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                           XL FINANCIAL ASSURANCE LTD.







                           SECOND AMENDED AND RESTATED
                             SHAREHOLDERS AGREEMENT







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                                TABLE OF CONTENTS

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SECTION 1      DEFINITIONS..................................................  2

SECTION 2      SHAREHOLDINGS................................................  2

SECTION 3      NUMBER AND ELECTION OF DIRECTORS.............................  2

SECTION 4      RESTRICTIONS ON TRANSFERS OF SHARES..........................  3

               (a)      Prior Consents for Transfers........................  3
               (b)      Sales or Transfers to Non-Parties...................  3
               (c)      Notice of Transfer..................................  3

SECTION 5      INSURANCE REGULATIONS........................................  3

               (a)      Insurance Regulations Generally.....................  3
               (b)      Maintenance of Books and Records....................  3

SECTION 6      TRANSFER OF SHARES TO SUBSIDIARIES AND ASSIGNMENTS...........  3

               (a)      Transfer of Shares to Subsidiaries..................  3
               (b)      Assignments.........................................  5

SECTION 7      ANTIDILUTION; EQUITY ACCOUNTING; REDEMPTION OF SHARES........  5

               (a)      Sale of Shares by the Company.......................  5
               (b)      Equity Accounting Rights and Tax Considerations.....  5
               (c)      Redemption of Shares................................  6

SECTION 8      LEGEND.......................................................  6

SECTION 9      COVENANTS OF THE COMPANY.....................................  6

               (a)      Issuance of Capital Stock...........................  6
               (b)      Lines of Business...................................  7
               (c)      Investment and Underwriting Guidelines..............  7
               (d)      Capital Support.....................................  7
               (e)      Dividends...........................................  7
               (f)      Non-compliance with Covenants.......................  7
               (g)      Waiver of Covenants.................................  7

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SECTION 10     BUSINESS OF THE COMPANY......................................  7

SECTION 11     NOTICES......................................................  7

SECTION 12     BINDING EFFECT AND BENEFITS..................................  7

SECTION 13     TERM; AMENDMENT; TERMINATION.................................  8

SECTION 14     REMEDIES FOR VIOLATIONS......................................  8

SECTION 15     ENTIRE AGREEMENT.............................................  8

SECTION 16     SEVERABILITY.................................................  8

SECTION 17     SECTION AND OTHER HEADINGS...................................  8

SECTION 18     CHOICE OF LAW AND FORUM AND SERVICE OF PROCESS...............  8

               (a)      English Law.........................................  8
               (b)      English Courts......................................  8
               (c)      Service of Process..................................  9

SECTION 19     ARBITRATION..................................................  9

SECTION 20     COUNTERPARTS................................................. 10

SECTION 21     CONSTRUCTION................................................. 10

EXHIBIT A      DEFINITIONS.................................................. A-1

EXHIBIT B      SHAREHOLDER JOINDER.......................................... B-1

SCHEDULE I     SHAREHOLDINGS................................................ I-1

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                           SECOND AMENDED AND RESTATED
                             SHAREHOLDERS AGREEMENT


         THIS  SECOND   AMENDED  AND  RESTATED   SHAREHOLDERS   AGREEMENT   (the
"Agreement") is dated as of July 21, 2006 among SECURITY CAPITAL  ASSURANCE LTD,
a Bermuda exempted company ("SCA"),  FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.,
a New York corporation ("FSA Holdings");  FINANCIAL  SECURITY  ASSURANCE INC., a
New York corporation ("FSANY");  and FINANCIAL SECURITY ASSURANCE  INTERNATIONAL
LTD., a Bermuda  exempted  company  ("FSA  International")  (SCA,  FSANY and FSA
International are also referred to herein, individually, as a "Shareholder" and,
collectively,  along  with any  other  Person  who shall  execute a  Shareholder
Joinder pursuant to the terms hereof, as the  "Shareholders");  and XL FINANCIAL
ASSURANCE LTD., a Bermuda  exempted  company (the "Company") (the parties hereto
are referred to herein,  individually,  as a "Party" and,  collectively,  as the
"Parties").

         WHEREAS, XL Capital Ltd (formerly known as EXEL Limited),  XL Insurance
(Bermuda) Ltd (formerly known as XL Insurance Ltd) ("XLI"), FSA Holdings,  FSANY
and the Company are parties to an amended and  restated  shareholders  agreement
dated as of April 27, 2001 (the "Amended and Restated Shareholders Agreement");

         WHEREAS,  FSANY is the holder of 150 Series A Preferred  Shares and FSA
International  is the holder of 213  Series A  Preferred  Shares in the  Company
(collectively, the "FSA Preferred Shares") and SCA is the holder of 2,449 common
shares in the Company ("Common Shares");

         WHEREAS,  the Parties hereby  acknowledge and agree that XLI executed a
transfer  agreement  in the  form  of  transfer  as  provided  in the  Company's
Bye-laws, whereby XLI, as transferor,  transferred all of the outstanding Common
Shares to SCA, as transferee;

         WHEREAS,  the  Parties  to  this  Agreement  and XL  Capital  and  XLI,
acknowledge and agree that each of XL Capital and XLI are no longer shareholders
of the Company or parties to this  Agreement and shall have no further rights or
obligations with respect thereto;

         WHEREAS,  the Parties to this Agreement  intend to adopt fourth amended
and restated bye-laws of the Company, as may be amended or restated from time to
time (the  "Bye-Laws")  to be  effective  as at the closing  date of the initial
public offering of the shares of Security Capital Assurance Ltd ("SCA IPO"); and

         WHEREAS, the Parties wish to amend and restate the Amended and Restated
Shareholders Agreement in certain respects to make modifications thereto, and to
restate the Amended and  Restated  Shareholders  Agreement in its entirety as so
amended to be effective as at the closing date of the SCA IPO.

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         NOW, THEREFORE, in consideration of the premises and for other good and
valuable   consideration,   the  receipt  and   adequacy  of  which  are  hereby
acknowledged, the Parties hereto agree as follows:

         SECTION 1. DEFINITIONS. Capitalized terms used herein have the meanings
provided in Exhibit A hereto and in the  Bye-Laws  unless the context  otherwise
requires.

         SECTION 2.  SHAREHOLDINGS.  The  Company  has issued the FSA  Preferred
Shares and Common  Shares  and, at the  effective  date of this  Agreement  such
Shares are held as set forth in Schedule I of this  Agreement.  It is understood
and agreed that the Shareholders  listed in Schedule I that are not party to the
Amended and  Restated  Shareholders  Agreement  are  permitted  Subsidiaries  or
Transferees,  entitled to own such Shares in accordance  with the Share Purchase
Agreement,  the Amended and Restated Shareholders Agreement,  this Agreement and
the Bye-Laws.  It is further understood and agreed that all requirements in such
agreements  for the  ownership  of such  Shares held by such  Shareholders  have
either been complied with or are hereby explicitly waived by the Parties.

         SECTION 3. NUMBER AND ELECTION OF DIRECTORS. Each of the Parties hereby
agrees that:

                  (a) so long as FSA Holdings or its permitted  Subsidiaries  or
         Transferees (collectively, "FSA") owns any of the FSA Preferred Shares,
         FSA shall be  entitled  to  designate  two  nominees  for  election  as
         Directors of the Company (such Directors,  the "FSA Directors") and, in
         the event that any such Director shall resign or otherwise  cease to be
         a  Director,  then  FSA  shall  be  entitled  to  designate  his or her
         replacement;

                  (b)  so  long  as  SCA  or  its  permitted   Subsidiaries   or
         Transferees (collectively, "SCA") owns all the Common Shares, SCA shall
         be entitled to designate  twelve  nominees for election as Directors of
         the Company (such  Directors,  the "SCA  Directors")  and, in the event
         that  any  such  Director  shall  resign  or  otherwise  cease  to be a
         Director,   then  SCA  shall  be  entitled  to  designate  his  or  her
         replacement;

                  (c) the FSA  Directors  shall  be  entitled  to  serve on each
         committee created from time to time by the Board of Directors;

                  (d) FSA and SCA agree to vote their respective Shares in favor
         of the election of the nominees of SCA and FSA designated in accordance
         with this Section 3; and

                  (e) each SCA Director  shall be entitled to ten votes and each
         FSA Director  shall be entitled to one vote with respect to any vote on
         any matter put before the Board of Directors or any committee thereof.

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         SECTION 4. RESTRICTIONS ON TRANSFER OF SHARES.

                  (a) PRIOR CONSENT FOR  TRANSFERS.  So long as any Shares shall
be  outstanding,  no  Shareholder  may Transfer any Shares,  except as otherwise
provided in Section 6 hereof or in the bye-laws of the  Company,  in addition to
any restrictions  under applicable law, without the prior written consent of the
Company and each other Shareholder;  provided,  however,  that any Transfer made
with the consent of the Parties shall not cause a Rating  Event.  Any attempt to
Transfer any Shares in  violation of such Section or the bye-laws  shall be null
and void.

                  (b) SALES OR TRANSFERS TO NON-PARTIES.  Any purchase of Shares
in the  Company by or  Transfer of Shares to a Person who is not a Party to this
Agreement  shall be made only pursuant to the terms of this Agreement and on the
condition  that such  Person  shall  execute a  Shareholder  Joinder  agreement,
substantially in the form of Exhibit B attached hereto, with the effect that the
holder shall  thereafter be deemed to be a Shareholder  for all purposes of this
Agreement  with respect to all Shares  purchased by the proposed  Shareholder or
acquired from the Donor (as defined in Section 6 below).

                  (c)  NOTICE OF  TRANSFER.  Any  Shareholder  making a Transfer
shall promptly

notify  the  Company,   and  the  Company  shall   promptly   notify  the  other
Shareholders,  if  any,  of the  name of each  Transferee  and the  date of such
Transfer and the purchase price per Share transferred to such Transferee.

         SECTION 5. INSURANCE REGULATIONS.

                  (a)  INSURANCE   REGULATIONS   GENERALLY.   Each   Shareholder
severally  agrees  that  it  will  comply  in all  material  respects  with  all
applicable  laws,  rules  and  regulations   affecting  insurance  companies  in
connection with its interest in and relationship with the Company.

                  (b)  MAINTENANCE  OF  BOOKS  AND  RECORDS.   Each  Shareholder
severally agrees that its respective books, accounts and records with respect to
all  transactions  pursuant to this  Agreement  shall be  maintained to disclose
clearly and  accurately in all material  respects the nature and details of such
transactions,  including  such  accounting  information  as may be  necessary to
support the reasonableness of any charges or fees.

         SECTION 6. TRANSFER OF SHARES TO SUBSIDIARIES AND ASSIGNMENTS.

                  (a) TRANSFER OF SHARES TO SUBSIDIARIES.  Each Shareholder (the
"Donor")  may  Transfer  all or any  part of the  Shares  held  thereby,  either
directly or indirectly to (1) a corporation,  company or  partnership,  at least
80% of the voting shares or capital of which is owned  directly or indirectly by
such Donor, or (2) a corporation  which owns directly or indirectly at least 80%
of the voting shares of such Donor

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(collectively,  the "Donee");  provided that each such Transfer shall be subject
to the following terms and conditions:

                           (i)  The  Donor  shall  give  written  notice  of the
                  Transfer to the Secretary of the Company  within 15 days after
                  the date of Transfer, which notice shall include the following
                  information:  the name of the  Donor;  the name,  address  and
                  taxpayer  identification  number  (if any) of the  Donee;  the
                  Donee's  relationship  to the  Donor;  the  number  of  Shares
                  Transferred;  the  purchase  price per Share;  and the date of
                  Transfer.  Upon receipt of such notice,  the  Secretary of the
                  Company  shall  record  the  Transfer  in the  records  of the
                  Company and shall send a copy of this  Agreement  to the Donee
                  and copies of the notice to each Shareholder.

                           (ii) The Donee receiving such Shares shall be subject
                  to all the terms and  provisions  of this  Agreement as if the
                  Donee were a Shareholder.  At or before the time such Transfer
                  becomes effective,  the Donee shall (x) execute and deliver to
                  the Company and each other  Shareholder a Shareholder  Joinder
                  agreement,  pursuant  to which such Donee  acknowledges  being
                  subject to the terms and provisions of this Agreement, and (y)
                  provide to the Company and each other  Shareholder  such legal
                  opinion or other  evidence,  if any,  as the  Company and each
                  other  Shareholder may reasonably  require to confirm that the
                  Donee is not a  Prohibited  Entity.  The  Donor  shall  remain
                  liable  hereunder for any  non-performance  of any obligations
                  hereunder  by the Donee as though the Donor  continued  to own
                  the Shares Transferred pursuant to this Section.

                           (iii)  The Donee  shall  succeed  to all the  rights,
                  responsibilities  and liabilities with respect to such Shares,
                  except that, for all purposes of this Agreement, including the
                  nomination  of  Directors   pursuant  to  the  bye-laws,   the
                  ownership  percentage  of the Donor and the Donee  after  such
                  Transfer shall be aggregated, and such Shareholders shall have
                  such rights  hereunder as a group resulting from the aggregate
                  ownership percentage and shall be deemed to be one Shareholder
                  where  appropriate  in the context of this  Agreement  and the
                  Share Purchase Agreement.

                           (iv) The initial Donor shall continue to own directly
                  or  indirectly at least 80% of the voting shares or capital of
                  the Donee,  or the Donee  shall  continue  to own  directly or
                  indirectly at least 80% of the voting shares or capital of the
                  Donor,  as the  case  may be,  so long as the  Donee  owns the
                  Shares.

                           (v)  Prior to the  Transfer,  the Donor and the Donee
                  shall obtain  written  confirmation  from the Rating  Agencies
                  that the Transfer will not result in a Rating Event and obtain
                  written approval or  non-disapproval of the Transfer from, and
                  make any required  filings with, all  applicable

                                      -4-
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                  insurance  or  securities  regulators,  including  the Bermuda
                  Monetary Authority.

                           (vi) The Donor or the Donee shall reimburse the other
                  Parties  for all  reasonable  expenses  incurred by such other
                  Parties as a result of such Transfer.

                           (vii) Permitted  Donees of the Preferred  Shares held
                  by FSA  shall  limited  to be FSA  Holdings  or its  direct or
                  indirect subsidiaries meeting the above requirements.

                  (b)  ASSIGNMENTS.  Except as provided in paragraph (a) of this
Section,  neither this Agreement nor any of the rights, interests or obligations
hereunder  shall be  assigned  by any of the  Parties  hereto  without the prior
written  consent of the other  Parties,  except by operation  of law;  provided,
however,  that any  assignment  made with the consent of the  Parties  shall not
cause a Rating Event. Subject to the preceding sentence,  this Agreement will be
binding  upon,  and will  inure to the  benefit  of and be  enforceable  by, the
Parties and their respective successors and assigns.

         SECTION 7. ANTIDILUTION; EQUITY ACCOUNTING; REDEMPTION OF SHARES.

                  (a) SALE OF SHARES BY THE COMPANY.  The Company agrees it will
not sell any Shares (or  securities  convertible  into  Shares)  unless it shall
first offer to each Shareholder the right to purchase such additional  number of
the type of Shares  currently held thereby or, with the prior written consent of
the relevant  Shareholder,  the type of security  proposed to be issued,  as the
Company shall elect (or securities  convertible into such Shares), upon the same
terms as  proposed  to be sold  (or,  in the case of an  offer  of  Shares  to a
Shareholder of a type different than being sold, upon  "substantially"  the same
terms as those being  sold),  as will permit such  Shareholder  to maintain  its
proportion of the voting Shares  (determined on the basis of the number of votes
such  Shareholder  is entitled to cast) issued and  outstanding  following  such
sale. In the event that the Parties in good faith  disagree as to terms intended
to constitute "substantially" the same terms, then the Company shall be entitled
to either  (i)  arbitrate  such  dispute  under  Section 19 hereof or (ii) offer
Shares of the same type  currently  held  thereby at a price equal to book value
per Share under U.S. GAAP as of the date of the last completed  fiscal  quarter.
For purposes of the foregoing, the number of Shares issued and outstanding shall
include the number of Shares that would be outstanding  upon full  conversion of
any securities convertible into Shares.

                  (b)  EQUITY  ACCOUNTING  RIGHTS  AND TAX  CONSIDERATIONS.  The
Company  and  SCA  agree  (i) to  take  all  reasonable  actions  necessary,  or
reasonably  believed  by FSA to be  necessary,  to  maintain  equity  accounting
treatment of FSA's  investment in the Company on a  consolidated  basis with its
subsidiaries  under U.S.  GAAP as in effect from time to time and to ensure that
each FSA holder of the  Preferred  Shares shall not be subject to United  States
income  taxes on  non-distributed  income of the Company and (ii) so long as the
Company and SCA may

                                      -5-
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reasonably  do so,  not to take any  action  which  would  result,  or which FSA
reasonably  believes would result, in FSA's being unable able to maintain equity
accounting  treatment  for its  investment  in the  Company  under U.S.  GAAP or
subject any FSA holder of the Preferred  Shares to United States income taxes on
non-distributed income of the Company; provided, however, that the Company shall
not be  required  to take such  action or refrain  from taking such action if it
might result,  or the Company  reasonably  believes it would result, in a Rating
Event, the Company becoming a United States taxpayer or adverse tax consequences
to any Shareholder  under the United States Internal Revenue Code in effect from
time to time.

                  (c)  REDEMPTION OF SHARES.  If the Company  redeems any Shares
owned by an FSA  Shareholder,  at the option of the  Company,  then the  Company
shall deliver to the FSA  Shareholder  cash equal to the  applicable  redemption
price of the redeemed  Series A Preferred  Shares on the date of redemption,  as
provided in the Company's  Bye-laws.  On the date of redemption at the option of
the  majority of the FSA  Shareholders  pursuant  to the terms of the  Company's
Bye-laws,  the Company  shall deliver to the FSA  Shareholder  cash equal to the
applicable redemption price of the redeemed Series A Preferred Shares;  provided
that  in the  event  of a  redemption  at the  option  of such  majority  of FSA
Shareholders due to the occurrence and  continuation of an Extraordinary  Event,
that has a material  adverse  effect on the rights of the FSA  Shareholders,  as
defined in the Company's  Bye-laws,  such FSA  Shareholders  may elect, at their
option,  for the Company to deliver,  or cause a third person to deliver to them
cash or SCA Shares, that in the aggregate, equal the applicable redemption price
of the redeemed  Series A Preferred  Shares.  If the FSA  Shareholders  elect to
receive  SCA  Shares,  as provided  in the  Company's  Bye-laws,  the SCA Shares
delivered to the redeemed  Shareholder  shall be (i) duly  registered  under the
U.S. Securities Act of 1933, as amended or (ii) subject to a registration rights
agreement that is substantially similar to the Registration Rights Agreement.

         SECTION 8. LEGEND.  So long as this  Agreement  remains in effect,  all
certificates representing Shares shall have the following legend thereon:

         The  security  represented  by this  instrument  and its  transfer  are
         subject to the  provisions  of a certain  Second  Amended and  Restated
         Shareholders Agreement (as amended from time to time, the "Agreement"),
         among XL Financial Assurance Ltd. (the "Company") and its shareholders,
         a copy of which Agreement is on file with the Secretary of the Company.
         Transfers  in  violation  of  the  Agreement  are  null  and  void.  By
         acceptance of this instrument,  the holder hereof agrees to be bound by
         the terms of the  Agreement.  No transfer  may be effected  without the
         prior approval of the Bermuda Monetary Authority.

         SECTION 9. COVENANTS OF THE COMPANY.  The Company covenants that, until
this  Agreement  is  terminated  pursuant  to Section 13 hereof,  to the fullest
extent permitted by applicable law:

                  (a) ISSUANCE OF CAPITAL STOCK.  The Company will not issue any
         shares of capital  stock or rights to acquire  capital stock other than
         in accordance with this Agreement.

                                      -6-
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                  (b) LINES OF BUSINESS.  The Company will limit its business to
         the following lines of insurance and reinsurance or lines substantially
         similar and activities incidental thereto:  financial guaranty, surety,
         credit and residual value.

                  (c) INVESTMENT AND UNDERWRITING GUIDELINES.  The Company shall
         have adopted and implemented  underwriting  guidelines,  and thereafter
         shall amend or supplement such  guidelines  only, by the unanimous vote
         of the Board of Directors or a committee thereof, in each case with all
         Directors  serving  thereon.  The Company  will not adopt or  implement
         investment guidelines that would result in a Rating Event.

                  (d) CAPITAL SUPPORT.  The Company will not waive any provision
         of any Support Agreement if to do so would result in a Rating Event.

                  (e)  DIVIDENDS.  The Company will not amend or repeal  Bye-Law
         50(2)(b)  of the  Company's  bye-laws,  if to do so would  result  in a
         Rating Event.

                  (f) NON-COMPLIANCE  WITH COVENANTS.  Unless waived as provided
         in paragraph (g) of this Section 9, a material  non-compliance with the
         covenants  contained  in  this  Section  9  shall  be  deemed  to be an
         Extraordinary Event as defined in the Bye-laws of the Company, with the
         resulting  rights,  remedies and  obligations  of the Parties  provided
         therein.

                  (g) WAIVER OF  COVENANTS.  The Company  may in any  particular
         instance not comply with any covenant or condition  set forth herein if
         before  or after the time for such  compliance  all  holders  of Shares
         shall either waive such  compliance in such instance or generally waive
         compliance  with such covenant or  condition,  but no such waiver shall
         extend to or affect such covenant or condition  except to the extent so
         expressly  waived in  writing  and,  until  such  waiver  shall  become
         effective,  the  obligations  of the  Company  in  respect  of any such
         covenant or condition shall remain in full force and effect.

         SECTION 10. BUSINESS OF THE COMPANY. It is the intention of the parties
that the Company  will be the primary  vehicle for  reinsuring  SCA's  Financial
Guaranty Business.

         SECTION 11.  NOTICES.  All notices and other  communications  hereunder
("Notices")  shall be in writing  and shall be deemed  effective  upon  receipt.
Notices  may be sent by  facsimile  to  telephone  numbers or  addressed  to the
Parties  at their  addresses  as they  appear  on the  records  of the  Company.
Whenever  the Company is required to give Notice to a  Shareholder,  the Company
shall send,  at the same time, a copy of the Notice to every other  Shareholder.
Whenever  Notice is required to be given to the  Company,  such Notice  shall be
given  to the  Secretary  of the  Company  and  sent to the  principal  place of
business of the Company and to every other Shareholder.

         SECTION 12.  BINDING  EFFECT AND BENEFITS.  The terms of this Agreement
shall be binding  upon and inure to the benefit of the Parties  hereto and their
respective   heirs,   executors,   administrators,   personal   representatives,
successors and assigns,  and shall be binding upon any

                                      -7-
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Person  to  whom  any  Shares  are  Transferred,  even  if in  violation  of the
provisions of this  Agreement,  and upon the heirs,  executors,  administrators,
successors and assigns of each such Person.

         SECTION 13. TERM; AMENDMENT;  TERMINATION.  This Agreement shall become
effective  as of the closing  date of the SCA IPO and shall remain in full force
and effect  until an agreement  in writing as to its  amendment  or  termination
shall  be  entered  into  by the  Shareholders;  provided,  however,  that  this
Agreement  shall not be amended or terminated if such  amendment or  termination
would  result  in a  Rating  Event.  Upon  termination  of this  Agreement,  the
Secretary of the Company  shall,  upon tender of the  certificates  representing
Shares,  delete  references to this Agreement  contained in the legend  endorsed
thereon  pursuant  to  Section 8 hereof  and  return  such  certificates  to the
Shareholder thereof.  This Agreement shall be amended only by a writing mutually
agreed to by the Shareholders and the Company.

         SECTION  14.  REMEDIES  FOR  VIOLATIONS.  The Shares  cannot be readily
purchased  or sold on the open market and for this  reason,  among  others,  the
Parties hereto will be  irreparably  damaged in the event that this Agreement is
not adhered to by the Parties hereto. In the event of any controversy concerning
the right or  obligation  to  purchase,  sell or vote any Shares,  such right or
obligation  shall be  enforceable  in a court of equity by a decree of  specific
performance. The Parties to this Agreement shall have, in addition to the rights
granted by this Section 14, all other legal and equitable  remedies which may be
available,  and the exercise by a Party of the rights granted by this Section 14
shall not be deemed an election of remedies.

         SECTION  15.  ENTIRE  AGREEMENT.  This  Agreement  contains  the entire
understanding  and agreement between the Parties hereto and supersedes any prior
agreements  among the  Parties  pertaining  to the  matters  dealt  with in this
Agreement.  There are no  representations,  warranties,  promises,  covenants or
understandings  about such matters other than those  expressly set forth in this
Agreement or the Share Purchase Agreement.

         SECTION 16.  SEVERABILITY.  The invalidity or  unenforceability  of any
particular  provision of this Agreement shall not affect the other provisions of
this  Agreement,  and in such event this  Agreement  shall be  construed  in all
respects as if such invalid or unenforceable provision were omitted.

         SECTION 17. SECTION AND OTHER HEADINGS.  The section and other headings
contained in this  Agreement  are for  reference  purposes  only,  and shall not
affect the interpretation of this Agreement.

         SECTION 18. CHOICE OF LAW AND FORUM AND SERVICE OF PROCESS.

                  (a)  ENGLISH  LAW.  This  Agreement  shall be  governed by and
construed in  accordance  with  English law,  without  regard to  principles  of
conflicts of law.

                  (b) ENGLISH  COURTS.  To the extent that an action is required
to further,  or  otherwise is not  inconsistent  with,  arbitration  pursuant to
Section 19 hereof,  each Party hereby

                                      -8-
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irrevocably  submits to the  non-exclusive  jurisdiction of any court of general
jurisdiction sitting in London,  England,  over any action or proceeding arising
out of or relating to this Agreement,  and each Party hereby  irrevocably agrees
that all  claims  in  respect  of such  action  or  proceeding  may be heard and
determined  in such court,  except  that  actions or  proceedings  to collect on
judgments issued by a London court may be brought in any jurisdiction  where the
losing Party has assets.  Each Party hereby irrevocably waives the defense of an
inconvenient  forum to the maintenance of such action or proceeding.  Each Party
hereby  irrevocably  waives, to the fullest extent it may effectively do so, any
right to trial by jury of any action or proceeding arising out of or relating to
this Agreement.

                  (c) SERVICE OF PROCESS.  Each Party hereby agrees that process
in any action or proceeding  may be served by registered  mail,  return  receipt
requested,  or in any other manner  permitted by the rules of the court in which
the action or proceeding may be brought.

         SECTION 19. ARBITRATION. Except as provided in Section 19(e) below, any
dispute, controversy or claim arising out of or relating to this Agreement or to
any actual or alleged  breach,  cancellation,  termination or invalidity of this
Agreement shall be finally and fully  determined in London,  England,  under the
provisions  of the  Arbitration  Act of 1996 (the  "Act")  and/or any  statutory
modifications  or amendments  thereto,  for the time being in force,  by a Board
composed of three arbitrators to be selected for each controversy as follows:

                  (a) Any Party to an arbitration  proceeding  hereunder may, in
         the event of such a  dispute,  controversy  or claim,  notify the other
         Party or Parties to such dispute, controversy or claim of its desire to
         arbitrate the matter,  and at the time of such  notification  the Party
         desiring  arbitration  shall  notify any other  Party or Parties of the
         name of the  arbitrator  selected by it. The other Party or Parties who
         has  been so  notified  shall  within  forty-five  (45)  calendar  days
         thereafter   select  an  arbitrator   and  notify  the  Party  desiring
         arbitration  of the name of such  second  arbitrator.  If the  Party or
         Parties  notified of a desire for  arbitration  shall fail or refuse to
         nominate the second  arbitrator  within  forty-five  (45) calendar days
         following the receipt of such notification,  the Party who first served
         notice of a desire to  arbitrate  may,  within a period of thirty  (30)
         calendar days  following the  expiration  of such  forty-five  (45) day
         period,  apply to a judge of the High Court of  Justice of England  and
         Wales for the appointment of a second arbitrator and in such a case the
         arbitrator  appointed  by such a judge  shall be  deemed  to have  been
         nominated  by the Party or  Parties  who  failed to select  the  second
         arbitrator. The two arbitrators, chosen as above provided, shall within
         thirty  (30)  calendar  days  after  the   appointment  of  the  second
         arbitrator  choose a third  arbitrator.  In the event of the failure of
         the first two  arbitrators to agree on a third  arbitrator  within said
         thirty (30)  calendar  day  period,  either of the Parties may within a
         period of thirty (30)  calendar  days  thereafter,  after notice to the
         other Party or  Parties,  apply to a judge of the High Court of Justice
         of England and Wales for the  appointment of a third  arbitrator and in
         such case the person so appointed  shall be deemed and shall act as the
         third  arbitrator.  Upon  acceptance of the  appointment  by said third
         arbitrator,  the Board of Arbitration  for the  controversy in question
         shall be

                                      -9-
<PAGE>

         deemed  fixed.  Each  arbitrator  selected  to  serve  on the  Board of
         Arbitration  shall be an  active or  retired  executive  officer  of an
         insurance  or a  reinsurance  company  having  no  direct  or  indirect
         financial interest in either party or its Affiliates and otherwise free
         of any actual or potential  conflict of interest that might  reasonably
         prevent such person from acting in a judicious  and  impartial  manner.
         All claims,  demands,  denials of claims and  notices  pursuant to this
         Section 19 shall be given in accordance with Section 11 hereof.

                  (b) The Board of Arbitration shall fix, by a notice in writing
         to the Parties,  a reasonable  time and place for the hearing and shall
         follow the rules and regulations governing the course and conduct of an
         arbitration   proceeding   under  the  London  Court  of  International
         Arbitration rules,  including discovery by the Parties, which rules are
         deemed to be incorporated by reference herein.

                  (c)  The  Board  of  Arbitration  shall,  within  ninety  (90)
         calendar  days  following  the  conclusion  of the hearing,  render its
         decision on the matter or matters in  controversy  in writing and shall
         cause a copy thereof to be served on the Parties  thereto.  In case the
         Board of Arbitration fails to reach a unanimous decision,  the decision
         of the  majority  of the members of the Board of  Arbitration  shall be
         deemed  to be the  decision  of the Board of  Arbitration  and the same
         shall be final and binding on the Parties thereto.  Such decision shall
         be a complete  defense to any  attempted  appeal or  litigation of such
         decision in the absence of serious  irregularity.  Without limiting the
         foregoing,  the  Parties  waive  any right to appeal  to,  and/or  seek
         collateral  review of the decision of the Board of Arbitration  by, any
         court or other body to the fullest extent  permitted by applicable law,
         including, without limitation,  application or appeal under Sections 45
         and 69 of the Act.

                  (d) Any order as to the costs of the  arbitration  shall be in
         the sole discretion of the Board of Arbitration, who may direct to whom
         and by whom  and in what  manner  they  shall  be  paid.  The  Board of
         Arbitration  shall have no power or  authority  to order the payment of
         punitive damages.

                  (e) Nothing in Section 18 or 19 hereof shall  preclude a Party
         from seeking an injunction,  specific  performance  or other  equitable
         remedy from any court of competent jurisdiction.

         SECTION 20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts,  each of  which  shall  be  deemed  an  original  and all of which
together shall constitute one and the same instrument.


         SECTION 21. CONSTRUCTION.  Whenever required by the context, references
herein to the singular  shall  include the plural and  references  herein to the
masculine gender shall include the feminine gender.

                                      -10-
<PAGE>

         IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered
this Agreement as of the date first above written.



                                 SECURITY CAPITAL ASSURANCE LTD


                                 By:
                                     -------------------------------------------
                                     Name:
                                     Title:



                                 FINANCIAL SECURITY
                                 ASSURANCE HOLDINGS LTD.


                                 By:
                                     -------------------------------------------
                                     Name:
                                     Title:



                                 FINANCIAL SECURITY ASSURANCE INC.


                                 By:
                                     -------------------------------------------
                                     Name:
                                     Title:



                                 FINANCIAL SECURITY ASSURANCE INTERNATIONAL LTD.


                                 By:
                                     -------------------------------------------
                                     Name:
                                     Title:

            [XLFA SECOND AMENDED AND RESTATED SHAREHOLDERS AGREEMENT]

                                      -11-
<PAGE>

                                 XL FINANCIAL ASSURANCE LTD.


                                 By:
                                     -------------------------------------------
                                     Name:
                                     Title:



ACKNOWLEDGED AND AGREED:

XL CAPITAL LTD


By:
      -------------------------------------------
Name:
Title:




XL INSURANCE (BERMUDA) LTD


By:
      -------------------------------------------
Name:
Title:










            [XLFA SECOND AMENDED AND RESTATED SHAREHOLDERS AGREEMENT]

                                      -12-
<PAGE>

                                    EXHIBIT A
                                     TO THE
                              AMENDED AND RESTATED
                             SHAREHOLDERS AGREEMENT

                                   DEFINITIONS

         "Board of Directors" means the Board of Directors of the Company.

         "Director" means a member of the Board of Directors of the Company.

         "Common Shares" means the common shares of the Company.

         "FSA Shareholder" means the holder(s) of Series A Preferred Shares.

         "SCA Financial Guaranty  Insurance  Business" means business insured by
XL Capital  Assurance  Inc.  or its  Affiliates  after the date  hereof that (i)
qualifies as "financial guaranty  insurance" under Section  6901(a)(1)(A) of the
New York Insurance Law and  regulations and rulings  thereunder,  as amended and
supplemented from time to time, (ii) is within the Underwriting Guidelines,  and
(iii) is not  incidental to an insurance or  reinsurance  transaction  involving
primarily  other types of  insurance  coverages  or part of a package  insurance
policy providing (or reinsurance agreement assuming) other insurance coverages.

         "Notice" means a notice pursuant to Section 11 of this Agreement.

         "Prohibited  Entity"  means  a  proposed  Transferee  not  meeting  the
requirements of Section 6 of this Agreement.

         "Rating  Agencies" means initially  Standard & Poor's Ratings  Services
and Moody's  Investors  Service,  Inc. and thereafter  those  securities  rating
agencies designated by the Board of Directors.

         "Rating  Event"  means  either of the  following  actions by any of the
Rating Agencies: (i) the downgrade or withdrawal of the Company's  claims-paying
ability or insurer/insurance financial strength or equivalent rating or (ii) the
placement  of the  Company's  rating  on  credit  watch or the  equivalent  with
negative implications.

         "Registration   Rights   Agreement"  means  the   Registration   Rights
Agreement,  dated as of November 3, 1998,  between FSA  Holdings  and XL Capital
Ltd, as amended and supplemented from time to time,  pertaining to FSA Holdings'
common stock.

         "SCA Shares"  means  common  shares,  par value $.01 per share,  of SCA
listed on the New York  Stock  Exchange  and any  securities  issued in  respect
thereof,  or in  substitution  therefor,  in  connection  with any stock  split,
dividend,  combination,  or  any  reclassification,   recapitalization,  merger,
consolidation, exchange or other similar reorganization.

                                      A-1
<PAGE>

         "Selling  Shareholder"  means  any  Shareholder  whose  Shares,  or any
interest therein, are to be Transferred pursuant to this Agreement.

         "Series A Preferred  Shares" means the Series A preferred shares of the
Company.

         "Shareholder" means an owner of Common Shares or Preferred Shares.

         "Shareholder  Joinder" means a joinder agreement signed by a Person who
is not a party to this Agreement.

         "Shares"  means  collectively,  the  Preferred  Shares  and the  Common
Shares.

         "Share Purchase Agreement" means the Share Purchase Agreement, dated as
of November 3, 1998,  among XL Capital Ltd,  FSA  Holdings  and the Company,  as
amended or supplemented from time to time.

         "Support   Agreement"  means  any  guaranty,   net  worth   maintenance
agreement,  stop loss  reinsurance  agreement or any similar  support  agreement
provided by XL Capital or a Subsidiary  of XL Capital to the Company in order to
obtain a rating or credit for a rating at least in the  double-A  category  from
the Ratings Agencies on the Company's insurance or reinsurance obligations or to
thereafter  avoid a Rating  Event but  specifically  excluding  any quota  share
reinsurance agreement.

          "Transfer"  means to directly or indirectly  sell,  assign,  transfer,
pledge,  mortgage,  hypothecate  or in any  other way  dispose  of Shares or any
interest therein, and shall include the process whereby Shares are Transferred.

         "Transferee"  means the Person to whom Shares are proposed to be or are
Transferred.

                                      A-2
<PAGE>

                                    EXHIBIT B
                                     TO THE
                              AMENDED AND RESTATED
                             SHAREHOLDERS AGREEMENT

                               SHAREHOLDER JOINDER



         By execution of this  Shareholder  Joinder,  the undersigned  agrees to
become  a  Party  to that  certain  Second  Amended  and  Restated  Shareholders
Agreement dated as of July 21, 2006, as amended or supplemented through the date
hereof (the  "Agreement"),  among  Security  Capital  Assurance  Ltd,  Financial
Security Assurance Holdings Ltd.,  Financial Security Assurance Inc.,  Financial
Security  Assurance  International  Ltd.  and XL  Financial  Assurance  Ltd. The
undersigned shall have all the rights, and shall observe all of the obligations,
applicable to a  Shareholder.  Capitalized  terms herein shall have the meanings
set forth in the Agreement.


Name: _______________________ Number of Shares Acquired: _________________

Address for                                With copies
Notices:                                   to:



-------------------------------------      -------------------------------------

-------------------------------------      -------------------------------------

-------------------------------------      -------------------------------------

-------------------------------------      -------------------------------------



                                           Signature:
                                                      --------------------------

                                           Date:
                                                 -------------------------------

                                      B-1
<PAGE>

                                   SCHEDULE I



                                  SHAREHOLDINGS


<TABLE>
<CAPTION>
------------------------------------ -------------------- ---------------- --------------------- ----------------
         Name of Shareholder           Number of Common         % of        Number of Preferred        % of
                                            Shares          Total Shares           Shares          Total Shares
------------------------------------ -------------------- ---------------- --------------------- ----------------
<S>                                         <C>                  <C>                <C>                 <C>
Security Capital Assurance Ltd.             2,449                87                 0                   0
------------------------------------ -------------------- ---------------- --------------------- ----------------
Financial Security Assurance Inc.             0                   0                150                  5
------------------------------------ -------------------- ---------------- --------------------- ----------------
Financial Security Assurance                  0                   0                213                  8
International Ltd.
------------------------------------ -------------------- ---------------- --------------------- ----------------
</TABLE>

                                      I-1