UNITED STATES
    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
   FORM 10-Q
   x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES
    EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2008o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES
    EXCHANGE ACT OF 1934For the transition period
    from          to    Commission file number
    000-50885
   QUANTA CAPITAL HOLDINGS
    LTD.
 (Exact name of registrant as
    specified in its charter)
   Bermuda

N/A(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)    22 Church
    Street, Penthouse
    Hamilton HM11
    Bermuda (Address
    of principal executive offices and zip code)
   441-294-6350
 (Registrants telephone
    number, including area code)
  x o
    Large Accelerated Filer
    o

Accelerated
    Filer xNon-Accelerated Filer
    o

Smaller reporting company
    o(Do not check if a smaller reporting company)   Rule 12b-2).  Yes o x




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##### 



QUANTA
    CAPITAL HOLDINGS LTD.
  INDEX TO
    FORM 10-Q
  Page No.PART I.


FINANCIAL INFORMATIONItem 1


Financial StatementsCondensed Consolidated Balance Sheets at June 30, 2008
    (unaudited) and December 31, 2007


3Unaudited Condensed Consolidated Statements of Operations for
    the three and six months ended June 30, 2008 and 2007


4Unaudited Condensed Consolidated Statements of Comprehensive
    Income (Loss) for the three and six months ended June 30,
    2008 and 2007


5Unaudited Condensed Consolidated Statements of Changes in
    Shareholders Equity for the six months ended June 30,
    2008 and 2007


6Unaudited Condensed Consolidated Statements of Cash Flows for
    the six months ended June 30, 2008 and 2007


7Notes to the Unaudited Condensed Consolidated Financial
    Statements


8Item 2


Managements Discussion and Analysis of Financial Condition
    and Results of Operations


27Item 3


Quantitative and Qualitative Disclosures about Market Risk


51Item 4


Controls and Procedures


54PART II.


OTHER INFORMATIONItem 1


Legal Proceedings


55Item 1A


Risk Factors


56Item 5


Other Information


57Item 6


Exhibits


58  2




---



##### 



PART 1.  FINANCIAL
    INFORMATION  ITEM 1.
    FINANCIAL
    STATEMENTS QUANTA
    CAPITAL HOLDINGS LTD.
    CONDENSED CONSOLIDATED BALANCE SHEETS(Expressed
    in thousands of U.S. dollars except for share and per share
    amounts)  June 30,


December 31,2008


2007(Unaudited)AssetsInvestments at fair value (amortized cost: June 30, 2008,
    $480,116; December 31, 2007, $645,205)
    Trading investments

$
479,547


$
648,384479,547



648,384Cash and cash equivalents


14,459



22,314Restricted cash and cash equivalents


19,309



131,013Accrued investment income


2,498



4,719Premiums receivable


10,900



57,912Funds withheld by cedants


611



443Losses and loss adjustment expenses recoverable


95,639



148,440Deferred acquisition costs, net


4,534



4,988Deferred reinsurance premiums


2,180



20,011Software, property and equipment, net of accumulated
    depreciation of $4,022 (December 31, 2007: $7,863)


660



747Other intangible assets


7,175



7,175Net deferred tax asset






5,277Other assets


21,202



29,932Total assets

$
658,714


$
1,081,355LiabilitiesReserve for losses and loss expenses

$
322,915


$
525,088Unearned premiums


24,060



95,586Environmental liabilities assumed


1,203



1,456Reinsurance balances payable


1,973



40,027Accounts payable and accrued expenses


24,387



22,144Deposit liabilities


40,139



36,867Deferred income and other liabilities


2,004



1,762Income taxes payable






5,277Contingencies (Note 9)


2,486



2,486Total liabilities


419,167



730,693Commitments (Note 9)






Shareholders equityCommon shares($0.01 par value; 200,000,000 shares authorized;
    70,175,440 and 70,133,499 issued and outstanding at
    June 30, 2008 and December 31, 2007)


702



701Additional paid-in capital


460,235



582,889Accumulated deficit


(221,367
)


(231,399
)Accumulated other comprehensive loss


(23
)


(1,529
)Total shareholders equity


239,547



350,662Total liabilities and shareholders equity

$
658,714


$
1,081,355   The accompanying notes are an integral part of these
    unaudited condensed consolidated financial statements
 3




---



##### 



QUANTA
    CAPITAL HOLDINGS LTD.
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(Expressed
    in thousands of U.S. dollars except for share and per share
    amounts)  For the three months ended


For the six months endedJune 30,


June 30,


June 30,


June 30,2008


2007


2008


2007RevenuesGross premiums written

$
(9,084
)

$
(4,077
)

$
(13,959
)

$
(12,810
)Premiums ceded


4,739



1,668



6,210



(8,511
)Net premiums written


(4,345
)


(2,409
)


(7,749
)


(21,321
)Change in net unearned premiums


4,674



3,805



7,179



20,301Net premiums earned


329



1,396



(570
)


(1,020
)Technical services revenues






501







993Net investment income


4,771



10,143



11,985



20,874Net (losses) gains on investments


(5,600
)


(6,371
)


426



(4,531
)Net foreign exchange (losses) gains


(200
)


454



(615
)


187Other income (expense)


14



2,714



(178
)


3,765Total revenues


(686
)


8,837



11,048



20,268ExpensesNet losses and loss expenses


(6,541
)


1,479



(9,574
)


352Acquisition expenses


1,112



270



1,152



(287
)General and administrative expenses


13,673



13,061



25,387



24,993Interest expense






1,442







2,835Depreciation of fixed assets and amortization and impairment of
    intangible assets


87



78



173



755Total expenses


8,331



16,330



17,138



28,648Loss from continuing operations before income taxes


(9,017
)


(7,493
)


(6,090
)


(8,380
)Income tax expense (benefit)


32



9



296



(16
)Net loss from continuing operations


(9,049
)


(7,502
)


(6,386
)


(8,364
)Discontinued operations:(Loss) income from discontinued operations






(533
)


1,320



4,957Gain on disposal of discontinued operations










15,098



Net (loss) income from discontinued operations






(533
)


16,418



4,957Net (loss) income to common shareholders

$
(9,049
)

$
(8,035
)

$
10,032


$
(3,407
)Weighted average common share and common share equivalents:Basic


70,146,112



70,059,993



70,141,278



70,034,089Diluted


70,146,112



70,059,993



70,169,204



70,034,089Basic loss from continuing operations per common share

$
(0.13
)

$
(0.10
)

$
(0.09
)

$
(0.12
)Basic (loss) income from discontinued operations per common share






(0.01
)


0.02



0.07Basic gain on discontinued operations per common share










0.21



Basic (loss) income per common share

$
(0.13
)

$
(0.11
)

$
0.14


$
(0.05
)Diluted loss from continuing operations per common share

$
(0.13
)

$
(0.10
)

$
(0.09
)

$
(0.12
)Diluted (loss) income from discontinued operations per common
    share






(0.01
)


0.02



0.07Diluted gain on discontinued operations per common share










0.21



Diluted (loss) income per common share

$
(0.13
)

$
(0.11
)

$
0.14


$
(0.05
)Dividend declared and paid per common share

$



$



$
1.75


$
   The accompanying notes are an integral part of these
    unaudited condensed consolidated financial statements
 4




---



##### 



QUANTA
    CAPITAL HOLDINGS LTD.
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
    COMPREHENSIVE INCOME (LOSS)(Expressed
    in thousands of U.S. dollars except for share and per share
    amounts)  For the three months ended


For the six months endedJune 30,


June 30,


June 30,


June 30,2008


2007


2008


2007Net (loss) income

$
(9,049
)

$
(8,035
)

$
10,032


$
(3,407
)Other comprehensive income (loss)Reclassification of net realized losses on foreign currency
    translation included in gain on disposal of discontinued
    operations










1,386



Foreign currency translation adjustments on discontinued
    operations






(387
)


90



(452
)Foreign currency translation adjustments on continuing operations


6



(119
)


30



(180
)Other comprehensive income (loss)


6



(506
)


1,506



(632
)Comprehensive (loss) income

$
(9,043
)

$
(8,541
)

$
11,538


$
(4,039
)   The accompanying notes are an integral part of these
    unaudited condensed consolidated financial statements
 5




---



##### 



QUANTA
    CAPITAL HOLDINGS LTD.
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
    SHAREHOLDERS EQUITY(Expressed
    in thousands of U.S. dollars except for share and per share
    amounts)  For the six months endedJune 30,


June 30,2008


2007Share capital  common shares of par value $0.01
    eachBalance at beginning of period

$
701


$
700Issued during period


1



1Balance at end of period


702



701Additional paid-in capitalBalance at beginning of period


582,889



582,578Common share dividends paid (per share 2008: $1.75; 2007: none)


(122,867
)


Non-cash stock compensation expense


213



138Balance at end of period


460,235



582,716Accumulated deficitBalance at beginning of period


(231,399
)


(263,830
)Cumulative effect adjustment resulting from the adoption of
    SFAS 159






10,021Net income (loss) available to common shareholders for period


10,032



(3,407
)Balance at end of period


(221,367
)


(257,216
)Accumulated other comprehensive (loss) incomeBalance at beginning of period


(1,529
)


8,888Cumulative effect adjustment resulting from the adoption of
    SFAS 159






(10,021
)Foreign currency translation adjustments on discontinued
    operations


1,476



Foreign currency translation adjustments on continuing operations


30



(632
)Balance at end of period


(23
)


(1,765
)Total shareholders equity

$
239,547


$
324,436   The accompanying notes are an integral part of these
    unaudited condensed consolidated financial statements
 6




---



##### 



QUANTA
    CAPITAL HOLDINGS LTD.
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Expressed
    in thousands of U.S. dollars)  For the six months endedJune 30,2008


2007Cash flows from operating activitiesNet income (loss)

$
10,032


$
(3,407
)Adjustments to reconcile net income (loss) to net cash used
    in operating activitiesIncome from discontinued operations


(1,320
)


(4,957
)Gain on disposal of discontinued operations


(15,098
)


Depreciation of property and equipment


172



580Amortization and Impairment of intangible assets






175Amortization of net discounts on investments


(634
)


(3,621
)Net (losses) gains on investments


(426
)


4,531Gain (loss) on foreign exchange translation


30



(632
)Loss on sale of property and equipment






108Non-cash stock compensation expense


214



103Changes in assets and liabilities:Restricted cash and cash equivalents


4,436



7,843Accrued investment income


2,151



324Premiums receivable


1,427



7,473Losses and loss adjustment expenses recoverable


27,008



67,801Deferred acquisition costs, net


(447
)


(2,938
)Deferred reinsurance premiums


5,696



15,421Other accounts receivable






(3,320
)Other assets


3,117



1,486Reserve for losses and loss adjustment expenses


(41,872
)


(56,871
)Unearned premiums


(13,002
)


(30,001
)Environmental liabilities assumed


(253
)


(915
)Reinsurance balances payable


(24,133
)


(14,749
)Accounts payable and accrued expenses


3,620



(19,871
)Deposit liabilities


3,272



(812
)Deferred income and other liabilities


242



(3,524
)Net cash used in operating activities of continuing operations


(35,768
)


(39,773
)Net cash used in operating activities of discontinued operations






(3,075
)Net cash used in operating activities


(35,768
)


(42,848
)Cash flows provided by investing activitiesInvestment in equity investment, recorded at cost in other assets






(118
)Purchases of fixed maturities and short-term investments


(189,898
)


(699,108
)Proceeds from sale of fixed maturities and short-term investments


341,205



753,708Proceeds from disposal of discontinued activities, net of
    expenses


(442
)


Capital expenditures


(85
)


Net cash provided by investing activities of continuing
    operations


150,780



54,482Net cash provided by investing activities of discontinued
    operations






5,914Net cash provided by investing activities


150,780



60,396Cash flows used in financing activitiesCash dividend paid to common shareholders


(122,867
)


Net cash used in financing activities of continuing operations


(122,867
)


(Decrease) increase in cash and cash equivalents


(7,855
)


17,548Cash and cash equivalents at beginning of period


22,314



32,894Cash and cash equivalents at end of period

$
14,459


$
50,442Supplemental cash flows information:Interest paid





$
4,499Income taxes paid






   The accompanying notes are an integral part of these
    unaudited condensed consolidated financial statements
 7




---



##### 



QUANTA
    CAPITAL HOLDINGS LTD.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS

(Expressed in thousands of U.S. dollars except for
    share amounts, or as otherwise stated) 1.
    Description
    of business and basis of presentation               8




---



##### 



Interim
    financial information
  Form 10-Q Regulation S-X.
  Form 10-K Form 10-K/A Form 10-K).
    
    reserves for losses and loss adjustment expenses;
    reinsurance balances recoverable and payable;
    deposit liabilities;
    certain estimated premiums written, unearned premiums and
    receivables;
    contingent commissions receivable and payable;
    provision for non-collectible reinsurance balances recoverable
    and premiums receivable;
    the valuation of investments and determination of hierarchical
    inputs used to measure fair value of investments;
    litigation and other contingent liabilities;
    annual incentive plan provisions and severance accruals;
    the valuation of intangible assets;
    environmental liabilities assumed; and
    deferred income taxes and liabilities.  2.
    Summary
    of Significant Accounting Policies  Form 10-K.
 9




---



##### 



142-3, (FSP 142-3),
    Form 10-Q
 10




---



##### 



14-1,
  EITF 03-6-1, EITF 03-6-1), EITF 03-6-1 EITF 03-6-1.
  3.
    Disposal
    of Quanta 4000 and Pembroke JV    Accounting for the
    Impairment or Disposal of Long-lived Assets EITF 03-13, Applying the conditions in Paragraph 42 of
    FAS 144 in Determining whether to report Discontinued
    Operations (EITF 03-13). EITF 03-13.
   11




---



##### 



Total consideration

$
Less:Carrying value of Quanta
    4000(1)


(14,271
)Reclassification of net realized losses on foreign currency
    translation


(1,386
)Carrying value of Pembroke
    JV(2)


117Estimated transaction costs


442Gain on disposal of Quanta 4000 and Pembroke JV

$
15,098     (1)
    
    Net liabilities of Quanta 4000 at February 13, 2008, prior
    to the impact of the sale transaction.(2)
    
    Carrying value of Pembroke JV at February 13, 2008, prior
    to the impact of the sale transaction.      Assets:Restricted cash, cash equivalents and investments

$
132,715Premiums receivable


46,078Losses and loss adjustment expenses recoverable


27,909Deferred acquisition costs, net


1,974Deferred reinsurance premiums


15,204Net deferred tax asset


5,277Other assets


8,978Total assets


238,135Liabilities:Reserves for losses and loss expenses


165,307Unearned premiums


62,060Reinsurance balances payable


19,210Income taxes payable


5,277Other liabilities


552Total liabilities


252,406Net liabilities

$
(14,271
)  12




---



##### 



Period from


For the three


For the sixJanuary 1, 2008 to


months ended


months endedFebruary 13, 2008


June 30, 2007


June 30, 2007Net premiums earned

$
6,441


$
18,468


$
46,521Net investment income


413



581



1,655Net gains on investments


28



719



765Net foreign exchange (losses) gains


(615
)


269



800Net losses and loss expenses


(3,212
)


(11,682
)


(27,104
)Acquisition expenses


(916
)


(4,994
)


(10,750
)General and administrative expenses


(819
)


(3,894
)


(6,930
)Income (loss) from discontinued operations

$
1,320


$
(533
)

$
4,957   4.
    Segment
    information    5.
    Deposit
    Liabilities    98-7, Deposit Accounting: Accounting for Insurance and
    Reinsurance Contracts that Do Not Transfer Insurance
    Risk,
 13




---



##### 



6.
    Income
    per share    Three months ended


Six months endedJune 30,


June 30,


June 30,


June 30,2008


2007


2008


2007Net loss from continuing operations

$
(9,049
)

$
(7,502
)

$
(6,386
)

$
(8,364
)Net (loss) income from discontinued operations






(533
)


16,418



4,957Net (loss) income to common shareholders

$
(9,049
)

$
(8,035
)

$
10,032


$
(3,407
)Weighted average common share and common share equivalents:Basic


70,146,112



70,059,993



70,141,278



70,034,089Diluted


70,146,112



70,059,993



70,169,204



70,034,089Basic (loss) income per common share:Basic loss from continuing operations per common share

$
(0.13
)

$
(0.10
)

$
(0.09
)

$
(0.12
)Basic net (loss) income from discontinued operations per common
    share






(0.01
)


0.23



0.07Basic (loss) income per common share

$
(0.13
)

$
(0.11
)

$
0.14


$
(0.05
)Diluted (loss) income per common share:Diluted loss from continuing operations per common share

$
(0.13
)

$
(0.10
)

$
(0.09
)

$
(0.12
)Diluted net (loss) income from discontinued operations per
    common share






(0.01
)


0.23



0.07Diluted (loss) income per common share

$
(0.13
)

$
(0.11
)

$
0.14


$
(0.05
)        14




---



##### 



7.
    Investments    June 30,


December 31,2008


2007Fixed maturities:U.S. government and government sponsored agencies

$
108,964


$
267,488Foreign governments


2,654



11,496Tax-exempt municipal


1,036



1,038Corporate


47,885



63,312Asset-backed securities


31,030



51,403Mortgage-backed securities


128,640



164,767Total fixed maturities


320,209



559,504Short-term investments


159,338



88,880Total investments

$
479,547


$
648,384     June 30,


December 31,2008


2007Quoted prices in active market (Level I)

$
159,338


$
88,880Significant other observable inputs (Level II)


320,209



559,504Fair value

$
479,547


$
648,384          15




---



##### 



June 30,


December 31,2008


2007Fair value


Fair valueFixed maturities:Due in one year or less

$
189,908


$
173,213Due after one year through five years


88,049



205,951Due after five years through 10 years


33,070



39,857Due after 10 years


8,850



13,193Total fixed maturities


319,877



432,214Mortgage-backed and asset-backed securities


159,670



216,170Total investments

$
479,547


$
648,384     June 30, 2008


December 31, 2007Ratings*

Fair value


Percentage


Fair value


PercentageAAA

$
425,890



88.8
%

$
571,370



88.1
%AA


15,001



3.1
%


19,341



3.0
%A


35,082



7.3
%


56,926



8.8
%BBB


3,574



0.8
%


747



0.1
%Total

$
479,547



100.0
%

$
648,384



100.0
%     *
    
    ratings as assigned by Standard & Poors
    Corporation    Three months endedJune 30,


June 30,2008


2007Fixed maturities

$
3,773


$
7,061Cash, cash equivalents and short-term investments


1,043



620Gross investment income


4,816



7,681Net amortization of discount/premium


284



2,751Investment expenses


(329
)


(289
)Net investment income

$
4,771


$
10,143   Six months endedJune 30,


June 30,2008


2007Fixed maturities

$
9,665


$
15,088Cash, cash equivalents and short-term investments


2,365



2,745Gross investment income


12,030



17,833Net amortization of discount/premium


634



3,621Investment expenses


(679
)


(580
)Net investment income

$
11,985


$
20,874  16




---



##### 



Three months endedJune 30,


June 30,2008


2007Net realized gains on investments

$
1,665


$
282Net change in fair market value of investments


(7,265
)


(6,653
)Net losses on investments

$
(5,600
)

$
(6,371
)       Six months endedJune 30,


June 30,2008


2007Net realized gains on investments

$
6,100


$
1,252Net change in fair market value of investments


(5,674
)


(5,783
)Net gains (losses) on investments

$
426


$
(4,531
)     8.
    Underwriting
    activity and reinsurance       17




---



##### 



Losses andLossAdjustmentExpenses


Amount of


A.M. BestReinsurer

Recoverable


collateral


Rating($ in millions)Everest Reinsurance Ltd.

$
47.1






A+The Toa Reinsurance Company of America


9.3






AGeneral Fidelity Insurance Company


7.9






A−Aspen Insurance Ltd.


5.0



2.0


APeleus Reinsurance Ltd.


3.2






AOdyssey America Reinsurance Corp.


3.2






AMax Re Ltd.


3.1



3.0


A−Various Lloyds syndicates


2.8






AGlacier Reinsurance AG


2.6



2.6


A−Arch Reinsurance Ltd.


2.5



2.0


AXL Re Ltd.


1.3






AOther Reinsurers Rated A- or Better


6.1



1.8


A−All Other Reinsurers


1.5






B+ or lowerTotal

$
95.6


$
11.4    18




---



##### 



9.
    Commitments
    and contingencies  a)
    Concentrations
    of credit risk  non-U.S. government
      b)
    Restricted
    assets          June 30, 2008


December 31, 2007Cash and cash





Cash and cashequivalents


Investments


equivalents


InvestmentsDeposits with U.S. regulatory authorities

$
10,003


$
16,462


$
9,602


$
17,213Funds deposited with Lloyds










111,154



129,819LOC pledged assets


215



87,136



211



111,889Trust funds


9,091



127,934



10,046



143,740Amounts held in trust funds related to deposit liabilities






38,586







39,195Total

$
19,309


$
270,118


$
131,013


$
441,856  19




---



##### 



c)
    Litigation  Zirkin v. Quanta
    Capital Holdings, Ltd. et al. Coronel v. Quanta Capital Holdings, Ltd. et al.
        Rule 10b-5
     20




---



##### 



d)
    Non
    Traditional Statutory Surplus Relief Contract  Long-Duration
 21




---



##### 



e)
    2007
    Long Term Incentive Plan      Three monthsended June 30,2008Expected volatility


43.95
%Dividend yield


0.00
%Risk-free interest rate


2.41
%Expected term (in years)


1.50     10.
    Amalgamation
    Agreement with Catalina   22




---



##### 




    approximately $17.7 million that vests and becomes payable
    under the 2007 LTIP (of which $8.4 million has been
    recognized and recorded in accounts payable and accrued expenses
    as of June 30, 2008);
    approximately $10.3 million with respect to severance costs
    and estimated gross up payments to those employees that become
    subject to specified excise taxes imposed under
    Section 280G and 4999 of the Code;
    approximately $5.0 million with respect to investment
    banking fees; and
    approximately $0.3 million with respect to share based
    compensation as a result of acceleration of vesting of stock
    options and restricted stock.  11.
    Options
    and stock based compensation       23




---



##### 



a)
    Options
    and warrants      Three months ended


Three months endedJune 30, 2008


June 30, 2007Number of





Number ofoptions and


Weighted-average


options and


Weighted-averagewarrants


exercise price


warrants


exercise priceOutstanding  beginning of period


3,109,422


$
9.27



3,339,296


$
9.37Granted










96,000



2.20Forfeited


(19,374
)


8.10



(270,101
)


8.74Outstanding  end of period


3,090,048


$
9.27



3,165,195


$
9.24   Six months ended


Six months endedJune 30, 2008


June 30, 2007Number of





Number ofoptions and


Weighted-average


options and


Weighted-averagewarrants


exercise price


warrants


exercise priceOutstanding  beginning of period


3,115,817


$
9.27



3,343,879


$
9.41Granted










121,000



2.18Forfeited


(25,769
)


8.30



(299,684
)


8.21Outstanding  end of period


3,090,048


$
9.27



3,165,195


$
9.24      24




---



##### 



Options and warrants outstandingAverage


Options and warrants exercisableNumber of


Average


remaining


Number of


Averageoptions and


exercise


contractual


options and


exerciseRange of exercise prices

warrants


price


life


warrants


price$1.88


100,000


$
1.88



5.21 years



25,000


$
1.88$2.08  2.09


50,000


$
2.09



8.68 years



12,500


$
2.08$2.20  2.30


71,000


$
2.26



6.68 years



17,750


$
2.30$4.59  $4.69


66,666


$
4.67



6.85 years



33,333


$
4.67$7.85


5,901


$
7.85



3.83 years



4,426


$
7.85$8.92


131,668


$
8.92



4.26 years



98,751


$
8.92$10.00  $10.20


2,629,813


$
10.04



5.28 years



2,628,563


$
10.00$11.60  $12.50


35,000


$
11.99



5.70 years



35,000


$
11.993,090,048











2,855,323       b)
    Performance
    Share Units and Restricted Shares    Three months ended


Three months endedJune 30, 2008


June 30, 2007Weighted-average





Weighted-averageNumber


share price


Number


share priceNon vested  beginning of period


93,460


$
2.32



168,558


$
3.84Granted










56,067



2.20Vested


(39,938
)


(2.32
)


(72,281
)


(2.63
)Forfeited










(9,108
)


(8.92
)Non vested  end of period


53,522


$
2.32



143,236


$
3.49   Six months ended


Six months endedJune 30, 2008


June 30, 2007Weighted-average





Weighted-averageNumber


share price


Number


share priceNon vested  beginning of period


109,882


$
3.18



184,937


$
3.75Granted










68,085



2.18Vested


(41,941
)


(2.31
)


(72,281
)


(2.63
)Forfeited


(14,419
)


(8.92
)


(37,505
)


(4.07
)Non vested  end of period


53,522


$
2.32



143,236


$
3.49      25




---



##### 



12.
    Income
    taxes                   26




---



##### 



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS.  Form 10-K (Form 10-K).
  Safe
    Harbor Disclosure
      
    The amalgamation may divert managements attention away
    from the run-off of our business;
    Even if our shareholders approve the amalgamation, the
    amalgamation may not be completed;
    Failure to complete the amalgamation would likely have a
    negative impact on the price of our common shares;
    The amalgamation limits our ability to pursue alternatives to
    the amalgamation;
    the risk that the amalgamation may not be completed in a timely
    manner, if at all;
    the occurrence of events, changes or other circumstances that
    could give rise to the termination of the amalgamation
    agreement, including under circumstances which may require the
    Company to pay Catalina a termination fee of $6 million,
    plus up to $1 million of Catalinas out-of-pocket
    expenses;
    the amount of the costs, fees, expenses and charges related to
    the amalgamation;
    We have placed all of our lines of businesses in run-off.
    Running off these businesses includes a number of risks,
    including the risk that we may not be able to mitigate our
    existing exposures to our historical underwriting risks, obtain
    the release of collateral when contracts are cancelled, reduce
    our expenses such that they do not exceed income from
    investments, prevent investment losses, recover amounts owed to
    us by our reinsurers and retrocessionaires, enter into
    commutations or other arrangements to mitigate our liabilities,
    obtain premium that has been due for an extended period of time
    but has not been paid to us, release capital from our
    subsidiaries to our holding company where it is available to our 27




---



##### 



shareholders, maintain sufficient liquidity in each of our
    subsidiaries to meet the obligations of those subsidiaries or
    retain control over our subsidiaries;  
    The execution of our run-off plan is expected to create
    substantial uncertainties and risks that may result in
    restructuring charges and unforeseen expenses and costs,
    including expenses related to increased arbitration activities
    as we seek to enforce our rights. In addition, as a result of
    commutations, loss portfolio transfers or other transactions, we
    may realize gains or losses of assets and liabilities that are
    different than the amount at which these are currently recorded.
    There can be no assurance that any of these initiatives or their
    results will not negatively impact our results of operations;
    Our existing policy obligations in certain lines of business
    that we have underwritten, including environmental insurance,
    continue to have large aggregate exposures to natural and
    man-made disasters such as hurricane, typhoon, windstorm, flood,
    earthquake, acts of war, acts of terrorism and political
    instability, in certain cases for up to twelve years, and our
    results may continue to be volatile as a result;
    Our ability to pay dividends from our subsidiaries to Quanta
    Holdings is restricted by regulations in Bermuda, several states
    in the United States and the European Union. In addition, the
    Bermuda Monetary Authority (the BMA) has, pursuant
    to its regulatory discretion, amended the license of Quanta
    Reinsurance Ltd., our principal subsidiary in Bermuda, to
    require that it, among other things, seek the approval from the
    BMA prior to paying any dividend to Quanta Holdings and
    prohibiting it from engaging in any new transactions. We will
    continue to work with the applicable regulatory authorities to
    facilitate dividends from our insurance operating subsidiaries
    to Quanta Holdings. Completing this work is expected to take a
    long period of time and requires us to meet many conditions,
    particularly the discharge of all our policy obligations;
    Our current estimates of our exposure to ultimate claim costs
    associated with hurricanes Katrina, Rita and Wilma (the
    2005 hurricanes) are based on available information,
    claims notifications received to date, industry loss estimates,
    output from industry models, a review of affected contracts and
    discussions with brokers and clients. The actual amount of
    losses from the 2005 hurricanes may vary significantly from our
    estimates based on such data, which could have a material
    adverse effect on our financial condition or our results of
    operations;
    Our ability to execute our run-off plan if the proposed
    amalgamation is not consummated or to complete alternative
    strategic transactions is dependent on our ability to retain
    our, or attract any additional, executives and key employees.
    Our inability to retain, attract and integrate members of our
    management team, key employees and other personnel could
    significantly and negatively affect the execution of our run-off
    plan and the preservation of shareholder value;
    If actual claims exceed our loss reserves, our financial results
    could be significantly adversely affected;
    The failure of any of the loss limitation methods we employ
    could have a material adverse effect on our financial condition
    or our results of operations;
    Based on our current estimate of losses related to the 2005
    hurricanes, we have exhausted all of our reinsurance and
    retrocessional protection. If our 2005 hurricanes losses prove
    to be greater than currently anticipated, we have no further
    reinsurance and retrocessional coverage available for those
    windstorms. Furthermore, if there are further catastrophic
    events relating to our underwriting exposures, our reinsurance
    and retrocessional coverage for these events may be limited or
    we may have no coverage at all; 28




---



##### 




    If we receive additional premium estimate reductions and
    cancellations in future periods, we may not receive all of our
    premiums receivable, and our cash flows could be adversely
    affected;
    We have a significant amount due from reinsurers and
    retrocessionaires who may refuse to pay our claims because we
    are a run-off company or for other reasons even when we believe
    those payments are contractually due to us. These actions, if
    taken, will increase our expenses as we take legal action and if
    we are unsuccessful in recovering these amounts, may have a
    negative impact on our financial results and position;
    Risks relating to pending and potential litigation and
    arbitration;
    Changes in regulation or tax laws applicable to us or our
    customers;
    Risks relating to our reliance on third-party administrators,
    consultants and other supporting vendors for claims handling,
    data, premium collection and return, information technology and
    administrative functions;
    Changes in accounting policies or practices; and
    Changes in general economic conditions, including inflation,
    interest rates, foreign currency exchange rates and other
    factors.  Form 10-K
    Overview
  Recent
    Developments
   29




---



##### 




    We incurred total general and administrative expenses of
    $13.7 million as compared to $13.1 million for the
    three months ended June 30, 2007. Included in total general
    and administrative expenses is $3.9 million related to the
    2007 Long Term Incentive Plan (2007 LTIP). We also
    incurred approximately $1.4 million of legal and
    professional fees associated with the proposed amalgamation.
    We recorded total net favorable loss development of
    $6.1 million, including $0.8 million on commutations,
    primarily as a result of actual claims experience developing
    better than expected. The total net favorable loss development
    is also net of $1.8 million of adverse loss development in
    relation to the 2005 hurricanes and hurricanes Charley, Frances,
    Ivan and Jeanne (the 2004 hurricanes).
    We generated net investment income of $4.8 million.
    We returned approximately $10.1 million in premiums to our
    clients in connection with cancellations, commutations and
    terminations of insurance policies.
    We recognized net gains on commutation of assumed and ceded
    reinsurance contracts of approximately $0.9 million. This
    consisted of net favorable loss development of approximately
    $0.8 million and returned earned premium of approximately
    $0.1 million. The net commutation payments resulted in a
    reduction in net loss and loss expense reserves of approximately
    $2.0 million and a reduction in premium receivables of
    approximately $0.01 million. These commutations resulted in
    net payments by us of approximately $1.3 million. 30




---



##### 




    We also completed two commutation transactions with certain of
    its ceded reinsurers which resulted in aggregate net cash
    receipts of $2.6 million. The transactions represent full
    and final settlement and release from all current and future
    obligations under those ceded reinsurance contracts. The net
    commutation receipts reduced net premiums payable by an
    aggregate amount of $0.2 million for and reduced loss and
    loss adjustment expenses recoverable by $1.7 million.    Summary
    of Our Financial and Capital Positions
         31




---



##### 



wind-up
      Our
    Results
    Form 10-K.
 32




---



##### 



ab initio
    Segment
    Information
     33




---



##### 



Main
    Drivers of our Results
  Revenues
      Expenses
         34




---



##### 



Results
    of Operations
    For
    the three months ended June 30, 2008 and 2007
    2008


2007($ in thousands)RevenuesGross premiums written

$
(9,084
)

$
(4,077
)Premiums ceded


4,739



1,668Net premiums written


(4,345
)


(2,409
)Change in unearned premium


4,674



3,805Net premiums earned


329



1,396Technical services revenues






501Net investment income


4,771



10,143Net gains on investments


(5,600
)


(6,371
)Net foreign exchange (losses) gains


(200
)


454Other income


14



2,714Total revenues


(686
)


8,837ExpensesNet losses and loss expenses


(6,541
)


1,479Acquisition expenses


1,112



270General and administrative expenses


13,673



13,061Interest expense






1,442Depreciation and amortization of intangible assets


87



78Total expenses


8,331



16,330Loss from continuing operations before income taxes


(9,017
)


(7,493
)Income tax expense


32



9Net loss from continuing operations


(9,049
)


(7,502
)Discontinued operations:Loss from operations of discontinued operations






(533
)Gain on disposal of discontinued operations






Net loss from discontinued operations






(533
)Net loss to common shareholders

$
(9,049
)

$
(8,035
)   Revenues
  Premiums.
   35




---



##### 



Technical services revenues.
  Net investment income and net gains on
    investments.
  2008


2007($ in thousands)Net investment income

$
4,771


$
10,143Net realized gains on investments


1,665



282Net change in the fair value of investments


(7,265
)


(6,653
)$
(829
)

$
3,772       Net foreign exchange (losses) gains.
  Expenses
  Net losses and loss expenses.
 36




---



##### 




    favorable loss experience in mature accident periods in certain
    of our product lines;
    favorable loss experience arising on commutation of certain
    assumed and ceded reinsurance contracts; and
    the very limited number of insurance and reinsurance contracts
    we were legally required to enter into during the three months
    ended June 30, 2008 and the associated net premiums earned
    as our insurance and reinsurance portfolios begin to run-off.    Acquisition expenses.
  General and administrative expenses.
  Interest expense.
   37




---



##### 



Discontinued
    operations
  Income from operations of discontinued
    operations.
    For the threemonths endedJune 30, 2007($ in thousands)Net premiums earned

$
18,468Net investment income


581Net gains on investments


719Net foreign exchange (losses) gains


269Net losses and loss expenses


(11,682
)Acquisition expenses


(4,994
)General and administrative expenses


(3,894
)Income from operations of discontinued operations

$
(533
)  38




---



##### 



For
    the six months ended June 30, 2008 and 2007
    2008


2007($ in thousands)RevenuesGross premiums written

$
(13,959
)

$
(12,810
)Premiums ceded


6,210



(8,511
)Net premiums written


(7,749
)


(21,321
)Change in unearned premium


7,179



20,301Net premiums earned


(570
)


(1,020
)Technical services revenues






993Net investment income


11,985



20,874Net gains (losses) on investments


426



(4,531
)Net foreign exchange losses (gains)


(615
)


187Other (expense) income


(178
)


3,765Total revenues


11,048



20,268ExpensesNet losses and loss expenses


(9,574
)


352Acquisition expenses


1,152



(287
)General and administrative expenses


25,387



24,993Interest expense






2,835Depreciation and amortization of intangible assets


173



755Total expenses


17,138



28,648Loss from continuing operations before income taxes


(6,090
)


(8,380
)Income tax expense (benefit)


296



(16
)Net loss from continuing operations


(6,386
)


(8,364
)Discontinued operations:Income from operations of discontinued operations


1,320



4,957Gain on disposal of discontinued operations


15,098



Net income from discontinued operations


16,418



4,957Net income (loss) to common shareholders

$
10,032


$
(3,407
)   Revenues
  Premiums.
     39




---



##### 



Technical services revenues.
  Net investment income and net gains on
    investments.
  2008


2007($ in thousands)Net investment income

$
11,985


$
20,874Net realized gains on investments


6,100



1,252Net change in the fair value of investments


(5,674
)


(5,783
)$
12,411


$
16,343     mark-to-market
  Net foreign exchange losses (gains).
  Expenses
  Net losses and loss expenses.
 40




---



##### 




    favorable loss experience in mature accident periods in certain
    of our product lines;
    favorable loss experience arising on commutation of certain
    assumed and ceded reinsurance contracts; and
    the very limited number of insurance and reinsurance contracts
    we were legally required to enter into during the six months
    ended June 30, 2008 and the associated net premiums earned
    as our insurance and reinsurance portfolios begin to run-off.            Acquisition expenses.
 41




---



##### 



General and administrative expenses.
  Interest expense.
    Discontinued
    operations
    EITF 03-13, (EITF 03-13). EITF 03-13.
     42




---



##### 



Income from operations of discontinued
    operations.
      Period fromJanuary 1,


For the six2008 to


months endedFebruary 13,


June 30,2008


2007($ in thousands)Net premiums earned

$
6,441


$
46,521Net investment income


413



1,655Net gains on investments


28



765Net foreign exchange (losses) gains


(615
)


800Net losses and loss expenses


(3,212
)


(27,104
)Acquisition expenses


(916
)


(10,750
)General and administrative expenses


(819
)


(6,930
)Income from operations of discontinued operations

$
1,320


$
4,957   Gain on disposal of discontinued
    operations.
  ($ in thousands)Total consideration

$
Less:Carrying value of Quanta
    4000(1)


(14,271
)Reclassification of net realized losses on foreign currency
    translation


(1,386
)Carrying value of Pembroke
    JV(2)


117Estimated transaction costs


442Gain on disposal of Quanta 4000 and Pembroke JV

$
15,098     (1)
    
    Net liabilities of Quanta 4000 at February 13, 2008, prior
    to the disposal.(2)
    
    Carrying value of Pembroke JV at February 13, 2008, prior
    to the disposal.  Financial
    Condition and Liquidity
   43




---



##### 



44




---



##### 



Financial
    condition
          asset-backed
 45




---



##### 



WeightedAverage


AAA


AAA


AALife in


Senior


Junior


Junior


Amortized


FairYears


Tranche*


Tranche*


Tranche*


Cost


Value($ in millions)By Vintage YearFixed Maturities with subprime exposure2003


2.8


$



$



$
0.1


$
0.2


$
0.12004


0.2



0.1











0.1



0.12005


0.7



0.7











0.8



0.72006


2.1



3.3











3.4



3.3Total


1.9


$
4.1


$



$
0.1


$
4.5


$
4.2Fixed Maturities with Alt-A exposure2004


3.0


$
0.2


$



$



$
0.2


$
0.22005


4.9



2.2











2.4



2.22006


2.8







0.4







0.4



0.4Total


4.5


$
2.4


$
0.4


$



$
3.0


$
2.8     *
    
    ratings as assigned by Standard & Poors
    Corporation     46




---



##### 



47




---



##### 



Losses andLossAdjustmentExpenses


Amount of


A.M. BestReinsurer

Recoverable


collateral


Rating($ in millions)Everest Reinsurance Ltd.

$
47.1






A+The Toa Reinsurance Company of America


9.3






AGeneral Fidelity Insurance Company


7.9






A−Aspen Insurance Ltd.


5.0



2.0


APeleus Reinsurance Ltd.


3.2






AOdyssey America Reinsurance Corp.


3.2






AMax Re Ltd.


3.1



3.0


A−Various Lloyds syndicates


2.8






AGlacier Reinsurance AG


2.6



2.6


A−Arch Reinsurance Ltd.


2.5



2.0


AXL Re Ltd.


1.3






AOther Reinsurers Rated A- or Better


6.1



1.8


A−All Other Reinsurers


1.5






B+ or lowerTotal

$
95.6


$
11.4       Liquidity
  Operating
    Cashflow; Cash and Cash Equivalents
    Sources
    of cash
   48




---



##### 



Uses of
    cash and liquidity
       49




---



##### 



Dividends
    and Redemptions
      Off-Balance
    Sheet Arrangements
    Posting
    of Security by Our
    Non-U.S.
    Operating Subsidiaries
     50




---



##### 



ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Derivative
    Valuation Risk
        Foreign
    Currency Risk and Functional Currency
   51




---



##### 



non-U.S. subsidiaries non-U.S. dollar
    Interest
    Rate Risk
       52




---



##### 



Credit
    Risk
  and/or
       53




---



##### 



Effects
    of Inflation
    ITEM 4.
    CONTROLS
    AND PROCEDURES   Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e) 15d-15(e)
    Changes
    in Internal Control over Financial Reporting
     54




---



##### 



PART II.
    OTHER
    INFORMATION   ITEM 1.
    LEGAL
    PROCEEDINGS  Zirkin v. Quanta Capital
    Holdings, Ltd. et al. Coronel v.
    Quanta Capital Holdings, Ltd. et al.
        Rule 10b-5
     55




---



##### 



ITEM 6.
    RISK
    FACTORS  Form 10-K,
  Risks
    Related to the Amalgamation
  The
    amalgamation may divert managements attention away from
    the run-off of our business and have a material adverse effect
    on the Companys operations.
    Even
    if the Companys shareholders approve the amalgamation, the
    amalgamation may not be completed.
    The
    Amalgamation Agreement limits the Companys ability to
    pursue alternatives to the amalgamation.
   56




---



##### 



Failure
    to complete the amalgamation would likely negatively affect the
    price of the Companys common shares.
    ITEM 5.
    OTHER
    INFORMATION  Rule 14a-8
  Rule 14a-8
     57




---



##### 



ITEM 6.
    EXHIBITS  2
.1

Agreement and Plan of Amalgamation, dated as of May 29, 2008,
    among the Company, Catalina and Catalina Alpha Ltd.
    (incorporated by reference from Exhibit 2.1 to the
    Companys Current Report on form 8-K filed on May 30, 2008).10
.1*

Gross-Up Agreement, dated as of May 21, 2008, between the
    Company and Peter D. Johnson.31
.1*

Certification of the Principal Executive Officer required by
    Rule 13a-14(a) or
    Rule 15d-14(a)
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31
.2*

Certification of the Principal Financial Officer required by
    Rule 13a-14(a) or Rule 15d-14(a) pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.32
.1*

Certification of the Principal Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.32
.2*

Certification of the Principal Financial Officer pursuant to 18
    U.S.C Section 1350, as adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith. 58




---



##### 



SIGNATURES
     Quanta Capital Holdings
    Ltd.Date:  August 8, 2008

/s/  Peter
    D. JohnsonPeter D. Johnson (On behalf of the registrant and as Principal Executive Officer)Date:  August 8, 2008

/s/  Jonathan
    J.R. DoddJonathan J.R. Dodd
    (Principal Financial Officer and Principal Accounting Officer)  59




---



##### 



Index to
    Exhibits
  2
.1

Agreement and Plan of Amalgamation, dated as of May 29, 2008,
    among the Company, Catalina and Catalina Alpha Ltd.
    (incorporated by reference from Exhibit 2.1 to the
    Companys Current Report on form 8-K filed on May 30, 2008).10
.1*

Gross-Up Agreement, dated as of May 21, 2008, between the
    Company and Peter D. Johnson.31
.1*

Certification of the Principal Executive Officer required by
    Rule 13a-14(a) or Rule 15d-14(a) pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.31
.2*

Certification of the Principal Financial Officer required by
    Rule 13a-14(a) or Rule 15d-14(a) pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.32
.1*

Certification of the Principal Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.32
.2*

Certification of the Principal Financial Officer pursuant to 18
    U.S.C Section 1350, as adopted pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.     *
    
    Filed herewith.