presented in italics within the
      appropriate footnotes.

Note 2 Trenwick/LaSalle Business Combination

Business Combinations

      On December 19, 1999, LaSalle Re Holdings, LaSalle Re and Trenwick Group
      Inc. signed a definitive agreement to combine under a new holding company,
      Trenwick. On September 27, 2000, following shareholder and regulatory
      approval, the newly formed Trenwick issued 36,668,594 of its common shares
      on a one-for-one, tax-free basis to the former shareholders of LaSalle Re
      Holdings (15,634,394 shares, including 26,656 restricted shares issued
      under share award plans), the minority shareholders of LaSalle Re, then a
      77.5% owned subsidiary of LaSalle Re Holdings (4,797,649 shares), and the
      former shareholders of Trenwick Group Inc. (16,236,551 shares, including
      224,331 restricted shares issued under share award plans).

      The Trenwick/LaSalle business combination was accounted for as a purchase
      by LaSalle Re Holdings of the minority interest in LaSalle Re and of
      Trenwick Group Inc. Under the purchase basis of accounting, the purchase
      price ($346,178) was allocated to the identifiable assets acquired and
      liabilities assumed, based on their estimated fair values at the date of
      acquisition; the unallocated excess was recorded as goodwill. Recent
      changes in accounting for goodwill and its amortization are described in
      Note 15.


                                      94
<PAGE>

Note 3 Property Catastrophe Business of LaSalle Re Limited

      Effective April 1, 2002, Trenwick sold the in-force property catastrophe
      reinsurance business of its subsidiary, LaSalle Re, to Endurance Specialty
      Insurance, Ltd. ("Endurance"). The sale was effected through a 100% quota
      share reinsurance agreement, with Endurance paying Trenwick a ceding
      commission of 25% of premiums ceded under the quota share agreement and
      additional profit sharing of 50% if the losses do not exceed a loss ratio
      of 45%. In addition, Endurance will have the right to renew LaSalle Re's
      in-force business as it expires in exchange for a 12.5% commission on the
      business renewed. Included in the results for the year ended December 31,
      2002 are $11,523 in ceding commissions earned on the quota share with
      Endurance, as well as $6,012 in amortization of acquisition costs on the
      related assumed business.

      In connection with this transaction, Trenwick recorded the following
      non-recurring revenues and expenses during the year ended December 31,
      2002:

<TABLE>
<S>                                                                                <C>
      Minimum proceeds related to sale of renewal rights                           $  8,000
      Accelerated amortization of reinsurance contracts not transferred in sale     (20,949)
      Legal expenses and investment banking fees                                     (4,370)
      Severance and related expenses                                                 (2,814)
                                                                                   --------
         Net loss on sale of LaSalle Re's in-force reinsurance business            $(20,133)
                                                                                   ========
</TABLE>

Note 4 Lloyd's Capital Transaction

      On October 4, 2002, Trenwick Managing Agents Limited (formerly Chartwell
      Managing Agents Limited) ("Trenwick Managing Agents"), Trenwick's managing
      agent at Lloyd's of London, entered into an agreement with National
      Indemnity Company ("NICO"), a member of the Berkshire Hathaway group of
      insurance companies. This agreement enabled Trenwick Managing Agents to
      increase the total premium capacity of Syndicate 839, its primary managed
      syndicate at Lloyd's, by (pound)141,250 ($227,413) for the 2002 year of
      account. NICO provided (pound)62,500 ($99,325) in premium capacity through
      (pound)25,000 ($39,730) of additional Lloyd's funding and (pound)78,750
      ($125,150) in premium capacity through a qualifying quota share
      reinsurance facility, (an outward reinsurance arrangement placed by a
      Lloyd's syndicate that has the effect of increasing the written premium
      capacity of that syndicate and which is subject to certain regulatory
      criteria and guidelines, including minimum standards for the rating, net
      assets and jurisdiction of the reinsurer) both for the 2002 year of
      account. In return for its capital support, NICO will receive a 41.4%
      share of the net underwriting result of Syndicate 839 for the 2002 year of
      account before ceding commissions and profit sharing. Under the terms of
      its capital support, NICO is not exposed to losses in prior years of
      account. Refer to Note 9 for a description of the letter of credit
      agreement supporting Trenwick's Lloyd's operations.

      On November 4, 2002, Trenwick Managing Agents entered into a second
      agreement with NICO, which was amended on December 23, 2002, and which
      enabled Syndicate 839 to have an authorized premium capacity of
      (pound)328,100 ($ 528,241), before qualifying quota share, for the 2003
      year of account. Under the terms of the amended December 2002 agreement,
      NICO has agreed to provide (pound)75,600 ($120,143) in premium capacity
      for the 2003 year of account, by increasing its additional funding to
      (pound)49,786 ($79,120). Of the premium capacity, (pound)62,500 ($99,325)
      is being applied to the aviation insurance line of Syndicate 839's
      business and


                                      -95-
<PAGE>

      (pound)13,100 ($20,818) is being applied to most of the remaining property
      and casualty insurance and reinsurance lines. The amended agreement also
      provides Trenwick Managing Agents an option for the premium capacity being
      supplied by NICO to the aviation line of Syndicate 839 to be increased to
      (pound)100,000 ($158,920), for which NICO will be required to deposit
      further additional funding at Lloyd's. Exercise of the option is
      contingent upon certain conditions having been satisfied at the time of
      the exercise of the option, including the retention of certain key
      employees, the obtaining of independent broker verification as to the size
      of the aviation market, and the approval of final contract wording. NICO
      will receive shares of the net underwriting results from each of these
      lines of Syndicate 839's business in proportion to the premium capacity
      provided. Trenwick Managing Agents paid NICO non-refundable fees totaling
      (pound)3,100 ($4,926) in connection with NICO's commitment to provide
      capital for the 2003 year of account.

      On December 24, 2002, Trenwick announced that it had entered into a
      definitive agreement with its Lloyd's letter of credit providers with
      respect to the renewal of $182,500 of letters of credit supporting
      Trenwick's participation at Lloyd's for the 2003 year of account. The
      agreement with the letter of credit providers states that Trenwick must
      pay to the letter of credit providers certain fees and 15% of the profits
      earned on the 2002 and 2003 Lloyd's years of account. Refer to Note 9 for
      a description of the letter of credit agreement supporting Trenwick's
      Lloyd's operations.

Note 5 Chubb Underwriting Facility

      On October 25, 2002, Trenwick's subsidiary Trenwick America Reinsurance
      Corporation ("Trenwick America Re") entered into an underwriting facility
      with Chubb Re, Inc. and its affiliate Federal Insurance Company (together,
      "Chubb") under which Trenwick America Re will cause, subject to Chubb's
      approval, all of its new and renewing United States reinsurance business
      during the term of the underwriting facility to be underwritten by
      Trenwick America Re as agent on behalf of Chubb, which will issue the
      reinsurance. Chubb's approval will not be unreasonably withheld. The
      underwriting facility permits Trenwick America Re to underwrite up to
      $400,000 of United States reinsurance business as agent on behalf of Chubb
      through January 31, 2004. The underwriting facility does not preclude
      Chubb from writing any business outside of the facility. As further
      described below, the profit commission to Trenwick America Re, if any,
      will be paid by Chubb beginning in the first quarter of 2006.

      Pursuant to the underwriting facility, which was effective November 1,
      2002, the parties will jointly adjust and settle any claims arising under
      the business underwritten, provided that Chubb will retain final claim
      settling authority. Trenwick America Re has agreed that during the term of
      the underwriting facility Trenwick America Re will not underwrite on
      behalf of any other third party without Chubb's approval. Chubb has
      entered into a non-competition agreement with Trenwick America Re
      restricting Chubb from renewing certain business underwritten through the
      facility for one year following the termination of the underwriting
      facility. Either party may terminate the underwriting facility
      prospectively at any time. Termination of the facility or any modification
      thereof that is deemed by Trenwick's letter of credit agreement providers
      to be materially adverse constitutes an event of default under the credit
      agreement (refer to Note 9 for details of the credit agreement). All
      premiums collected from the underwriting facility are required to be paid
      directly to Chubb.

      Chubb will receive as a fronting fee either five percent of gross written
      premium on two-thirds of the business underwritten through the
      underwriting facility, or $15,000 whichever is greater. To date, Trenwick
      America Re has paid $10,000 of this amount to Chubb, and additional
      payments of $1,250 are due to be paid by Trenwick America Re at the end of
      each


                                      -96-
<PAGE>

      calendar quarter of 2003. Trenwick America Re is entitled to receive a
      monthly expense reimbursement equal to 2.0% of the gross written premiums
      underwritten on behalf of Chubb collected during the applicable month. The
      total expense reimbursement payable to Trenwick America Re is subject to a
      cap of $6,500. The minimum total expense reimbursement is $5,500 unless
      the underwriting facility is terminated prior to the expiration of its
      term, in which case it will be prorated based on the amount of time the
      underwriting agreement was in effect.

      The notional "experience account" established with respect to the
      underwriting facility equals premiums collected (net of ceding commission
      and reinsurance brokerage), plus investment credit on the experience
      account balance, plus recoverable reinsurance payment, less paid losses
      and loss adjustment expenses, expense reimbursements, Chubb's fronting
      fee, and reinsurance premiums paid (net of ceding commission). The
      experience account will earn an investment credit at a rate equal to the
      three-year United States Treasury bill as of the close of business on the
      first business day of the applicable time period. The investment credit
      will be calculated each March 31, June 30, September 30 and December 31
      and will be based upon the average daily balance in the experience account
      during the applicable three-month time period.

      Chubb will receive one-third and Trenwick America Re will receive
      two-thirds of any profits generated by the underwriting facility,
      including underwriting profits and investment income. The profit
      commission will equal two-thirds of the experience account, and will be
      paid on the following payment schedule:

      March 31, 2006         25% of cumulative indicated profit commission

      September 30, 2006     50% of cumulative indicated profit commission,
                             less prior profit commission paid

      March 31, 2007         75% of cumulative indicated profit commission,
                             less prior profit commission paid

      September 30, 2007     100% of cumulative indicated profit commission,
                             less prior profit commission paid

      For purposes of calculating the profit commission, the experience account
      will be adjusted to account for unpaid claims and claims expenses (case
      reserves, incurred but not reported and additional case reserves.)

      Trenwick America Re has also agreed to reinsure Chubb for 100% of all
      losses in excess of premiums collected less certain expenses. To secure
      its reinsurance obligations to Chubb, Trenwick America Re has posted a
      $50,000 security deposit with Chubb. Trenwick America Re is required to
      pay additional amounts to Chubb for the security deposit, so that the
      security deposit is equal to the greater of $50,000 or the amount of
      Trenwick America Re's reinsurance obligations. Given the long-term nature
      of the stop-loss reinsurance agreement, the amount of the cash deposit may
      be greater than Trenwick America Re's obligations under the stop-loss
      reinsurance agreement. The security deposit will earn an investment credit
      at a rate equal to the three-year United States Treasury bill as of the
      close of business on the first business day of the applicable time period.
      The amount of the security deposit in excess of certain decreasing amounts
      over time will be returned to Trenwick America Re on a payment schedule
      beginning March 31, 2006, provided that at such times Trenwick America Re
      has an A.M. Best rating of "A-" or better. On January 12, 2012, regardless
      of whether Trenwick


                                       97
<PAGE>

      America Re has reacquired an "A-" rating from A.M. Best, that portion of
      the security deposit that exceeds the positive difference (if any) of
      Trenwick America Re's obligations minus the amount in the experience fund,
      will be returned to Trenwick America Re.

      An "event of default" by Trenwick America Re under the Chubb facility
      would occur if creditors attach or take possession of any material amount
      of Trenwick America Re's assets, or if Trenwick America Re voluntarily or
      involuntarily enters into rehabilitation, dissolution, winding-up,
      liquidation, administration or reorganization proceedings under applicable
      bankruptcy, insolvency or similar law. Upon the occurrence of an event of
      default by Trenwick America Re, no profit commission will be paid and no
      reductions in the amount of collateral will be made until the event of
      default ceases, or January 1, 2012, which ever is earlier. At that time,
      the profit commission payment schedule and collateral reduction schedules
      will recommence at the point at which the event of default occurred.

      Since November 1, 2002, the effective date of the Chubb facility, Trenwick
      America Re has written approximately, $126,890 in gross premiums under the
      facility. To date, almost all of the bound premiums have been renewal
      business.

Note 6 Segment and Geographic Information

      Segment Information

      During the first quarter of 2002, Trenwick amended the basis in which
      operating segments are reported. The continuing Lloyd's syndicates managed
      by Trenwick and the International Specialty Insurance and Reinsurance
      operations were combined into one operating segment and the United States
      based property and casualty reinsurance and Bermuda based property
      catastrophe reinsurance operations were combined into one segment called
      Reinsurance. These changes were made to conform to changes in Trenwick's
      management and operational structure.

      For the years ended December 31, 2002, 2001 and 2000, Trenwick reported
      its specialty property and casualty insurance and reinsurance business in
      the following business segments:

      o Reinsurance, which includes treaty reinsurance on United States property
      and casualty risks and worldwide property catastrophe reinsurance. United
      States treaty reinsurance is written principally through Trenwick America
      Re and includes the run-off of reinsurance business formerly written by
      Chartwell Insurance Company (which merged with and into Trenwick America
      Re effective December 31, 2002) and The Insurance Corporation of New York.
      In addition, the Reinsurance segment includes the results of the Chubb
      underwriting facility. The remainder of Trenwick's reinsurance segment
      consists of property catastrophe reinsurance written by LaSalle Re on a
      worldwide basis until it ceased underwriting effective April 1, 2002. (See
      Note 3)

      o International operations, which includes Trenwick's Lloyd's operations
      as well as United Kingdom specialty insurance and treaty and facultative
      reinsurance. Trenwick's Lloyd's operations are conducted through its
      wholly owned subsidiary Trenwick Managing Agents, which manages
      underwriting syndicates at Lloyd's, almost exclusively for Trenwick's own
      account. The United Kingdom specialty insurance and facultative
      reinsurance was principally written by Trenwick International Limited
      ("Trenwick International"), which wrote business on a worldwide basis
      until it ceased underwriting new business effective November 29, 2002.
      During 2002, renewals of certain lines of business previously underwritten
      by Trenwick International including, among others, general aviation and
      commercial property, were underwritten by Trenwick's Lloyd's entities
      following downgrades in Trenwick International's financial strength
      ratings by Standard & Poor's.


                                       98
<PAGE>

      o United States specialty program insurance, which was written principally
      through its United States subsidiary, Canterbury Financial Group, Inc. and
      its operating subsidiaries, The Insurance Corporation of New York, Dakota
      Specialty Insurance Company and Chartwell Insurance Company (merged with
      and into Trenwick America Re effective December 31, 2002). Trenwick ceased
      underwriting substantially all United States specialty program insurance
      effective October 30, 2002.

      Excluded from the aforementioned segments are Trenwick's Lloyd's
      syndicates in runoff and Excess and Casualty Reinsurance Association Pool
      ("ECRA Pool") runoff, which includes insurance and reinsurance that was
      either sold or non-renewed. The ECRA Pool was a New York state licensed
      insurance pool that underwrote multi-line property and casualty business
      until it ceased underwriting in 1983. The losses incurred by the ECRA pool
      included asbestos and environmental risks for those periods. Trenwick
      America Re participated in the ECRA Pool during pool years 1978 to 1982,
      while The Insurance Corporation of New York participated during pool years
      1950 to 1967.

      The following tables present business segment and other financial
      information for Trenwick as of December 31, 2002 and 2001 and for the
      years ended December 31, 2002, 2001 and 2000:

                                                              December 31,
                                                           2002          2001
                                                        ----------    ----------
      Total assets:
      Reinsurance                                       $1,780,339    $2,259,616
      International operations                           2,645,332     1,915,314
      U.S. specialty program insurance                     757,988       561,991
      Lloyd's syndicates runoff and ECRA pool runoff        59,023        99,021
      Unallocated                                           35,300        92,613
                                                        ----------    ----------
      Total assets                                      $5,277,982    $4,928,555
                                                        ==========    ==========

<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                            2002            2001            2000
                                                        -----------     -----------     -----------
<S>                                                     <C>             <C>             <C>
      Total revenues:
      Reinsurance                                       $   467,182     $   457,346     $   219,914
      International operations                              509,770         462,479         112,436
      U.S. specialty program insurance                      161,503          97,178          14,696
      Lloyd's syndicates runoff and ECRA pool runoff            171           9,482          14,239
      Unallocated                                            (2,191)          4,320             270
                                                        -----------     -----------     -----------
      Total revenues                                    $ 1,136,435     $ 1,030,805     $   361,555
                                                        ===========     ===========     ===========

      Net income (loss):
      Reinsurance                                       $   (96,854)    $    (8,781)    $    29,828
      International operations                             (144,400)        (94,296)         (9,832)
      U.S. specialty program insurance                      (37,476)             44            (135)
      Lloyd's syndicates runoff and ECRA pool runoff        (14,688)        (17,256)         (5,396)
      Unallocated interest expense and
        subsidiary  preferred share dividends               (20,188)        (27,944)         (6,404)
      Other unallocated                                     (29,456)         (6,164)          1,390
      Change in accounting principle                        (41,653)             --              --
                                                        -----------     -----------     -----------
      Net income (loss)                                 $  (384,715)    $  (154,397)    $     9,451
                                                        ===========     ===========     ===========
</TABLE>


                                       99
<PAGE>

      Revenues from transactions between operating segments have been eliminated
      in consolidation. Other unallocated consists mainly of general and
      administrative expenses and income taxes of Trenwick and its non-insurance
      subsidiaries.

      Geographic Information

      The following table presents Trenwick's gross premiums written allocated
      to the geographic region in which the risks originated:

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                2002          2001          2000
                                             ----------    ----------    ----------
<S>                                          <C>           <C>           <C>
      Gross premiums written:
      United States                          $  992,061    $  797,262    $  205,819
      United Kingdom                            248,251       317,895       115,273
      Europe, excluding United Kingdom          127,645       133,762        20,429
      Australia, New Zealand and Far East        42,160        31,578        13,934
      Other                                     164,405       171,758        73,189
                                             ----------    ----------    ----------
      Gross premiums written                 $1,574,522    $1,452,255    $  428,644
                                             ==========    ==========    ==========
</TABLE>

Note 7 Underwriting Activities

      Premiums

      Insurance and reinsurance premiums on contracts are accrued on an
      estimated basis throughout the term of such contracts. For retrospectively
      rated and other experience rated reinsurance contracts, premiums are
      estimated and accrued based on the difference between total unpaid claims
      and claims expenses before and after the experience under the contract
      (the with-and-without method). Premium estimates are made based on
      statistical and other data and record subsequent adjustments in the period
      in which they become known. Short-duration contracts are accounted for as
      reinsurance when they provide indemnification against loss or liability
      relating to insurance risk and as deposits when they do not.

      Insurance and reinsurance premiums (net of reinsurance ceded) are earned
      on a pro-rata basis over the related contract period. A liability for
      unearned premium income is recorded for the portion of premiums applicable
      to the unexpired portion of premium coverage with renewal dates later than
      the date of the balance sheet. Premium income for insurance business and
      excess of loss reinsurance is computed using pro-rata methods. With
      respect to proportional business, our estimates of future coverage and the
      related premium are computed based on reports received from ceding
      companies. Premium recognition on this business is matched on a pro-rata
      basis to the applicable period of coverage based upon these reports.
      Reinsurance premiums are recorded as prepaid expenses amortized over the
      contract period in proportion to the amount of reinsurance protection
      provided. Where the contract provides for return premiums, accruals are
      made based on loss experience through the date of the balance sheet.

      The components of premiums written and earned follow:


                                      100
<PAGE>

                                            Year Ended December 31,
                                      2002            2001          2000
                                  -----------     -----------     ---------

      Assumed premiums written    $   562,752     $   579,000     $ 249,910
      Direct premiums written       1,011,770         873,255       178,734
                                  -----------     -----------     ---------
      Gross premiums written        1,574,522       1,452,255       428,644
      Ceded premiums written         (583,021)       (481,937)     (126,012)
                                  -----------     -----------     ---------
      Net premiums written        $   991,501     $   970,318     $ 302,632
                                  ===========     ===========     =========

      Assumed premiums earned     $   525,786     $   490,126     $ 301,640
      Direct premiums earned          974,120         831,869       116,998
                                  -----------     -----------     ---------
      Gross premiums earned         1,499,906       1,321,995       418,638
      Ceded premiums earned          (521,001)       (432,489)     (115,889)
                                  -----------     -----------     ---------
      Net premiums earned         $   978,905     $   889,506     $ 302,749
                                  ===========     ===========     =========

      Policy Acquisition Costs

      Policy acquisition costs consist primarily of commissions and brokerage
      expenses that vary with and are primarily related to the acquisition of
      business. Policy acquisition costs are deferred and amortized over the
      period in which the related premiums are earned. Deferred policy
      acquisition costs are reviewed on a quarterly basis to determine that they
      do not exceed recoverable amounts after allowing for anticipated
      investment income.

      The components of policy acquisition costs follow:

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                                    2002          2001          2000
                                                 ---------     ---------     ---------
<S>                                              <C>           <C>           <C>
      Gross policy acquisition costs deferred    $ 386,780     $ 358,564     $ 209,764
      Ceded policy acquisition costs deferred     (107,537)      (70,051)      (39,208)
                                                 ---------     ---------     ---------
      Net policy acquisition costs deferred      $ 279,243     $ 288,513     $ 170,556
                                                 =========     =========     =========

      Policy acquisition costs expensed          $ 267,913     $ 273,066     $  78,603
                                                 =========     =========     =========
</TABLE>

      Commissions on cessions to retrocessionaires earned by Trenwick of
      $83,041, $69,142 and $13,959 for the 2002, 2001 and 2000 years,
      respectively, were recorded as a reduction to gross policy acquisition
      costs.

      Claims and Claims Expenses

      Claims and claims expenses are recorded as incurred, at management's best
      estimate, in order to match claims and claims expense costs with premiums
      over the contract periods. The amount provided for unpaid claims and
      claims expenses consists of any unpaid reported claims and claims expenses
      and estimates for incurred but not reported claims and claims expenses,
      net of estimated salvage and subrogation. The estimates for claims and
      claims expenses incurred but not reported were developed based on
      historical claims and claims expense experience and an actuarial
      evaluation of expected claims and claims expense experience. Workers'
      compensation indemnity liabilities that are considered fixed and
      determinable are discounted using an interest rate of 3.5%. Reserves for
      unpaid claims and claims expenses by their very nature, do not represent
      an exact calculation of the liability and, while Trenwick has established
      reserves equal to the current best estimate of ultimate losses, there
      remains a likelihood that further changes in such claim estimates, either
      upward or downward, will occur in the future. Adjustments to previously
      reported reserves for unpaid claims and claims expenses are considered
      changes in estimates for accounting purposes and are reflected in the
      income statement in the period in which the adjustment becomes known.

      The components of net claims and claims expenses incurred are as follows:


                                      101
<PAGE>

<TABLE>
<CAPTION>
                                                              Year ended December 31,
                                                        2002            2001            2000
                                                    -----------     -----------     -----------
<S>                                                 <C>             <C>             <C>
      Gross claims and claims expenses incurred     $ 1,250,259     $ 1,554,813     $   325,761
      Ceded claims and claims expenses incurred        (368,724)       (727,408)        (98,054)
                                                    -----------     -----------     -----------
      Net claims and claims expenses incurred       $   881,535     $   827,405     $   227,707
                                                    ===========     ===========     ===========
</TABLE>

      The following table presents a reconciliation of the beginning and ending
      balances of net liabilities for unpaid claims and claims expenses. The
      gross liabilities for unpaid claims and claims expenses at period ends are
      as reflected in the balance sheet. The net liabilities for unpaid claims
      and claims expenses reflect deductions for reinsurance recoverable on
      unpaid claims and claims expenses, also as reflected in the balance sheet.

<TABLE>
<CAPTION>
                                                                              Year ended December 31,
                                                                       2002            2001            2000
                                                                    -----------     -----------     -----------
<S>                                                                 <C>             <C>             <C>
      Net unpaid claims and claims expenses, beginning of period    $ 1,621,970     $ 1,375,156     $   172,576
                                                                    -----------     -----------     -----------

      Net unpaid claims and claims expenses
        of  Lloyd's syndicates ownership acquired and of
        Trenwick Group Inc. at date of acquisition, respectively         78,817              --       1,220,989
                                                                    -----------     -----------     -----------

      Provision, net of reinsurance recoverable:
         Claims incurred in the current period                          596,476         716,525         215,555
         Claims incurred prior to the current period                    303,379         120,773          17,523
                                                                    -----------     -----------     -----------
               Total provision                                          899,855         837,298         233,078
                                                                    -----------     -----------     -----------

      Payments, net of reinsurance:
        Claims incurred in the current period                          (105,393)       (142,475)        (54,826)
        Claims incurred prior to the current period                    (537,420)       (439,799)       (204,484)
                                                                    -----------     -----------     -----------
         Total payments                                                (642,813)       (582,274)       (259,310)
                                                                    -----------     -----------     -----------

      Foreign currency translation adjustment to net
        unpaid claims and claims expenses                                81,634          (8,210)          7,823
                                                                    -----------     -----------     -----------
      End of period:
        Net unpaid claims and claims expenses                         2,039,463       1,621,970       1,375,156
      Reinsurance recoverable on unpaid claims
        and claims expenses                                           1,659,441       1,390,955         999,968
                                                                    -----------     -----------     -----------
        Gross unpaid claims and claims expenses                     $ 3,698,904     $ 3,012,925     $ 2,375,124
                                                                    ===========     ===========     ===========
</TABLE>

      Unpaid claims and claims expense at year end 2002 and 2001 of $3,718,124
      and $3,032,748, respectively, include amounts approved for payment but
      unpaid at year end 2002 and 2001 ($19,220 and $19,823, respectively).
      These amounts are reflected in the above table as


                                      102
<PAGE>

      payments within the period when approved for payment by Trenwick.
      Reinsurance recoverables on unpaid claims and claims expenses at year end
      2002 and 2001 of $1,803,011 and $1,411,469, respectively, include amounts
      recoverable on losses that have been paid by Trenwick but for which
      reimbursements have not been received from ceding companies at year end
      2002 and 2001 ($255,611 and $156,373, respectively). These amounts are
      reflected in the above table as receipts within the period when approved.
      In addition, the 2002 and 2001 provisions for claims and claims expenses
      incurred of $881,535 and $827,405, respectively, include benefits related
      to reductions in the liability under the contingent interest notes
      ($18,320 and $9,893, respectively). These amounts are not reflected in the
      above table. The amount in the above table reflected as net unpaid claims
      and claims expenses of Lloyd's syndicates ownership required represents
      the reinsurance liabilities incurred to close out prior years of account
      of syndicates for which Trenwick provided a greater percentage of the
      capital in 2002 than in 2001. Workers' compensation claims subject to
      discounting were $4,678 and $3,998, respectively, at year end 2002 and
      2001, and the related discount was $1,464 and $1,145, respectively.

      During the year ended December 31, 2002, Trenwick recorded increases in
      claims and claims expenses related to prior years of $303,379. Of this
      amount, approximately $27,408 related to adverse development on property
      losses stemming from the September 11, 2001 terrorist attacks. The
      remaining $275,971 of loss reserve increases are a result of the
      reassessment of reserve levels, a culmination of work completed by both
      Trenwick's internal actuaries and independent actuarial consultants in all
      of Trenwick's businesses, described in detail below. Of the reserve
      increases recorded, approximately $169,422 or 61.4%, relates to Trenwick's
      U.S. treaty reinsurance operations and principally impacts the most recent
      accident years, 1999 to 2001, where deterioration has occurred across all
      lines of business. A significant portion of the deterioration arose in the
      general liability and asbestos and environmental lines of business.
      Trenwick's U.S. specialty program insurance, now in runoff, contributed
      approximately $45,527, or 16.5% of the reserve increases recorded in 2002.
      This deterioration was concentrated in a small number of programs and
      related primarily to general liability business. Of the remaining reserve
      increases recorded, $51,573 emanated from Trenwick's international
      liability business written through Trenwick International, now in runoff.
      The last significant component of the increases on prior years' reserves
      for unpaid claims and claims expenses was recorded by Trenwick Managing
      Agents, which contributed $30,826 of the reserve increases. These
      increases related primarily to the financial institutions and professional
      indemnity lines of business written through Trenwick's Lloyd's syndicates.
      These reserve increases were offset in part by a decrease in reserves for
      prior years' claims at LaSalle Re of $15,477.

      As a result of deterioration in loss reserve indications during the first
      nine months of 2002, Trenwick engaged external actuarial consultants
      during the fourth quarter to assist management in reviewing reserves for
      December 31, 2002. Based on the results of our external and internal
      actuarial studies, significant reserve adjustments of $106,600 were
      recorded in the fourth quarter of 2002.

      With respect to the 2002 provision for claims incurred prior to the
      current period, approximately 87% related to claims occurring between 1998
      and 2001 and was spread across multiple lines of business. The period from
      1998 to 2001 represents a period of weak insurance and reinsurance pricing
      and the actual loss results for business written during that period have
      turned out to be significantly worse than originally estimated by Trenwick
      when it originally


                                      103
<PAGE>

      wrote the business and subsequently re-estimated reserves for this
      business.

      During the year ended December 31, 2001, claims in the current period
      include an estimated loss from the September 11, 2001 terrorist attacks of
      $366,300 before reinsurance recoverable of approximately $268,100. The
      principal losses related to aviation risks underwritten by Trenwick's
      operations at Lloyd's and property and related risks, including business
      interruption, underwritten by LaSalle Re. Trenwick's estimate of its
      losses from aviation risks from the September 11, 2001 terrorist attacks
      is based on two maximum losses and two partial losses. Estimates of its
      property and related losses is based on two maximum losses and two partial
      losses. Estimates of Trenwick's property and related losses are based on
      an assessment of individual policies which it has determined have exposure
      to the September 11, 2001 terrorist attacks. This assessment included
      market share analysis, probable maximum loss analysis, independent risk
      modeling analysis and cedant loss estimates.

      Claims incurred in 2001 also included other catastrophe losses totaling
      $24,000. The largest of these losses was tropical storm Allison and storms
      affecting the Midwest United States amounting to $10,500 and the November
      12, 2001 American Airlines crash in Queens, New York of $7,800.

      In 2001, Trenwick recorded a net increase $110,880 (net of recoveries
      under the contingent interest note of $9,893) in estimates for claims
      occurring in prior accident years. The increase in 2001 is principally due
      to reserve strengthening recorded on business acquired in the
      Trenwick/LaSalle business combination. This reserve strengthening includes
      $15,654 related to U.S. casualty treaty reinsurance business, which was
      underwritten prior to 2001 and $11,530 related to prior participation in
      the ECRA Pool. In addition, $13,940 of the loss reserve strengthening
      related to U.S. specialty program insurance. Also included in the reserve
      strengthening was $20,463 relating principally to directors and officers
      liability business written through Trenwick's Lloyd's syndicates. Lastly,
      the reserve strengthening included $48,293 stemming from deterioration in
      discontinued businesses and reviews of the property insurance and
      liability business lines written through Trenwick International. The
      increase in 2000 is principally due to unfavorable development of prior
      year estimates for LaSalle Re and Trenwick America Re offset in part by
      favorable development of prior year reserves at the Lloyd's syndicates
      managed by Trenwick Managing Agents. The increase in 2000 reflects a
      deterioration in market conditions since 1997.

      Inflation

      Inflation raises the cost of economic losses and non-economic damages
      covered by insurance contracts and therefore is a factor in determining
      effective rates of reinsurance and the appropriateness of reserves. The
      methods used to estimate individual case reserves and reserves for claims
      incurred but not yet reported implicitly incorporate the effects of
      inflation in the projection of ultimate losses. Due to the inherent
      uncertainties of estimating unpaid claims and claims expenses, actual
      claims and claims expenses may deviate, perhaps substantially, from
      estimates reflected in these financial statements. Management believes
      that its claim estimation methods are reasonable and prudent and that its
      unpaid claims and claims expenses at year end 2002 are adequate.

      Latent Injury And Toxic Tort Claims

      The balance of unpaid claims and claims expenses also includes provisions
      for latent injury or toxic tort claims such as asbestos that cannot be
      estimated with traditional techniques. Due to inconsistent court decisions
      in federal and state jurisdictions and the wide variation among


                                      104
<PAGE>

      insureds with respect to underlying facts and coverage, uncertainty exists
      with respect to these claims as to liabilities of ceding companies and,
      consequently, reinsurance coverage. During the year ended December 31,
      2002, Trenwick increased its asbestos and environmental ("A&E") reserves
      by $28,997. In making its reserve estimates, management considered that
      this addition to A&E reserves resulted in a three-year survival ratio
      (calculated as the A&E reserves at year-end divided by the average annual
      A&E payments over the previous 3 calendar years and represents the number
      of years that existing reserves will last if the current level of average
      annual payments for the last three years repeats itself indefinitely) of
      12.9, which is higher than the property and casualty insurance ratio at
      December 31, 2001 as reported by A.M. Best and which Trenwick believes is
      consistent with levels of companies that have recorded A&E adjustments in
      2002.

      The estimate of net unpaid claims and claims expenses for asbestos and
      environmental claims at year end 2002 and 2001 was $112,006 and $91,050,
      respectively, comprising gross unpaid claims and claims expenses of
      $145,048 and $118,688, net of reinsurance recoverable on unpaid claims and
      claims expenses of $33,042 and $27,638. During the years ended December
      31, 2002, 2001 and 2000, payments of A&E related claims and claims
      expenses were $7,025, $10,110 and $10,457, respectively. The above figures
      include liabilities emanating from Trenwick's participation in the ECRA
      Pool.

      Reinsurance

      Reinsurance and retrocessional agreements are entered into to reduce our
      exposure on individual risks, catastrophic losses and other large losses
      in all lines of business. Trenwick remains primarily liable in the event
      that reinsurers fail to meet their obligations, however, Trenwick holds
      collateral under some of these agreements which would serve to offset a
      substantial portion of the liability should the reinsurer fail to pay.
      Reinsurance contracts which do not meet insurance accounting risk transfer
      requirements are classified as deposits. These deposits are treated as
      financing transactions and interest income or interest expense are
      credited or charged to them according to contract terms.

      Trenwick America Re's reinsurance treaties consist principally of property
      catastrophe reinsurance treaties. Trenwick International and Trenwick
      Managing Agents, as is customary with companies operating in the London
      Market and Lloyd's, have purchased larger amounts of reinsurance to
      protect themselves. Canterbury Financial Group Inc. has purchased specific
      reinsurance programs for each of the programs underwritten by its
      insurance companies.

      From 1989 to 1999, Trenwick America Re purchased aggregate excess of loss
      ratio treaties from several reinsurers. These facilities provided Trenwick
      America Re with a layer of protection against adverse results from its
      domestic casualty business in excess of specified loss ratios. Trenwick
      America Re did not purchase an aggregate excess of loss ratio treaty after
      1999 when its reinsurance philosophy was modified and it began using
      specific retrocessional and property catastrophe protections to manage its
      underwriting results, and to eliminate the use of aggregate stop loss
      coverages to provide capital enhancement. Interest expense on funds held
      under these facilities is recorded as an investment expense, and is
      included in the funds held offset at year end 2002 and 2001.

      At the time of the closing of the merger of Trenwick Group Inc. and
      Chartwell (October 27, 1999), Chartwell purchased a reinsurance policy
      from London Life and Casualty Reinsurance Co. Ltd. and Scandinavian
      Reinsurance Co. Ltd. providing for up to $100,000 in coverage in


                                      105
<PAGE>

      order to indemnify Trenwick Group Inc. against unanticipated increases in
      Chartwell's reserves for business written on or before the date the merger
      was completed. Amounts recoverable under the agreement are presented gross
      in the balance sheet at both year end 2002 and 2001 as reinsurance
      recoverable on unpaid claims and claims expenses ($91,970) and
      miscellaneous accounts receivable, included in other assets ($8,030). The
      related benefit for losses ceded to the agreement was reflected as a
      reduction to claims and claims expenses incurred and the benefit related
      to other underwriting balances was reflected as a reduction to
      underwriting expenses in the historical financial statements of Trenwick
      Group Inc.

      In 2002, LaSalle Re purchased two excess of loss programs which provided
      coverage of $20,000 in excess of the first $30,000 of losses per
      occurrence and $5,000 in excess of the first $50,000 of losses per
      occurrence both of which, as of April 1, 2002, were retroceded to
      Endurance as part of the sale of LaSalle's in-force reinsurance business.
      A third excess of loss program which provided coverage of $25,000 in
      excess of the first $100,000 of losses per occurrence for a four year
      period with a yearly aggregate limit of $50,000 and a contract aggregate
      limit of $150,000 was commuted by LaSalle Re in December 2002.

      In 2001, LaSalle Re purchased three excess of loss programs which provide
      coverage of $20,000 in excess of the first $30,000 of losses per
      occurrence, $5,000 in excess of the first $50,000 of losses per occurrence
      and $25,000 in excess of the first $75,000 of losses per occurrence.

      Reinsurance recoverable balances, net

      The components of reinsurance recoverable balances, net at year end 2002
      and 2001 are as follows:

<TABLE>
<CAPTION>
                                                                 2002          2001
                                                              ----------    ----------
<S>                                                           <C>           <C>
      Paid claims                                             $  255,611    $  156,373
      Unpaid claims and claims expenses, net of funds held
         offset of $112,041 and $135,859                       1,547,400     1,255,096
                                                              ----------    ----------
      Reinsurance recoverable balances, net                   $1,803,011    $1,411,469
                                                              ==========    ==========
</TABLE>

      Reinsurance recoverable balances at year end 2002 and 2001 are net of
      allowances for doubtful accounts of $80,369 and $54,580, respectively,
      which includes $37,194 and $22,896 for paid claims and $43,175 and $31,684
      for unpaid claims and claims expenses, respectively.

      Letters of credit, trust accounts and funds withheld in the aggregate
      amount of $294,595 (including interest) have been arranged in favor of
      Trenwick collateralizing reinsurance recoverables with respect to certain
      retrocessionaires.


                                      106
<PAGE>

Note 8 Investing Activities

      Debt and Equity Security Investments

      All of Trenwick's debt securities have been classified as "available for
      sale." Both debt and equity securities are reported at estimated fair
      value principally using quoted market prices or broker dealer quotes.
      Included in equity securities are limited partnerships in which Trenwick
      holds greater than a 3% interest, and which are reported at their equity
      value.

      Fair value and amortized cost or cost of debt and equity securities at
      December 31, 2002 and 2001 follow:

<TABLE>
<CAPTION>
                                                                2002                        2001
                                                       ------------------------    ------------------------
                                                          Fair                        Fair
                                                         Value          Cost         Value          Cost
                                                       ----------    ----------    ----------    ----------
<S>                                                    <C>           <C>           <C>           <C>
      U.S. and U.K. federal government
           securities, including agencies              $  732,485    $  721,553    $  443,683    $  435,994
      Other foreign government securities                  95,316        94,387        79,369        77,693
      U.S. municipal government securities                  4,544         3,974           125           125
      Mortgage and other asset-backed securities          277,728       269,604       670,279       652,908
      Corporate and other debt securities                 382,761       390,695       767,144       759,309
                                                       ----------    ----------    ----------    ----------
      Debt securities fair value and amortized cost    $1,492,834    $1,480,213    $1,960,600    $1,926,029
                                                       ==========    ==========    ==========    ==========
      Publicly traded common and preferred stock       $       --    $       --    $   14,619    $    7,865
      Limited partnerships                                  8,849         8,849(1)      9,545         9,545(1)
                                                       ----------    ----------    ----------    ----------
      Equity securities fair value and cost            $    8,849    $    8,849    $   24,164    $   17,410
                                                       ==========    ==========    ==========    ==========
</TABLE>

      (1)   Amounts represent cost adjusted for changes in equity of the limited
            partnerships.

      Gross unrealized gains and losses on debt and equity securities at
      December 31, 2002 and 2001 follow:

<TABLE>
<CAPTION>
                                                              2002                         2001
                                                    ------------------------     ------------------------
                                                      Gains         Losses         Gains         Losses
                                                    ----------    ----------     ----------    ----------
<S>                                                 <C>           <C>            <C>           <C>
      U.S. and U.K. federal government
        securities, including agencies              $   11,333    $     (405)    $    9,812    $   (2,123)
      Other foreign government securities                  947           (17)         1,946          (270)
      U.S. municipal government securities                 570            --             --            --
      Mortgage and other asset-backed securities         9,496        (1,372)        17,842          (471)
      Corporate and other debt securities                  844        (8,775)        23,111       (15,276)
                                                    ----------    ----------     ----------    ----------
      Debt securities gross gains and losses        $   23,190    $  (10,569)    $   52,711    $  (18,140)
                                                    ==========    ==========     ==========    ==========
      Equity securities gross gains and losses      $       --    $       --     $    6,754    $       --
                                                    ==========    ==========     ==========    ==========
</TABLE>

      The fair value and amortized cost for debt securities at year end 2002 are
      shown below by contractual maturity periods, except mortgage-backed and
      asset-backed securities which are included based on expected maturity
      dates. Actual maturities will differ from contractual maturities because
      borrowers generally have the right to prepay obligations.


                                      107
<PAGE>

                                                   Fair       Amortized
                                                   Value          Cost
                                                ----------    ----------
      Due in one year or less                   $  667,665    $  666,754
      Due after one year through five years        491,306       474,874
      Due after five years through ten years       236,267       226,333
      Due after ten years                           97,596       112,252
                                                ----------    ----------
      Debt securities total maturities          $1,492,834    $1,480,213
                                                ==========    ==========

      Net Investment Income and Net Investment Gains (Losses)

      Investment income, consisting principally of interest and dividends, is
      recognized when earned, net of investment expenses. In computing interest
      income, premiums are amortized and discounts are accreted on debt
      securities utilizing the interest method. The amortization and accretion
      for mortgage-backed and other asset-backed securities is adjusted, when
      sufficient information exists to estimate the probability and timing of
      their prepayments, to the amount that would have existed had the new
      effective yield been applied since the acquisition of the security.
      Imputed interest on the funds held offset to reinsurance recoverable is
      included in investment expense.

      Trenwick generally limits investments in debt securities that are rated
      below investment grade, as these investments are subject to a higher
      degree of credit risk than investment grade securities. Trenwick also
      monitors the creditworthiness of the portfolio, including below investment
      grade securities, and writes down investments when fair values decline for
      reasons other than changes in interest rates or other perceived temporary
      conditions. Realized gains or losses on disposition of investments are
      determined on the basis of specific identification.

      Sources of net investment income follow:

<TABLE>
<CAPTION>
                                                           Year ended December 31,
                                                     2002          2001          2000
                                                  ---------     ---------     ---------
<S>                                               <C>           <C>           <C>
      Debt securities interest                    $ 113,243     $ 120,866     $  49,518
      Equity securities dividends and earnings         (862)        5,366           421
      Cash and cash equivalents interest              7,113        15,727        10,788
      Other investment income                            17         2,602         2,805
                                                  ---------     ---------     ---------
      Gross investment income                       119,511       144,561        63,532
      Imputed interest expense                       (9,821)      (11,342)       (2,850)
      Other investment expenses                      (4,652)       (4,105)       (1,967)
                                                  ---------     ---------     ---------
      Net investment income                       $ 105,038     $ 129,114     $  58,715
                                                  =========     =========     =========
</TABLE>

      Net realized gains (losses) on sales of investments and their effect on
      net income follow:

<TABLE>
<CAPTION>
                                                       Year ended December 31,
                                                    2002         2001         2000
                                                  --------     --------     --------
<S>                                               <C>          <C>          <C>
      Debt securities realized gains              $ 57,352     $ 24,487     $  1,221
      Equity securities realized gains               8,785        1,132           97
      Debt securities realized losses              (18,093)      (9,159)      (2,658)
      Equity securities realized losses                 --       (7,664)         (46)
                                                  --------     --------     --------
      Net realized investment gains (losses)        48,044        8,796       (1,386)
      Applicable minority interest                      --           --         (450)
                                                  --------     --------     --------

      Net realized investment gains (losses)      $ 48,044     $  8,796     $   (936)
                                                  ========     ========     ========
</TABLE>


                                      108
<PAGE>

      During the years ended December 31, 2002 and 2001, Trenwick wrote down the
      fair value of certain securities by $1,365 and $3,441, respectively and
      reflected the write-downs as realized losses on investments to recognize
      declines in value that were other than temporary. No securities were
      written down during the year ended December 31, 2000.

      Net unrealized gains (losses) on investments and their effect on other
      comprehensive income (loss) follow:

<TABLE>
<CAPTION>
                                                           2002         2001        2000
                                                         --------     --------    --------
<S>                                                      <C>          <C>         <C>
      Debt securities net gains                          $ 17,243     $ 22,904    $ 35,404
      Equity securities net gains (losses)                  2,031        2,285      (2,013)
                                                         --------     --------    --------
      Net investment gains                                 19,274       25,189      33,391
      Applicable minority interest                             --           --         966
                                                         --------     --------    --------
      Net investment gains included in comprehensive
        income before income taxes                         19,274       25,189      32,425
      Applicable income taxes                               8,009        6,370       6,509
                                                         --------     --------    --------
      Net investment gains included in
        comprehensive income (loss)                        11,265       18,819      25,916
      Less net realized investment gains (losses)
        Included in net income (loss)                      37,849        8,520      (1,040)
                                                         --------     --------    --------
      Net unrealized investment gains (losses)
        included in other comprehensive income (loss)    $(26,584)    $ 10,299    $ 26,956
                                                         ========     ========    ========
</TABLE>

      Net Unrealized Investment Gains (Losses)

      Unrealized investment gains and losses are calculated as the difference
      between recorded values (fair value) and amortized cost or cost. Net
      unrealized investment gains and losses, net of applicable deferred income
      taxes, are included in common shareholders' equity as accumulated other
      comprehensive income.

      Components of net unrealized investment gains at year end 2002 and 2001
      follow:

                                                      2002        2001
                                                  --------    --------

      Debt securities net unrealized gains        $ 12,621    $ 34,571
      Equity securities net unrealized gains            --       6,754
                                                  --------    --------
      Net unrealized gains before income taxes      12,621      41,325
      Applicable deferred income taxes              10,359      12,479
                                                  --------    --------
      Net unrealized investment gains             $  2,262    $ 28,846
                                                  ========    ========

Note 9 Financing Activities

      Indebtedness, Minority Interest and Convertible Preferred Stock

      Indebtedness and other mandatorily redeemable obligations are recorded at
      their fair value at the date of the Trenwick/LaSalle business combination
      or at principal amounts advanced subsequent thereto. Discount on these
      obligations is accreted utilizing the interest method. The principal
      amount of Trenwick's contingent interest note obligations is adjusted for
      any adverse development in the applicable liability for claims and claims
      expenses. The mandatorily redeemable preferred capital securities held as
      an investment by a subsidiary (face amount $18,712) are eliminated in
      consolidation.


                                      109
<PAGE>

      On November 29, 2002 Trenwick announced that it had elected to suspend,
      with immediate effect and for an indefinite period, payment of dividends
      on the mandatorily redeemable preferred capital securities of its U.S.
      subsidiary, on the preferred shares of its Bermuda subsidiary and on its
      Series B convertible preferred stock.

      The carrying values of indebtedness, minority interest and convertible
      preferred stock at December 31, 2002 and 2001 follow:

                                                    2002        2001
                                                  --------    --------
      Senior notes                                $ 74,777    $ 73,920
      Senior credit facility                            --     195,035
      Contingent interest notes                      1,721      19,923
      Other debt                                        --       2,385
                                                  --------    --------
         Total indebtedness                         76,498     291,263
                                                  --------    --------
      Mandatorily redeemable preferred
        capital securities of U.S. subsidiary       68,320      68,119
      Preferred shares of
        Bermuda subsidiary                          75,000      75,000
                                                  --------    --------
         Total minority interest                   143,320     143,119
      Convertible preferred stock                   40,000          --
                                                  --------    --------
      Total indebtedness, minority interest
               and convertible preferred stock    $259,818    $434,382
                                                  ========    ========


                                      110
<PAGE>

      Convertible Preferred Shares

      On September 27, 2000, Trenwick assumed the benefits and obligations of
      LaSalle Re Holdings under a $100,000 catastrophe equity put option. The
      catastrophe equity put option was amended and restated as of January 1,
      2001 and amended as of January 25, 2002. As amended, the catastrophe
      equity put option enabled Trenwick to raise up to $55,000 of equity,
      through the issue of convertible preferred shares to European Reinsurance
      Company of Zurich ("European Re"), a subsidiary of Swiss Reinsurance
      Company, in the event there was a qualifying catastrophic event or events
      occurring prior to January 1, 2002.

      As a result of the terrorist attacks of September 11, 2001, LaSalle Re
      incurred in excess of $140,000 in catastrophe losses as defined under the
      catastrophe equity put option agreement and Trenwick delivered notice of
      exercise of the catastrophe equity put on March 28, 2002. On July 1, 2002,
      Trenwick commenced an arbitration proceeding seeking $55,000 in damages
      and other relief against European Re. The claims arose out of European
      Re's failure to meet its obligations under the catastrophe equity put
      option agreement. On September 6, 2002, the catastrophe put option was
      amended and restated and the pending arbitration proceedings were
      terminated. Under the terms of the second restated agreement, European Re
      purchased 550,000 of Trenwick's Series B Cumulative Perpetual Preferred
      Shares (the "Series B Shares") with a liquidation preference of $100 per
      share for an aggregate purchase price of $40,000 ($72.73 per share). The
      Series B Shares bear cumulative dividends, payable quarterly in arrears,
      based upon the Series B Shares' Standard & Poor's rating at LIBOR plus a
      margin determined in accordance with the following schedule:

                     Standard & Poor's Rating           LIBOR Margin

                BBB- or above                                  3.75%
                BB+                                            4.25%
                BB                                             4.50%
                BB-                                            4.75%
                Below BB-                                      6.00%

      These factors adjust upward by 0.25% on the third anniversary if the
      securities are still unrated, and upward by 0.50% on the fifth anniversary
      if they are still unrated. Also, if the Standard & Poor's rating is below
      BBB- on the fifth anniversary, the factors adjust upward by an additional
      0.50%. The maximum adjustment based upon these circumstances is 0.75%.

      During the year ended December 31, 2002, Trenwick incurred $1,384 of
      dividends on the convertible preferred stock. At December 31, 2002, the
      Series B Shares were rated D by Standard & Poor's.

      The Series B Shares are convertible into common shares of Trenwick after
      five years or upon the occurrence of a "special conversion event" at the
      greater of book value or the average thirty-day trading price of the
      common shares. Special conversion events are either the occurrence of a
      change in control without the written consent of the registered holders of
      more than 50% of the Series B shares outstanding ("Change in Control
      Conversion Event"), or the failure of Trenwick to maintain a GAAP net
      worth as defined under the terms of the Certificate of Designation with
      respect to Series B Cumulative Convertible Perpetual Preferred Shares
      equal to at least $225,000 for a period of more than sixty days ("Net
      Worth Conversion Event"). On February 20, 2003, Trenwick notified European
      Re that its GAAP net worth at


                                      111
<PAGE>

      December 31, 2002, as defined, was less than $225,000. In the event that
      the GAAP net worth of Trenwick remains below $225,000 through April 19,
      2003, a Net Worth Conversion Event will have occurred and the holders of
      the Series B Shares will thereafter be able to convert their shares on not
      less than sixty days notice to Trenwick. Management believes it is
      unlikely that the GAAP net worth of Trenwick will exceed $225,000 at such
      time. The conversion price per common share of the Series B shares is the
      greater of i) the liquidity factor times the average thirty day stock
      price preceding the conversion date, ii) the liquidity factor times Book
      Value Per Common Share (as defined) or iii) par value of a common share.
      The liquidity factor will be calculated as an amount equal to 0.8 if the
      conversion occurs within 60 days after a Change in Control Conversion
      Event or 1.0 if the conversion does not occur within 60 days after the
      occurrence of a Change in Control Conversion Event.

      Trenwick has the option to redeem the Series B Shares after the first
      anniversary of the issuance, paying an early redemption premium of $2.00
      per share if redeemed before the second anniversary, and $1.00 per share
      if redeemed between the second and third anniversary. This option expires
      on the fifth anniversary of issuance of the Series B Shares.

      The maximum number of Trenwick common shares that could be required to be
      issued upon conversion of the Series B Shares is 550,000,000 which would
      occur when both the book value of common stock and the average thirty-day
      trading price of the common shares were less than or equal to $0.10 per
      share. Trenwick currently has the authority to issue up to 150,000,000
      preferred and common shares without prior authorization from the
      shareholders. Trenwick, therefore does not currently have the ability to
      control settlement of the Series B Shares and has therefore recorded them
      as temporary equity in the accompanying balance sheet. As of December 31,
      2002, the Series B shares would be settled with 12,188,756 common shares
      upon conversion. The following table details how changes in the price of
      Trenwick's common shares or changes in book value would affect the
      settlement amounts:

      Average market
        value of
      common shares                      Book value per share
      --------------  -------------------------------------------------------
                      $0.10-$0.50    $0.51-$1.00    $1.01-$2.00   $2.01-$5.00
                      -----------    -----------    -----------   -----------
                         Range of shares issuable upon conversion (in millions)
       $0.10-$0.50      550 - 110      108 - 55        54 - 28       27 - 11
       $0.51-$1.00      108 - 55       108 - 55        54 - 28       27 - 11
       $1.01-$2.00       54 - 28        54 - 28        54 - 28       27 - 11
       $2.01-$5.00       27 - 11        27 - 11        27 - 11       27 - 11

      Future Minimum Principal Payments on Indebtedness and Minority Interest

      Future minimum principal payments on indebtedness and minority interest at
      December 31, 2002 follow: 2003, $75,000; 2004, $0; 2005, $0; 2006, $1,000,
      2007, $0 and thereafter $86,350. The foregoing amounts include a principal
      payment of $75,000 due to the senior note holders on April 1, 2003.
      Trenwick anticipates that it will be unable to make this payment and has
      entered into discussions with the senior note holders concerning a
      proposed restructuring or amendment of the senior notes. There can be no
      assurance that an agreement relating to this restructuring will be reached
      by April 1, 2003. If such an agreement is not reached, or a waiver thereof
      obtained, Trenwick would be in default under the terms of the senior
      notes.


                                      112
<PAGE>

      Senior Notes

      The senior notes, with a par value of $75,000, are due April 1, 2003, and
      are not subject to redemption prior to maturity. They are unsecured
      obligations and rank senior in right of payment to all existing and future
      subordinated indebtedness of Trenwick America Corporation ("Trenwick
      America"), Trenwick's U.S. holding company. Under the terms of the notes,
      Trenwick America is not restricted from incurring indebtedness, but may
      not incur secured indebtedness for borrowed money unless it provides an
      equivalent security interest to the holders of the senior notes. Interest
      on the notes is payable semi-annually at an annual rate of 6.7%. As
      permitted under the terms of the senior notes, effective November 29,
      2002, Trenwick America suspended payment of interest on these obligations,
      however interest continues to be charged to operations at the imputed rate
      of 7.9%. Trenwick is engaged in continuing discussions with holders of the
      senior notes with respect to a possible restructuring of these senior
      notes. Trenwick's agreements entered into in connection with the renewal
      of its letter of credit facility in December 2002 provided that Trenwick
      would replace, refinance or restructure these senior notes by March 1,
      2003. The banks participating in Trenwick's letter of credit facility have
      provided to Trenwick a waiver of this March 1, 2003 deadline as
      discussions with the senior note holders continue. At this time, Trenwick
      does not have sufficient available liquidity to pay the amount due on
      April 1, 2003 and is uncertain whether it will be able to complete the
      restructuring by that date. If Trenwick is unable to restructure these
      senior notes by April 1, 2003 and either the banks under the credit
      facility or the senior noteholders determine to exercise the rights
      available to them or take other action with respect to the assets of
      Trenwick, Trenwick and/or one or more of its subsidiaries may be forced to
      seek protection from creditors through proceedings commenced in Bermuda
      and other jurisdictions including the United States. In addition, at any
      time the insurance regulatory authorities having jurisdiction over
      Trenwick's insurance company operating subsidiaries may commence voluntary
      or involuntary proceedings for the formal supervision, rehabilitation or
      liquidation of such subsidiaries, or one or more of the creditors of
      Trenwick or its subsidiaries may commence proceedings against Trenwick or
      its non-regulated subsidiaries seeking their liquidation.

      Senior Credit Facility

      Concurrent with the Trenwick/LaSalle business combination in September of
      2000, Trenwick America and Trenwick Holdings, Trenwick's United States and
      United Kingdom holding companies, entered into an amended and restated
      $490,000 credit agreement with various lending institutions (the "Banks"),
      which was guaranteed by LaSalle Re Holdings. The credit agreement
      consisted of both a $260,000 revolving credit facility and a $230,000
      letter of credit facility. The revolving credit facility was subsequently
      converted into a four-year term loan and repaid in full on June 17, 2002.
      On December 24, 2002, the credit agreement was amended to reduce the
      letter of credit facility, which is utilized by Trenwick to support its
      underwriting operations at Lloyd's, to the currently outstanding $182,500.
      The letter of credit facility is scheduled to terminate on December 31,
      2003 although the letters of credit issued pursuant to the facility will
      not expire until December 31, 2006.

      Pursuant to a guaranty agreement entered into concurrently with the credit
      agreement, Trenwick has guaranteed the obligations of Trenwick America and
      Trenwick Holdings under the credit agreement. In April of 2002, Trenwick
      pledged the capital stock of LaSalle Re Holdings, which was the guarantor
      of the obligations under the credit agreement, and LaSalle Re as
      collateral to the Banks. In December of 2002, Trenwick agreed to provide
      the Banks additional security interests as described below.


                                      113
<PAGE>

      On October 18, 2002, A.M. Best Company lowered the financial strength
      ratings of Trenwick's operating subsidiaries below A-. The lowered A.M.
      Best Company ratings constituted an event of default under the credit
      agreement. In addition, Trenwick's increases in reserves for unpaid claims
      and claims expenses and the establishment of a Trenwick deferred tax asset
      valuation allowance in the third quarter of 2002 resulted in Trenwick
      violating the financial covenants in the credit agreement requiring
      Trenwick to maintain a minimum tangible net worth and minimum risk-based
      capital. On November 13, 2002, Trenwick, its subsidiaries and the Banks
      executed a forbearance agreement with respect to the events of default
      arising from Trenwick's lowered A.M. Best Company ratings and financial
      covenant violations.

      Subsequently, an amendment and waiver of default under the credit
      agreement and amendment to the guaranty agreement were entered into on
      December 24, 2002 (the "December Amendments"). The December Amendments
      extended the letter of credit facility through December 31, 2003 to
      support Trenwick's underwriting operation at Lloyd's for the 2003 year of
      account. To those Banks extending their letters of credit, Trenwick agreed
      to pay a 5% per annum cash letter of credit fee, issue pay-in-kind notes
      bearing interest at LIBOR plus 2.5% per annum to evidence an additional
      3.16% per annum letter of credit fee, issue warrants equal to 10% of
      Trenwick's fully diluted equity capital, and pay 15% of the profits earned
      by Trenwick's Lloyd's operations for the 2002 and 2003 Lloyd's years of
      account. Trenwick, Trenwick America and Trenwick Holdings agreed to
      provide the Banks a security interest in all of, their respective equity
      interests in, and the assets and property of, their direct and indirect
      subsidiaries as additional collateral for the Banks, and to cause the
      subsidiaries to provide a guaranty to the Banks, subject to applicable
      laws and regulations and certain existing contractual rights of holders of
      other indebtedness.

      The December Amendments also prohibit Trenwick and its subsidiaries from
      declaring or paying any dividends (including on Trenwick's common shares,
      the Series A Preferred Shares of LaSalle Re Holdings and the capital
      securities issued by Trenwick Capital Trust I). The December Amendments
      and other amendments and waivers entered into in the first quarter of 2003
      waive certain other defaults, add covenants further restricting the
      operation of Trenwick's business, prohibit Trenwick from making certain
      payments without the Banks' approval, prohibit Trenwick and its
      subsidiaries from selling or otherwise disposing of any assets or
      property, require Trenwick to regularly report certain financial
      information to the Banks, and adjust downward certain of the financial
      covenants.

      Pursuant to the December Amendments, Trenwick is required to collateralize
      with cash, cash equivalents and marketable securities 60% of the
      outstanding letters of credit by August 1, 2003. In addition, Trenwick is
      required to use its best efforts to terminate the letters of credit by
      December 31, 2003. In order to do so, the letters of credit would need to
      be replaced with other letters of credit or collateral acceptable to
      Lloyd's. In the event Trenwick has not terminated the letters of credit by
      December 31, 2003, it is required on such date to collateralize with cash,
      cash equivalents and marketable securities the full amount of the
      outstanding letters of credit. At this time, Trenwick does not have
      sufficient available liquidity to collateralize the letters of credit as
      required by the December Amendment. Additionally, Trenwick does not
      believe that it will be able to replace the letters of credit with other
      letters of credit or collateral acceptable to Lloyd's.


                                      114
<PAGE>

      Since December 2002, Trenwick has entered into additional amendments and
      numerous waivers with the Banks providing for, among other things, waivers
      of potential covenant defaults, further reductions in certain financial
      covenants, additional financial reporting, approval of certain employee
      and other payments, and extension of numerous deadlines imposed under the
      December Amendments.

      If there is an event of default under the credit agreement, including as a
      result of Trenwick failing to collateralize the letters of credit as
      described above, or if there is an event of default under other
      outstanding indebtedness of Trenwick or its subsidiaries, including under
      the senior note facility, resulting in a cross default under the credit
      agreement, Trenwick may be required to fully and immediately collateralize
      the outstanding letters of credit under the terms of the guaranty
      agreement. No liability for any such amounts has been reflected in
      Trenwick's financial statements for any potential future event of default.
      If the potential future events of default are not waived, there is
      substantial doubt as to Trenwick's ability to continue as a going concern
      and Trenwick and/or one or more of its subsidiaries may be forced to seek
      protection from creditors through proceedings commenced in Bermuda and
      other jurisdictions including the United States. In addition, at any time
      one or more of the insurance regulatory authorities having jurisdiction
      over Trenwick's insurance company operating subsidiaries may commence
      voluntary or involuntary proceedings for the formal supervision,
      rehabilitation or liquidation of such subsidiaries, or one or more of the
      creditors of Trenwick or its subsidiaries may commence proceedings seeking
      their liquidation.

      Under the terms of Trenwick's agreements with the Banks, and particularly
      under the December Amendments, Trenwick and its subsidiaries are subject
      to financial and operational restrictions which limit Trenwick's
      flexibility to pursue business and strategic alternatives. These
      restrictions will apply so long as Trenwick and its subsidiaries have
      unpaid reimbursement obligations to the Banks with respect to the letters
      of credit.

      The result of the foregoing is that the future operations of Trenwick, at
      least in the next several years, are likely to consist substantially of
      the sale or management in runoff of some or all of its existing insurance
      and reinsurance businesses including administration of claims, regulatory
      reporting, settlement of reinsurance agreements (including commutations
      thereof where appropriate), cash and investment management and related
      matters. The costs involved in such operations are likely to differ
      significantly from those of prior years, where a significant portion of
      the operating costs related to underwriting, marketing and securing
      reinsurance for new business. The reimbursement of costs as they relate
      directly to the insurance entities themselves will be subject to review by
      regulatory authorities which may challenge these costs or impose other
      restrictions with respect to the runoff including the provision of an
      acceptable runoff plan.

      Contingent Interest Notes

      The contingent interest notes were issued immediately prior to Chartwell's
      acquisition of The Insurance Corporation of New York in 1995 to protect
      Chartwell against the possibility of adverse development of that insurer's
      liability for claims and claims expenses and long-tail casualty exposures,
      which are more fully described in Note 7. Trenwick Group Inc. assumed the
      obligations of Chartwell under the contingent interest notes in the 1999
      Trenwick/Chartwell merger, and Trenwick America subsequently assumed the
      obligations of Trenwick Group Inc. under the contingent interest notes in
      the Trenwick/LaSalle business combination, described in Note 2. The
      contingent interest notes were issued in an aggregate principal amount of
      $1,000 with principal accruing interest at a rate of 8% per annum,
      compounded annually. The interest will not be payable until scheduled
      maturity on June 30,2006 or earlier redemption of the


                                      115
<PAGE>

      contingent interest notes. In addition, the contingent interest notes
      entitle the holders thereof to receive at maturity, in proportion to the
      principal amount of the contingent interest notes held by them, an
      aggregate of from $0, up to $55,000 in contingent interest. The actual
      amount of contingent interest paid will depend on the outcome of certain
      contingencies, the most significant of which is the development over time
      of The Insurance Corporation of New York's reserves for unpaid claims and
      claims expenses.

      During the years ended December 31, 2002 and 2001, Trenwick recorded
      $18,320 and $9,893, respectively, of adverse development related to the
      subject business, and as a result, the carrying value of the contingent
      interest notes at December 31, 2002 has been reduced to the principal
      value of $1,000 plus accrued interest with no contingent interest, which
      is the present value of the amount expected to be paid at maturity. The
      notes will continue to accrue interest at a rate of 8% per year.

      The contingent interest notes contain covenants which relate to the
      maintenance of certain records and limitations on certain indebtedness. At
      December 31, 2002, Trenwick was in compliance with these covenants.

      Letters of Credit

      As of December 31, 2002, Trenwick had $288,151 in letters of credit
      outstanding. This amount includes $196,447 in letters of credit
      outstanding to provide capital to support the participation in certain
      Lloyd's syndicates, of which $182,500 of the letters of credit are
      outstanding under the senior credit facility. The remaining letters of
      credit balance is outstanding primarily under a secured letter of credit
      facility under which letters of credit totaling $91,029 at December 31,
      2002 have been issued in favor of ceding insurance companies to secure
      LaSalle Re's obligations under various reinsurance contracts.

      Lines of Credit

      Trenwick International has established a line of credit under which it can
      borrow up to $4,025 at a rate of 1.0% above the lending bank's base rate.
      Additionally, Trenwick Managing Agents has established a line of credit
      under which it can borrow up to $403 at a rate of 2.5% above the lending
      bank's base rate. There were no borrowings outstanding under either of
      these lines of credit during the 2002 year.

      Mandatorily Redeemable Preferred Capital Securities

      The mandatorily redeemable preferred capital securities, with a face value
      of $110,000, are obligations of a business trust subsidiary of Trenwick
      America. The capital securities mature in February 2037, require
      preferential cumulative semi-annual cash distributions at an annual rate
      of 8.82% and are guaranteed by Trenwick America, within certain limits, as
      to distribution payments and liquidation or redemption payments. On
      November 9, 2002, Trenwick ceased payment of dividends on the capital
      securities. Trenwick America is prohibited from incurring future
      collateralized indebtedness without equally and ratably collateralizing
      the amounts due under the capital securities. The terms of the capital
      securities permit Trenwick America to defer payments of interest at any
      time and from time to time for a period not exceeding ten consecutive
      semi-annual periods, provided that no extension period may extend beyond
      the stated maturity date. Trenwick continues to record interest expense on
      the capital securities at the imputed interest rate of 11.2%.

      The business trust issuing the capital securities holds an investment in
      subordinated debentures of Trenwick America that have an aggregate
      principal amount of $113,403, and interest from that investment is the
      source of cash distributions on the capital securities. The capital
      securities are subject to mandatory redemption in certain circumstances
      pertaining to Trenwick


                                      116
<PAGE>

      America's prepayment or repayment of its subordinated debentures held by
      the trust. In the event of a default by Trenwick America with respect
      either to making required payments on the subordinated debentures or to
      its guarantee under certain circumstances, holders of the capital
      securities may institute a direct action against Trenwick America. On
      January 15, 2003, Trenwick America gave notice of its right to defer
      payment of interest due by its selection of an extension period extending
      the commencement of the next semi-annual interest payment period to August
      1, 2003. In the first quarter of 2001 and the fourth quarter of 2000, a
      Trenwick subsidiary purchased $10,650 and $13,000, respectively, par value
      of the capital securities in the open market for $8,462 and $9,902,
      respectively. The carrying value of these securities and the related
      dividends have been eliminated in consolidation.


                                      117
<PAGE>

      Preferred Shares of LaSalle Re Holdings Limited

      In connection with the Trenwick/LaSalle business combination, as described
      in Note 2, the outstanding Series A preferred shares of LaSalle Re
      Holdings have been classified as minority interest in Trenwick's balance
      sheet at their liquidation preference value. The preferred shares have a
      par value of $1.00 per share and are entitled to a liquidation preference
      of $25.00 per share ($75,000 aggregate), plus accrued and unpaid dividends
      to the date of liquidation. Dividends on the preferred shares are
      cumulative at 8.75% of the liquidation preference per annum ($2.1875 per
      share or $6,563 aggregate). Subsequent to the Trenwick/LaSalle business
      combination, preferred share dividends which were previously deducted from
      retained earnings have been reflected as subsidiary preferred share
      dividends in Trenwick's statement of operations. On or after March 27,
      2007, the preferred shares may be redeemed, in whole or in part, at a
      redemption price of $25.00 per share, plus accrued and unpaid dividends to
      the date of liquidation. Prior thereto, under certain circumstances, the
      preferred shares may be redeemed in whole at a redemption price of $26.00
      per share ($78,000 aggregate), plus accrued and unpaid dividends to the
      date of liquidation. The payment of dividends on LaSalle Re Holdings'
      preferred shares was suspended for an indefinite period effective November
      2, 2002. In the event that the dividends on the preferred shares of
      LaSalle Re Holdings are not paid for six quarters, the holders of these
      shares will have the right to elect two special representatives who will
      be entitled to receive notice of and take part in all board meetings, with
      the privilege of voice but not vote, until all dividends in arrears have
      been paid.

      Interest Expense and Subsidiary Preferred Share Dividends

      Interest expense and subsidiary preferred share dividends are accrued and
      recognized when incurred. Interest expense and dividends on capital
      securities are computed by the accretion of discount on certain
      obligations utilizing the interest method. The dividends on our
      mandatorily redeemable preferred capital securities held as an investment
      by a subsidiary are eliminated in consolidation.

      Components of interest expense and subsidiary preferred share dividends
      for the years ended December 31, 2002, 2001 and 2000 follow:

<TABLE>
<CAPTION>
                                                       2002       2001       2000
                                                      -------    -------    -------
<S>                                                   <C>        <C>        <C>
      Senior notes interest                           $ 5,882    $ 5,803    $ 1,462
      Senior credit facility interest                   4,558     11,162      3,641
      Contingent interest notes accretion                 805      2,860        696
      Other indebtedness interest                         788        147         14
                                                      -------    -------    -------
      Interest expense                                 12,033     19,972      5,813
      U.S. subsidiary capital securities dividends      7,790      7,815      2,419
      Bermuda subsidiary preferred share dividends      6,563      6,563      1,640
      Letter of credit fees                             8,313      3,809        724
      Commitment and other fees                         1,317        983      1,179
                                                      -------    -------    -------
      Total                                           $36,016    $39,142    $11,775
                                                      =======    =======    =======
</TABLE>


                                      118
<PAGE>

      Share Capital

      At year end 2002, the authorized share capital of Trenwick was 150,000,000
      shares of par value $.10 each, which includes both common and preferred
      shares. At year end 2002 Trenwick had outstanding 36,801,545 issued and
      fully paid common shares and 550,000 of Series B Cumulative Perpetual
      Preferred Shares. Shares reserved for future issuance at year end 2002
      totaled 2,200,692, including shares reserved for the future exercise of
      warrants (153,263), options (1,847,429) and the shareholder rights plan
      (200,000).

      For matters that are put to shareholder vote, common shareholders of
      Trenwick are generally entitled to one vote per common share owned.
      Trenwick's by-laws limit the voting rights of those shareholders holding
      10% or more of Trenwick's outstanding common shares. The voting limitation
      is to prevent Trenwick from being characterized as a U.S. controlled
      foreign corporation and the adverse tax consequences that can result.

      At December 31, 2002, there were warrants outstanding for the purchase of
      153,263 common shares at prices of $25.45 and $26.67 per share ($4,003
      aggregate). This does not include the warrants that Trenwick has agreed to
      issue to the Banks under the December Amendments. Warrants for 69,545
      shares at an exercise price of $25.45 per share and warrants for 83,718
      shares having an average exercise price of $26.67 per share expired on
      January 29, 2003. Warrants for 580 common shares at a price of $25.45 per
      share were exercised in December 2000.

      During years ended December 31, 2002, 2001 and 2000, Trenwick issued
      48,464, 224,539 and 1,405 common shares, respectively, under employee
      compensation, director compensation, stock purchase and stock option plans
      and on exercises of warrants. Prior to the Trenwick/LaSalle business
      combination, LaSalle Re Holdings issued 22,167 common shares during the
      year ended December 31, 2000 under employee compensation, stock purchase
      and stock option plans. See note 11 for additional information on
      restricted common share awards and employee share purchase plan purchases.

      During the years ended December 31, 2002, 2001 and 2000, Trenwick paid
      dividends of $0.12, $0.16 and $0.04, respectively, per common share.

      Shareholder Rights Plan

      In September 2000, Trenwick adopted a new shareholder rights plan.
      Shareholders of record received one right for each common share held. The
      rights are exercisable only if a person or group acquires beneficial
      ownership of 15% or more of Trenwick's common shares or commences a tender
      or exchange offer for 15% or more of Trenwick's common shares. Each right
      entitles a common shareholder to buy 1/200th of a junior participating
      preferred share at an exercise price of $85.00.

      In the event that an outside party acquires beneficial interest in 15% or
      more of Trenwick's common shares, all rights holders except the acquirer
      may purchase,


                                      119
<PAGE>

      for the exercise price, in lieu of the preferred shares, Trenwick common
      shares having a market value of twice the exercise price of each right. If
      Trenwick is acquired in a merger or other business combination after the
      acquisition of 15% of Trenwick's common shares, all rights holders except
      the acquirer may purchase the acquirer's shares at a similar discount.
      Trenwick is entitled to redeem the rights at $0.01 per right, subject to
      certain restrictions. The rights will expire on September 27, 2010.

Note 10 Income Taxation

      Trenwick and certain of its subsidiaries are incorporated under the laws
      of Bermuda and are subject to Bermuda law with respect to taxation. Under
      current Bermuda law, they are not taxed on any Bermuda income or capital
      gains taxes and they have received an undertaking from the Bermuda
      Minister of Finance that, in the event of any Bermuda income or capital
      gains taxes being imposed, they will be exempt from those taxes until
      2016. Trenwick's U.S. subsidiaries are subject to federal, and state
      income taxes imposed by U.S. authorities; its UK subsidiaries, including
      its Lloyd's corporate names, are subject to U.K. corporation taxes and the
      Lloyd's corporate names are also subject to U.S. taxation on their U.S.
      connected income. Other branches of Trenwick's subsidiaries are subject to
      the relevant local income taxes.


      Income taxes are provided based upon amounts reported in the financial
      statements and the provisions of currently enacted tax laws. Income taxes
      are allocated to operations, other comprehensive income and shareholders'
      equity, as applicable.

      Current income tax assets and liabilities are provided for estimated
      income taxes refundable or payable based on the current year's income tax
      return. Deferred income tax assets and liabilities are recognized for the
      estimated future income tax effects of temporary differences and
      carryforwards. Temporary differences are the differences between the
      financial statement carrying amounts of assets and liabilities and their
      tax bases, as well as the timing of income or expense recognition for
      financial reporting and tax purposes of items not related to assets and
      liabilities. Valuation allowances are established to reduce the carrying
      amount of deferred income tax assets, if necessary, to amounts that are
      more likely than not to be realized. Trenwick periodically reviews the
      adequacy of these valuation allowances and records any changes in
      allowances through earnings.

      In evaluating the realizability of Trenwick's net deferred tax asset,
      during 2002, Trenwick established a full valuation allowance on its net
      deferred tax asset. In prior years, Trenwick had recorded a valuation
      allowance with respect to its foreign tax credits, however, as of year-end
      2002, management concluded that Trenwick's current circumstances and its
      cumulative financial accounting losses do not support a position that it
      is more likely than not that Trenwick will be able to realize these future
      tax benefits. Trenwick will periodically review the sufficiency of its
      valuation allowance and record any future changes in allowances through
      earnings.

      Income (loss) before income taxes and the provision for income taxes by
      jurisdiction and by allocation between current and deferred for the years
      ended 2002, 2001 and 2000 follow:


                                      120
<PAGE>

<TABLE>
<CAPTION>
                                                         2002          2001          2000
                                                      ---------     ---------     ---------
<S>                                                   <C>           <C>           <C>
Income (loss) before income taxes by jurisdiction:
Bermuda                                               $ (87,319)    $ (36,747)    $  20,950
United States                                          (215,482)      (63,822)      (19,030)
United Kingdom                                           61,110      (112,652)        1,456
Other                                                       104         1,019            --
                                                      ---------     ---------     ---------
Total                                                 $(241,587)    $(212,202)    $   3,376
                                                      =========     =========     =========

Income taxes by jurisdiction:
U.S. federal income tax expense (benefit)             $  60,257     $ (26,671)    $  (7,236)
U.S. state income tax expense                               744         1,512           441
U.K. federal income tax expense (benefit)                81,508       (32,418)          750
Other jurisdictions income tax expense
 (benefit)                                                  619          (228)          (30)
                                                      ---------     ---------     ---------
Total income tax expense (benefit)                    $ 143,128     $ (57,805)    $  (6,075)
                                                      =========     =========     =========

Current and deferred income taxes:
Current income tax expense (benefit)                  $  (7,712)    $   1,355     $ (17,218)
Deferred income tax expense (benefit)                   150,840       (59,160)       11,143
                                                      ---------     ---------     ---------
Total income tax expense (benefit)                    $ 143,128     $ (57,805)    $  (6,075)
                                                      =========     =========     =========
</TABLE>

For jurisdictions other than the U.S. and UK, there are no significant
differences between the effective tax rates for each jurisdiction and the
applicable statutory tax rates.

For the years ended December 31, 2002, 2001 and 2000, the U.S. federal effective
tax rate of (27.9)%, 40.8% and 37.2% respectively differs from the statutory tax
rate of 35% as follows (2000 balances represent amounts incurred by Trenwick
subsequent to September 27, 2000, the effective date of the Trenwick/LaSalle
business combination):

<TABLE>
<CAPTION>
                                                      2002         2001         2000
                                                   ---------     --------     --------
<S>                                                <C>           <C>          <C>
U.S. loss before U.S. federal income taxes         $(215,482)    $(63,822)    $(19,030)
State income taxes                                      (744)      (1,521)        (441)
                                                   ---------     --------     --------
U.S. loss before U.S. federal income taxes         $(216,226)    $(65,343)    $(19,471)
                                                   ---------     --------     --------
Income tax benefit at 35% statutory rate           $ (75,679)    $(22,870)    $ (6,815)
Tax-exempt investment income effect                       (1)        (984)        (951)
Non-deductible goodwill amortization effect           18,242          529          124
True-up for prior year taxes                            (710)      (3,039)          --
Change in valuation allowance                        119,579          109           --
Other book-tax differences                            (1,174)        (416)         406
                                                   ---------     --------     --------
Total U.S. federal income tax expense (benefit)    $  60,257     $(26,671)    $ (7,236)
                                                   =========     ========     ========
</TABLE>

For the 2002, 2001 and 2000 years, the U.K. effective tax rate of 133.4%, 28.8%
and 51.5% respectively differs from the statutory tax rate of 30% as follows:


                                      121
<PAGE>

<TABLE>
<CAPTION>
                                                        2002          2001       2000
                                                      --------     ---------     ------
<S>                                                   <C>          <C>           <C>
Income (loss) before U.K. income taxes                $ 61,110     $(112,652)    $1,456
                                                      --------     ---------     ------
Income tax expense (benefit) at 30% statutory rate    $ 18,333     $ (33,796)    $  437
Valuation allowance                                     95,723           945         --
Non-taxable loan forgiveness                           (32,572)           --         --
Other UK corporate tax expenses                             24           433        313
                                                      --------     ---------     ------
Total U.K. income tax expense (benefit)               $ 81,508     $ (32,418)    $  750
                                                      ========     =========     ======
</TABLE>

      At December 31, 2002, Trenwick has net operating loss carryforwards in the
      U.S. and the U.K. The U.S. subsidiaries have a U.S. net operating loss
      carryforward of $261,832 that will be available to offset regular taxable
      income during the carryforward periods, which expire in 2007 ($9,655) and
      between 2018 through 2022 ($252,177). As a result of the Trenwick/LaSalle
      business combination, an ownership change took place on September 27,
      2000, and approximately $32,485 of the total U.S. net operating loss
      carryforward became limited to a cumulative annual utilization of $5,228.
      The remaining $229,347 in U.S. net operating loss carryforwards are not so
      limited.

      The U.K. subsidiaries' net operating loss carryforwards are a result of
      underwriting losses generated by Trenwick International and Trenwick's
      Lloyd's operations. Those underwriting losses from Trenwick's Lloyd's
      members are from both open and closed years of accounts. The trading
      losses that have been declared by Trenwick International and Lloyd's
      members, including closed years of accounts through 1999, amount to
      approximately $269,316. These underwriting losses may be carried forward
      indefinitely to offset future trading profits of the specific U.K. company
      that generated the loss. The remaining U.K. net operating loss
      carryforwards from the open years of account of Trenwick's Lloyd's
      operations have been determined on a loss reserve accrual basis and will
      not be finalized until the close of the underwriting year of account. At
      December 31, 2002, these losses totaled $14,205.

      As of April 2000, it became legally possible to group the current year
      profits and losses of U.K. companies that have a common worldwide parent.
      Pursuant to this legislation, Trenwick may group its profits and losses
      among Trenwick International and its Lloyd's members. In addition, new
      legislation was introduced effective for tax years beginning on or after
      January 1, 2000, which permits U.K. insurers and Lloyd's members to
      disclaim technical reserves for tax purposes. The new legislation also
      provides a calculation whereby additional receipts or expense may be
      included in taxable income depending upon the payout of claims relative to
      the reserves taken into account for tax purposes within a margin of error.
      Management has reviewed the new legislation and during 2002 amended its
      2000 U.K. returns and elected to disclaim a portion of its technical
      reserves. Each year management will re-evaluate the appropriateness of the
      amount of disclaimed reserves. At December 31, 2002, disclaimed technical
      reserves for the 2002 tax year were estimated at $39,807. Disclaimed loss
      reserves are temporary differences that represent future tax deductions.

      Deferred income tax assets (liabilities) attributable to temporary
      differences at December 31, 2002 and 2001, respectively, follow:


                                      122
<PAGE>

                                                           2002          2001
                                                        ---------     ---------
Deferred income tax assets:

U.S. discounting and other loss reserve adjustments     $  51,019     $  37,950
U.K. disclaimed loss reserves                              11,942        37,796
Unearned premium income                                    15,888        10,845
U.S. net operating losses                                  91,641        48,782
U.K. net operating losses                                  80,795           945
U.K. losses not yet realized for tax purposes               4,261        35,958
Contingent interest note                                       --         6,416
Tax basis difference on investment securities               2,736         1,309
Employee stock option and compensation plans                1,849         1,057
Foreign tax credits                                           575           410
Alternative minimum tax credits                               804         5,859
Debt issuance costs                                           757         1,399
Tax on foreign currency translation loss                    1,619         1,276
Acquisition of indebtedness income                          1,851         1,851
Other U.S. and U.K. items                                   1,506         1,082
                                                        ---------     ---------
Deferred tax asset, gross of valuation allowance          267,243       192,935
Valuation allowance                                      (217,039)       (1,212)
                                                        ---------     ---------
Deferred tax asset, net of valuation allowance             50,204       191,723
                                                        ---------     ---------

Deferred income tax liabilities:

Deferred policy acquisition costs                         (22,107)      (15,890)
Unrealized investment gains                               (10,359)      (12,541)
Accretion of market discount on debt securities            (2,067)       (2,362)
Equity investment adjustments                              (3,182)       (4,489)
Fair value adjustment of debt obligations                  (8,117)       (8,437)
Deferred intercompany transactions                             --        (7,510)
Other U.S. and U.K. items                                  (4,372)         (568)
                                                        ---------     ---------
Gross deferred income tax liabilities                     (50,204)      (51,797)
                                                        ---------     ---------
Net deferred income tax asset                           $      --     $ 139,926
                                                        =========     =========

Note 11 Employee Benefits and Compensation Arrangements

      Retirement and Savings Plans

      Expenses for employee retirement and savings plans are recognized as they
      are incurred.

      Trenwick has defined contribution plans for substantially all full-time
      employees, through which it contributes between 5% and 20% of an eligible
      employee's total compensation to the plan, dependent upon each employee's
      salary and age. No employee contributions are made to these plans.

      Additionally, Trenwick maintains a 401(k) savings plan for substantially
      all United States full-time employees, through which employees contribute
      up to the maximum amount allowable by the Internal Revenue Service.
      Trenwick contributes up to 6% of a participating employee's compensation
      to the plan.

      Trenwick's provisions for employee retirement and savings plans for the
      years ended December 31, 2002, 2001 and 2000 were as follows:


                                      123
<PAGE>

                                      2002      2001      2000
                                    ------    ------    ------

      Defined contribution plans    $4,712    $4,054    $  956
      401(k) savings plan              653       660        99
                                    ------    ------    ------
      Total                         $5,365    $4,714    $1,055
                                    ======    ======    ======

      Restricted Common Share Awards

      Deferred compensation is recorded for the fair value of restricted common
      share awards and deferred compensation is presented as a separate,
      offsetting component of shareholders' equity. Compensation expense is
      recognized over the vesting period of the restricted common shares.

      Trenwick awards restricted common shares to key employees. During the 2002
      year, no restricted common shares were awarded and 73,414, restricted
      common shares were canceled due to employee terminations. During the 2001
      year, Trenwick awarded 194,116 restricted common shares at an average fair
      value of $21.22 per share and 38,463 restricted common shares were
      canceled due to employee terminations. On September 27, 2000, Trenwick
      awarded 224,331 restricted common shares in exchange for restricted common
      shares previously awarded by Trenwick Group Inc. at an average fair value
      of $13.05. During the 2000 year, 4,896 restricted common shares were
      canceled due to employee terminations.

      The scheduled vesting of the 188,169 restricted common shares outstanding
      at year end 2002 is as follows: 2003, 54,832 shares; 2004, 54,832 shares;
      2005, 54,790 shares and 2006, 24,715 shares. Trenwick recognized $795,
      $1,394 and $597, respectively, of compensation expense with respect to
      restricted common shares for the 2002, 2001 and 2000 years.

      Prior to the Trenwick/LaSalle business combination, LaSalle Re Holdings
      granted common shares to employees on the fifth anniversary date of their
      hire. At the time of the award, the market value of the shares was
      recognized as compensation expense. During the year ended December 31,
      2000, 635 shares were awarded to employees, and $9, was recognized as
      compensation expense.

      Employee Share Purchase Plan

      Shares sold to employees in connection with employee share purchase plans
      are recorded at fair value; compensation expense is recognized for the
      difference between fair value and the discounted sales price.

      Trenwick is authorized to sell up to 300,000 common shares to its
      employees at a 15% discount from market value under an employee share
      purchase plan adopted as of February 1, 2001. During the years ended
      December 31, 2002 and 2001, Trenwick issued 48,464 and 15,840 shares under
      the plan and recognized $24 and $26 of compensation expense, respectively.
      Effective April 1, 2003, Trenwick will cease accepting new contributions
      to this plan.


                                      124
<PAGE>

      LaSalle Re Holdings had a similar plan which it terminated in connection
      with the Trenwick/LaSalle business combination. Prior to termination,
      LaSalle Re Holdings issued 21,532, shares under the plan during the year
      ended December 31, 2000, and recognized $47 of compensation expense.

      Share Options

      Options are granted for a fixed number of common shares to employees and
      non-employee directors. These options have an exercise price equal to the
      market value of the shares at the date of grant. The current accounting
      standard establishes a fair value based method of accounting for
      stock-based compensation plans; however, it permits an entity to continue
      to apply the accounting provisions of a previous standard and make pro
      forma disclosures of net income and earnings per share, as if the fair
      market value based method had been applied. Trenwick continues to account
      for the share option grants in accordance with the previous standard; the
      pro forma disclosures required by the fair value based method are
      presented below.

      Trenwick has several plans through which it makes options in common shares
      available to employees at the discretion of its board of directors.
      Non-employee directors receive automatic grants under a separate plan.
      Exercise prices are generally fixed at the market value at the date of
      grant. Options vest and are exercisable on various terms, usually either
      over a five year period or up to a ten year period. All options have an
      expiration date not exceeding ten years. Transactions under the share
      option plans during the periods presented follow:

<TABLE>
<CAPTION>
                                                           Year ended December 31,
                                                     2002           2001           2000
                                                  ----------    -----------     ----------
<S>                                               <C>           <C>             <C>
      Number of shares:
      Options outstanding, beginning of period     3,385,379      2,824,616        459,436
      Options granted in exchange for
        Trenwick Group Inc. options                       --             --      2,435,042
      Other options granted                          530,929        687,398             --
      Options canceled                            (2,068,879)      (115,193)       (69,037)
      Options exercised                                   --        (11,442)          (825)
                                                  ----------    -----------     ----------
      Options outstanding, end of period           1,847,429      3,385,379      2,824,616
                                                  ==========    ===========     ==========

      Options exercisable, end of period           1,041,115      2,369,598      2,311,678
                                                  ==========    ===========     ==========

      Range of exercise price:
      Options granted                             $   1 - $8    $  20 - $22     $ 13 - $41
      Options exercised                           $       --    $        21     $ 18 - $19
      Options outstanding, end of period          $  1 - $40    $  13 - $41     $ 13 - $41
      Options exercisable, end of period          $ 13 - $40    $  13 - $41     $ 19 - $41
                                                  ==========    ===========     ==========

      Weighted average exercise price:
      Options granted                             $     0.99    $     21.02     $    26.51
      Options exercised                           $       --    $     21.30     $    18.56
      Options outstanding, end of period          $    18.95    $     25.29     $    26.29
      Options exercisable, end of period          $    28.18    $     28.39     $    29.20
                                                  ==========    ===========     ==========
</TABLE>

      Further details on options outstanding and exercisable at December 31,
      2002 follow:


                                      125
<PAGE>

<TABLE>
<CAPTION>
                                                                                    Options currently
                                            Options outstanding                         exercisable
                              ---------------------------------------------    ----------------------------
                                                                Weighted
                                                                 Average
                                 Weighted                       Remaining        Weighted
                                 Average                       Contractual       Average
                                 Exercise         Number         Life in         Exercise         Number
      Exercise price range        Price         of Options        Years           Price         of Options
      ---------------------    ------------    ------------    ------------    ------------    ------------
<S>                            <C>                <C>                    <C>   <C>                <C>
      Under $10.00             $       0.99         530,929              10    $         --              --
      $10.01-$25.00                   18.61         520,087               7           18.48         244,702
      $25.01 and over                 31.15         796,413               3           31.15         796,413
                                               ------------                                    ------------
                               $      18.95       1,847,429               6    $      28.18       1,041,115
                                               ============                                    ============
</TABLE>

      During the year ended December 31, 2002, 1,365,187 share options were
      cancelled pursuant to the employee stock option exchange program. This
      voluntary program offered all active employees with the exception of the
      Chief Executive Officer a one-time opportunity to exchange stock options
      for new options at a grant price equal to the fair market value of
      Trenwick common shares on December 16, 2002, which was $0.89.

      Concurrent with the Trenwick/LaSalle business combination, all of the
      options under LaSalle Re Holdings' plans and all of the options granted
      under Trenwick Group Inc.'s plans prior to the 2000 year became fully
      vested.

      Pro Forma Information

      All of the outstanding share options were issued at an exercise price
      equal to fair market value on the date of grant; therefore no compensation
      expense has been recognized for these grants. Had the fair value based
      method described above been applied, net income (loss) available to common
      shareholders and net income (loss) per common share would have been the
      pro forma amounts shown below:

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                                 2002            2001            2000
                                                             -----------     -----------     -----------
<S>                                                          <C>             <C>             <C>
      Net income (loss) available to common shareholders:
        As reported                                          $  (386,099)    $  (154,397)    $     4,528
        Pro forma                                            $  (386,420)    $  (155,363)    $     3,929

      Basic and diluted earnings (loss) per common share:
        As reported                                          $    (10.49)    $     (4.19)    $      0.21
        Pro forma                                            $    (10.50)    $     (4.22)    $      0.19
</TABLE>

      The pro forma adjustments relating to options granted from 1995 to 2002
      are based on a fair value method using the Black-Scholes option pricing
      model; no effect has been given to options granted prior to 1995.
      Valuation and related assumption information for options granted in each
      of the periods below are as follows:

                                       2002         2001         2000
                                       Year         Year         Year
                                     --------     --------     --------

      Expected volatility                53.0%        38.0%        30.0%
      Risk-free interest rate             4.0%         4.9%         5.1%
      Common share dividend yield         1.2%         0.9%         0.6%


                                      126
<PAGE>

      The Black-Scholes option valuation model was developed for use in
      estimating the fair value of options which have no vesting restrictions
      and are fully transferable. In addition, option valuation models require
      the input of highly subjective assumptions including the expected share
      price volatility. Because Trenwick's share options have characteristics
      significantly different from those of traded options, and because changes
      in the subjective input assumptions can materially affect the fair value
      estimate, in Trenwick's opinion the existing models do not necessarily
      provide a reliable measure of the fair value of its share options.

      Stock Appreciation Rights

      Under a plan now terminated, a liability for stock appreciation rights was
      recorded at each period end based on the excess of the current fair value
      of the underlying common stock over the fair value at the time of grant.
      Compensation expense was recognized for adjustments to the liability.

      In consideration for entering into an employment agreement, LaSalle Re
      Holdings granted stock appreciation rights to its former chairman and
      chief executive officer. During the year ended December 31, 2001, Trenwick
      paid $1,451 in settlement of his exercisable rights. During the years
      ended December 31, 2001 and 2000, Trenwick recognized $(278) and $765,
      respectively, of compensation expense under this agreement. At year end
      2002, there are no stock appreciation rights outstanding.

Note 12 Other Comprehensive Income

      Other comprehensive income is recorded for the change in the net
      unrealized appreciation of investments and the change in foreign currency
      translation adjustments, both net of income taxes.

      The components of accumulated other comprehensive income at December 31,
      2002 and 2001 follow:

<TABLE>
<CAPTION>
                                                                      2002         2001
                                                                    --------     --------
<S>                                                                 <C>          <C>
      Unrealized investment gains, net of
       applicable deferred income taxes of $10,359 and $12,479      $  2,262     $ 28,846
      Foreign currency translation adjustment, net of
       applicable deferred income taxes of $(1,619) and $(1,276)     (10,081)      (5,627)
                                                                    --------     --------
      Accumulated other comprehensive income                        $ (7,819)    $ 23,219
                                                                    ========     ========
</TABLE>

Note 13 Earnings Per Share Common Share

      The computation of basic and diluted earnings per common share follows:


                                      127
<PAGE>

<TABLE>
<CAPTION>
                                                                Year ended December 31,
                                                         2002             2001             2000
                                                     ------------     ------------     ------------
<S>                                                  <C>              <C>              <C>
      Income available to common shareholders:

      Net income (loss) available to common
        shareholders - basic and diluted             $   (386,099)    $   (154,397)    $      4,528
                                                     ============     ============     ============
      Weighted average common shares outstanding:
      Weighted average shares outstanding - basic      36,791,431       36,825,637       21,084,030
      Net weighted average shares issuable
         (when dilutive)
        Stock options and warrants exercise                    --               --          121,901
        Stock appreciation rights exercise                     --               --           65,168
                                                     ------------     ------------     ------------
      Weighted average shares
          outstanding - diluted                        36,791,431       36,825,637       21,271,099
                                                     ============     ============     ============
      Basic and diluted earnings (loss)
        per common share                             $     (10.49)    $      (4.19)    $       0.21
                                                     ============     ============     ============
</TABLE>

      For the years ended December 31, 2002, 2001 and 2000, 1,476,763, 3,061,151
      and 2,474,521, respectively, aggregate share options, stock appreciation
      rights, contingently issuable shares and warrants were excluded from the
      computation of diluted earnings per share because their effect would have
      been antidilutive on the calculation for the respective period.

Note 14 Insurance Regulation

      Trenwick and its insurance and reinsurance company subsidiaries are
      subject to regulatory oversight under the insurance statutes and
      regulations of the jurisdictions in which they conduct business, including
      all states of the United States, Bermuda and the United Kingdom. These
      regulations vary from jurisdiction to jurisdiction and are generally
      designed to protect ceding insurance companies and policyholders by
      regulating Trenwick's financial integrity and solvency in its business
      transactions and operations. Many of the insurance statutes and
      regulations applicable to Trenwick's subsidiaries relate to reporting and
      enable regulators to closely monitor Trenwick's performance. Typical
      required reports include information concerning Trenwick's capital
      structure, ownership, financial condition, and general business
      operations.


                                      128
<PAGE>

      Because Trenwick, Trenwick America and Trenwick Holdings are holding
      companies, their principal sources of funds consist of permissible
      dividends, tax allocation payments and other statutorily permissible
      payments from their respective regulated operating insurance company
      subsidiaries, each of which is subject to oversight and regulatory
      supervision by insurance regulators in its jurisdiction of domicile. As a
      result of recent losses incurred by these operating insurance company
      subsidiaries, their cash distribution capacities have been significantly
      reduced. Each insurance regulatory body, including those of Bermuda, New
      York, Connecticut, North Dakota, the United Kingdom and Lloyd's, may act
      independently with respect to the company or companies domiciled in its
      jurisdiction. To the extent that any such regulator takes action with
      respect to an insurance company domiciled in its jurisdiction, such action
      could adversely impact the ability of Trenwick to continue to function, or
      could precipitate other actions by other insurance regulators with respect
      to the particular Trenwick company or companies under their primary
      jurisdiction. Additionally, although these financial statements are
      prepared on a consolidated basis, the actual assets and liabilities shown
      in the financial statements which are held by the insurance company
      subsidiaries generally will not be available to satisfy the obligations of
      other companies within the Trenwick group of companies. Insurance
      regulators may also review certain payments made to Trenwick by its
      insurance company subsidiaries, such as payments for administrative
      services, and could attempt to seek return of such payments to the
      insurance company subsidiaries.

      U.S. Regulation

      Trenwick's United States operations are subject to extensive regulation
      under state statutes that delegate regulatory, supervisory and
      administrative powers to state insurance commissioners. The extent of
      regulation varies from state to state, but generally has its source in
      statutes that delegate regulatory, supervisory and administrative
      authority to a department of insurance in each state. Among other things,
      state insurance commissioners regulate insurer solvency standards, insurer
      licensing, authorized investments, premium rates, restrictions on the size
      of risks that may be insured under a single policy, loss and expense
      reserves and provisions for unearned premiums, deposits of securities for
      the benefit of policyholders, policy form approval, and market conduct
      regulation, including the use of credit information in underwriting and
      other underwriting and claims practices. State insurance departments also
      conduct periodic examinations of the affairs of insurance companies and
      require the filing of annual and other reports relating to the financial
      condition of companies and other matters. In general, regulated insurers
      must file all rates for directly underwritten insurance with the insurance
      department of each state in which they operate on an admitted basis;
      however, reinsurance generally is not subject to rate regulation.

      Each of Trenwick's U.S. insurance subsidiaries is subject to restrictions
      on the payment of dividends without prior approval from the state
      insurance regulator in its


                                      129
<PAGE>

      respective state of domicile. These restrictions are based upon certain
      measures of statutory surplus and net income. At year end 2002, based upon
      these restrictions, Dakota Specialty Insurance Company and ReCor Insurance
      Company had $3,091 and $21, respectively, available for the payment of
      dividends to their parent, The Insurance Corporation of New York, in 2003
      without prior regulatory approval. Dakota Specialty Insurance Company has
      received regulatory approval from the State of North Dakota Department of
      Insurance to pay an extraordinary dividend of $20,000 to its parent, The
      Insurance Corporation New York. The remainder of Trenwick's U.S. insurance
      subsidiaries are precluded from paying dividends without prior regulatory
      approval based upon these restrictions. Additionally, on November 26,
      2002, Trenwick America Re entered into a "letter of understanding" with
      the Connecticut Department of Insurance pursuant to which Trenwick America
      Re agreed, among other things, that it would not lend any of its funds or
      make any ordinary or extraordinary dividends without the prior written
      approval of the Connecticut Insurance Department.

      Risk Based Capital

      The NAIC has adopted Risk-Based Capital, or RBC, requirements for property
      and casualty insurance companies to evaluate the adequacy of statutory
      capital and surplus in relation to investment and insurance risks such as
      asset quality, asset and liability matching, loss reserve adequacy and
      other business factors. RBC is generally calculated and reported to the
      regulatory authorities with an insurance company's annual regulatory
      filings on or before March 1 of each year. The RBC calculation yields a
      ratio of the total adjusted statutory capital of an insurance company to
      the minimum level of statutory required capital as calculated under the
      provisions of the RBC model. The RBC calculation takes into account: (1)
      asset risk, (2) credit risk, (3) underwriting risk, and (4) all other
      relevant risks including the insurance company's current underwriting
      activities. The Model Act of the NAIC provides four levels of regulatory
      activity if the RBC ratio yielded by the calculation falls below specified
      minimums. At each of four successively lower RBC ratios specified by
      statute, increasing regulatory action may be required. The four levels
      are: (1) Company Action Level Event, (2) Regulatory Action Level Event,
      (3) Authorized Control Level Event, and (4) Mandatory Control Level Event.

      Under the insurance laws of their respective states of domicile,
      Trenwick's United States insurance subsidiaries are required to maintain
      minimum levels of capital and surplus as regards policyholders. The
      failure of an insurer to maintain the required surplus level can result in
      the placing of the insurer by the insurer's domestic state's insurance
      department into supervision, rehabilitation or liquidation proceedings,
      for the benefit of policyholders and creditors of the insurer, and the
      general public.


                                      130
<PAGE>

      On December 3, 2002, Trenwick America Re entered into a "letter of
      understanding" with the State of Connecticut Insurance Department pursuant
      to which Trenwick America Re agreed that it would not take any of the
      following actions without the prior written approval of the Connecticut
      Insurance Commissioner or her designee:

            o     Dispose of, convey or encumber any of its assets or business
                  in force;

            o     Withdraw any of its bank accounts except in the ordinary
                  course of business;

            o     Settle any intercompany balances;

            o     Lend any of its funds;

            o     Transfer any of its property;

            o     Make any new investments other than cash equivalents;

            o     Incur any debt, obligation or liability, except liabilities in
                  the ordinary course of business;

            o     Make any material change in management;

            o     Make any material change in its operations;

            o     Move any books and records from its office in Stamford,
                  Connecticut;

            o     Pay any dividends, ordinary or extraordinary;

            o     Enter into any unaffiliated insurance or reinsurance contracts
                  that would constitute new or renewal business, or any
                  unaffiliated commutation agreements or settlement agreements
                  in excess of $1,000 not in the ordinary course of business; or

            o     Enter into affiliated transactions of any nature.

      Senior management of Trenwick America Re has also agreed to meet with the
      State of Connecticut Insurance Department, in person or by conference
      call, with such frequency as may be deemed necessary by the Connecticut
      Insurance Commissioner or her designee, to provide updates on the status
      of Trenwick and any changes in the status of Trenwick America Re. Trenwick
      America Re is also required to provide to the State of Connecticut
      Insurance Department a monthly financial statement consisting of a balance
      sheet and income statement on the 15th day of each month as of the prior
      month end. The above described terms will remain in effect until such time
      as the Connecticut Insurance Commissioner deems that they are no longer
      necessary or issues an order that supercedes the letter of understanding.

      On January 24, 2003, Trenwick met with the State of Connecticut Insurance
      Department to present preliminary 2002 financial statements of the
      regulated entities and provided the Connecticut Department of Insurance
      with an overview of Trenwick's proposed restructuring plan. Trenwick also
      discussed with the State of Connecticut Insurance Department the reserve
      charges taken for the fourth quarter of 2002. Trenwick America Re's
      significant reserve increases in the fourth quarter of 2002 had an adverse
      impact on its RBC rating, which was at the "Regulatory Action Level Event"
      at December 31, 2002. At this level, Trenwick America Re is required to
      submit a Comprehensive Plan of Action to the State of Connecticut
      Insurance Department. Such a plan was submitted to the State of
      Connecticut Insurance Department on January 23, 2003. In addition, the
      State of Connecticut Insurance Department, at its discretion, is also able
      to take any action deemed necessary under the circumstances. Trenwick
      America Re is subject to a statutory requirement that it maintain a
      minimum capital and surplus to policyholders equal to the RBC "Company
      Action Level Event," which was $237,237 at December 31, 2002. As of
      December 31, 2002, Trenwick America Re was not in compliance with this
      requirement.


                                      131
<PAGE>


      On January 29, 2003, Trenwick met with the New York Insurance Department
      (the "NYID") and had similar discussions to those with the State of
      Connecticut Insurance Department on January 24, 2003 described above. The
      Insurance Corporation of New York's reported RBC was at the "Mandatory
      Control Level Event" for the year ended December 31, 2002. New York
      Insurance Law requires that New York domiciled insurers report their
      risk-based capital based on a formula calculated by applying factors to
      various asset, premium and reserve items. The NYID uses the formula as an
      early warning regulatory tool for purposes of monitoring New York
      domiciled insurance companies to identify possibly inadequately
      capitalized insurers. The New York Superintendent of Insurance has
      explicit regulatory authority to require various actions with respect to
      New York domiciled insurers whose capital base or other operations are not
      satisfactory. The Insurance Corporation of New York has ceased
      underwriting new business and is in ongoing communication with the New
      York Insurance Department concerning its operations and continued
      permitted activities.

      Trenwick received a letter from the NYID dated March 11, 2003 in which the
      NYID noted that the surplus to policyholders of The Insurance Corporation
      of New York, as of December 31, 2002 was $18,300 and therefore was
      impaired in the amount of $16,700, based on the statutory requirement that
      it maintain a minimum surplus to policyholders of $35,000. In the letter,
      the NYID notified The Insurance Corporation of New York that the surplus
      impairment must be corrected within 30 days, and directed it to advise the
      NYID within 30 days as to the steps management will take to remove the
      impairment and comply with the minimum surplus requirement. If the NYID is
      not satisfied that The Insurance Corporation of New York has eliminated
      the impairment by April 10, 2003, the Superintendent of the NYID may
      proceed against The Insurance Corporation of New York pursuant to the
      provisions of Article 74 of the New York Insurance Law, the statute
      authorizing supervision, rehabilitation, conservation, liquidation and
      dissolution of insurers, including domestic insurers. Management expects
      to file its plan to correct the capital impairment by April 10, 2003 .

      Trenwick has been notified by the NYID that, in the NYID's view,
      approximately $26,000 in loans made to Trenwick America by The
      Insurance Corporation of New York in 2002 were in contravention of New
      York regulatory requirements. As a result, The Insurance Corporation of
      New York and Trenwick may be the subject of regulatory action brought by
      the NYID.

      To date, the State of Florida has suspended the underwriting authority of
      The Insurance Corporation of New York and Trenwick America Re to write any
      further business. In addition, the State of Colorado has recently
      suspended The Insurance Corporation of New York's underwriting authority.
      It is anticipated that other states will suspend the underwriting
      authority of the various insurance companies.

      Trenwick's United States insurance subsidiaries are subject to guaranty
      fund laws which can result in assessments, up to prescribed limits, for
      losses incurred by policyholders as a result of the impairment or
      insolvency of unaffiliated insurance companies. Typically, an insurance


                                      132
<PAGE>

      company is subject to the guaranty fund laws of the states in which it
      conducts insurance business; however, Trenwick's United States insurance
      subsidiaries that conduct business on a surplus lines basis in a
      particular state are generally exempt from that state's guaranty fund
      laws.

      Trenwick's U.S. insurance subsidiaries file financial statements prepared
      in accordance with statutory accounting practices prescribed or permitted
      by insurance regulators in each subsidiary's states of domicile. Combined
      statutory surplus of the U.S. insurance subsidiaries was $125,939 and
      $374,835 at year end 2002 and 2001; their combined statutory net income
      (loss) was $(183,247), $12,438 and $(16,157) for the 2002, 2001 and 2000
      years, respectively.

      The State of Connecticut Insurance Department has permitted Trenwick
      America Re to account for the reinsurance agreement purchased in
      connection with the Trenwick/Chartwell business combination on a
      prospective basis in its statutory basis financial statements. This
      treatment is consistent with the U.S. GAAP accounting treatment of the
      contract. The New York State Insurance Department has required The
      Insurance Corporation of New York to account for that reinsurance
      agreement on a retroactive basis. The difference in these statutory
      accounting practices does not have an effect on the combined statutory
      surplus or net income of Trenwick's U.S. insurance subsidiaries. The terms
      of this reinsurance agreement are described in Note 7.

      National Association of Insurance Commissioners ("NAIC")

      The National Association of Insurance Commissioners, or NAIC, is an
      organization which assists state insurance supervisory officials in the
      United States to achieve insurance regulatory objectives, including the
      maintenance and improvement of state regulation. From time to time various
      regulatory and legislative changes have been proposed in the insurance
      industry, some of which could have an effect on reinsurers. Among the
      proposals that have in the past been or are at present being considered
      are the possible introduction of federal regulation in addition to, or in
      lieu of, the current system of state regulation of insurers, and proposals
      in various state legislatures (some of which proposals have been enacted)
      to conform portions of their insurance laws and regulations to various
      model acts adopted by the NAIC. Trenwick is unable to predict what effect,
      if any, these developments may have on its operations and financial
      condition.

      In March 1998, the NAIC adopted the Codification of Statutory Accounting
      Principles ("Codification"), which is intended to standardize regulatory
      accounting and reporting for the insurance industry. Codification provides
      guidance for areas where statutory accounting has been silent and changes
      current statutory accounting in some areas. However, statutory accounting
      principles will continue to be established by individual state laws and
      permitted practices. Effective January 1, 2001, the states of Connecticut
      (domicile of Trenwick America Re), and North Dakota (domicile of Dakota
      Specialty Insurance Company) adopted Codification. The cumulative effect
      of adoption of Codification was an increase in aggregate


                                      133
<PAGE>

      statutory surplus of $14,305 on January 1, 2001, primarily due to the
      recording of net deferred income tax assets. New York (domicile of The
      Insurance Corporation of New York and ReCor Insurance Company Inc.)
      adopted codification as well as certain prescribed accounting practices
      that differ from codification. Most significantly deferred tax assets and
      liabilities were not recorded under New York law. The effect of
      differences in accounting practices by the New York Insurance Department
      served to decrease surplus by $9,042. In 2002 the New York Insurance
      Department adopted regulations to allow deferred tax assets as admitted
      assets, although certain prescribed accounting practices still differ from
      those found in the codification. The cumulative effect of this change in
      accounting in 2002 ($1,663) was recorded as an adjustment to increase
      statutory surplus.

      Holding Company Regulation

      Trenwick is subject to regulation under the insurance holding company
      statutes of various states, including Connecticut, New York and North
      Dakota, the domicile states of its United States insurance companies. The
      insurance holding company laws and regulations vary from state to state,
      but generally require an insurance holding company, and insurers and
      reinsurers that are subsidiaries of an insurance holding company, to
      register with the state regulatory authorities and to file with those
      authorities certain reports including information concerning their capital
      structure, ownership, financial condition, affiliate transactions and
      general business operations.

      State laws also require prior notice or regulatory agency approval of
      direct or indirect changes in control or deemed control of an insurer,
      reinsurer or its holding company and of certain significant intercorporate
      transfers of assets within the holding company structure. The acquisition
      of securities representing or convertible into more than 10% of the voting
      power of the securities of Trenwick by an investor would be subject to
      prior approval by the Connecticut, New York and North Dakota insurance
      commissioners. Such investor would also be required to file certain
      notices and reports with the insurance commissioners prior to such
      acquisition.

      Debt securities and cash with a carrying value of $84,723 at December 31,
      2002 were on deposit with various state or governmental insurance
      departments in order to comply with insurance laws. Trenwick is currently
      engaged in a process to reduce redundant statutory deposits resulting from
      the December 31, 2002 merger of Chartwell Insurance Company with and into
      Trenwick America Re.

      Bermuda Regulation

      LaSalle Re and LaSalle Re Corporate Capital Ltd. are regulated by the
      Insurance Act 1978 of Bermuda and related regulations (the "Insurance
      Act"), which provides that no person shall carry on an insurance business
      in or from within Bermuda unless registered as an insurer under the
      Insurance Act by the Minister of Finance. Under the Insurance Act,
      insurance business includes reinsurance business. The Minister of Finance,
      in deciding whether to grant


                                      134
<PAGE>

      registration, has broad discretion to act as he thinks fit in the public
      interest. The Minister of Finance is required by the Insurance Act to
      determine whether the applicant is a fit and proper body to be engaged in
      the insurance business and, in particular, whether it has, or has
      available to it, adequate knowledge and expertise. The continued
      registration of an applicant as an insurer is subject to its complying
      with the terms of its registration and such other conditions as the
      Minister of Finance may impose from time to time. An Insurance Advisory
      Committee appointed by the Bermuda Minister of Finance advises the Bermuda
      Monetary Authority ("BMA") on matters connected with the discharge of the
      BMA's functions. Sub-committees of the Insurance Advisory Committee
      supervise and review the law and practice of insurance in Bermuda,
      including reviews of accounting and administrative procedures. The
      day-to-day supervision of insurers is the responsibility of the BMA.

      LaSalle Re, Trenwick's Bermuda insurance subsidiary, is subject to Bermuda
      insurance regulations, which mandate minimum solvency margins and
      liquidity ratios. As a Class 4 Insurer, LaSalle Re must maintain a minimum
      statutory capital and surplus level of the greater of $100,000, 50% of net
      premiums written ($2,262 for 2002), or 15% of net loss reserves ($29,405
      at year end 2002). In addition, Bermuda insurance regulations restrict the
      payment of dividends from retained earnings or additional paid-in-capital
      which exceed certain thresholds without prior approval from the Bermuda
      Minister of Finance. At December 31, 2002, LaSalle Re had negative
      retained earnings and is therefore precluded from paying dividends.
      Statutory capital and surplus of LaSalle Re was $127,756 and $430,463 at
      year end 2002 and 2001, respectively; statutory net income (loss) was
      $21,461, $(13,757) and $9,992 for the years ended December 31, 2002 and
      2001, and for the fifteen months ended December 31, 2000, respectively.

      The Insurance Act also imposes on Bermuda insurance companies solvency and
      liquidity standards and auditing and reporting requirements and grants to
      the Minister of Finance powers to supervise, investigate, require
      information and the production of documents and intervene in the affairs
      of insurance companies. Although LaSalle Re Corporate Capital Ltd. is
      governed by the Insurance Act, it is exempted from complying with most of
      the filings required to be made by insurance companies by section 57 of
      the Insurance Act.

      U.K. Regulation

      Trenwick and its insurance and reinsurance company subsidiaries are
      subject to regulatory oversight under the insurance statutes and
      regulations of the jurisdictions in which they conduct business, including
      all states of the United States, Bermuda and the United Kingdom. These
      regulations vary from jurisdiction to jurisdiction and are generally
      designed to protect ceding insurance companies and policyholders by
      regulating Trenwick's financial integrity and solvency in its business
      transactions and operations. Many of the insurance statutes and
      regulations applicable to Trenwick's subsidiaries relate to reporting and
      enable regulators to closely monitor Trenwick's performance. Typical
      required reports include information concerning Trenwick's capital
      structure, ownership, financial condition, and general business
      operations.


                                      135
<PAGE>

      Under the applicable U.K. laws, Trenwick's U.K. insurance subsidiaries may
      make distributions only from accumulated realized profits, net of
      accumulated realized losses. In addition, under the U.K. Interim
      Prudential Sourcebook, Trenwick International Limited is not permitted to
      make any distribution that would reduce its net assets below the required
      minimum margin of solvency which, as determined under the FSA's rules, is
      approximately $38,822 at year end 2002. The net assets of Trenwick
      International Limited were $30,165 at December 31, 2002. Trenwick
      International Limited must also notify the FSA of any proposal to declare
      or pay a dividend on any of its share capital. Under Lloyd's regulations,
      Trenwick Managing Agents is not permitted to make any distribution that
      would cause its net assets to fall below any of its Share Capital, minimum
      net current asset margin or minimum net asset margin. As of December 31,
      2002, the highest of the three tests required Trenwick Managing Agents to
      maintain approximately (pound)800 ($1,288) of capital. The net assets of
      Trenwick Managing Agents were $16,301 at December 31, 2002.

Note 15 Goodwill

      Goodwill represents the unamortized excess of purchase price over the fair
      value of identifiable net assets of acquired entities.

      For the years ended December 31, 2001 and 2000, goodwill was amortized on
      a straight-line basis over twenty-five years.

      Effective January 1, 2002, Trenwick adopted a new Financial Accounting
      Standards Board statement which amended the accounting for goodwill and
      other intangible assets. This new statement suspended systematic goodwill
      amortization and its implementation resulted in Trenwick's Bermuda holding
      company, LaSalle Re Holdings, creating negative goodwill of $11,586 to
      operations as of January 1, 2002 as a cumulative effect of an accounting
      change. The statement also required that the remaining goodwill balance of
      $53,239 at December 31, 2001 be tested for impairment under either market
      value or cash flow tests. The market value test was performed using the
      Income Forecast Model, which uses discounted cash flows. Cash flow tests
      were also performed, and as a result of the tests performed, it was
      determined that the goodwill was impaired and the entire remaining
      goodwill balance was charged to operations as of January 1, 2002 as a
      cumulative effect of an accounting change.

      The following table presents the pro forma effect on net loss and loss per
      common share for the years ended December 31, 2001 and 2000 had this
      accounting standard been effective January 1, 2000 as compared to net loss
      available to common shareholders and loss per common share for the year
      ended December 31, 2002.

<TABLE>
<CAPTION>
                                                            ------------     ------------     ------------
                                                                 2002             2001             2000
                                                            ------------     ------------     ------------
<S>                                                         <C>              <C>              <C>
      Net income (loss) available to
      common shareholders:
      Reported net income (loss) available
        to common shareholders                              $   (386,099)    $   (154,397)    $      4,528
        Add back: goodwill amortization                               --           (1,071)            (259)
      Cumulative effect of change
        in accounting for goodwill                               (41,653)              --
      Adjusted net income (loss) available to               ------------     ------------     ------------
        common shareholders                                 $   (344,446)    $   (153,326)    $      4,787
                                                            ============     ============     ============
      Basic and diluted income (loss) per share:
      Reported basic and diluted income
        (loss) per share                                    $     (10.49)    $      (4.19)    $       0.21
        Add back: goodwill amortization                               --            (0.03)           (0.01)
      Cumulative effect of change
        in accounting for goodwill                                 (1.13)              --
                                                            ------------     ------------     ------------
      Adjusted basic and diluted income (loss) per share    $      (9.36)    $      (4.16)    $       0.22
                                                            ============     ============     ============
</TABLE>


                                      136
<PAGE>

      The goodwill resulting from the Trenwick/LaSalle Re business combination
      was recorded by Trenwick, ($1,120, net of accumulated amortization of $73
      at December 31, 2001) Trenwick America, ($52,119, net of accumulated
      amortization of $1,866 at December 31, 2001) and by LaSalle Re Holdings,
      ($(11,586) net of accumulated accretion of $610 at December 31, 2001). The
      net amount ($41,653 at December 31, 2001) is presented as goodwill in the
      December 31, 2001 balance sheet.

Note 16 Other Assets and Other Liabilities

      Investments in managing general agencies, through which Trenwick wrote
      primary insurance business and in which Trenwick holds ownership interests
      of between 20% and 30% are recorded in other assets on the balance sheet.
      Based on the ownership interest and Trenwick's ability to exercise
      significant influence on the operating and financial policies of these
      managing general agencies, these investments are accounted for under the
      equity method.

      Premises and equipment, including leasehold improvements and capitalized
      software costs, are recorded at cost and amortized or depreciated using
      the straight-line method over their useful lives.

      The components of other assets and other liabilities at December 31, 2002
      and 2001 follow:

      Other assets:                                          2002        2001
                                                           --------    --------
      Investments in managing general agencies             $  1,719    $  9,010
      Premises and equipment, net of accumulated
        depreciation of $24,461 and $7,462                   20,095      24,793
      Funds held by insurers and other insurance deposits    60,717      44,424
      Prepaid expenses and other deposits                    17,971      10,848
      Current income taxes recoverable                        7,462       5,229
      Contingent commissions receivable                      10,952       8,666
      Other receivables                                      35,507      13,262
      Other                                                  25,332      16,563
                                                           --------    --------
      Total                                                $179,755    $132,795
                                                           --------    --------

      Other liabilities:
      Accounts payable and accrued expenses                $ 67,724    $ 85,810
      Security deposits for insureds                         17,114       9,548
      Contingent balances payable                            12,349      11,503
      Other                                                  29,362      18,693
                                                           --------    --------
      Total                                                $126,549    $125,554
                                                           ========    ========


                                      137
<PAGE>

      During the years ended December 31, 2002, 2001 and 2000, Trenwick recorded
      $5,763, $1,944, and $239, respectively, in equity income related to
      investments in managing general agencies. Depreciation and amortization on
      items included in other assets charged to operations for the years ended
      December 31, 2002, 2001 and 2000 years was $12,569, $7,158 and $1,229,
      respectively. In connection with Trenwick's decision to cease underwriting
      new U.S. specialty insurance business, in December 2002, Trenwick sold its
      investment in one of the managing general agencies.

      Operating Lease Agreements

      Trenwick leases office space under non-cancelable operating leases which
      expire at various dates through 2015. Trenwick's future minimum lease
      commitments at year end 2002 total $16,757, and are payable as follows:
      2003, $5,669; 2004, $3,930; 2005, $2,959; 2006, $1,772; 2007, $1,726 and
      thereafter, $701.

      Total office rent expense for the years ended December 31, 2002, 2001 and
      2000 was $3,685, $4,963, and $2,113, respectively.

Note 17 Fair Value of Financial Instruments

      The fair value of a financial instrument is defined as the amount at which
      the instrument could be exchanged in a current transaction between willing
      parties. Fair values are estimated based upon quoted market prices or
      broker dealer quotes and may vary in the near term.

      The carrying amounts and estimated fair values of financial instruments in
      summary form at year end 2002 and 2001 follow:

<TABLE>
<CAPTION>
                                                      2002                        2001
                                            ------------------------    ------------------------
                                             Carrying        Fair        Carrying        Fair
                                              Amount        Value         Amount        Value
                                            ----------    ----------    ----------    ----------
<S>                                         <C>           <C>           <C>           <C>
      Assets:
      Debt securities (Note 8)              $1,492,834    $1,492,834    $1,960,600    $1,960,600
      Equity securities (Note 8)                 8,849         8,849        24,164        24,164
      Cash and cash equivalents                814,235       814,235       331,350       331,350
      Deposits                                   8,138         8,138         7,800         7,800
      Security deposit held by Chubb            50,207        50,207            --            --

      Liabilities:
      Senior notes (Note 9)                     74,777        20,250        73,920        63,750
      Senior credit facility (Note 9)               --            --       195,035       195,035
      Contingent interest notes (Note 9)         1,721         1,721        19,923        19,923
      Other indebtedness (Note 9)                   --            --         2,385         2,385
</TABLE>

Note 18 Commitments, Contingencies, Concentrations and Related-Party
Transactions

      Restrictions on Certain Payments within Trenwick

      Because Trenwick's operations are conducted through its operating
      subsidiaries, Trenwick is dependent upon the ability of its operating
      subsidiaries to transfer funds, principally in the form of cash dividends,
      tax reimbursements and other statutorily permissible payments. In addition
      to general legal restrictions on payments of dividends and other
      distributions to shareholders applicable to all corporations, Trenwick's
      insurance subsidiaries are subject to further regulations that, among
      other things, restrict the amount of dividends and other distributions
      that may be paid to their parent corporations, as more fully described in
      Note 14.


                                      138
<PAGE>

      Related-Party Transactions

      As previously discussed in Note 9, the December Amendments to Trenwick's
      letter of credit facility prohibit Trenwick and its subsidiaries from
      declaring or paying any dividends (including on Trenwick's common shares,
      the perpetual preferred shares of LaSalle Re Holdings and the capital
      securities issued by Trenwick Capital Trust I). The amendments also
      prohibit Trenwick from making certain payments without the Banks'
      approval.

      Litigation

      Trenwick is party to various legal proceedings generally arising in the
      normal course of its business. Trenwick does not believe that the eventual
      outcome of any such proceeding will have a material effect on its
      financial condition or results of operations or cash flows. Trenwick's
      subsidiaries are regularly engaged in the investigation and the defense of
      claims arising out of the conduct of their business. Pursuant to
      Trenwick's insurance and reinsurance arrangements, disputes are generally
      required to be finally settled by arbitration.

      Investments and Cash Held as Collateral or on Deposit

      Debt securities and cash with a carrying value of $230,514 at year end
      2002 are being held in trust as collateral for certain reinsurance
      obligations of Trenwick's subsidiaries.

      At December 31, 2002 Trenwick Managing Agents had funds held as collateral
      for sponsored names guarantees for 2000 yearly of account syndicates that
      have not yet closed of $161.

      Additionally, Trenwick has debt securities and cash with a carrying value
      of $136,166 being held as collateral for Lloyd's syndicates operations.

      Concentrations

      During the year ended December 31, 2002, Trenwick received 42.0% of its
      gross written premiums through five brokers of which Marsh and McLennan
      accounted for 15.2%, Aon Reinsurance Agency accounted for 15.1%, Heath
      Lambert accounted for 4.7%, WillisFaber accounted for 4.2%, and
      Reinsurance Alternatives accounted for 2.8%. During 2001, Aon Reinsurance
      Agency accounted for 19.4%, Marsh and McLennan accounted for 16.0%,
      Reinsurance Alternatives accounted for 7.5%, Heath Lambert accounted for
      5.8%, and Benfield Blanch accounted for 1.9%. During 2000, Aon Reinsurance
      Agency accounted for 18.0%, Marsh and McLennan accounted for 13.0%, Heath
      Lambert accounted for 6.0%, Reinsurance Alternatives accounted for 5.0%
      and Benfield Blanch accounted for 3.0%.

      Loss of all or a substantial portion of the business provided by these
      brokers could have a material adverse effect on Trenwick's continuing
      underwriting business.

      No one ceding company accounted for more than 3% of Trenwick's gross
      written premiums in the 2002 or 2001 years, or the 2000 year.


                                      139
<PAGE>

      At December 31, 2002, 24% of Trenwick's net reinsurance recoverable is
      recoverable from five principal retrocessionaires. The reinsurance
      recoverable balances, net of funds held liabilities, were from London Life
      and Casualty Reinsurance Corporation ($80,996), GE Frankona Ltd.
      ($110,305), Centre Re Ltd. ($70,164), Transatlantic Reinsurance Company
      ($84,707) and AIOI Insurance Company Ltd. ($81,808). All of these
      companies are rated A or better by A.M. Best Company, or S&P if an A.M.
      Best rating is not available.

      Related Party Transactions

      Included in other assets are Trenwick's investments in managing general
      agencies through which it writes primary insurance business, as more fully
      described in Note 16. At year end 2002 and 2001, the carrying value of
      these investments totaled $1,719 and $9,010, respectively. During 2002 and
      2001, Trenwick incurred $10,807 and $11,655 of acquisition costs to these
      managing general agencies, respectively. At year end 2002 and 2001,
      Trenwick's balance sheet includes $22,557 and $19,231, respectively, of
      agents' balances receivable from these managing general agencies including
      installment premiums deferred and not yet due. The current portion of
      balances due from these managing general agencies are settled on a monthly
      basis.

      Two of LaSalle Re Holdings'founding shareholders were CNA Financial and
      Aon. CNA's ownership of LaSalle Re Holdings during the period prior to the
      Trenwick/LaSalle business combination was between 15.6% and 18.3%.
      Additionally, during the year ended December 31, 2000, LaSalle Re Holdings
      assumed $668 of premiums, ceded $6,556 of premiums, incurred $1,244 of
      override and profit commissions on premiums ceded and incurred $685 in
      underwriting support service fees to CNA. Aon's ownership of LaSalle Re
      Holdings prior to the Trenwick/LaSalle business combination was between
      15.3% and 18.0%. During the year ended December 31, 2000, LaSalle Re
      Holdings assumed $30,340 of premiums through Aon, incurred $3,034 of
      brokerage costs on premiums assumed through Aon and incurred $821 of
      investment management service expenses to Aon.

      While the 2001 underwriting support services agreement between LaSalle Re
      Holdings and CNA did not terminate until September 30, 2001, LaSalle Re
      Holdings did not utilize CNA's underwriting support services following the
      Trenwick/LaSalle business combination. Consequently, all fees payable
      between September 30, 2000 and September 30, 2001 were accrued and
      expensed at the date of the business combination (October 27, 2000).


                                      140
<PAGE>

Note 19 Additional Operating Cash Flow Information

      Operating activities are presented in the consolidated statement of cash
      flows on a direct basis. The indirect basis reconciles net income (loss)
      to cash from (for) operating activities.

      This reconciliation follows:

<TABLE>
<CAPTION>
                                                           2002          2001          2000
                                                           Year          Year          Year
                                                         ---------     ---------     ---------
<S>                                                      <C>           <C>           <C>
       Net income (loss)                                 $(384,715)    $(154,397)    $   9,451
       Adjustments to reconcile net income (loss)
         to net cash from (for) operating activities:
       Investment premium amortization, net                  5,058         2,991          (786)
       Net realized investment losses (gains)              (48,044)       (8,796)        1,386
       Unrealized loss (gain) on foreign exchange              596        (2,196)          419
       Minority interest in undistributed
         net income (loss) of subsidiaries                      --            --           839
       Contingent interest note adjustments                (18,203)       (8,700)       (4,675)
       Deferred income taxes                               150,840       (59,160)       11,143
       Uncollectible accounts provision                      1,191         3,320         4,081
       Cumulative effect of change in
         accounting principle                               41,653            --            --
       Depreciation and amortization expense                12,569         7,645           837
       Other fair value adjustment accretion                   865           458           365
       Other                                                 5,594        (3,197)       (4,383)
       Changes in assets and liabilities, net
       of effect from purchases of subsidiary:
         Accrued investment income                          19,054          (945)       (3,697)
         Premiums receivable                                15,416      (111,729)       10,449
         Reinsurance recoverable balances, net            (391,542)     (475,833)     (102,861)
         Prepaid reinsurance premiums                      (65,634)      (51,289)      (10,141)
         Deferred policy acquisition costs                 (11,330)      (16,876)       (5,743)
         Other assets                                     (140,043)       22,741           751
         Unpaid claims and claims expenses                 685,376       662,661        70,570
         Unearned premium income                           109,335       122,713         8,964
         Reinsurance balances payable                      149,142       101,575       (15,055)
         Other liabilities                                 (30,537)       32,241        11,384
                                                         ---------     ---------     ---------
       Cash from (for) operating activities              $ 106,641     $  63,227     $ (16,702)
                                                         =========     =========     =========
</TABLE>


                                      141
<PAGE>

Note 20 Unaudited Quarterly Financial Data

      Summarized unaudited quarterly financial data for the years presented
      follow:

<TABLE>
<CAPTION>
                                                      Quarter         2002          2001          2000
                                                  --------------    ---------     ---------     --------
<S>                                               <C>               <C>           <C>           <C>
          Net premiums earned                     Fourth quarter    $ 240,797     $ 222,298     $ 220,010
                                                  Third quarter       194,823       239,862        26,751
                                                  Second quarter      277,261       224,571        28,776
                                                  First quarter       266,024       202,774        27,212

          Net investment income                   Fourth quarter    $  23,497     $  32,973     $  30,937
                                                  Third quarter        24,401        30,770         9,591
                                                  Second quarter       27,885        33,186         9,251
                                                  First quarter        29,255        32,184         8,936

          Net realized investment                 Fourth quarter    $  45,749     $     968     $     530
            gains (losses)                        Third quarter        (3,119)       (3,302)          270
                                                  Second quarter        3,957         2,272            38
                                                  First quarter         1,457         8,859        (2,224)

          Net income (loss)                       Fourth quarter    $(197,030)    $ (26,397)    $   1,795
                                                  Third quarter      (136,912)      (96,107)        8,552
                                                  Second quarter        3,789       (50,806)       12,912
                                                  First quarter       (54,562)       18,913       (13,808)

          Net income (loss)                       Fourth quarter    $(198,116)    $ (26,397)    $   1,795
            available to common                   Third quarter      (137,210)      (96,107)        6,911
            shareholders                          Second quarter        3,789       (50,806)       11,271
                                                  First quarter       (54,562)       18,913       (15,449)

          Diluted income (loss)                   Fourth quarter    $   (5.39)    $   (0.72)    $    0.05
            per common share                      Third quarter     $   (3.73)    $   (2.61)    $    0.44
                                                  Second quarter    $    0.10     $   (1.38)    $    0.71
                                                  First quarter     $   (1.48)    $    0.51     $   (0.98)
</TABLE>


                                      142
<PAGE>

                      TRENWICK GROUP LTD. AND SUBSIDIARIES
            SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                               TRENWICK GROUP LTD.
                              (Parent Company Only)
                                  BALANCE SHEET
            (Amounts expressed in thousands of United States dollars)
                           December 31, 2002 and 2001

Assets:                                                 2002       2001
                                                      --------   --------
Investments in consolidated subsidiaries,
   after minority interest of $143,320 and $143,119   $152,866   $542,855
Cash and cash equivalents                               11,088        634
Due from consolidated subsidiaries                      10,867     51,183
Other assets                                             7,408      9,316
                                                      --------   --------

   Total assets                                       $182,229   $603,988
                                                      ========   ========

Liabilities:
Due to consolidated subsidiaries                      $ 97,909   $100,976
Other liabilities                                        6,850      4,686
                                                      --------   --------
Total liabilities                                      104,759    105,662

Shareholders' equity                                    77,470    498,326
                                                      --------   --------

   Total liabilities and shareholders' equity         $182,229   $603,988
                                                      ========   ========


                                      S-1
<PAGE>

                      TRENWICK GROUP LTD. AND SUBSIDIARIES
     SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT-(continued)

                               TRENWICK GROUP LTD.
                              (Parent Company Only)
                             STATEMENT OF OPERATIONS
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                               2002         2001         2000
                                                            ---------    ---------    ---------
<S>                                                         <C>          <C>          <C>
Revenues:
Consolidated subsidiary dividends                           $      --    $   7,500    $   1,500
Other income                                                   14,344        1,789           --
                                                            ---------    ---------    ---------
     Total revenues                                            14,344        9,289        1,500

Expenses:
Interest expense on affiliate loan                              4,350        4,688           --
General and administrative expenses                            23,434       16,054          675
Forgiveness of loans to subsidiaries                          108,574           --           --
                                                            ---------    ---------    ---------
Total expenses                                                136,358       20,742          675

Income (loss) before equity in undistributed income of
     unconsolidated subsidiaries income taxes, and
     cumulative effect of change in accounting principles    (122,014)     (11,453)         825

Equity in undistributed income (loss) of
  consolidated subsidiaries                                  (261,156)    (143,368)       8,626

Income taxes (benefit)                                            424         (424)          --
                                                            ---------    ---------    ---------
Net income (loss) before cumulative
     effect of change in accounting principles               (383,594)    (154,397)       9,451
                                                            ---------    ---------    ---------

Cumulative effect of change in
     accounting principle                                       1,121           --           --
                                                            ---------    ---------    ---------
Net income (loss)                                            (384,715)    (154,397)       9,451
Dividends on preferred shares                                   1,384           --        4,923
                                                            ---------    ---------    ---------

Net income (loss) available to
     common shareholders                                    $ 386,099    $(154,397)   $   4,528
                                                            =========    =========    =========
</TABLE>


                                      S-2
<PAGE>

                      TRENWICK GROUP LTD. AND SUBSIDIARIES
     SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT-(continued)

                               TRENWICK GROUP LTD.
                              (Parent Company Only)
                             STATEMENT OF CASH FLOWS
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                  2002         2001         2000
                                               ---------    ---------    ---------
<S>                                            <C>          <C>          <C>
Operating activities:
Dividends received                             $   7,294    $   7,500    $   1,500
Net investment income received                        33           71           --
Other income received                                120           --           --
Operating expenses paid                           (3,772)     (13,457)         (22)
                                               ---------    ---------    ---------

Cash from (for) operating activities               3,675       (5,886)       1,478
                                               ---------    ---------    ---------

Investing activities:
Purchases of debt securities                     (39,958)          --           --
Maturity debt securities                          40,080           --           --
Acquisition of cash on business combination           --           --          215
Additions to premises and equipment                 (187)        (520)          --
Investment in subsidiaries                      (200,225)        (270)     (75,000)
                                               ---------    ---------    ---------

Cash for investing activities                   (200,290)        (790)     (74,785)
                                               ---------    ---------    ---------

Financing activities:
Issuance of convertible preferred stock           40,000           --           --
Preferred share dividends paid                      (298)          --           --
Issuance of common shares                            157          418           30
Share and option repurchases                        (161)          --           --
Common share dividends paid                       (4,415)      (5,918)      (1,468)
Debt issuance costs                                 (728)          --           --
Affiliate loans                                  172,514       12,555       75,000
                                               ---------    ---------    ---------

Cash from financing activities                   207,069        7,055       73,562
                                               ---------    ---------    ---------

Change in cash and cash equivalents               10,454          379          255

Cash and cash equivalents, beginning of year         634          255           --
                                               ---------    ---------    ---------

Cash and cash equivalents, end of year         $  11,088    $     634    $     255
                                               =========    =========    =========
</TABLE>


                                      S-3
<PAGE>

                      TRENWICK GROUP LTD. AND SUBSIDIARIES
               SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION

                               TRENWICK GROUP LTD.
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                        2002           2001          2000
                                                    -----------    -----------   -----------
<S>                                                 <C>            <C>           <C>
Deferred policy acquisition costs
U.S. treaty reinsurance                             $    46,906    $    36,039   $    30,347
Worldwide property catastrophe reinsurance                 (176)         4,438         4,309
                                                    -----------    -----------   -----------
     Total Reinsurance                                   46,730         40,477        34,656
Lloyd's syndicates continuing                            43,850         37,228        32,278
International specialty insurance and reinsurance        20,359         28,416        25,339
                                                    -----------    -----------   -----------
     Total International operations                      64,209         65,644        57,617
U.S. specialty program insurance                         16,261          9,364         5,920
Lloyd's syndicates and ECRA Pool runoff                      --            385         2,230
                                                    -----------    -----------   -----------
  Total                                             $   127,200    $   115,870   $   100,423
                                                    ===========    ===========   ===========

Unpaid claims and claim expenses
U.S. treaty reinsurance                             $ 1,286,219    $ 1,109,219   $ 1,198,949
Worldwide property catastrophe reinsurance              220,105        238,402       139,660
                                                    -----------    -----------   -----------
     Total Reinsurance                                1,506,324      1,347,621     1,338,609
Lloyd's syndicates continuing                         1,426,459      1,046,131       536,630
International specialty insurance and reinsurance       372,407        277,040       194,777
                                                    -----------    -----------   -----------
     Total International operations                   1,798,866      1,323,171       731,407
U.S. specialty program insurance                        353,844        233,584       169,961
Lloyd's syndicates and ECRA Pool runoff                  59,090        128,372       168,949
                                                    -----------    -----------   -----------
  Total                                             $ 3,718,124    $ 3,032,748   $ 2,408,926
                                                    ===========    ===========   ===========

Unearned premium income
U.S. treaty reinsurance                             $   146,908    $   112,085   $    92,224
Worldwide property catastrophe reinsurance                8,819         32,462        23,393
                                                    -----------    -----------   -----------
     Total Reinsurance                                  155,097        144,547       115,617
Lloyd's syndicates continuing                           277,063        200,836       155,867
International specialty insurance and reinsurance       111,654        138,754       128,753
                                                    -----------    -----------   -----------
     Total International operations                     388,717        339,590       284,620
U.S. specialty program insurance                        177,810        126,920        84,950
Lloyd's syndicates and ECRA Pool runoff                      --          1,233        11,151
                                                    -----------    -----------   -----------
  Total                                             $   721,624    $   612,290   $   496,338
                                                    ===========    ===========   ===========

Net premiums earned
U.S. treaty reinsurance                             $   347,035    $   288,760   $    87,721
Worldwide property catastrophe reinsurance               37,381         83,898        85,659
                                                    -----------    -----------   -----------
     Total Reinsurance                                  384,416        372,658       173,380
Lloyd's syndicates continuing                           300,960        245,973        66,736
International specialty insurance and reinsurance       157,617        180,791        37,667
                                                    -----------    -----------   -----------
     Total International operations                     458,577        426,764       104,403
U.S. specialty program insurance                        136,060         80,649        12,203
Lloyd's syndicates and ECRA Pool runoff                    (148)         9,435        12,763
                                                    -----------    -----------   -----------
  Total                                             $   978,905    $   889,506   $   302,749
                                                    ===========    ===========   ===========
</TABLE>


                                      S-4
<PAGE>

                      TRENWICK GROUP LTD. AND SUBSIDIARIES
        SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION -(continued)

                               TRENWICK GROUP LTD.
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                       2002         2001        2000
                                                    ---------    ---------   ---------
<S>                                                 <C>          <C>         <C>
Net investment income
U.S. treaty reinsurance                             $  43,161    $  49,868   $  12,139
Worldwide property catastrophe reinsurance             16,055       30,014      35,667
                                                    ---------    ---------   ---------
     Total Reinsurance                                 59,216       79,882      47,806
Lloyd's syndicates continuing                          20,764       19,292       3,623
International specialty insurance and reinsurance      14,235       11,713       2,654
                                                    ---------    ---------   ---------
     Total International operations                    34,999       31,005       6,277
U.S. specialty program insurance                       10,453       13,057       2,351
Lloyd's syndicates and ECRA Pool runoff                   199           --       2,020
Unallocated                                               171        5,170         261
                                                    ---------    ---------   ---------
  Total                                             $ 105,038    $ 129,114   $  58,715
                                                    =========    =========   =========

Claims and claims expenses incurred
U.S. treaty reinsurance                             $ 356,248    $ 224,975   $  74,544
Worldwide property catastrophe reinsurance              7,707      100,902      54,885
                                                    ---------    ---------   ---------
     Total Reinsurance                                363,955      325,877     129,429
Lloyd's syndicates continuing                         184,952      225,540      44,862
International specialty insurance and reinsurance     178,453      185,684      33,325
                                                    ---------    ---------   ---------
     Total International operations                   363,405      411,224      78,187
U.S. specialty program insurance                      140,035       66,530       9,826
Lloyd's syndicates and ECRA pool runoff                14,140       23,774      10,265
                                                    ---------    ---------   ---------
  Total                                             $ 881,535    $ 827,405   $ 227,707
                                                    =========    =========   =========

Policy acquisition costs
U.S. treaty reinsurance                             $ 109,080    $ 101,216   $  23,213
Worldwide property catastrophe reinsurance             (2,335)      17,025      14,753
                                                    ---------    ---------   ---------
     Total Reinsurance                                106,745      118,241      37,966
Lloyd's syndicates continuing                          87,715       91,170      25,446
International specialty insurance and reinsurance      38,828       39,939       8,841
                                                    ---------    ---------   ---------
     Total International operations                   126,543      131,109      34,287
U.S. specialty program insurance                       34,562       20,996       2,424
Lloyd's syndicates and ECRA pool runoff                    63        2,720       3,926
                                                    ---------    ---------   ---------
  Total                                             $ 267,913    $ 273,066   $  78,603
                                                    =========    =========   =========

Underwriting expenses
U.S. treaty reinsurance                             $  13,577    $  11,680   $   4,796
Worldwide property catastrophe reinsurance              2,556       10,254      11,244
                                                    ---------    ---------   ---------
     Total Reinsurance                                 16,133       21,934      16,040
Lloyd's syndicates continuing                          52,972       25,926       7,163
International specialty insurance and reinsurance      20,538       21,425       4,209
                                                    ---------    ---------   ---------
     Total International operations                    73,510       47,351      11,372
U.S. specialty program insurance                       17,405        7,209       2,502
Lloyd's syndicates and ECRA pool runoff                   495        2,522       1,977
                                                    ---------    ---------   ---------
  Total                                             $ 107,543    $  79,016   $  31,891
                                                    =========    =========   =========
</TABLE>


                                      S-5
<PAGE>

                      TRENWICK GROUP LTD. AND SUBSIDIARIES
        SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION -(continued)

                               TRENWICK GROUP LTD.
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                                       2002         2001        2000
                                                    ---------    ---------   ---------
<S>                                                 <C>          <C>         <C>
Net premiums written
U.S. treaty reinsurance                             $ 385,789    $ 319,145   $  83,180
Worldwide property catastrophe reinsurance              7,002       89,509      73,441
                                                    ---------    ---------   ---------
     Total Reinsurance                                392,791      408,654     156,621
Lloyd's syndicates continuing                         311,878      264,270      78,346
International specialty insurance and reinsurance     118,815      191,875      37,649
                                                    ---------    ---------   ---------
     Total International operations                   430,693      456,145     115,995
U.S. specialty program insurance                      168,984      102,472      13,858
Lloyd's syndicates and ECRA pool runoff                  (967)       3,047      16,158
                                                    ---------    ---------   ---------
  Total                                             $ 991,501    $ 970,318   $ 302,632
                                                    =========    =========   =========
</TABLE>


                                      S-6
<PAGE>

                      TRENWICK GROUP LTD. AND SUBSIDIARIES
                 SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2002, 2001 and 2000
                (Amounts in thousands of United States dollars)

                                                     Balance at     Balance at
                                                    Beginning of      End of
                                                       Period         Period
                                                    ------------   ------------
Year Ended December 31, 2002
Allowances for uncollectible
  reinsurance recoverable and premiums receivable    $  51,114      $  77,194

Year Ended December 31, 2001
Allowances for uncollectible
  reinsurance recoverable and premiums receivable    $  25,557      $  51,114

Year Ended December 31, 2000
Allowances for uncollectible
  reinsurance recoverable and premiums receivable    $      --      $  25,557


                                      S-7

<PAGE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

                                    PART III

Item 10.  Directors and Executive Officers

The information called for by Item 10 is incorporated herein by reference to the
sections captioned "Board of Directors", "Management", and "Executive
Compensation" of Trenwick's proxy statement for its 2003 Annual General Meeting
of Shareholders, or will be provided by amendment.

Item 11.  Executive Compensation

The information called for by Item 11 is incorporated herein by reference to the
section captioned "Executive Compensation" of Trenwick's proxy statement for its
2003 Annual General Meeting of Shareholders, or will be provided by amendment.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

       Securities Authorized For Issuance Under Equity Compensation Plans

<TABLE>
<CAPTION>
                                                                                    (c)
                                                                                 Number of
                                                                                 securities
                                                                            remaining available
                                                                            for future issuance
                                         (a)                   (b)              under equity
                                Number of securities     Weighted-average    compensation plans
                                  to be issued upon     exercise price of        (excluding
                                     exercise of           outstanding           securities
                                outstanding options,    options, warrants       reflected in
        Plan category            warrants and rights        and rights           column(a))
-----------------------------   --------------------    -----------------   --------------------
<S>                                  <C>                      <C>              <C>
Equity compensation plans
  approved by security
  holders..................          $1,847,429               $18.95           $1,748,815
Equity compensation plans
  not approved by security
  holders..................                  --                   --                   --
                                     ----------               ------           ----------
Total......................          $1,847,429               $18.95           $1,748,815
                                     ==========               ======           ==========
</TABLE>

The other information called for by Item 12 is incorporated herein by reference
to the section captioned "Principal Shareholders" of Trenwick's proxy statement
for its 2003 Annual General Meeting of Shareholders, or will be provided by
amendment.


                                      143
<PAGE>

Item 13. Certain Relationships and Related Transactions

The information called for by Item 13 is incorporated herein by reference to the
section captioned "Election of Directors" of Trenwick's proxy statement for its
2003 Annual General Meeting of Shareholders, or will be provided by amendment.

Item 14. Controls and Procedures

Within the 90 days prior to the filing date of this report, Trenwick carried out
an evaluation, under the supervision and with the participation of our
management, including the Acting Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Rule 13a-15 promulgated under the Securities
and Exchange Act of 1934. Based on that evaluation, our management, including
the Acting Chief Executive Officer and Chief Financial Officer, concluded that
our disclosure controls and procedures are effective in timely alerting them to
material information required to be included in our periodic reports to be filed
with the Securities and Exchange Commission. In addition, there have been no
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies or
material weaknesses. It should be noted that the design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions, regardless of
how remote.

                                     PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)   The following documents are filed as part of this report:

      1.    Financial statements

            Report of Independent Accountants - PricewaterhouseCoopers LLP.

            Consolidated Balance Sheet at December 31, 2002 and December 31,
            2001.

            Consolidated Statement of Operations and Comprehensive Income for
            the years ended December 31, 2002, 2001 and 2000.

            Consolidated Statement of Cash Flows for the years ended December
            31, 2002, 2001 and 2000.

            Consolidated Statement of Changes in Shareholders' Equity for the
            years ended December 31, 2002, 2001 and 2000.

            Notes to Consolidated Financial Statements.

      2.    Financial statement schedules required to be filed by Item 8 of this
            Form:


                                      144
<PAGE>

                        Schedule
            Page        Number
            ----        ------
            S-1         II      Condensed Financial Information of Registrant.

            S-4         III     Supplementary Insurance Information.

            S-7         V       Valuation and Qualifying Accounts.

      3.    Exhibits

            3.1   Memorandum of Association. Incorporated by reference to
                  Exhibit 3.1 to Trenwick Group Limited's Registration Statement
                  on Form S-4 (File No. 333-44290).

            3.2   Bye-Laws. Incorporated by reference to Exhibit 3.3 to Trenwick
                  Group Limited's Registration Statement on Form S-4 (File No.
                  333-44290).

            3.3   Certificate of Incorporation of Gowin Holdings International
                  Limited, dated December 14, 1999. Incorporated by reference to
                  Exhibit 3.2(a) to Trenwick Group Limited's Registration
                  Statement on Form S-4. (File No. 333-44290).

            3.4   Certificate of Incorporation on Change of Name from Gowin
                  Holdings International Limited to Trenwick Group Ltd., dated
                  as of March 27, 2000. Incorporated by reference to Exhibit
                  3.2(b) to Trenwick Group Limited's Registration Statement on
                  Form S-4 (File No. 333-44290).

            4.1   Specimen Share Certificate. Incorporated by reference to
                  Exhibit 4.2 to Trenwick Group Limited's Registration Statement
                  on Form S-4. (File No. 333-44290).

            4.2   Rights Agreement, dated as of September 27, 2000, between
                  Trenwick Group Ltd. and First Chicago Trust Company of New
                  York including, as Exhibit A thereto, a form of Rights
                  Certificate. Incorporated by reference to Exhibit 4.2 to
                  Trenwick Group Limited's Form 8-A filed October 2, 2000. (File
                  No. 1-15389).

            4.3   (a) Indenture dated as of January 31, 1997, between The Chase
                  Manhattan Bank and Trenwick Group Inc. Incorporated by
                  reference to Exhibit 4.2(a) to Trenwick Group Inc.'s Annual
                  Report on Form 10-K for the year ended December 31, 1996 (File
                  No. 0-14737).

                  (b) Amended and Restated Declaration of Trust of Trenwick
                  Capital Trust I dated as of January 31, 1997. Incorporated by
                  reference to Exhibit 4.2(b) to Trenwick Group Inc.'s Annual
                  Report on Form 10-K for the year ended December 31, 1996 (File
                  No. 0-14737).

                  (c) Exchange Capital Securities Guarantee Agreement dated as
                  of July 25, 1997, between Trenwick Group Inc. and The Chase
                  Manhattan Bank, as Trustee. Incorporated by reference to
                  Exhibit 4.7 to Trenwick Group Inc.'s Registration Statement on
                  Form S-4 (File No. 333-28707).

            4.4   First Supplemental Indenture, dated as of September 27, 2000,
                  among Trenwick Group Inc., Trenwick America Corporation and
                  The Chase Manhattan Bank, as Trustee, with respect to the
                  8.82% Junior Subordinated Deferrable Interest


                                      145
<PAGE>

                  Debentures. Incorporated by reference to Exhibit 4.2 to
                  Trenwick America Corporation's Current Report on Form 8-K,
                  filed on November 16, 2000 (File No. 0-31967).

            4.5   Indenture dated as of March 27, 1998 between Trenwick Group
                  Inc. and The First National Bank of Chicago, as Trustee, with
                  respect to Trenwick Group Inc.'s $75 million principal amount
                  of 6.7% Senior Notes due April 1, 2003. Incorporated by
                  reference to Exhibit 4.2 to Trenwick Group Inc.'s Quarterly
                  Report on Form 10-Q for the quarter ended March 31, 1998 (File
                  No. 1-15389).

            4.6   First Supplemental Indenture, dated as of September 27, 2000,
                  among Trenwick Group Inc., Trenwick America Corporation, and
                  Bank One Trust Company, N.A., as successor to First National
                  Bank of Chicago, as Trustee, with respect to the $75 million
                  principal amount of 6.7% Senior Notes due April 1, 2003.
                  Incorporated by reference to Exhibit 4.4 to Trenwick America
                  Corporation's Current Report on Form 8-K, filed on November
                  16, 2000 (File No. 0-31967).

            4.7   Indenture, dated as of December 1, 1995, between Chartwell Re
                  Corporation, as the successor to Piedmont Management Company
                  Inc., and Fleet Bank, as Trustee, for the Contingent Interest
                  Notes due June 30, 2006. Incorporated by reference to Exhibit
                  4.5 to Chartwell Re Corporation's Registration Statement on
                  Form S-1 (File No. 333-678).

            4.8   First Supplemental Indenture, dated as of December 13, 1995,
                  among Piedmont Management Company, Chartwell Re Corporation
                  and Fleet Bank, as Trustee under the Contingent Interest Notes
                  due June 30, 2006. Incorporated by reference to Exhibit 4.6 to
                  Chartwell Re Corporation's Registration Statement on Form S-1
                  (File No. 333-678).

            4.9   Second Supplemental Indenture, dated as of October 27, 1999,
                  among Chartwell Re Corporation, Trenwick Group Inc. and State
                  Street Bank and Trust Company, as successor to Fleet Bank, as
                  Trustee, with respect to the Contingent Interest Notes due
                  June 30, 2006. Incorporated by reference to Exhibit 4.7 to
                  Trenwick America Corporation's Current Report on Form 8-K,
                  filed on November 16, 2000 (File No. 0-31967).

            4.10  Third Supplemental Indenture, dated as of September 27, 2000,
                  among Trenwick Group Inc., Trenwick America Corporation and
                  State Street Bank and Trust Company, as successor to Fleet
                  Bank, as Trustee under the contingent Interest Notes due June
                  30, 2006. Incorporated by reference to Exhibit 4.8 to Trenwick
                  America Corporation's Current Report on Form 8-K, filed on
                  November 16, 2000 (File No. 0-31967).

            4.11  Certificate of Designation, Preferences and Rights of Series B
                  Cumulative Convertible Perpetual Preferred Shares of Trenwick
                  Group Ltd. Incorporated by reference to Exhibit 99.3 to
                  Trenwick Group Ltd.'s Current Report on Form 8-K, filed on
                  September 10, 2002 (file no. 1-16089).

            10.1  Amended and Restated Credit Agreement, dated as of November
                  24, 1999 and Amended and Restated as of September 27, 2000,
                  among Trenwick America Corporation, Trenwick Holdings Limited,
                  various lending institutions, First


                                      146
<PAGE>

                  Union National Bank, as Syndication Agent, Fleet National
                  Bank, as Documentation Agent, and Chase Manhattan Bank, as
                  Administrative Agent. Incorporated by reference to Exhibit
                  10.1 to Trenwick Group Limited's Quarterly Report on Form 10-Q
                  for the quarter ended September 30, 2000 (File No. 1-16089).

            10.2  First Amendment and Waiver to the Credit Agreement, dated as
                  of June 13, 2001, among Trenwick America Corporation, Trenwick
                  Holdings Limited, the lending institutions from time to time
                  party thereto, First Union National Bank, as Syndication
                  Agent, Fleet National Bank, as Documentation Agent, and The
                  Chase Manhattan Bank, as Administrative Agent. Incorporated by
                  reference to Exhibit 10.1 to Trenwick Group Limited's First
                  Amendment to Quarterly Report on Form 10-Q for the quarter
                  ended September 30, 2001, filed on January 11, 2002 (File No.
                  0-31967).

            10.3  First Amendment to the Holdings Guaranty, dated as of June 13,
                  2001, among Trenwick Group Ltd. and the lending institutions
                  from time to time party to the Credit Agreement. Incorporated
                  by reference to Exhibit 10.2 to Trenwick Group Limited's First
                  Amendment to Quarterly Report on Form 10-Q for the quarter
                  ended September 30, 2001, filed on January 11, 2002 (File No.
                  0-31967).

            10.4  Second Amendment and Waiver to the Credit Agreement, dated as
                  of November 13, 2001, among Trenwick America Corporation,
                  Trenwick Holdings Limited, the lending institutions from time
                  to time party thereto, First Union National Bank, as
                  Syndication Agent, Fleet National Bank, as Documentation
                  Agent, and JP Morgan Chase Bank, as Administrative Agent.
                  Incorporated by reference to Exhibit 10.3 to Trenwick Group
                  Limited's First Amendment to Quarterly Report on Form 10-Q for
                  the quarter ended September 30, 2001, filed on January 11,
                  2002 (File No. 0-31967).

            10.5  Second Amendment to the Holdings Guaranty, dated as of
                  November 13, 2001, among Trenwick Group Ltd. and the lending
                  institutions from time to time party to the Credit Agreement.
                  Incorporated by reference to Exhibit 10.4 to Trenwick Group
                  Limited's First Amendment to Quarterly Report on Form 10-Q for
                  the quarter ended September 30, 2001, filed on January 11,
                  2002 (File No. 0-31967).

            10.6  Amended and Restated Catastrophe Equity Securities Issuance
                  Option Agreement, dated as of January 1, 2001, between
                  Trenwick Group Ltd. and European Reinsurance Company of
                  Zurich.

            10.7  Amendment No. 1 to Amended and Restated Catastrophe Equity
                  Securities Issuance Option Agreement, dated as of January 25,
                  2002, between Trenwick Group Ltd. and European Reinsurance
                  Company of Zurich.

            10.8  Common Stock Purchase Warrant, dated March 6, 1992, issued by
                  Chartwell Re Corporation to Wand Partners (Chartwell) L.P.
                  Incorporated by reference to Exhibit 10.34 to Chartwell Re
                  Corporation's Registration Statement on Form S-1 (File No.
                  33-75386).

            10.9  Common Stock Purchase Warrant, dated December 31, 1992, issued
                  by Chartwell to Wand Partners (Chartwell) L.P. Incorporated by
                  reference as


                                      147
<PAGE>

                  Exhibit 10.35 to Chartwell Re Corporation's Registration
                  Statement on Form S-1 (File No. 33-75386).

            10.10 Common Stock Purchase Warrant, dated December 31, 1992, issued
                  by Chartwell to John Sagan. Incorporated by reference to
                  Exhibit 10.36 to Chartwell Re Corporation's Registration
                  Statement on Form S-1 (File No. 33-75386).

            10.11 Trenwick Group Inc. 1989 Stock Plan, as amended. Incorporated
                  by reference to Exhibit 99.1 to Trenwick Group Limited's
                  Registration Statement on Form S-8 (File No. 333-47690).*

            10.12 Trenwick Group Inc. 1993 Non-Employee Directors Stock Option
                  Plan, as amended. Incorporated by reference to Exhibit 99.2 to
                  Trenwick Group Limited's Registration Statement on Form S-8
                  (File No. 333-47690).*

            10.13 Trenwick Group Inc. 1993 Stock Option Plan, as amended.
                  Incorporated by reference to Exhibit 99.3 to Trenwick Group
                  Limited's Registration Statement on Form S-8 (File No.
                  333-47690).*

            10.14 Trenwick Group Inc. 1996 RB Stock Option Plan, as amended.
                  Incorporated by reference to Exhibit 99.4 to Trenwick Group
                  Limited's Registration Statement on Form S-8 (File No.
                  333-47690).*

            10.15 Chartwell Re Corporation 1996 Non-Employee Directors Stock
                  Option Plan, as amended. Incorporated by reference to Exhibit
                  99.6 to Trenwick Group Limited's Registration Statement on
                  Form S-8 (File No. 333-47690).*

            10.16 Chartwell Re Corporation 1997 Omnibus Stock Incentive Plan, as
                  amended. Incorporated by reference to Exhibit 99.7 to Trenwick
                  Group Limited's Registration Statement on Form S-8 (File No.
                  333-47690).

            10.17 LaSalle Re Holdings Limited 1996 Long-Term Incentive Plan, as
                  amended. Incorporated by reference to Exhibit 99.8 to Trenwick
                  Group Limited's Registration Statement on Form S-8 (File No.
                  333-47690).

            10.18 Trenwick Unfunded Supplemental Executive Retirement Plan, as
                  amended through December 14, 1993. Incorporated by reference
                  to Exhibit 10.14 to Trenwick Group Inc.'s Annual Report on
                  Form 10-K for the year ended December 31, 1994 (File No.
                  0-14737).*

            10.19 Leased Automobile Policy for executive officers. Incorporated
                  by reference to Exhibit 10.5 to Trenwick Group Inc.'s Annual
                  Report on Form 10-K for the year ended December 31, 1998.
                  (File No. 1-15389).*

            10.20 Description of life insurance and long-term disability
                  insurance coverage for executive officers. Incorporated by
                  reference to Exhibit 10.16 to Trenwick Group Inc.'s Annual
                  Report on Form 10-K for the year ended December 31, 1994 (File
                  No. 0-14737).*


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<PAGE>

            10.21 Trenwick Directors Deferred Compensation Plan. Incorporated by
                  reference to Exhibit 10.17 to Trenwick Group Inc.'s Annual
                  Report on Form 10-K for the year ended December 31, 1994 (File
                  No. 0-14737).*

            10.22 Declaration of Trust dated December 10, 1996, as amended
                  through September 9, 1997, establishing a retirement plan for
                  certain employees of Trenwick Management Services Limited.
                  Incorporated by reference to Exhibit 10.9 to Trenwick Group
                  Inc.'s Annual Report on Form 10-K for the year ended December
                  31, 1998. (File No. 1-15389).*

            10.23 Employment Agreement, dated as of March 31, 1993, between
                  Chartwell Re Corporation and Steven J. Bensinger. Incorporated
                  by reference to Exhibit 10.20 to Chartwell Re Corporation's
                  Registration Statement on Form S-1 (File No. 33-75386).*

            10.24 Fourth Amendment to the Employment Agreement, dated as of
                  December 31, 1997, between Chartwell Re Corporation and Steven
                  J. Bensinger. Incorporated by reference to Exhibit 10.34 to
                  Chartwell Re Corporation's Annual Report on Form 10-K for the
                  year ended December 31, 1997 (File No. 1-12502).*

            10.25 Fifth Amendment to the Employment Agreement, dated as of
                  August 4, 1998, between Chartwell Re Corporation and Steven J.
                  Bensinger. Incorporated by reference to Exhibit 10.23 to
                  Chartwell Re Corporation's Annual Report on Form 10-K for the
                  year ended December 31, 1998 (File No. 1-12502).*

            10.26 Sixth Amendment to the Employment Agreement, dated as of
                  December 30, 1998, between Chartwell Re Corporation and Steven
                  J. Bensinger. Incorporated by reference to Exhibit 10.26 to
                  Chartwell Re Corporation's Annual Report on Form 10-K for the
                  year ended December 31, 1998 (File No. 1-12502).*

            10.27 Employment Assumption and Amendment Agreement, dated as of
                  October 25, 1999, between Trenwick Group Inc. and Steven J.
                  Bensinger. Incorporated by reference to Exhibit 10.25 to
                  Trenwick Group Inc.'s Annual Report on Form 10-K for the year
                  ended December 31, 1999 (File No. 1-15389).*

            10.28 Employment Termination Agreement, dated as of December 12,
                  2001, between Trenwick Group Ltd. and Steven J. Bensinger.*

            10.29 Employment Agreement, dated May 11, 2001, between Trenwick
                  Group Ltd. and James F. Billett, Jr. Incorporated by reference
                  to Exhibit 10.1 to Trenwick Group Limited's Quarterly Report
                  on Form 10-Q for the quarter ended June 30, 2001 (File No.
                  1-16089).*

            10.30 Form of Amended and Restated Change of Control Agreement,
                  dated September 26, 2000, between Trenwick Group Inc. and
                  senior officers of Trenwick Group Inc. and Trenwick America
                  Corporation. Incorporated by reference to Exhibit 10.15 to
                  Trenwick Group Limited's Quarterly Report on Form 10-Q for the
                  quarter ended September 30, 2000 (File No. 1-16089).*

            10.31 Form of Assumption Letter, dated September 27, 2000, by
                  Trenwick Group Ltd. assuming the obligations of Trenwick Group
                  Inc. under the Change of Control


                                      149
<PAGE>

                  Agreements. Incorporated by reference to Exhibit 10.16 to
                  Trenwick Group Limited's Quarterly Report on Form 10-Q for the
                  Quarter ended September 30, 2000 (File No. 1-16089).

            10.32 Office lease between Trenwick America Corporation and
                  EOP-Canterbury Green, L.L.C. dated as of January 29, 1998,
                  with respect to office space in Stamford, Connecticut.
                  Incorporated by reference to Exhibit 10.16 to Trenwick Group
                  Inc.'s Annual Report on Form 10-K for the year ended December
                  31, 1997 (File No. 1-15389).

            10.33 First Amendment dated as of March 31, 1998, to office lease
                  between Trenwick America Corporation and EOP-Canterbury Green
                  L.L.C. dated January 29, 1998. Incorporated by reference to
                  Exhibit 10.11 to Trenwick Group Inc.'s Annual Report on Form
                  10-K for the year ended December 31, 1998 (File No. 1-15389).

            10.34 Lease of the premises located at 2 Minster Court, London,
                  England, by and between Chartwell UK Management Services
                  Limited (as Tenant) and The Prudential Assurance Company
                  Limited (as Landlord). Incorporated by reference to Exhibit
                  10.32 to Trenwick Group Inc.'s Annual Report on Form 10-K for
                  the year ended December 31, 1999 (File No. 1-15389).

            10.35 Underlease between Wereldhave Property Corporation PLC and
                  predecessors of Trenwick Management Services Limited dated May
                  22, 1991, with respect to office space located at 16
                  Eastcheap, London, England. Incorporated by reference to
                  Exhibit 10.12 to Trenwick Group Inc.'s Annual Report on Form
                  10-K for the year ended December 31, 1998 (File No. 1-15389).

            10.36 Coinsured Aggregate Excess of Loss Reinsurance Agreement
                  between Trenwick America Reinsurance Corporation and Centre
                  Reinsurance Company of New York. Incorporated by reference to
                  Exhibit 10.28 to Trenwick Group Inc.'s Annual Report on Form
                  10-K for the year ended December 31, 1994 (File No. 0-14737).

            10.37 Aggregate Excess of Loss Ratio Cover between Trenwick America
                  Reinsurance Corporation and Continental Casualty Company.
                  Incorporated by reference to Exhibit 10.22 to Trenwick Group
                  Inc.'s Annual Report on Form 10-K for the year ended December
                  31, 1995 (File No. 0-14737).

            10.38 1996 Coinsured Aggregate Excess of Loss Reinsurance Agreement
                  between Trenwick America Reinsurance Corporation and Centre
                  Reinsurance Company of New York and CNA Re. Incorporated by
                  reference to Exhibit 10.33 to Trenwick Group Inc.'s Annual
                  Report on Form 10-K for the year ended December 31, 1996 (File
                  No. 0-14737).

            10.39 First and Second Coinsured Aggregate Excess of Loss
                  Reinsurance Agreement between Trenwick America Reinsurance
                  Corporation and Centre Reinsurance Company of New York and CNA
                  Re. Incorporated by reference to Exhibit 10.31 to Trenwick
                  Group Inc.'s Annual Report on Form 10-K for the year ended
                  December 31, 1997 (File No. 1-15389).


                                      150
<PAGE>

            10.40 1998 Coinsured Aggregate Excess of Loss Reinsurance Agreement
                  between Trenwick America Reinsurance Corporation and Centre
                  Reinsurance Company of New York and National Union.
                  Incorporated by reference to Exhibit 10.27 to Trenwick Group
                  Inc.'s Annual Report on Form 10-K for the year ended December
                  31, 1998 (File No. 1-15389).

            10.41 1999 Coinsured Aggregate Excess of Loss Reinsurance Agreement
                  between Trenwick America Reinsurance Corporation and Centre
                  Insurance Company and National Union. Incorporated by
                  reference to Exhibit 10.39 to Trenwick Group Inc.'s Annual
                  Report on Form 10-K for the year ended December 31, 1999 (File
                  No. 1-15389).

            10.42 Aggregate Excess of Loss Reinsurance Agreement, dated as of
                  October 27, 1999, by and between Chartwell Reinsurance
                  Company, Dakota Specialty Insurance Company, The Insurance
                  Corporation of New York and Drayton Company Limited, inclusive
                  of corporate capital support of London underwriting
                  operations, and London Life and Casualty Reinsurance
                  Corporation and Scandinavian Reinsurance Company, Ltd.
                  Incorporated by reference to Exhibit 10.40 to Trenwick Group
                  Inc.'s Annual Report on Form 10-K for the year ended December
                  31, 1999 (File No. 1-15389).

            10.43 Quota Share Arrangement, dated as of April 1, 1999, between
                  LaSalle Re Limited and Continental Casualty Company.
                  Incorporated by reference to Exhibit 10.2 to LaSalle Re
                  Holdings Limited's Quarterly Report on Form 10-Q for the
                  quarterly period ended March 31, 1999 (File No. 1-12823).

            10.44 Quota Share Treaty between CNA International Reinsurance
                  Company Limited and LaSalle Re Limited in respect of 1999
                  underwriting year of account (London office). Incorporated by
                  reference to Exhibit 10.32 to LaSalle Re Holdings Limited's
                  Annual Report on Form 10-K for the fiscal year ended September
                  30, 1999 (File No. 1-12823).

            10.45 Quota Share Treaty between CNA International Reinsurance
                  Company Limited and LaSalle Re Limited in respect of 1999
                  underwriting year of account (Amsterdam office). Incorporated
                  by reference to Exhibit 10.38 to LaSalle Re Holdings Limited's
                  Annual Report on Form 10-K for the fiscal year ended September
                  30, 1999 (File No. 1-12823).

            10.46 LMX Quota Share Retrocessional Agreement between Continental
                  Casualty Company and LaSalle Re Limited for the 1999
                  underwriting year of account. Incorporated by reference to
                  Exhibit 10.43 to LaSalle Re Holdings Limited's Annual Report
                  on Form 10-K for the fiscal year ended September 30, 1999
                  (File No. 1-12823).

            10.47 Third Amendment to the Credit Agreement, dated as of April 12,
                  2002, among Trenwick America Corporation, Trenwick Holdings
                  Limited, the lending institutions from time to time party to
                  the Credit Agreement, Wachovia Bank, National Association,
                  Fleet National Bank, and JPMorgan Chase Bank. Incorporated by
                  reference to Exhibit 10.1 to Trenwick Group Ltd.'s Quarterly
                  Report on Form 10-Q for the quarter ended March 31, 2002,
                  filed on May 15, 2002 (file no. 1-16089).


                                      151
<PAGE>

            10.48 Third Amendment to the Holdings Guaranty, dated as of April
                  12, 2002, among Trenwick Group Ltd. and the lending
                  institutions from time to time party to the Credit Agreement.
                  Incorporated by reference to Exhibit 10.2 to Trenwick Group
                  Ltd.'s Quarterly Report on Form 10-Q for the quarter ended
                  March 31, 2002, filed on May 15, 2002 (file no. 1-16089).

            10.49 Transfer and Purchase Agreement, dated as of May 16, 2002,
                  among Trenwick Group Ltd., LaSalle Re Limited, and Endurance
                  Specialty Insurance Ltd. Incorporated by reference to Exhibit
                  99.1 to Trenwick Group Ltd.'s Current Report on Form 8-K,
                  filed on May 22, 2002 (file no. 1-16089).

            10.50 Quota Share Retrocession Agreement, dated as of May 16, 2002,
                  between LaSalle Re Limited and Endurance Specialty Insurance,
                  Ltd. Incorporated by reference to Exhibit 99.2 to Trenwick
                  Group Ltd.'s Current Report on Form 8-K, filed on May 22, 2002
                  (file no. 1-16089).

            10.51 Bill of Sale and Assignment Agreement, dated as of May 16,
                  2002, among LaSalle Re Limited and Endurance Specialty
                  Insurance Ltd. Incorporated by reference to Exhibit 99.3 to
                  Trenwick Group Ltd.'s Current Report on Form 8-K, filed on May
                  22, 2002 (file no. 1-16089).

            10.52 Administrative Services Agreement, dated as of May 16, 2002,
                  between LaSalle Re Limited and Endurance Specialty Insurance
                  Ltd. Incorporated by reference to Exhibit 99.4 to Trenwick
                  Group Ltd.'s Current Report on Form 8-K, filed on May 22, 2002
                  (file no. 1-16089).

            10.53 Assignment of Reinsurance Recoverables and Other Receivables,
                  dated as of May 16, 2002, between LaSalle Re Limited and
                  Endurance Insurance Ltd. Incorporated by reference to Exhibit
                  99.5 to Trenwick Group Ltd.'s Current Report on Form 8-K,
                  filed on May 22, 2002 (file no. 1-16089).

            10.54 Settlement Agreement, dated as of January 1, 2001, between
                  Trenwick Group Ltd. and European Reinsurance Company of
                  Zurich. Incorporated by reference to Exhibit 99.1 to Trenwick
                  Group Ltd.'s Current Report on Form 8-K, filed on September
                  10, 2002 (file no. 1-16089).

            10.55 Second Amended and Restated Catastrophe Equity Securities
                  Issuance Option Agreement, dated as of September 6, 2002,
                  between Trenwick Group Ltd. and European Reinsurance Company
                  of Zurich. Incorporated by reference to Exhibit 99.2 to
                  Trenwick Group Ltd.'s Current Report on Form 8-K, filed on
                  September 10, 2002 (file no. 1-16089).

            10.56 Amendment No. 1 to the Registration Rights Agreement, dated as
                  of September 6, 2002, between Trenwick Group Ltd. and European
                  Reinsurance Company of Zurich. Incorporated by reference to
                  Exhibit 99.4 to Trenwick Group Ltd.'s Current Report on Form
                  8-K, filed on September 10, 2002 (file no. 1-16089).

            10.57 Summary of Indicative Terms and Conditions--Underwriting and
                  Reinsurance Arrangement between Chubb Re, Inc. and Trenwick
                  America Reinsurance Corporation, dated October 25, 2002.
                  Incorporated by reference to Exhibit 99.1


                                      152
<PAGE>

                  to Trenwick Group Ltd.'s Current Report on Form 8-K, filed on
                  October 29, 2002 (file no. 1-16089).

            10.58 Agreement, dated as of November 1, 2002, between National
                  Indemnity Company and Trenwick Managing Agents Limited.
                  Incorporated by reference to Exhibit 99.1 to Trenwick Group
                  Ltd.'s Current Report on Form 8-K, filed on November 5, 2002
                  (File No. 1-16089).

            10.59 Agreement, dated as of August 26, 2002 between Trenwick Group
                  Ltd. and Mr. W. Marston Becker. Incorporated by reference to
                  Exhibit 10.2 to Trenwick Group Ltd.'s Quarterly Report on Form
                  10-Q for the quarter ended September 30, 2002, filed on
                  November 14, 2002 (File No. 1-16089).*

            10.60 Forbearance Agreement, dated as of November 11, 2002, among
                  Trenwick America Corporation, Trenwick Holdings Limited, the
                  lending institutions party to the Credit Agreement, and
                  JPMorgan Chase Bank. Incorporated by reference to Exhibit 10.1
                  to Trenwick Group Ltd.'s Quarterly Report on Form 10-Q for the
                  quarter ended September 30, 2002, filed on November 14, 2002
                  (File No. 1-16089).

            10.61 Amendment to Forbearance Agreement, dated as of November 21,
                  2002, among Trenwick America Corporation, Trenwick Holdings
                  Limited, Trenwick Group Ltd., LaSalle Re Holdings Limited, the
                  lending institutions party to the Credit Agreement, and
                  JPMorgan Chase Bank. Incorporated by reference to Exhibit 99.1
                  to Trenwick Group Ltd.'s Current Report on Form 8-K, filed on
                  December 3, 2002 (File No. 1-16089).

            10.62 Second Amendment to the Forbearance Agreement, dated as of
                  December 6, 2002, among Trenwick America Corporation, Trenwick
                  Holdings Limited, Trenwick Group Ltd., LaSalle Re Holdings
                  Limited, the lending institutions party to the Credit
                  Agreement, and JPMorgan Chase Bank. Incorporated by reference
                  to Exhibit 99.1 to Trenwick Group Ltd.'s Current Report on
                  Form 8-K, filed on December 12, 2002 (File No. 1-16089).

            10.63 Third Amendment and Consent to the Forbearance Agreement,
                  dated as of December 9, 2002, among Trenwick America
                  Corporation, Trenwick Holdings Limited, Trenwick Group Ltd.,
                  LaSalle Re Holdings Limited, the lending institutions party to
                  the Credit Agreement, and JPMorgan Chase Bank. Incorporated by
                  reference to Exhibit 99.2 to Trenwick Group Ltd.'s Current
                  Report on Form 8-K, filed on December 12, 2002 (File No.
                  1-16089).*

            10.64 Trenwick Group Ltd. Term Sheet LOC Facility, dated as December
                  3, 2002. Incorporated by reference to Exhibit 99.3 to Trenwick
                  Group Ltd.'s Current Report on Form 8-K, filed on December 12,
                  2002 (File No. 1-16089).

            10.65 Fourth Amendment and Waiver to the Credit Agreement, dated as
                  of December 24, 2002, among Trenwick America Corporation,
                  Trenwick Holdings Limited, Trenwick UK Holdings Limited, the
                  lending institutions from time to time party to the Credit
                  Agreement, Wachovia Bank, National Association and JPMorgan
                  Chase Bank. Incorporated by reference to Exhibit 99.1 to
                  Trenwick Group Ltd.'s Current Report on Form 8-K, filed on
                  December 26, 2002 (File No. 1-16089).


                                      153
<PAGE>

            10.66 Fourth Amendment to the Holdings Guaranty, dated as of
                  December 24, 2002, among Trenwick Group Ltd. and the lending
                  institutions from time to time party to the Credit Agreement.
                  Incorporated by reference to Exhibit 99.2 to Trenwick Group
                  Ltd.'s Current Report on Form 8-K, filed on December 26, 2002
                  (File No. 1-16089).

            10.67 Fifth Amendment to the Credit Agreement, dated as of January
                  16, 2003, among Trenwick America Corporation, Trenwick
                  Holdings Limited, Trenwick UK Holdings Limited, the lending
                  institutions from time to time party to the Credit Agreement,
                  Wachovia Bank, National Association and JPMorgan Chase Bank.
                  Incorporated by reference to Exhibit 99.1 to Trenwick Group
                  Ltd.'s Current Report on Form 8-K, filed on March 18, 2003
                  (File No. 1-16089).

            10.68 Fifth Amendment and Consent to the Holdings Guaranty, dated as
                  of January 16, 2003, among Trenwick Group, Ltd. and the
                  lending institutions from time to time party to the Credit
                  Agreement. Incorporated by reference to Exhibit 99.2 to
                  Trenwick Group Ltd.'s Current Report on Form 8-K, filed on
                  March 18, 2003 (File No. 1-16089).

            10.69 Agreement, dated January 28, 2003, between James F. Billett
                  and Trenwick Group Ltd. Incorporated by reference to Exhibit
                  99.1 to Trenwick Group Ltd.'s Current Report on Form 8-K,
                  filed on March 18, 2003 (File No. 1-16089).

            10.70 Sixth Amendment and Waiver to the Credit Agreement, dated as
                  of January 27, 2003, among Trenwick America Corporation,
                  Trenwick Holdings Limited, Trenwick UK Holdings Limited, the
                  lending institutions from time to time party to the Credit
                  Agreement, Wachovia Bank, National Association and JPMorgan
                  Chase Bank. Incorporated by reference to Exhibit 99.4 to
                  Trenwick Group Ltd.'s Current Report on Form 8-K, filed on
                  March 18, 2003 (File No. 1-16089).

            10.71 Sixth Amendment and Consent to the Holdings Guaranty, dated as
                  of January 27, 2003, among Trenwick Group Ltd. and the lending
                  institutions form time to time party to the Credit Agreement.
                  Incorporated by reference to Exhibit 99.5 to Trenwick Group
                  Ltd.'s Current Report on Form 8-K, filed on March 18, 2003
                  (File No. 1-16089).

            10.72 Seventh Amendment and Waiver to the Credit Agreement, dated as
                  of March 7, 2003, among Trenwick America Corporation, Trenwick
                  Holdings Limited, Trenwick UK Holdings Limited, the lending
                  institutions from time to time party to the Credit Agreement,
                  Wachovia Bank, National Association and JPMorgan Chase Bank.
                  Incorporated by reference to Exhibit 99.6 to Trenwick Group
                  Ltd.'s Current Report on Form 8-K, filed on March 18, 2003
                  (File No. 1-16089).

            10.73 Seventh Amendment to the Holdings Guaranty, dated as of March
                  7, 2003, among Trenwick Group Ltd. and the lending
                  institutions form time to time party to the Credit Agreement.
                  Incorporated by reference to Exhibit 99.7 to Trenwick Group
                  Ltd.'s Current Report on Form 8-K, filed on March 18, 2003
                  (File No. 1-16089).

            10.74 Fourth Waiver to the Credit Agreement, dated as of March 14,
                  2003, among Trenwick America Corporation, Trenwick Holdings
                  Limited, Trenwick UK


                                      154
<PAGE>

                  Holdings Limited, the lending institutions from time to time
                  party to the Credit Agreement, Wachovia Bank, National
                  Association and JPMorgan Chase Bank. Incorporated by reference
                  to Exhibit 99.8 to Trenwick Group Ltd.'s Current Report on
                  Form 8-K, filed on March 18, 2003 (File No. 1-16089).

            10.75 Agreement, between the Connecticut Insurance Department and
                  Trenwick America Reinsurance Corporation, dated December 3,
                  2002. Incorporated by reference to Exhibit 99.9 to Trenwick
                  Group Ltd.'s Current Report on Form 8-K, filed on March 18,
                  2003 (File No. 1-16089).

            10.76 Agreement, dated as of December 10, 2002, between LaSalle Re
                  Limited and Trenwick Group Ltd. Incorporated by reference to
                  Exhibit 99.10 to Trenwick Group Ltd.'s Current Report on Form
                  8-K, filed on March 18, 2003 (File No. 1-16089).

            10.77 Agreement dated December 23, 2002 between National Indemnity
                  Company and Trenwick Managing Agents Limited.**

            12.1  Computation of Ratios.**

            21.1  List of Subsidiaries. **

            23.1  Consent of PricewaterhouseCoopers LLP. **

            99.1  Certification of Acting Chief Executive Officer **

            99.2  Certification of Chief Financial Officer **

      *     Management contract or compensatory plan or arrangement.

      **    Filed herewith

(b)   Reports on Form 8-K

      Reports on Form 8-K

      Trenwick filed Current Reports on Form 8-K on the following dates during
      the fourth quarter of 2002:

            October 28, 2002, reporting the lowering by A.M. Best Company on
            October 18, 2002 of the financial strength ratings of the operating
            subsidiaries of Trenwick, and the existence of an event of default
            under the Credit Agreement among Trenwick America Corporation,
            Trenwick Holdings Limited and various financial institutions.

            October 29, 2002, reporting (a) the entry by Trenwick America
            Reinsurance Corporation into an underwriting facility with a
            subsidiary of Chubb Corporation on October 25, 2002 and (b)
            Trenwick's announcement on October 25, 2002 that it had engaged
            independent actuaries to conduct a review of Trenwick's reserves for
            unpaid claims and claims expenses at each of its operating
            subsidiaries.

            October 31, 2002, reporting the immediate cessation of underwriting
            of Trenwick's United States specialty program insurance business,
            effective as of October 30, 2002.


                                      155
<PAGE>

            November 5, 2002, reporting the execution by Trenwick Managing
            Agents Limited of a letter agreement with National Indemnity Company
            on November 4, 2002 pursuant to which National Indemnity Company
            agreed to provide to Trenwick's Lloyd's Syndicate 839 $150 million
            in capital and a $45 million quota share reinsurance facility for
            the 2003 year of account.

            November 15, 2002, reporting the entry on November 13, 2002 by
            Trenwick, Trenwick America Corporation, Trenwick Holdings Limited
            and LaSalle Re Holdings Limited into a Forbearance Agreement dated
            as of November 11, 2002 with certain lending institutions party to
            the Credit Agreement dated as of November 24, 1999 and amended and
            restated as of September 27, 2000, and JP Morgan Chase Bank, as
            administrative agent.

            December 3, 2002, reporting the entry on November 21, 2002 by
            Trenwick, Trenwick America Corporation, Trenwick Holdings Limited
            and LaSalle Re Holdings Limited into an extension of the Forbearance
            Agreement, and the suspension of dividends and distributions payable
            on the outstanding Trenwick Series B Cumulative Convertible
            Perpetual Preferred Shares, LaSalle Re Holdings Limited Series A
            Preferred Shares and Trenwick Capital Trust I 8.82% Exchange
            Subordinated Capital Income Securities.

            December 12, 2002, reporting (a) the entry on December 8, 2002 by
            Trenwick, Trenwick America Corporation, Trenwick Holdings Limited
            and LaSalle Re Holdings Limited into an agreement in principle with
            its letter of credit providers, (b) the entry by Trenwick, Trenwick
            America Corporation, Trenwick Holdings Limited and LaSalle Re
            Holdings Limited into amendments to the Forbearance Agreement on
            December 6, 2002 and December 9, 2002, extending the forbearance
            period until December 31, 2002, (c) the hiring of Greenhill & Co. as
            a financial advisor and (d) the cessation of underwriting at
            Trenwick International Limited.

            December 26, 2002, reporting the entry on December 24, 2002 by
            Trenwick, Trenwick America Corporation, Trenwick Holdings Limited
            and Trenwick UK Holdings Limited into a Fourth Amendment and Waiver
            to the Credit Agreement, extending for an additional year $182
            million of letters of credit utilized by Trenwick to support its
            underwriting operations at Lloyd's., and a Fourth Amendment to the
            Holdings Guaranty, dated as of December 24, 2002, providing for
            Trenwick to pledge all of its equity interests, assets and property
            as collateral for the renewing letter of credit providers.


                                      156
<PAGE>

                                   SIGNATURES

Pursuant to the Requirements of Section 13 or 15(d) of Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                    TRENWICK GROUP LTD.
                                    (Registrant)

                                    By  /s/ W. Marston Becker
                                      ---------------------------------

                                        W. Marston Becker

                                        Acting Chairman, and
                                        Acting Chief Executive Officer

Dated:  March 31, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
               Signature                                 Title                                  Date
               ---------                                 -----                                  ----
<S>                                      <C>                                               <C>
  /s/ W. Marston Becker                  Acting Chairman of the Board, and                 March 31, 2003
-------------------------------          Acting Chief Executive
      W. Marston Becker                  Officer and Director (Principal
                                         Executive
                                         Officer)


  /s/ Alan L. Hunte                      Executive Vice President and Chief                March 31, 2003
-------------------------------          Financial Officer (Principal
      Alan L. Hunte                      Financial and Accounting Officer)


  /s/ Anthony S. Brown                                                                     March 31, 2003
-------------------------------
      Anthony s. Brown

  /s/ Robert M. DeMichele                                                                  March 31, 2003
-------------------------------
      Robert M. DeMichele

  /s/ Clement S. Dwyer                                                                     March 31, 2003
-------------------------------
      Clement S. Dwyer

  /s/ Joseph D. Sargent                                                                    March 31, 2003
-------------------------------
      Joseph D. Sargent

  /s/ Stephen R. Wilcox                                                                    March 31, 2003
-------------------------------
      Stephen R. Wilcox
</TABLE>


                                      157
<PAGE>

                 CERTIFICATION OF ACTING CHIEF EXECUTIVE OFFICER

I, W. Marston Becker, certify that:

      1.    I have reviewed this annual report on Form 10-K of Trenwick Group
            Ltd. (the "Registrant");

      2.    Based on my knowledge, this annual report does not contain any
            untrue statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this annual report;

      3.    Based on my knowledge, the financial statements, and other financial
            information included in this annual report, fairly present in all
            material respects the financial condition, results of operations and
            cash flows of the Registrant as of, and for, the periods presented
            in this annual report;

      4.    The Registrant's other certifying officer and I are responsible for
            establishing and maintaining disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant
            and we have:

            a.    designed such disclosure controls and procedures to ensure
                  that material information relating to the Registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

            b.    evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

            c.    presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

      5.    The Registrant's other certifying officer and I have disclosed,
            based on our most recent evaluation, to the Registrant's auditors
            and the audit committee of Registrant's board of directors (or
            persons performing the equivalent function):

            a.    all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial data and have identified for the Registrant's
                  auditors any material weaknesses in internal controls; and

            b.    any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal controls; and

      6.    The Registrant's other certifying officer and I have indicated in
            this annual report whether or not there were significant changes in
            internal controls or in other factors that could significantly
            affect internal controls subsequent to the date of our most recent
            evaluation, including any corrective actions with regard to
            significant deficiencies and material weaknesses.

Date: March 31, 2003


 /s/ W. Marston Becker
 ------------------------------------------------
         W. Marston Becker
         Acting Chief Executive Officer
         (Principal Executive Officer)


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<PAGE>

                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Alan L. Hunte, certify that:

      1.    I have reviewed this annual report on Form 10-K of Trenwick Group
            Ltd. (the "Registrant");

      2.    Based on my knowledge, this annual report does not contain any
            untrue statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this annual report;

      3.    Based on my knowledge, the financial statements, and other financial
            information included in this annual report, fairly present in all
            material respects the financial condition, results of operations and
            cash flows of the Registrant as of, and for, the periods presented
            in this annual report;

      4.    The Registrant's other certifying officer and I are responsible for
            establishing and maintaining disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant
            and we have:

            a.    designed such disclosure controls and procedures to ensure
                  that material information relating to the Registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

            b.    evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

            c.    presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

      5.    The Registrant's other certifying officer and I have disclosed,
            based on our most recent evaluation, to the Registrant's auditors
            and the audit committee of Registrant's board of directors (or
            persons performing the equivalent function):

            a.    all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial data and have identified for the Registrant's
                  auditors any material weaknesses in internal controls; and

            b.    any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal controls; and

      6.    The Registrant's other certifying officer and I have indicated in
            this annual report whether or not there were significant changes in
            internal controls or in other factors that could significantly
            affect internal controls subsequent to the date of our most recent
            evaluation, including any corrective actions with regard to
            significant deficiencies and material weaknesses.

Date: March 31, 2003


  /s/ Alan L. Hunte
  ------------------------------
         Alan L. Hunte
         Executive Vice President and
         Chief Financial Officer


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