##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31,
2002

Commission file number: 0-27662

IPC Holdings, Ltd.

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Bermuda                                                            |  | Not Applicable                          
|                                                                   |  |                                         
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

American International Building,
29 Richmond Road, Pembroke, HM 08, Bermuda




(Address of principal executive
offices)


(441) 298-5100




(Registrants telephone number,


including area code)


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

Securities registered pursuant to
Section 12(g) of the Act: Common Shares, par value $0.01
per share

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

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

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Act).     Yes     þ          No     o

The aggregate market value of the
Registrants Common Shares held by non-affiliates of the
Registrant as of June 28, 2002, was $1,113,206,699 based on
the last reported sale price of Common Shares on the Nasdaq
National Market system on that date.

The number of the Registrants Common
Shares, par value U.S. $0.01 per share, as of
March 14, 2003, was 48,179,805.

DOCUMENTS INCORPORATED BY REFERENCE

1.     Portions of the
Registrants 2002 Annual Report to Shareholders to be
mailed to shareholders on or about April 28, 2003 are
incorporated by reference into Part II of this
Form 10-K. With the exception of the portions of the Annual
Report specifically incorporated herein by reference, the Annual
Report is not deemed to be filed as part of this Form 10-K.

2.     Portions of the
Registrants definitive proxy statement to be filed with
the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934,
as amended (the Exchange Act), relating to the
Registrants Annual Meeting of Shareholders scheduled to be
held June 13, 2003 are incorporated by reference into
Part III of this Form 10-K. With the exception of the
portions of the Proxy Statement specifically incorporated herein
by reference, the Proxy Statement is not deemed to be filed as
part of this Form 10-K.









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TABLE OF CONTENTS



|                                |                                                                                               |  |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                         
|                                | Item 1. Business                                                                             
|                                | Item 2. Properties                                                                           
|                                | Item 3. Legal Proceedings                                                                    
|                                | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II                        
|                                | Item 5. Market for the Registrants Common Stock and Related Shareholder Matters             
|                                | Item 6. Selected Financial Data                                                              
|                                | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|                                | Item 8. Financial Statements and Supplementary Data                                          
|                                | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III                       
|                                | Item 10. Directors and Executive Officers                                                    
|                                | Item 11. Executive Compensation                                                              
|                                | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                | Item 13. Certain Relationships and Related Transactions                                      
|                                | Item 14. Controls and Procedures                                                             
|PART IV                        
|                                | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|AMENDED AND RESTATED BYE-LAWS  
|STATEMENT REGARDING COMPUTATION
|PORTIONS OF THE ANNUAL REPORT  
|SUBSIDIARIES OF THE REGISTRANT 
|CONSENT OF KPMG                



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##### Table of Contents



IPC HOLDINGS, LTD.

TABLE OF CONTENTS

|         |  |                                                                                           |  |        |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ------ | -- | 
|         |  |                                                                                           |  | Page  
|Item     |  |                                                                                           |  | Number
|         |  |                                                                                           |  |       
|PART I  
|        
|1.       |  | Business                                                                                  |  |        | 2  | 
|2.       |  | Properties                                                                                |  |        | 22 | 
|3.       |  | Legal Proceedings                                                                         |  |        | 22 | 
|4.       |  | Submission of Matters to a Vote of Security
    Holders                                   |  |        | 22 | 
|PART II 
|        
|5.       |  | Market for the Registrants Common Stock and
    Related Shareholder Matters              |  |        | 22 | 
|6.       |  | Selected Financial Data                                                                   |  |        | 24 | 
|7.       |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |  |        | 25 | 
|7A.      |  | Quantitative & Qualitative Disclosures about
    Market Risk                              |  |        | 25 | 
|8.       |  | Financial Statements and Supplementary Data                                               |  |        | 25 | 
|9.       |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |  |        | 25 | 
|PART III
|        
|10.      |  | Directors and Executive Officers                                                          |  |        | 26 | 
|11.      |  | Executive Compensation                                                                    |  |        | 26 | 
|12.      |  | Security Ownership of Certain Beneficial Owners
    and Management                        |  |        | 26 | 
|13.      |  | Certain Relationships and Related Transactions                                            |  |        | 26 | 
|14.      |  | Controls and Procedures                                                                   |  |        | 26 | 
|PART IV 
|15.      |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                       |  |        | 26 | 

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PART I

Special Note Regarding Forward-Looking
Information

This report contains certain forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking
statements are statements other than historical information or
statements of current condition, including but not limited to
expectations regarding market cycles, renewals and our ability
to increase written premium volume and improve profit margins,
market conditions, the impact of current market conditions and
trends on future periods, the impact of our business strategy on
our results, trends in pricing and claims and the insurance and
reinsurance market response to catastrophic events. Some
forward-looking statements may be identified by our use of terms
such as believes, anticipates,
intends, or expects and relate to our
plans and objectives for future operations. In light of the
risks and uncertainties inherent in all forward-looking
statements, the inclusion of such statements in this report
should not be considered as a representation by us or any other
person that our objectives or plans will be achieved. We do not
intend, and are under no obligation, to update any
forward-looking statement contained in this report. The largest
single factor in our results has been and will continue to be
the severity or frequency of catastrophic events, which is
inherently unpredictable. Numerous factors could cause our
actual results to differ materially from those in the
forward-looking statements, including, but not limited to, the
following: (i) the occurrence of natural or man-made
catastrophic events with a frequency or severity exceeding our
estimates; (ii) any lowering or loss of one of the
financial ratings of IPC Holdings wholly owned subsidiary,
IPCRe Limited (IPCRe and together with the Company,
IPCRe Europe (as defined herein) and IPCRe Underwriting Services
(as defined herein), we or IPC);
(iii) a decrease in the level of demand for property
catastrophe reinsurance, or increased competition owing to
increased capacity of property catastrophe reinsurers;
(iv) the effect of competition on market trends and
pricing; (v) the adequacy of our loss reserves;
(vi) loss of our non-admitted status in United States
jurisdictions or the passage of federal or state legislation
subjecting us to supervision or regulation in the United States;
(vii) challenges by insurance regulators in the United
States to our claim of exemption from insurance regulation under
current laws; (viii) a contention by the United States
Internal Revenue Service that we are engaged in the conduct of a
trade or business within the U.S.; (ix) loss of services of
any one of our executive officers; (x) changes in interest
rates and/or equity values in the United States of America and
elsewhere; or (xi) changes in exchange rates and greater
than expected currency exposure.




Item 1.  Business

General Development of the Business

Overview.We
provide property catastrophe reinsurance and, to a limited
extent, property-per-risk excess, aviation (including
satellite), marine and other short-tail reinsurance on a
worldwide basis. During 2002, approximately 80% of our gross
premiums written covered property catastrophe risks. Property
catastrophe reinsurance covers unpredictable events such as
hurricanes, windstorms, hailstorms, earthquakes, volcanic
eruptions, fires, industrial explosions, freezes, riots, floods
and other man-made or natural disasters. Substantially all of
the reinsurance written by IPCRe has been, and continues to be,
written on an excess of loss basis for primary insurers rather
than reinsurers, and is subject to aggregate limits on exposure
to losses. During 2002, we had approximately 327 clients,
including many of the leading insurance companies around the
world. Approximately 44% of our clients in 2002 were based in
the United States, and approximately 45% of gross premiums
written during 2002 related primarily to U.S. risks. Our
non-U.S. clients and covered risks are located principally in
Europe, Japan, Australia and New Zealand. At December 31,
2002, IPC Holdings had total shareholders equity of
$1,291 million and total assets of $1,474 million.

In response to a severe imbalance between the
global supply of and demand for property catastrophe reinsurance
that developed in the period from 1989 through 1993, IPC
Holdings and IPCRe were formed and commenced operations in June
1993 through the sponsorship of American International Group,
Inc. (AIG), a holding company incorporated in
Delaware which, through its subsidiaries, is primarily engaged
in a broad range of insurance and insurance-related activities
and financial services in the United States and

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abroad. AIG purchased 24.4% of IPC Holdings
initial share capital and an option (which was exercised on
December 12, 2001) to obtain up to an additional 10% (on a
fully diluted basis, excluding employee stock options) of our
share capital (the AIG Option). Since our formation,
subsidiaries of AIG have provided administrative, investment
management and custodial services to us, and the Chairman of the
Boards of Directors of IPC Holdings, IPCRe and IPCRe
Underwriting Services Limited (IPCUSL) is also a
director and officer of various subsidiaries and affiliates of
AIG. See Item 13. Certain Relationships and Related
Transactions. For discussion of the limitation of voting
rights of any 10% or more beneficial owner of Common Shares
(including AIG) to less than 10% of total voting rights, see
Amendment No. 1 to the Companys Registration
Statement on Form 8-A, dated February 9, 1996.


On March 13, 1996, IPC Holdings completed an
initial public offering in which 13,521,739 of the 25,000,000
Common shares outstanding, were sold by existing shareholders.
IPC Holdings Common Shares are included for trading on the
Nasdaq National Market under the ticker symbol IPCR.

On September 10, 1998, IPCRe incorporated a
subsidiary in Ireland, named IPCRe Europe Limited. Effective
October 1, 1998, IPCRe Europe commenced underwriting
selected reinsurance business, primarily in Europe. Currently,
IPCRe Europe retrocedes 90% of the business it underwrites to
IPCRe. IPCRe Services Limited, a subsidiary of IPC Holdings,
Ltd., was established in the United Kingdom on June 27,
1997, from where European marketing efforts were conducted on
behalf of IPCRe and IPCRe Europe. IPCRe Services ceased
operations in January, 2000, and was dissolved on
December 11, 2001.

On November 7, 2001, IPC Holdings
incorporated a subsidiary in Bermuda, IPCUSL, which is licensed
as an Underwriting Agent and currently acts for Allied World
Assurance Company Ltd, a Bermuda-based Class 4 insurer (see
Item 13. Certain Relationships and Related
Transactions, and Note 9 to the Consolidated
Financial Statements  Related Party Transactions).

On December 12, 2001, we completed a
follow-on public offering in which 17,480,000 ordinary shares
were sold (including the exercise of the over-allotment option
of 2,280,000 shares) at $26.00 per share. Concurrent with
the offering, we sold 2,847,000 shares in a private
placement to AIG at a price equal to the public offering price.
Furthermore, AIG exercised the AIG Option, which had been
granted at the time of the Companys formation, whereby
they acquired 2,775,000 shares at an exercise price of
$12.7746 per share. Total net proceeds raised from these
transactions were approximately $546 million. AIG has
informed us that AIG presently intends to continue its share
ownership in the Company for the foreseeable future.

Internet Address:Our Internet address is
www.ipcre.bmand the investor relations section of our
web site is located at
www.ipcre.bm/sections/financial-info/frmsquarterlies.html.We
make available free of charge, on or through the investor
relations section of our web site, annual reports on
Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 as soon as reasonably
practicable after we electronically file such material with, or
furnish it to, the Securities and Exchange Commission.

Recent Industry and Legislative
Developments

From 1996 to 1999, there was an increase in the
supply of reinsurance capacity, which caused downward pressure
on pricing. In 1996, 1997 and 2000, few catastrophic events
occurred. Consequently, few claims were made on IPCRe. Many
catastrophic events occurred in 1998, 1999 and 2001 in many
parts of the world, including Hurricane Georges (which caused
estimated industry-wide insured losses in excess of
$4 billion), a hailstorm which struck Sydney, Australia
(estimated industry losses $1.6 billion), Hurricane Floyd
(estimated industry losses $2.2 billion), and cyclones
Anatol, Lothar and Martin which struck several parts of Europe
in December, 1999 (estimated industry losses in excess of
$9 billion). Significant claims were incurred by many
reinsurers during 2000 as a result of events in late 1999,
followed by several catastrophic events in 2001. In June 2001,
Tropical Storm Allison affected parts of Texas (estimated
industry losses of $2.5 billion) and on September 11,
2001, terrorist attacks were carried out in the U.S. (estimated
industry losses of between $30 billion to
$70 billion). The property catastrophe reinsurance market
began experiencing improvements in rates, terms and conditions
in the fourth quarter of 2000. The improvements in rates, terms
and conditions continued throughout 2001 and were accelerated by
the terrorist attacks of September 11.

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Property catastrophe reinsurance premiums have
often risen in the aftermath of significant catastrophic losses.
As claims are reserved, industry surplus is depleted and the
industrys capacity to write new business diminishes. We
believe that market trends similar to those that have occurred
in past cycles are developing in the current environment.


With respect to terms and conditions other than
pricing, for 2002 renewals the coverage of claims that are the
result of terrorist acts was generally excluded from
property catastrophe reinsurance contracts covering large
commercial risks, but not excluded for personal lines or other
coverages, except where caused by nuclear, biological or
chemical means. During 2002, IPCRe participated in a number of
underwriting pools which cover property losses arising from
terrorist acts as a separate hazard.

On November 26, 2002, the Terrorism Risk
Insurance Act of 2002, (TRIA) was signed into law.
TRIA establishes a temporary federal program which requires U.S.
and other insurers to offer coverage in their commercial
property and casualty policies for losses resulting from
terrorists acts committed by foreign persons or interests
in the United States or with respect to specified U.S. air
carriers, vessels or missions abroad. The coverage offered may
not differ materially from the terms, amounts and other coverage
limitations applicable to other policy coverages.

Under TRIA, the U.S. Secretary of the Treasury
determines whether an act is a covered terrorist act, and if it
is covered, losses resulting from that act ultimately are shared
among insurers, the federal government and policyholders.
Generally, insurers pay all losses to policyholders, retaining a
defined deductible and 10% of losses above the
deductible. The federal government will reimburse insurers for
90% of losses above the deductible and, under certain
circumstances, the federal government will require insurers to
levy surcharges on policyholders to recoup for the federal
government its reimbursements paid. An insurers deductible
in 2003 is 7% of the insurers 2002 direct earned premiums,
and rises to 10% of 2003 direct earned premiums in 2004, and, if
the program continues in 2005, 15% of 2004 direct earned
premiums in 2005. The program terminates at the end of 2004
unless the Secretary of the Treasury extends it to 2005. Federal
reimbursement of the insurance industry is limited to
$100 billion in each of 2003, 2004 and 2005, and no insurer
that has met its deductible shall be liable for the payment of
its portion of the aggregate industry insured loss that exceeds
$100 billion, thereby capping the insurance industrys
and each insurers ultimate exposure to terrorist acts
covered by TRIA.

Since TRIA does not apply to reinsurance
companies, it does not directly apply to IPCRe. Until such time
as the prices being asked by insurance companies for terrorism
cover, and the clients acceptance (take-up rate) of the terms
and conditions of the cover, are known, it is unclear how this
legislation will affect our potential writings of
U.S. terrorism cover in 2003. We have continued to exclude
losses resulting from terrorist acts, as defined in this
legislation, from U.S. property catastrophe contracts
covering large commercial risks incepting January 1, 2003.

Business Strategy

Our principal strategy is to provide property
catastrophe excess of loss reinsurance programs to a
geographically diverse, worldwide clientele of primary insurers
with whom we maintain long-term relationships. Under excess of
loss contracts, we begin paying losses when our customers
claims from a particular catastrophic event exceed a specified
amount (known as an attachment point), and our maximum liability
is capped at an amount specified in our reinsurance contracts.
To a lesser extent, we also seek to provide these clients with
other excess of loss short-tail reinsurance products. On a
limited basis, we provide similar reinsurance programs and
products to reinsurers. We periodically consider underwriting
additional lines of property/casualty coverage, including on a
non-excess of loss basis, provided losses can be limited in a
manner comparable to that described below.

The primary elements of our strategy include:

Disciplined Risk
Management.We seek to limit and
diversify our loss exposure through six principal mechanisms:
(i) writing substantially all of our premiums on an excess
of loss basis, which limits our ultimate exposure per contract
and permits us to determine and monitor our aggregate loss
exposure; (ii) adhering to

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maximum limitations on reinsurance accepted in
defined geographical zones; (iii) limiting program size for
each client in order to achieve diversity within and across
geographical zones; (iv) administering risk management
controls appropriately weighted with our modeling techniques, as
well as our assessment of qualitative factors (such as the
quality of the cedents management and capital and risk
management strategy); (v) utilizing a range of attachment
points for any given program in order to balance the risks
assumed with the premiums written; and (vi) prudent
underwriting of each program written. Historically, we have
declined to renew existing business if the terms were
unfavorable or if the exposure would violate any of these
limitations. We underwrite only those risks we are willing to
bear, utilizing a minimal amount of retrocessional protection.
Therefore, we retain most of the risk in the reinsurance
contracts we write and pay little in retrocession premiums.


Capital-Based Exposure
Limits.Each year, we
establish maximum limitations on reinsurance accepted in defined
geographic zones on the basis of, and as a proportion of,
shareholders equity.

Client Selection and
Profile.We believe that
establishing long-term relationships with insurers who have
sound capital and risk management strategies is key to creating
long-term value for our shareholders. We have successfully
attracted customers that are generally sophisticated,
long-established insurers who desire the assurance not only that
claims will be paid, but that reinsurance will continue to be
available after claims have been paid. We believe our financial
stability, ratings from Standard & Poors
(S & P) and A.M. Best and growth of
capital are essential for creating and maintaining these
long-term relationships.

Capital Management and Shareholder Returns.We manage our capital relative to
our risk exposure in an effort to maximize sustainable long-term
growth in shareholder value, while recognizing that catastrophic
losses will adversely impact short-term financial results from
time to time. We seek growth of IPCs capital to protect it
from major catastrophes, to ensure ongoing customer
relationships and to support premium growth opportunities.

Disciplined Investment Management.In light of the risks of our
underwriting business, our primary investment strategy is
capital preservation. Current investment guidelines permit
investments in equities up to a maximum of 20% of the total
portfolio, and our fixed maturity investments are substantially
limited to the top three investment grades or the equivalent
thereof, at the time of purchase. At December 31, 2002 our
equity investments consisted of three managed funds, an
Institutional Index fund, which tracks the investment returns of
the S & P 500 Index, an American equity fund and a
global equity fund. The last two funds are managed by a
subsidiary of AIG. The investment in such equities represented
15.6% of the total fair value of our investment portfolio on
December 31, 2002. On that date, 75.2% of our fixed
maturity investments consisted of cash and cash equivalents,
U.S. Treasuries or other government agency issues and
investments with an AAA or AA rating.

Business

General.We
provide treaty reinsurance principally to insurers of personal
and commercial property worldwide. Treaty reinsurance is
reinsurance of a specified type or category of risk defined in a
contract. As described below, we write most reinsurance on an
excess of loss basis. Our property catastrophe reinsurance
coverages, which accounted for 80% of our gross premiums written
during 2002, are generally all-risk in nature,
subject to various policy exclusions. Our predominant exposure
under such coverages is to property damage from unpredictable
events such as hurricanes, windstorms, hailstorms, earthquakes
and volcanic eruptions, although we are also exposed to losses
from sources as diverse as freezes, riots, floods, industrial
explosions, fires, and other man-made or natural disasters. The
balance of premiums written are derived from aviation (including
satellite), property-per-risk excess, marine and other
short-tail reinsurance. In accordance with market practice, our
property catastrophe reinsurance coverage generally excludes
certain risks such as war, pollution, nuclear contamination and
radiation. During 2002, IPCRe participated in a number of
underwriting pools which cover property losses arising from
terrorist acts as a separate hazard.

Because we underwrite property catastrophe
reinsurance and have large aggregate exposures to natural and
man-made disasters, our loss experience generally has included
and will continue to include infrequent events of great
severity. Consequently, the occurrence of losses from
catastrophic events has caused and is

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likely to continue to cause our financial results
to be volatile. In addition, because catastrophes are an
inherent risk of our business, a major event or series of
events, such as occurred during 1998, 1999 and 2001, can be
expected to occur from time to time. In the future, such events
could have a material adverse effect on our financial condition
or results of operations, possibly to the extent of eliminating
our shareholders equity. Increases in the values and
concentrations of insured property and the effects of inflation
have resulted in increased severity of industry losses in recent
years, and we expect that those factors will increase the
severity of catastrophe losses per year in the future.


We currently seek to limit our loss exposure
principally by offering most of our products on an excess of
loss basis, adhering to maximum limitations on reinsurance
accepted in defined geographic zones, limiting program size for
each client and prudent underwriting of each program written. In
addition, our policies contain limitations and exclusions from
coverage and choice of forum. There can be no assurance that our
efforts to limit exposure by using the foregoing methods will be
successful. In addition, geographic zone limitations involve
significant underwriting judgments, including the determination
of the area of the zones and the inclusion of a particular
policy within a zones limits. Underwriting is inherently a
matter of judgment, involving important assumptions about
matters that are inherently unpredictable and beyond our
control, and for which historical experience and probability
analysis may not provide sufficient guidance.

Excess of loss Reinsurance Contracts.Our policy is to write
substantially all of our business on an excess of loss basis.
Such contracts provide a defined limit of liability, permitting
us to quantify our aggregate maximum loss exposure. By contrast,
maximum liability under pro rata contracts is more difficult to
quantify precisely. Quantification of loss exposure is
fundamental to our ability to manage our loss exposure through
geographical zone limits and the program limits described below.
Excess of loss contracts also help us to control our
underwriting results by increasing our flexibility to determine
premiums for reinsurance at specific retention levels, based
upon our own underwriting assumptions, and independent of the
premiums charged by primary insurers. In addition, because
primary insurers typically retain a larger loss exposure under
excess of loss contracts, they have a greater incentive to
underwrite risks and adjust losses in a prudent manner.

In addition, we diversify our risk by, to a
limited extent, writing other short-tail coverages, including
risk excess of loss, aviation (including satellite), and other
lines, including marine, a quota share of workers
compensation catastrophe excess, and kidnap and ransom and
related exposures. These lines diversify risk (although they may
involve some catastrophe exposure) and thus reduce the
volatility in results of operations caused by catastrophes.

The following table sets out our gross premiums
written and number of contracts written by type of reinsurance.

|                           |       |                         |         |            |  |           |      |                |   |            |       |           |  |                |         |            |  |           |      |       |   |  |       |       |  |   |        |        |  |  |      |       |   |  |       |       | 
|-------------------------- | ----- | ----------------------- | ------- | ---------- |  | --------- | ---- | -------------- | - | ---------- | ----- | --------- |  | -------------- | ------- | ---------- |  | --------- | ---- | ----- | - |  | ----- | ----- |  | - | ------ | ------ |  |  | ---- | ----- | - |  | ----- | ----- | 
|                           |       |                        
|                           |       | Year ended December 31,
|                           |       |                        
|                           |       |                         |         |            |  |          
|                           |       | 2002                    |         | 2001       |  | 2000     
|                           |       |                         |         |            |  |          
|                           |       |                         |         | Percentage |  |           |      |                |   | Percentage |       |           |  |                |         | Percentage |  |          
|                           |       |                         |         | of         |  | Number    |      |                |   | of         |       | Number    |  |                |         | of         |  | Number   
|Type of Reinsurance        |       | Premiums                |         | Premiums   |  | of        |      | Premiums       |   | Premiums   |       | of        |  | Premiums       |         | Premiums   |  | of       
|Assumed                    |       | Written                 |         | Written    |  | Contracts |      | Written        |   | Written    |       | Contracts |  | Written        |         | Written    |  | Contracts
|                           |       |                         |         |            |  |           |      |                |   |            |       |           |  |                |         |            |  |          
|                           |       | (in thousands)          |         |            |  |           |      | (in thousands) |   |            |       |           |  | (in thousands) |         |            |  |          
|Catastrophe excess of loss |       | $                       | 208,930 |            |  |           | 80.4 | %              |   |            | 1,550 |           |  | $              | 117,293 |            |  |           | 88.2 | %     |   |  | 1,564 |       |  | $ | 79,243 |        |  |  | 84.5 | %     |   |  | 1,676 |      
|Risk excess of loss        |       |                         | 10,547  |            |  |           | 4.1  | %              |   |            | 76    |           |  |                | 3,220   |            |  |           | 2.4  | %     |   |  | 106   |       |  |   | 4,416  |        |  |  | 4.7  | %     |   |  | 132   |      
|Retrocessional reinsurance |       |                         | 15,578  |            |  |           | 6.0  | %              |   |            | 87    |           |  |                | 6,310   |            |  |           | 4.7  | %     |   |  | 71    |       |  |   | 2,676  |        |  |  | 2.9  | %     |   |  | 82    |      
|Aviation(1)                |       |                         | 9,304   |            |  |           | 3.6  | %              |   |            | 34    |           |  |                | 5,924   |            |  |           | 4.4  | %     |   |  | 28    |       |  |   | 5,904  |        |  |  | 6.3  | %     |   |  | 25    |      
|Other                      |       |                         | 15,326  |            |  |           | 5.9  | %              |   |            | 83    |           |  |                | 310     |            |  |           | 0.3  | %     |   |  | 94    |       |  |   | 1,518  |        |  |  | 1.6  | %     |   |  | 137   |      
|                           |       |                         |         |            |  |           |      |                |   |            |       |           |  |                |         |            |  |           |      |       |   |  |       |       |  |   |        |        |  |  |      |       |   |  |       |      
|                           | Total |                         | $       | 259,685    |  |           |      | 100.0          | % |            |       | 1,830     |  |                | $       | 133,057    |  |           |      | 100.0 | % |  |       | 1,863 |  |   | $      | 93,757 |  |  |      | 100.0 | % |  |       | 2,052 | 
|                           |       |                         |         |            |  |           |      |                |   |            |       |           |  |                |         |            |  |           |      |       |   |  |       |       |  |   |        |        |  |  |      |       |   |  |       |      



---



|    |                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In 2002, aviation included three aviation
    contracts and two satellite contracts, written on a pro rata
    basis rather than excess of loss. In 2001, aviation included one
    aviation contract and two satellite contracts, written on a pro
    rata basis. Other aviation contracts were written on an excess
    of loss basis.

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Catastrophe Excess of loss Reinsurance.Catastrophe excess of loss
reinsurance provides coverage to a primary insurer when
aggregate claims and claim expenses from a single occurrence of
a peril, covered under a portfolio of primary insurance
contracts written by the primary insurer, exceed the attachment
point specified in the reinsurance contract with the primary
insurer. The primary insurer can then recover up to the limit of
reinsurance it has elected to buy for each layer. Once a layer
is breached by collection of claims, the primary insurer
generally buys replacement coverage for the liability used,
i.e., a reinstatement, for an additional premium. Most of our
policies are limited to losses occurring during the policy term.

Risk Excess of loss Reinsurance.To a lesser extent, we also write
risk excess of loss property reinsurance. This reinsurance
responds to a loss of the reinsured in excess of its retention
level on a single risk, rather than to aggregate
losses for all covered risks, as does catastrophe reinsurance. A
risk in this context might mean the insurance
coverage on one building or a group of buildings or the
insurance coverage under a single policy which the reinsured
treats as a single risk. Most of the risk excess treaties in
which we participate contain a relatively low loss-per-event
limit on our liability.

Retrocessional Reinsurance.We also selectively provide
reinsurance cover to other reinsurance companies, which is known
as retrocessional protection. Demand for, and terms and
conditions, including pricing of, this type of business can vary
quite significantly from year to year. Accordingly, the premium
volume that we write of this type of business will fluctuate
year to year. Most of the underlying risks retroceded arise from
property catastrophe excess of loss contracts.

Aviation Reinsurance.We also write a small amount of
short-tail aviation reinsurance on proportional and excess of
loss bases. Although they primarily involve property damage,
certain aviation risks may involve casualty coverage arising
from the same event causing the property damage. In 2002, the
majority of this business was written in three pro rata aviation
contracts, where the underlying insurance is written on an
excess of loss basis, and two pro rata satellite contracts.

Other lines of business.Other lines include a pro rata
participation in a number of pools which underwrite terrorism as
a separate risk; a quota share of workers compensation
catastrophe excess; a quota share of kidnap and ransom and
related exposures; some marine excess of loss contracts and some
miscellaneous property covers, on an excess of loss basis.

Policy Features.Historically, our policies have
been written for a one-year period, and generally without
experience-based adjustments. During the period 1997 to 1999,
the trend in the industry was towards multi-year policies. In
particular, some of the insureds renewing policies in 1999
specifically requested longer periods, in part to address
concerns regarding Y2K risks. A proportion of our policies
in 1999 were for terms of fifteen to eighteen months. However,
commencing in the second quarter of 1999, we declined renewals
and submissions of new business which were on a multi-year
basis, because of the general inadequacy of market pricing. In
addition, during the same period, the industry offered a variety
of experienced-based incentives such as no claims
bonuses and profit commissions. A proportion of our policies
included some or all of these incentives, but we have declined
to accept such terms during the past two years. Because of the
improvements in terms and conditions that have taken place
recently, we will consider writing business on a multi-year
basis treaty by treaty.

Underwriting Services.Beginning on December 1,
2001, we commenced providing underwriting services to a
multi-line insurance and reinsurance company in which AIG owns a
23.4% ownership interest. (See Item 13. Certain
Relationships and Related Transactions, and Note 9 to
the Consolidated Financial Statements  Related Party
Transactions.)

Geographic Diversification

Since inception, we have sought to diversify our
exposure across geographic zones around the world in order to
obtain the optimum spread of risk. We divide our markets into
geographic zones and limit coverage we are willing to provide
for any risk located in a particular zone, so as to limit our
net aggregate loss exposure from all contracts covering risks
believed to be located in that zone, to a predetermined level.

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The predetermined levels are established annually
on the basis of, and as a proportion of, shareholders
equity. If a proposed reinsurance program would cause the limit
then in effect to be exceeded, the program would be declined,
regardless of its desirability, unless we utilize retrocessional
coverage (i.e., IPC purchasing reinsurance, such as our
proportional reinsurance facilities), thereby reducing the net
aggregate exposure to the maximum limit permitted, or less. If
we were to suffer a net financial loss in any fiscal year, thus
reducing shareholders equity, the limits per zone would be
reduced in the next year, with the possible effect that we would
thereafter reduce existing business in a zone exceeding such
limit.

Currently, we have divided the United States into
8 geographic zones and our other markets, including Europe and
Japan, into a total of 18 zones. We designate as zones
geographic areas which, based on historic catastrophe loss
experience reflecting actual catastrophe events and property
development patterns, we believe are most likely to absorb a
large percentage of losses from one catastrophic event. These
zones are determined using computer modeling techniques and
underwriting assessments. The zones may vary in size, level of
population density and commercial development in a particular
area. The zones with the greatest exposure written are in the
United States, in particular the Atlantic and North-Central
regions, and northern Europe. The parameters of these geographic
zones are subject to periodic review and change.

We recognize that events may affect more than one
zone, and to the extent we have accepted reinsurance from a
ceding insurer with a loss exposure in more than one zone, we
will consider such potential loss in testing its limits in all
such affected zones. For example, the program for a
U.S. national carrier typically will be subject to limits
in each U.S. zone. A program with worldwide exposure will
also be subject to limits in U.S. zones or other zones
around the world, as applicable. This results in very
substantial double-counting of exposures in
determining utilization of an aggregate within a given zone.
Consequently, the total sum insured will be less than the sums
of utilized aggregates for all of the zones.

The following table sets out gross premiums
written, number of written contracts and the percentage of our
premiums allocated to the zones of coverage exposure.

|                                  |       |                         |         |            |  |           |      |                |   |            |     |           |  |                |        |            |  |           |      |       |   |  |     |       |  |   |        |        |  |  |      |       |   |  |     |       | 
|--------------------------------- | ----- | ----------------------- | ------- | ---------- |  | --------- | ---- | -------------- | - | ---------- | --- | --------- |  | -------------- | ------ | ---------- |  | --------- | ---- | ----- | - |  | --- | ----- |  | - | ------ | ------ |  |  | ---- | ----- | - |  | --- | ----- | 
|                                  |       |                        
|                                  |       | Year ended December 31,
|                                  |       |                        
|                                  |       |                         |         |            |  |          
|                                  |       | 2002                    |         | 2001       |  | 2000     
|                                  |       |                         |         |            |  |          
|                                  |       |                         |         | Percentage |  |           |      |                |   | Percentage |     |           |  |                |        | Percentage |  |          
|                                  |       |                         |         | of         |  | Number    |      |                |   | of         |     | Number    |  |                |        | of         |  | Number   
|                                  |       | Premiums                |         | Premiums   |  | of        |      | Premiums       |   | Premiums   |     | of        |  | Premiums       |        | Premiums   |  | of       
|Geographic Area(1)                |       | Written                 |         | Written    |  | Contracts |      | Written        |   | Written    |     | Contracts |  | Written        |        | Written    |  | Contracts
|                                  |       |                         |         |            |  |           |      |                |   |            |     |           |  |                |        |            |  |          
|                                  |       | (in thousands)          |         |            |  |           |      | (in thousands) |   |            |     |           |  | (in thousands) |        |            |  |          
|United States                     |       | $                       | 117,904 |            |  |           | 45.4 | %              |   |            | 707 |           |  | $              | 57,971 |            |  |           | 43.6 | %     |   |  | 729 |       |  | $ | 39,107 |        |  |  | 41.7 | %     |   |  | 806 |      
|Worldwide(2)                      |       |                         | 36,804  |            |  |           | 14.2 | %              |   |            | 206 |           |  |                | 22,165 |            |  |           | 16.7 | %     |   |  | 184 |       |  |   | 14,992 |        |  |  | 16.0 | %     |   |  | 227 |      
|Worldwide (excluding the U.S.)(3) |       |                         | 16,312  |            |  |           | 6.3  | %              |   |            | 71  |           |  |                | 5,758  |            |  |           | 4.3  | %     |   |  | 114 |       |  |   | 4,827  |        |  |  | 5.2  | %     |   |  | 104 |      
|Europe (including the U.K.)       |       |                         | 62,861  |            |  |           | 24.2 | %              |   |            | 506 |           |  |                | 26,435 |            |  |           | 19.9 | %     |   |  | 412 |       |  |   | 19,144 |        |  |  | 20.4 | %     |   |  | 444 |      
|Japan                             |       |                         | 15,432  |            |  |           | 5.9  | %              |   |            | 79  |           |  |                | 7,383  |            |  |           | 5.5  | %     |   |  | 68  |       |  |   | 4,175  |        |  |  | 4.5  | %     |   |  | 71  |      
|Australia and New Zealand         |       |                         | 6,102   |            |  |           | 2.4  | %              |   |            | 82  |           |  |                | 5,701  |            |  |           | 4.3  | %     |   |  | 120 |       |  |   | 5,188  |        |  |  | 5.5  | %     |   |  | 134 |      
|Other                             |       |                         | 4,270   |            |  |           | 1.6  | %              |   |            | 179 |           |  |                | 7,644  |            |  |           | 5.7  | %     |   |  | 236 |       |  |   | 6,324  |        |  |  | 6.7  | %     |   |  | 266 |      
|                                  |       |                         |         |            |  |           |      |                |   |            |     |           |  |                |        |            |  |           |      |       |   |  |     |       |  |   |        |        |  |  |      |       |   |  |     |      
|                                  | Total |                         | $       | 259,685    |  |           |      | 100.0          | % |            |     | 1,830     |  |                | $      | 133,057    |  |           |      | 100.0 | % |  |     | 1,863 |  |   | $      | 93,757 |  |  |      | 100.0 | % |  |     | 2,052 | 
|                                  |       |                         |         |            |  |           |      |                |   |            |     |           |  |                |        |            |  |           |      |       |   |  |     |       |  |   |        |        |  |  |      |       |   |  |     |      




Notes:




|    |                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Except as otherwise noted, each of these
    categories includes contracts that cover risks primarily located
    in the designated geographic area.
|   
|   
|(2) | Includes contracts that cover risks primarily in
    two or more countries, including the United States.                                            
|   
|   
|(3) | Includes contracts that cover risks primarily in
    two or more countries, excluding the United States.                                            

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The following table sets out our gross aggregate
in-force liability allocated to various zones of coverage
exposure at January 1, 2003, 2002 and 2001. Our aggregate
limits will be reduced to the extent that business is ceded to
our reinsurance facilities (see Retrocessional Reinsurance
Purchased below).

|                                     |               |                                            |         |                |         |                |         |         |         |  |         |         |         | 
|------------------------------------ | ------------- | ------------------------------------------ | ------- | -------------- | ------- | -------------- | ------- | ------- | ------- |  | ------- | ------- | ------- | 
|                                     |               |                                           
|                                     |               | Aggregate Limit of Liability at January 1,
|                                     |               |                                           
|                                     |               | 2003                                       |         | 2002           |         | 2001          
|Geographic Area                      |               |                                            |         |                |         |               
|                                     |               | (in thousands)                             |         | (in thousands) |         | (in thousands)
|United States                        |               |                                            |         |                |         |                |         |         |         |  |         |        
|                                     | New England   |                                            | $       | 742,061        |         |                | $       | 593,260 |         |  | $       | 277,817 |        
|                                     | Atlantic      |                                            |         | 776,912        |         |                |         | 633,586 |         |  |         | 314,165 |        
|                                     | Gulf          |                                            |         | 740,047        |         |                |         | 580,236 |         |  |         | 303,091 |        
|                                     | North Central |                                            |         | 766,722        |         |                |         | 602,012 |         |  |         | 291,484 |        
|                                     | Mid West      |                                            |         | 734,521        |         |                |         | 593,876 |         |  |         | 307,440 |        
|                                     | West          |                                            |         | 735,521        |         |                |         | 576,904 |         |  |         | 294,937 |        
|                                     | Alaska        |                                            |         | 420,620        |         |                |         | 267,878 |         |  |         | 116,153 |        
|                                     | Hawaii        |                                            |         | 388,733        |         |                |         | 263,584 |         |  |         | 121,979 |        
|                                     |               | Total United States(1)                     |         |                | 928,784 |                |         |         | 723,677 |  |         |         | 434,111 | 
|Canada                               |               |                                            | 127,134 |                |         |                | 78,510  |         |         |  | 49,679  |        
|Worldwide(2)(3)                      |               |                                            | 150,172 |                |         |                | 67,488  |         |         |  | 65,814  |        
|Worldwide (excluding the U.S.)(2)(4) |               |                                            | 119,852 |                |         |                | 91,052  |         |         |  | 75,341  |        
|Northern Europe                      |               |                                            | 667,887 |                |         |                | 508,037 |         |         |  | 253,014 |        
|Japan                                |               |                                            | 182,008 |                |         |                | 124,071 |         |         |  | 83,830  |        
|Australia and New Zealand(2)         |               |                                            | 60,683  |                |         |                | 86,122  |         |         |  | 69,684  |        
|Other                                |               |                                            | 162,457 |                |         |                | 131,664 |         |         |  | 48,613  |        




Notes:




|    |                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The United States in aggregate is not a zone. The
    degree of double-counting in the 8 U.S. zones is
    illustrated by the relation of the aggregate in-force limit of
    liability for the United States compared to the individual
    limits of liability in the 8 zones.
|   
|(2) | Except as otherwise noted, each of these
    aggregates includes contracts that cover risks located primarily
    in the designated geographic area.                                                                                                                              
|   
|(3) | Includes contracts that cover risks primarily in
    two or more countries, including the United States.                                                                                                                                                                          
|   
|   
|(4) | Includes contracts that cover risks primarily in
    two or more countries, excluding the United States.                                                                                                                                                                          

The effectiveness of geographic zone limits in
managing risk exposure depends on the degree to which an actual
event is confined to the zone in question and on our ability to
determine the actual location of the risks believed to be
covered under a particular reinsurance program. Accordingly,
there can be no assurance that risk exposure in any particular
zone will not exceed that zones limits.

With respect to U.S. exposures, we use the
computer-based systems described below as one tool in estimating
the aggregate losses that could occur under all our contracts
covering U.S. risks as a result of a range of potential
catastrophic events. By evaluating the effects of various
potential events, we monitor whether the risks that could be
accepted within a zone are appropriate in light of other risks
already affecting such zone and, in addition, whether the level
of our zone limits is acceptable.

Underwriting and Program Limits

In addition to geographic zones, we seek to limit
our overall exposure to risk by pursuing a disciplined
underwriting strategy which limits the amount of reinsurance we
will supply in accordance with a particular program or contract,
so as to achieve diversification within and across geographical
zones. Commencing January 2002, the maximum exposure was
generally limited to $50 million per program and to
$10 million per

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contract. Previously, program limits and contract
limits were $25 million and $5 million, respectively.
Under the authority of the Chief Executive Officer, we have
exceeded these limits in a small number of instances. We also
attempt to distribute our exposure across a range of attachment
points i.e., the amount of claims that have to be borne by the
ceding insurer before our reinsurance coverage applies.
Attachment points vary and are based upon our assessment of the
ceding insurers market share of property perils in any
given geographic zone to which the contract relates, as well as
the capital needs of the ceding insurer.


Prior to reviewing any program proposal, we
consider the appropriateness of the cedent, including the
quality of its management and its capital and risk management
strategy. In addition, we require that each proposed reinsurance
program received includes information on the nature of the
perils to be included and detailed aggregate information as to
the location or locations of the risks covered under the
catastrophe contract. Additional information would also include
the cedents loss history for the perils being reinsured,
together with relevant underwriting considerations which would
impact exposures to catastrophe reinsurers. We first evaluate
exposures on new programs in light of the overall zone limits in
any given catastrophe zone, together with program limits and
contract limits, to ensure a balanced and disciplined
underwriting approach. If the program meets all these initial
underwriting criteria, we then evaluate the proposal in terms of
its risk/reward profile to assess the adequacy of the proposed
pricing and its potential impact on our overall return on
capital. Once a program meets our requirements for underwriting
and pricing, the program would then be authorized for acceptance.

We extensively use sophisticated modeling and
other technology in our underwriting techniques. Each submission
received is registered on the GENIUS reinsurance
data system we use for both underwriting and aggregate control
purposes. This system enables both management and underwriters
to have on-line information regarding both individual exposures
and zonal aggregate concentrations. Submissions are recorded to
determine and monitor their status as being pending, authorized,
or bound.

In addition to the reinsurance data system, we
use computer modeling to measure and estimate loss exposure
under both simulated and actual loss scenarios and in comparing
exposure portfolios to both single and multiple events. Since
1993, we have contracted Applied Insurance Research, Inc. for
the use of their proprietary models, currently CATRADER®,
as part of our modeling approach. These computer-based loss
modeling systems utilize A.M. Bests data and direct
exposure information obtained from our clients, to assess each
clients catastrophe management approach and adequacy of
their programs protection. Modeling is part of our
underwriting criteria for catastrophe exposure pricing. The
majority of our client base also use one or more of the various
modeling consulting firms in their exposure management analysis.
In addition, we sometimes perform or contract for additional
modeling analysis when reviewing our major commitments. The
combination of reinsurance system information, together with
CATRADER® modeling, enables us to monitor and control our
acceptance of exposure on a global basis.

Generally, the proposed terms of coverage,
including the premium rate and retention level for excess of
loss contracts, are set by the lead reinsurer and agreed to by
the client and broker. On placements requiring large market
capacity, typically the broker strives to achieve a consensus of
proposed terms with many participating underwriters to ensure
placement. On both U.S. and non-U.S. business, we act in many
cases as a lead or consensus lead reinsurer. When not the lead,
we sometimes actively negotiate additional terms or conditions.
If we elect to authorize a participation, the underwriter will
specify the percentage or monetary participation in each layer,
and will execute a slip to be followed by a contract to
formalize coverage.

We have a procedure for underwriting control to
ensure that all acceptances are made in accordance with our
underwriting policy and aggregate control. Each underwriting
individual is given an underwriting authority, limits above
which must be submitted for approval to the Chief Executive
Officer. All new acceptances are reviewed by senior underwriting
personnel.

Generally, 60% (by volume) of premiums (excluding
reinstatement premiums) we write each year are for contracts
which have effective dates in the first quarter, about 20% in
the second quarter, about 15% in the third quarter. Premiums are
generally due in installments, either quarterly or
semi-annually, over the contract term, with each installment
usually received within 30 days after the due date.

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Retrocessional Reinsurance Purchased

Effective January 1, 1999, we arranged a
proportional reinsurance facility for IPCRe through two leading
intermediaries. The business covered by this facility is
property catastrophe business written by IPCRe. The facility
provides coverage of up to $50 million in each of at least
5 named zones, and potentially other zones of our choosing,
provided that the risks in those zones do not accumulate with
those in the named zones. The United States and the Caribbean
are excluded zones. The named zones are the United Kingdom;
Europe (excluding the U.K.); Australia/ New Zealand; Japan and
Canada. Business ceded to the facility is solely at our
discretion. Within these limitations, we may designate the
treaties to be included in the facility, subject to IPCRe
retaining at least 50% of the risk. The premium ceded is pro
rata, less brokerage, taxes and an override commission. AIG, as
a participating reinsurer, has a 10% participation on a direct
basis. Most reinsurers participating in the facility have
financial strength ratings of A or above, and the minimum rating
is A-. This facility was subsequently renewed annually on the
same terms and the bound participation has been 92%, 61.5%,
37.0% and 60.5% for 2000, 2001, 2002 and 2003 respectively.
IPCRe co-participates on the balance.

Effective January 1, 2002 we arranged a
Property Catastrophe Excess of Loss reinsurance facility in
respect of certain property business written by IPCRe. This
facility covers first losses only for the business ceded to this
facility and all subsequent events are retained by IPCRe.
Business ceded to this facility includes worldwide business
excluding the United States and Canada. The reinsurer
participating in the facility in 2002 had a financial strength
rating of A+. IPCRe can cede $15 million net loss in the
aggregate per contract year to the facility. IPCRes
retention is $10 thousand in the aggregate. Business ceded to
this facility is at our sole discretion. This facility was
renewed at January 1, 2003 with a different reinsurer,
whose rating is AA-. Under the terms of the treaty, coverage is
now $30 million excess of $10 thousand in the aggregate.

Marketing

Our customers generally are sophisticated,
long-established insurers who understand the risks involved and
who desire the assurance not only that claims will be paid but
that reinsurance will continue to be available after claims are
paid. Catastrophic losses can be expected to affect financial
results adversely from time to time, and we believe that
financial stability, ratings and growth of capital (as well as
service and innovation) are essential for creating long-term
relationships with clients, and that such relationships are key
to creating long-term value for the Company and our
shareholders. During 2002, no single ceding insurer accounted
for more than 5.4% of our gross premiums written.

We market our reinsurance products worldwide
through non-exclusive relationships with more than 50 of the
leading reinsurance brokers active in the U.S. and non-U.S.
markets for property catastrophe reinsurance. In addition, from
1993 to January 2000 our products were marketed in Europe
through IPCRe Services. As noted above, IPCRe Services ceased
operations in January 2000, because consolidation among our
clients and brokers has reduced the need to maintain a physical
presence in the U.K. in order to promote our services.

Based on premiums written during the year ended
December 31, 2002, the five broker groups from which we
derived the largest portions of our business in 2002 (with the
approximate percentage of our business derived from such group)
are Marsh & McLennan Companies, Inc. (34.8%), Aon Corp. and
affiliates (27.0%), Willis Group (12.8%), Benfield Group (9.6%),
and Towers Perrin (1.9%). For the years ended December 31,
2001 and 2000, respectively, the approximate percentages were:
Marsh  41.8% and 35.8%; Aon  17.8% and
19.7%; Willis  11.0% and 11.4%; Benfield 
10.9% and 6.5%; Herbert Clough  3.7% and 5.7%. During
the year ended December 31, 2002, we had in force
reinsurance contracts with only 13 ceding companies which were
not derived from a reinsurance broker; otherwise, our products
are marketed exclusively through brokers. All brokerage
transactions are entered into on an arms-length basis.

Our brokers perform data collection, contract
preparation and other administrative tasks, enabling us to
market our reinsurance products cost effectively by maintaining
a small staff. By relying largely on reinsurance brokers to
market our products, we are able to avoid the expense and
regulatory complications of worldwide offices, thereby
minimizing fixed costs associated with marketing activities. We
believe that by maintaining close relationships with brokers, we
are able to obtain access to a broad range of potential
reinsureds. We meet frequently in Bermuda and elsewhere outside
the United States with brokers and senior representatives of

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clients and prospective clients. All contract
submissions are approved in IPCRes executive offices in
Bermuda, and we do not believe that conducting our operations in
Bermuda has adversely affected our marketing activities in light
of the client base we have attracted and retained.


Reserves for Losses and Loss Adjustment
Expenses

Under generally accepted accounting principles in
the United States of America, we are not permitted to establish
loss reserves with respect to our property catastrophe business
until the occurrence of an event which may give rise to a claim.
Once such an event occurs, we establish reserves based upon
estimates of losses incurred by the ceding insurers as a result
of the event and our estimate of the portion of such loss we
have reinsured. With respect to our non-catastrophe business, we
are permitted to establish loss reserves as determined by a
historical loss development pattern. Only loss reserves
applicable to losses incurred up to the reporting date may be
set aside, with no allowance for the provision of a contingency
reserve to account for expected future losses. Claims arising
from future catastrophic events can be expected to require the
establishment of substantial reserves from time to time. Our
reserves are adjusted as we receive notices of claims and proofs
of loss from reinsureds and as estimates of severity of damages
and our share of the total loss are revised.

We establish additional reserves where we believe
that the ultimate loss amount is greater than that reported to
us by the ceding company. These reserves, which provide for
development on reported losses, are also known as Reported but
not Enough (RBNE) reserves. We also establish
reserves for losses incurred as a result of an event known but
not reported to us. These incurred but not reported
(IBNR) reserves, together with RBNE reserves, are
established for both catastrophe and other losses. To estimate
the portion of loss and loss adjustment expenses relating to
these claims for the year, we review our portfolio of business
to determine where the potential for loss may exist. Industry
loss data, as well as actual experience, knowledge of the
business written by us and general market trends in the
reinsurance industry, are considered. We may also use computer
modeling to measure and estimate loss exposure under the actual
event scenario, if available. Since 1993, we have contracted
Applied Insurance Research, Inc. for the use of their
proprietary models  currently
CATRADER®  as part of our modeling approach.
These computer-based loss modeling systems utilize A.M.
Bests data and direct exposure information obtained from
our clients. The sum of the individual estimates derived from
the above methodology provides us with an overall estimate of
the loss reserve for the company as a whole. We have contracted
a leading worldwide independent firm of actuaries to conduct a
review of reserves on a semi-annual basis.

Generally, reserves are established without
regard to whether we may subsequently contest the loss. Our
policy is to establish reserves for reported losses based upon
reports received from ceding companies, supplemented by our
reserve estimates.

Loss reserves represent our estimates, at a given
point in time, of the ultimate settlement and administration
costs of claims incurred, and it is possible that the ultimate
liability may exceed or be less than such estimates. Such
estimates are not precise in that, among other things, they are
based on predictions of future developments and estimates of
future trends in claim severity and frequency and other variable
factors such as inflation and currency exchange rates. During
the claim settlement period, it often becomes necessary to
refine and adjust the estimates of liability on a claim either
upward or downward, and any such adjustment would affect our
results of operations in the period when the adjustment is
determined. Even after such adjustments, ultimate liability may
materially exceed or be less than the revised estimates. In
contrast to casualty losses, which frequently can be determined
only through lengthy, unpredictable litigation, property losses
tend to be reported promptly and settled within a shorter period
of time.

See also Managements Discussion and
Analysis  Critical Accounting Policies
contained in the Annual Report.

Investments

General.Our
current investment strategy is defined primarily by the need to
safeguard our capital, since we believe that the risks inherent
in catastrophe reinsurance should not be augmented by a
speculative

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investment policy. For this reason our investment
policy is conservative with a strong emphasis on the quality of
investments. At December 31, 2002, other than cash, our
investments consisted of fixed maturity securities, none of
which had a rating of less than A, and investments in three
equity mutual funds. Corporate bonds represented 57% of total
fixed maturity investments at December 31, 2002 and of these 45%
were issued by U.S. corporations and 55% by non-U.S.
corporations. Our investment policy also stresses
diversification and at December 31, 2002, the Federal Home
Loan Mortgage Corp. was the only individual issuer whose
securities represented more than 5% of our portfolio. Guidelines
are also set which limit permitted issuers, the amount of
non-U.S. dollar denominated securities and the target duration
of the portfolio.


The following table summarizes the fair value of
our investments and cash and cash equivalents as of
December 31, 2002 and 2001:

|                                    |                                         |                |           |         |  |   |           |         | 
|----------------------------------- | --------------------------------------- | -------------- | --------- | ------- |  | - | --------- | ------- | 
|                                    |                                         |               
|                                    |                                         | December 31,  
|                                    |                                         |               
|Type of Investment                  |                                         | 2002           |           | 2001   
|                                    |                                         |                |           |        
|                                    |                                         |               
|                                    |                                         | (in thousands)
|Fixed Maturities available for sale |                                         |                |           |         |  |   |           |        
|                                    | U.S. Government and government agencies |                | $         | 106,507 |  |   | $         | 151,369 | 
|                                    | Other governments                       |                |           | 179,472 |  |   |           | 105,347 | 
|                                    | Corporate                               |                |           | 772,893 |  |   |           | 435,845 | 
|                                    | Supranational entities                  |                |           | 94,737  |  |   |           | 65,663  | 
|                                    |                                         |                |           |         |  |   |           |        
|                                    |                                         |                | 1,153,609 |         |  |   | 758,224   |        
|Equities, available for sale        |                                         |                | 216,897   |         |  |   | 158,870   |        
|Cash and cash equivalents           |                                         |                | 16,656    |         |  |   | 315,207   |        
|                                    |                                         |                |           |         |  |   |           |        
|                                    |                                         | $              | 1,387,162 |         |  | $ | 1,232,301 |        
|                                    |                                         |                |           |         |  |   |           |        

We regularly monitor the difference between the
cost and fair value of our investments, which involves
uncertainty as to whether declines in value are temporary in
nature. If we believe a decline in value of a particular
investment is temporary, we record the decline as an unrealized
loss as a separate component of our shareholders equity.
If we believe the decline is other-than-temporary, we write down
the cost basis of the investment to the market price as of the
reporting date and record a realized loss in our statement of
income (loss). The determination that a security has incurred an
other-than-temporary decline in value requires the judgement of
IPCs management, which includes the views of our
investment managers and a regular review of our investments. Our
assessment of a decline in value includes our current judgement
as to the financial position and future prospects of the entity
that issued the security. If that judgement changes in the
future we may ultimately record a realized loss, after having
originally concluded that the decline in value was temporary.

We review all securities that are trading at a
significant discount to par, amortized cost (if lower) or cost
for an extended period of time. We generally focus our attention
on all securities whose market value is less than 75% of their
cost. The specific factors we consider in evaluating potential
impairment include the following:



| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | The extent of decline in value                                                                               
|
| |  | The length of time the security is below cost                                                                
|
| |  | The future prospects of the issuer, or in the
    case of mutual funds, the future prospects of the fund     
|
| |  | Whether the decline appears to be related to
    general market or industry conditions, or is issuer-specific
|
| |  | Our intent and ability to hold the security                                                                  
|
| |  | Other qualitative and quantitative factors                                                                   

Our investment guidelines are reviewed
periodically and are subject to change at the discretion of the
Board of Directors.

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Maturity and Duration of Portfolio.Currently, we maintain a target
modified duration for the portfolio of between 1.25 years
and 3.75 years although actual maturities of individual
securities vary from less than one year to a maximum of eight
years for fixed maturity securities and ten years for
money-market securities. At December 31, 2002 the fixed
maturity portfolio (including cash and cash equivalents within
such portfolio) had an average maturity of 2.9 years and an
average modified duration of 2.45 years. We believe that,
given the relatively high quality of our portfolio, adequate
market liquidity exists to meet our cash demands.

The following table summarizes the fair value by
maturities of our fixed maturity investment portfolio as of
December 31, 2002 and 2001. For this purpose, maturities
reflect contractual rights to put or call the securities; actual
maturities may be longer.

|                                       |  |                |           |      |  |   |         | 
|-------------------------------------- |  | -------------- | --------- | ---- |  | - | ------- | 
|                                       |  |               
|                                       |  | December 31,  
|                                       |  |               
|                                       |  | 2002           |           | 2001
|                                       |  |                |           |     
|                                       |  |               
|                                       |  | (in thousands)
|Due in one year or less                |  | $              | 99,914    |      |  | $ | 40,922  | 
|Due after one year through five years  |  |                | 883,323   |      |  |   | 580,383 | 
|Due after five years through ten years |  |                | 170,372   |      |  |   | 136,919 | 
|                                       |  |                |           |      |  |   |         | 
|                                       |  | $              | 1,153,609 |      |  | $ | 758,224 | 
|                                       |  |                |           |      |  |   |         | 

Quality of Debt Securities in Portfolio.Our investment guidelines
stipulate that a majority of the securities be AAA and AA rated,
although a select number of A rated issues is permitted. The
primary rating source is Moodys Investors Service Inc.
(Moodys). When no Moodys rating is
available, S & P ratings are used and where
split-ratings exist, the higher of Moodys and
S & P is used.

The following table summarizes the composition of
the fair value of all cash and fixed maturity investments by
rating:

|                                        |  |              |        |      |  |  |        | 
|--------------------------------------- |  | ------------ | ------ | ---- |  |  | ------ | 
|                                        |  |             
|                                        |  | December 31,
|                                        |  |             
|                                        |  | 2002         |        | 2001
|                                        |  |              |        |     
|Cash and cash equivalents               |  |              | 1.4%   |      |  |  | 29.4%  | 
|U.S. Government and government agencies |  |              | 9.1%   |      |  |  | 14.1%  | 
|AAA                                     |  |              | 30.8%  |      |  |  | 16.9%  | 
|AA                                      |  |              | 33.9%  |      |  |  | 32.2%  | 
|A                                       |  |              | 24.8%  |      |  |  | 7.4%   | 
|                                        |  |              |        |      |  |  |        | 
|                                        |  |              | 100.0% |      |  |  | 100.0% | 
|                                        |  |              |        |      |  |  |        | 

There are no delinquent securities in our
investment portfolio.

Equities.Our
investments in equities comprise holdings of units in three
mutual funds. The AIG Global Equity Growth fund is incorporated
in Ireland, managed by AIG/Sun America and invests predominantly
in large capitalized companies operating in diverse sectors of
global equity markets. The AIG American Equity Trust fund is
also incorporated in Ireland, managed by AIG/ Sun America and
invests predominantly in large capitalized companies operating
in diverse sectors of North America. The third fund is the
Vanguard Institutional Index fund, a U.S.-based fund which seeks
to replicate the performance of the S & P 500
Index.

Real Estate.Our portfolio does not contain any
investments in real estate or mortgage loans.

Foreign Currency Exposure.At December 31, 2002 and
2001, most of our fixed maturity investments were in securities
denominated in U.S. dollars, with the exception of an Australian
dollar time deposit in the amount of approximately
U.S. $3.1 million (equivalent). The investment
guidelines permit up to 20% of the portfolio to be invested in
non-U.S. dollar securities. However, from inception, such
investments have been made infrequently and for the purpose of
improving overall portfolio yield. When we do hold
non-U.S. dollar denominated securities, we have entered and
may enter into forward foreign exchange contracts for purposes
of hedging our non-U.S. dollar denominated investment
portfolio. In addition, in the event that loss payments must be
made in currencies other than the U.S. dollar, in some
cases we will match the liability with assets

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denominated in the same currency, thus mitigating
the effect of exchange rate movements on the balance sheet. To
date, this strategy has been used on three occasions. See also
Managements Discussion and Analysis 
Quantitative and Qualitative Disclosure about Market Risk,
contained in the Annual Report.


Derivatives.Our investment policy guidelines
provide that financial futures and options and foreign exchange
contracts may not be used in a speculative manner but may be
used, subject to certain numerical limits, as part of a
defensive strategy to protect the market value of the portfolio.
No investments were made in derivative instruments during 2002,
and there were no open positions at December 31, 2002.

Investment Advisory and Custodial Services.Investment advisory and custodial
services are provided to us by subsidiaries of AIG. See
Item 13. Certain Relationships and Related
Transactions.

Competition

The property catastrophe reinsurance industry is
highly competitive. We compete, and will continue to compete,
with insurers and property catastrophe reinsurers worldwide,
many of which have greater financial, marketing and management
resources than we do. Some of our competitors are large
financial institutions who have reinsurance divisions, while
others are specialty reinsurance companies. In total, there are
several hundred companies writing reinsurance of different
types, including property catastrophe. Our main competition in
the industry comes from multi-line insurance and reinsurance
providers that write catastrophe-based products as part of a
larger portfolio. Our major competitors include companies based
in the U.S., Europe and Bermuda. Though all of these companies
offer property catastrophe reinsurance, in many cases it
accounts for a small percentage of their total portfolio. During
the fourth quarter of 2001, in response to a reduction in market
capacity and perceived increase in demand, a number of new
insurance and reinsurance companies were formed in Bermuda and
elsewhere, most of which write property catastrophe reinsurance.
Also, several of our existing competitors have raised additional
capital, or have announced plans to do so. In addition, there
may be established companies or new companies of which we are
not aware that may be planning to enter the property catastrophe
reinsurance market or existing reinsurers that may be planning
to commit capital to this market. Competition in the types of
reinsurance business that we underwrite is based on many
factors, including premium charges and other terms and
conditions offered, services provided, ratings assigned by
independent rating agencies, speed of claims payment, claims
experience, perceived financial strength, the length of
relationships with clients and brokers and experience and
reputation of the reinsurer in the line of reinsurance to be
written. Many of the reinsurers who have entered the
Bermuda-based and other reinsurance markets have or could have
more capital than us. The full effect of this additional capital
on the reinsurance market may not be known for some time. No
assurance can be given as to what impact this additional capital
will ultimately have on terms or conditions of the reinsurance
contracts of the types written by us.

In September 1996, IPCRe was rated by A.M. Best
Company, Inc. (A.M. Best), who gave it an initial
rating of A+ (Superior). This rating was affirmed by A.M. Best
in all subsequent years. In July, 1997 S & P
assigned financial strength and counter-party credit ratings of
A+ (Strong), which were also affirmed in all subsequent years.
During 1999, these ratings were extended to IPCRe Europe. The
rating received from A.M. Best represents the second highest
rating on their rating scale. The rating received from
S & P represents the fifth highest rating on their
rating scale. Such ratings are based on factors of concern to
cedents and brokers and are not directed toward the protection
of investors. Such ratings are neither a rating of securities
nor a recommendation to buy, hold or sell such securities. While
we believe that IPCRes current ratings are of benefit,
some of our principal competitors have a rating equal to or
greater than that of IPCRe. Insurance ratings are one factor
used by brokers and cedents in the United States as a means of
assessing the financial strength and quality of reinsurers. In
addition, a cedents own rating may be adversely affected
by the rating of its reinsurer(s). IPCRe is not licensed or
admitted as an insurer in any jurisdiction in the United States
and, consequently, must generally post letters of credit or
other security to cover outstanding claims of, or unearned
premiums with respect to, ceding insurers in the United States
to enable such insurers to obtain favorable regulatory capital
treatment of their reinsurance. See Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources,
contained in the Annual Report.

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In addition, over the last few years capital
markets participants, including exchanges and financial
intermediaries, have developed financial products such as risk
securitizations, intended to compete with traditional
reinsurance, the usage of which has grown in volume. Further,
the tax policy of the countries in which our clients operate can
affect the demand for reinsurance. We are also aware of many
potential initiatives by capital market participants to produce
additional alternative products that may compete with the
existing catastrophe reinsurance markets. We are unable to
predict the extent to which the foregoing new, proposed or
potential initiatives may affect the demand for our products or
the risks which may be available for us to consider underwriting.

Employees

As of January 1, 2003, we employed
15 people on a full-time basis including our Chief
Executive Officer, Chief Financial Officer and four
underwriters. We believe that employee relations are good. None
of our employees are subject to collective bargaining
agreements, and we know of no current efforts to implement such
agreements at IPC.

Some of our employees, including most of our
senior management, are employed pursuant to work permits granted
by the Bermuda authorities. These permits expire at various
times over the next several years. We have no reason to believe
that these permits would not be extended upon request at their
respective expirations. However, regulations enacted by the
Minister of Labour and Home Affairs in Bermuda have imposed
limitations on the number of times permits for non-key employees
are renewed, to a maximum of six years.

Subsidiaries

IPCRe is a wholly-owned subsidiary of IPC
Holdings. It was formed as a Bermuda company in June, 1993.

On September 10, 1998, IPCRe incorporated a
subsidiary in Ireland named IPCRe Europe Limited. Effective
October 1, 1998, IPCRe Europe commenced underwriting
selected reinsurance business primarily in Europe. Currently,
IPCRe Europe retrocedes 90% of the business it underwrites to
IPCRe.

On November 7, 2002, IPC Holdings
incorporated IPCUSL, a new subsidiary in Bermuda IPCUSL is
registered in Bermuda as a licensed insurance agent.

Regulation

Bermuda
The Insurance Act of 1978, as amended, and Related Regulations
(the Insurance Act).

As a holding company, IPC Holdings is not subject
to Bermuda insurance regulations. The Insurance Act, which
regulates the insurance business of IPCRe, provides that no
person shall carry on any insurance business in or from within
Bermuda unless registered as an insurer under the Insurance Act
by the Bermuda Monetary Authority (the Authority),
which is responsible for the day-to-day supervision of insurers.
Under the Insurance Act, insurance business includes reinsurance
business. The Authority, in deciding whether to grant
registration, has broad discretion to act as the Authority
thinks fit in the public interest. The Authority is required by
the Insurance Act to determine whether the applicant is a fit
and proper body to be engaged in the insurance business and, in
particular, whether it has, or has available to it, adequate
knowledge and expertise. The registration of an applicant as an
insurer is subject to its complying with the terms of its
registration and such other conditions as the Authority may
impose at any time.

An Insurance Advisory Committee appointed by the
Bermuda Minister of Finance advises the Authority on matters
connected with the discharge of the Authoritys functions
and sub-committees thereof supervise and review the law and
practice of insurance in Bermuda, including reviews of
accounting and administrative procedures.

The Insurance Act imposes on Bermuda insurance
companies solvency and liquidity standards and auditing and
reporting requirements and grants to the Authority powers to
supervise, investigate and intervene

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in the affairs of insurance companies. Certain
significant aspects of the Bermuda insurance regulatory
framework are set forth below.


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

Cancellation of Insurers
Registration.An insurers
registration may be cancelled by the Authority on certain
grounds specified in the Insurance Act, including failure of the
insurer to comply with its obligations under the Insurance Act
or, if in the opinion of the Authority, the insurer has not been
carrying on business in accordance with sound insurance
principles.

Principal
Representative.An insurer is
required to maintain a principal office in Bermuda and to
appoint and maintain a principal representative in Bermuda. For
the purpose of the Insurance Act, the principal office of IPCRe
is at our executive offices in Pembroke, Bermuda, and
IPCRes principal representative is our President and Chief
Executive Officer. Without a reason acceptable to the Authority,
an insurer may not terminate the appointment of its principal
representative, and the principal representative may not cease
to act as such, unless 30 days notice in writing to
the Authority is given of the intention to do so. It is the duty
of the principal representative, within 30 days of reaching
the view that there is a likelihood of the insurer for which the
principal representative acts becoming insolvent or that a
reportable event has, to the principal
representatives knowledge, occurred or is believed to have
occurred, to make a report in writing to the Authority setting
out all the particulars of the case that are available to the
principal representative. Examples of such a reportable
event include failure by the insurer to comply
substantially with a condition imposed upon the insurer by the
Authority relating to a solvency margin or a liquidity or other
ratio.

Independent Approved
Auditor.Every registered insurer
must appoint an independent auditor who will annually audit and
report on the Statutory Financial Statements and the statutory
financial return of the insurer, both of which, in the case of
IPCRe, are required to be filed annually with the Authority. The
independent auditor of IPCRe must be approved by the Authority
and may be the same person or firm which audits IPCRes
financial statements and reports for presentation to its
shareholders.

Loss Reserve
Specialist.As a registered
Class 4 insurer, IPCRe is required to submit an opinion of
its approved loss reserve specialist with its statutory
financial return in respect of its loss and loss expense
provisions. The loss reserve specialist, who will normally be a
qualified property and casualty actuary, must be approved by the
Authority.

Statutory Financial
Statements.An insurer must
prepare annual Statutory Financial Statements. The Insurance Act
prescribes rules for the preparation and substance of such
Statutory Financial Statements (which include, in statutory
form, a balance sheet, an income statement, a statement of
capital and surplus and notes thereto). The insurer is required
to give detailed information and analyses regarding premiums,
claims, reinsurance and investments. The Statutory Financial
Statements are not prepared in accordance with generally
accepted accounting principles in the United States of America
and are distinct from the financial statements prepared for
presentation to the insurers shareholders under the
Companies Act 1981 of Bermuda (the Companies Act),
which financial statements will be prepared in accordance with
generally accepted accounting principles in the United States of
America. IPCRe, as a general business insurer, is required to
submit the annual Statutory Financial Statements as part of the
annual statutory financial return. The Statutory Financial
Statements and the statutory financial return do not form part
of the public records maintained by the Authority.

Annual Statutory Financial
Return.IPCRe is required to file
with the Authority a statutory financial return no later than
four months after its financial year end (unless specifically
extended). The statutory financial return for an insurer
includes, among other matters, a report of the approved
independent auditor on the Statutory Financial Statements of
such insurer, solvency certificates, the Statutory Financial
Statements themselves, the opinion of the loss reserve
specialist and a schedule of reinsurance ceded. The solvency
certificates must be signed by the principal representative and
at least two directors of the insurer who are

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required to certify, among other matters, whether
the minimum solvency margin has been met and whether the insurer
complied with the conditions attached to its certificate of
registration. The independent approved auditor is required to
state whether in its opinion it was reasonable for the directors
to so certify. Where an insurers accounts have been
audited for any purpose other than compliance with the Insurance
Act, a statement to that effect must be filed with the statutory
financial return.


Minimum Solvency Margin and Restrictions on
Dividends and Distributions.Under
the Insurance Act, the amount of the general business assets of
a Class 4 insurer, such as IPCRe, must exceed the amount of
its general business liabilities by an amount greater than the
prescribed minimum solvency margin.

IPCRe



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



| |     |              
| | --- | -------------
| | (A) | $100,000,000,



| |     |                                                                                                                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (B) | 50% of net premiums written (being gross premiums
    written less any premiums ceded by IPCRe. IPCRe may not deduct
    more than 25% of gross premiums when computing net premiums
    written), and
|
| | (C) | 15% of losses and loss adjustment expenses, net
    of reinsurance recoveries;                                                                                                                        



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | is prohibited from declaring or paying any
    dividends during any financial year if it is in breach of its
    minimum solvency margin or minimum liquidity ratio (see below)
    or if the declaration or payment of such dividends would cause
    it to fail to meet such margin or ratio (if it has failed to
    meet its minimum solvency margin or minimum liquidity ratio on
    the last day of any financial year, IPCRe is prohibited, without
    the approval of the Authority, from declaring or paying any
    dividends during the next financial year);
|
| | (3) | is prohibited from declaring or paying in any
    financial year dividends of more than 25% of its total statutory
    capital and surplus (as shown on its previous financial
    years statutory balance sheet) unless it files (at least
    7 days before payment of such dividends) with the Authority
    an affidavit signed by two directors and the Principal
    Representative in Bermuda stating that it will continue to meet
    the required margins after the payment of the dividends;                                                                  
|
| | (4) | is prohibited, without the approval of the
    Authority, from reducing by 15% or more its total statutory
    capital as set out in its previous years financial
    statements, and any application for such approval must include
    an affidavit stating that it will continue to meet the required
    margins; and                                                                                                                                                                                                                                                
|
| | (5) | is required, at any time it fails to meet its
    solvency margin, within 30 days (45 days where total
    statutory capital and surplus falls to $75 million or less)
    after becoming aware of that failure or having reason to believe
    that such failure has occurred, to file with the Authority a
    written report containing certain information.                                                                                                                                                                                                           

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

Supervision, Investigation and
Intervention.The Authority may
appoint an inspector with extensive powers to investigate the
affairs of an insurer if the Authority believes that an
investigation is required in the interest of the insurers
policyholders or persons who may become policyholders. In order
to verify or

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supplement information otherwise provided to the
Authority, the Authority may direct an insurer to produce
documents or information relating to matters connected with the
insurers business.


If it appears to the Authority that there is a
risk of the insurer becoming insolvent, or that it is in breach
of the Insurance Act or any conditions imposed upon its
registration, the Authority may, among other things, direct the
insurer (1) not to take on any new insurance business,
(2) not to vary any insurance contract if the effect would
be to increase the insurers liabilities, (3) not to
make certain investments, (4) to realize certain
investments, (5) to maintain in, or transfer to the custody
of a specified bank, certain assets, (6) not to declare or
pay dividends or other distributions or to restrict the making
of such payments and/or (7) to limit its premium income.

Disclosure of
Information.In addition to powers
under the Insurance Act to investigate the affairs of an
insurer, the Authority may require certain information from an
insurer (or certain other persons) to be produced to the
Authority. Further, the Authority has been given powers to
assist other regulatory authorities, including foreign insurance
regulatory authorities with their investigations involving
insurance and reinsurance companies in Bermuda but subject to
restrictions. For example, the Authority must be satisfied that
the assistance being requested is in connection with the
discharge of regulatory responsibilities of the foreign
regulatory authority. Further, the Authority must consider
whether to co-operate is in the public interest. The grounds for
disclosure are limited and the Insurance Act provides sanctions
for breach of the statutory duty of confidentiality.

Certain Other
Considerations.IPC Holdings, IPCRe and IPCUSL
(together IPCBDA) will each also need to comply with
the provisions of the Companies Act regulating the payment of
dividends and making of distributions from contributed surplus.
A company is prohibited from declaring or paying a dividend, or
making a distribution out of contributed surplus, if there are
reasonable grounds for believing that: (a) the company is,
or would after the payment be, unable to pay its liabilities as
they become due; or (b) the realizable value of the
companys assets would thereby be less than the aggregate
of its liabilities and its issued share capital and share
premium accounts.

Although IPCBDA are incorporated in Bermuda, they
are classified as non-resident of Bermuda for exchange control
purposes by the Bermuda Monetary Authority. Pursuant to its
non-resident status, IPCBDA may hold any currency other than
Bermuda Dollars and convert that currency into any other
currency (other than Bermuda Dollars) without restriction.

As exempted companies, IPCBDA may
not, without the express authorization of the Bermuda
legislature or under a license granted by the Minister,
participate in certain business transactions, including:
(i) the acquisition or holding of land in Bermuda (except
that held by way of lease or tenancy agreement which is required
for its business and held for a term not exceeding
50 years, or which is used to provide accommodation or
recreational facilities for its officers and employees and held
with the consent of the Minister, for a term not exceeding
21 years); (ii) the taking of mortgages on land in
Bermuda in excess of $50,000; or (iii) the carrying on of
business of any kind in Bermuda, except in certain limited
circumstances such as doing business with another exempted
undertaking in furtherance of the business of IPCBDA (as the
case may be) carried on outside Bermuda.

The Bermuda government actively encourages
foreign investment in exempted entities like the
Company that are based in Bermuda, but do not operate in
competition with local businesses. As well as having no
restrictions on the degree of foreign ownership, IPCBDA are not
currently subject to taxes on their income or dividends or to
any foreign exchange controls in Bermuda. In addition, there
currently is no capital gains tax in Bermuda.

United
States

IPCRe is not admitted to do business in the
United States. The insurance laws of each state of the United
States and of many other countries regulate the sale of
insurance and reinsurance within their jurisdictions by alien
insurers and reinsurers such as IPCRe, which are not admitted to
do business within such jurisdictions. With some exceptions,
such sale of insurance or reinsurance within a jurisdiction
where the insurer is not

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admitted to do business is prohibited. We do not
intend to maintain an office or to solicit, advertise, settle
claims or conduct other insurance activities in any jurisdiction
other than Bermuda or Ireland where the conduct of such
activities would require that IPCRe be so admitted.


In addition to the regulatory requirements
imposed by the jurisdictions in which they are licensed,
reinsurers business operations are affected by regulatory
requirements in various states of the United States governing
credit for reinsurance which are imposed on their
ceding companies. In general, a ceding company which obtains
reinsurance from a reinsurer that is licensed, accredited or
approved by the jurisdiction or state in which the reinsurer
files statutory financial statements is permitted to reflect in
its statutory financial statements a credit in an aggregate
amount equal to the liability for unearned premiums and loss
reserves and loss expense reserves ceded to the reinsurer. IPCRe
is not licensed, accredited or approved in any state in the
United States. The great majority of states, however, permit a
credit to statutory surplus resulting from reinsurance obtained
from a non-licensed or non-accredited reinsurer to be offset to
the extent that the reinsurer provides a letter of credit or
other acceptable security arrangement. A few states do not allow
credit for reinsurance ceded to non-licensed reinsurers except
in certain limited circumstances and others impose additional
requirements that make it difficult to become accredited.
Premiums ceded to IPCRe are also subject to excise tax in the
United States for U.S. business, and in certain other
jurisdictions.

We do not believe that IPCRe violates insurance
laws of any jurisdiction in the United States. There can be no
assurance, however, that inquiries or challenges to IPCRes
reinsurance activities will not be raised in the future. We
believe that IPCRes manner of conducting business through
our offices in Bermuda has not materially adversely affected its
operations to date. There can be no assurance, however, that our
location, regulatory status or restrictions on our activities
resulting therefrom will not adversely affect our ability to
conduct business in the future.

European
Union

IPCRe Europe is incorporated in Ireland and is,
as such, subject to regulations imposed by the European Union.

Certain United States Federal Income Tax
Considerations

The discussion below is only a general summary
of certain United States federal income tax considerations that
are relevant to certain holders of Common Shares of IPC
Holdings. It does not address all relevant tax considerations
that may be relevant to holders of Common Shares nor does it
address tax considerations that may be relevant to certain
holders. Investors and prospective investors should consult
their own tax advisors concerning federal, state, local and
non-U.S. tax consequences of ownership and disposition of
Common Shares.

Taxation of IPCBDA.IPCBDA are Bermuda corporations,
none of which files United States federal income tax returns. We
believe that IPCRe operates in such a manner that it is not
subject to U.S. tax (other than U.S. excise tax on
reinsurance premiums and withholding tax on certain investment
income from U.S. sources) because it does not engage in a
trade or business in the United States. However, because
definitive identification of activities which constitute being
engaged in a trade or business in the United States is not
provided by the U.S. Internal Revenue Code of 1986, as
amended (the Code) or regulations or court
decisions, there can be no assurance that the U.S. Internal
Revenue Service (the IRS) will not contend that any
of IPCBDA is engaged in a trade or business in the United
States. If IPCRe were to qualify for benefits under the income
tax treaty between the United States and Bermuda, it would only
be subject to U.S. tax if it is deemed to be engaged in the
conduct of a U.S. trade or business through a
permanent establishment in the United States. Any
profits attributable to such permanent establishment would be
subject to U.S. tax at regular corporate rates, plus an
additional 30% branch profits tax on such income
remaining after the regular tax, in which case our earnings and
shareholders equity could be materially adversely affected.

Currently, IPCRe pays premium excise taxes in the
United States (1%), Australia (3%), and certain other
jurisdictions. From time to time, U.S. legislation has been
proposed which would increase such tax to 4%.

20



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Controlled Foreign Corporation Rules.Each United States
shareholder of a controlled foreign
corporation (CFC) who owns shares in the CFC
on the last day of the CFCs taxable year must include in
its gross income for United States federal income tax purposes
its pro rata share of the CFCs subpart F
income, even if the subpart F income is not
distributed. For these purposes, any U.S. person who owns,
directly or indirectly through foreign persons, or is considered
to own under applicable constructive ownership rules of the
Code, 10% or more of the total combined voting power of all
classes of stock of a foreign corporation will be considered to
be a United States shareholder. In general, a
foreign insurance company such as IPCRe or IPCRe Europe is
treated as a CFC only if such United States
shareholders collectively own more than 25% of the total
combined voting power or total value of its stock for an
uninterrupted period of 30 days or more during any tax
year. AIG owns 24.3% of the Common Shares, although, pursuant to
our Bye-laws, the combined voting power of these shares is
limited to less than 10% of the combined voting power of all
shares. We believe that, because of the dispersion of IPC
Holdings share ownership among holders other than AIG and
because of the restrictions on transfer, issuance or repurchase
of the Common Shares, shareholders of IPC Holdings should not be
subject to treatment as United States shareholders
of a CFC. In addition, because under the Bye-laws no single
shareholder (including AIG) is permitted to exercise as much as
10% of the total combined voting power of IPC Holdings,
shareholders of IPC Holdings should not be viewed as
United States shareholders of a CFC for purposes of
these rules. There can be no assurance, however, that these
rules will not apply to shareholders of IPC Holdings,
including as a result their indirect ownership of the stock of
IPC Holdings subsidiaries. Accordingly, U.S. persons
who might, directly or through attribution, acquire 10% or more
of the Common Shares of IPC Holdings should consider the
possible application of the CFC rules.

Related Person Insurance Income Rules.If IPCRes related person
insurance income (RPII) were to equal or exceed 20%
of IPCRes gross insurance income in any taxable year, any
U.S. person who owns Common Shares directly or indirectly
on the last day of the taxable year would likely be required to
include in its income for U.S. federal income tax purposes
its pro rata share of IPCRes RPII for the taxable year,
determined as if such RPII were distributed proportionately to
such United States shareholders at that date regardless of
whether such income is distributed. The amount of RPII earned by
IPCRe (generally, premium and related investment income from the
direct or indirect insurance or reinsurance of any direct or
indirect U.S. shareholder of IPCRe or any person related to
such shareholder, including IPC Holdings) will depend on a
number of factors, including the geographic distribution of
IPCRes business and the identity of persons directly or
indirectly insured or reinsured by IPCRe. Although we do not
believe that the 20% threshold was met in taxable years from
1994 to 2002, some of the factors which determine the extent of
RPII in any period may be beyond our control. Consequently,
there can be no assurance that IPCRes RPII will not
equal or exceed 20% of its gross insurance income in any taxable
year.

The RPII rules provide that if a shareholder who
is a U.S. person disposes of shares in a foreign insurance
corporation that has RPII (even if the amount of RPII is less
than 20% of the corporations gross insurance income) and
in which U.S. persons own 25% or more of the shares, any
gain from the disposition will generally be treated as ordinary
income to the extent of the shareholders share of the
corporations undistributed earnings and profits that were
accumulated during the period that the shareholder owned the
shares (whether or not such earnings and profits are
attributable to RPII). In addition, such a shareholder will be
required to comply with certain reporting requirements,
regardless of the amount of shares owned by the shareholder.
These rules should not apply to dispositions of Common Shares
because IPC Holdings is not itself directly engaged in the
insurance business and because proposed U.S. Treasury
regulations appear to apply only in the case of shares of
corporations that are directly engaged in the insurance
business. There can be no assurance, however, that the IRS will
interpret the proposed regulations in this manner or that the
applicable regulations will not be promulgated in final form in
a manner that would cause these rules to apply to disposition of
Common Shares.

Tax-Exempt Shareholders.Tax-exempt entities are generally
required to treat certain subpart F insurance income,
including RPII, that is includable in income by the tax-exempt
entity as unrelated business taxable income.

21



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Item 2.     Properties

Pursuant to an administrative services agreement
with American International Company, Limited (AICL),
an indirect wholly-owned subsidiary of AIG, IPC Holdings
and IPCRe are allocated office space in AICLs building in
Bermuda and our executive offices are located there. The address
of the executive offices is American International Building,
29 Richmond Road, Pembroke HM 08, Bermuda and our
telephone number is (441) 298-5100.




Item 3.     Legal
Proceedings

We will be subject to litigation and arbitration
in the ordinary course of our business. We are not currently
involved in any material pending litigation or arbitration
proceedings.




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

No matters were submitted to a vote of our
shareholders during the fourth quarter of the year ended
December 31, 2002.




PART II






|        |                                                                             
|------- | ----------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common
    Stock and Related Shareholder Matters

Our common shares are quoted on the Nasdaq
National Market under the symbol IPCR. The following
table sets out the high and low prices for our common shares for
the periods indicated as reported by the Nasdaq National Market.
Such prices reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and do not necessarily represent actual
transactions.

|                             |                |      |   |       |  |  |   |       | 
|---------------------------- | -------------- | ---- | - | ----- |  |  | - | ----- | 
|                             |                | High |   | Low  
|                             |                |      |   |      
|Year ended December 31, 2002 |                |      |   |       |  |  |   |      
|                             | First Quarter  |      | $ | 32.54 |  |  | $ | 27.51 | 
|                             | Second Quarter |      |   | 34.48 |  |  |   | 29.96 | 
|                             | Third Quarter  |      |   | 32.43 |  |  |   | 25.94 | 
|                             | Fourth Quarter |      |   | 32.49 |  |  |   | 28.55 | 
|                            
|Year ended December 31, 2001 |                |      |   |       |  |  |   |      
|                             | First Quarter  |      | $ | 24.50 |  |  | $ | 19.38 | 
|                             | Second Quarter |      |   | 25.05 |  |  |   | 18.50 | 
|                             | Third Quarter  |      |   | 24.75 |  |  |   | 18.90 | 
|                             | Fourth Quarter |      |   | 29.95 |  |  |   | 22.10 | 

Our common shares are also listed on the Bermuda
Stock Exchange

As of February 28, 2003, there were 58
holders of record of common shares.

In September, 2001 we paid a dividend of $0.16
per common share. We did not pay dividends during 2002 or 2000.
In each of March, June, and September, 1999, we paid dividends
of $0.3175 per common share. In December 1999, we paid a
dividend of $0.16 per common share. The amount and timing of
dividends is at the discretion of our Board of Directors and is
dependent upon our profits and financial requirements, as well
as loss experience, business opportunities and any other factors
that the Board deems relevant. In addition, if we have funds
available for distribution, we may nevertheless determine that
such funds should be retained for the purposes of replenishing
capital, expanding premium writings or other purposes. We are a
holding company, whose principal source of income is cash
dividends and other permitted payments from IPCRe and IPCUSL.
The payment of dividends from IPCRe to us is restricted under
Bermuda law and regulation, including Bermuda insurance law, and
under IPCRes $150 million revolving credit facility
which expires on June 30, 2003. The credit facility limits
the amount of dividends that may be paid quarterly by IPCRe to
us to the lesser of i) IPCRes aggregate positive net
income from March 31, 1998 to the end of the then-current

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fiscal quarter over the aggregate amount of all
dividends and distributions paid during the same period, and
ii) IPCRes positive consolidated net income for the
four fiscal quarters ending in the immediate prior quarter, over
the aggregate amount of all dividends and distributions paid
during the same period. The maximum amount of dividends that
IPCRe could have paid in the fourth quarter of 2002 in
accordance with the terms of the credit facility was
$156.7 million.


Under the Insurance Act, IPCRe is required to
maintain a solvency margin and a minimum liquidity ratio and is
prohibited from declaring or paying any dividends if to do so
would cause IPCRe to fail to meet its solvency margin and
minimum liquidity ratio. Under the Insurance Act, IPCRe is
prohibited from paying dividends of more than 25% of its total
statutory capital and surplus at the end of the previous fiscal
year unless it files an affidavit stating that the declaration
of such dividends has not caused it to fail to meet its solvency
margin and minimum liquidity ratio. The Insurance Act also
prohibits IPCRe from declaring or paying dividends requirements
without the approval of the Bermuda Monetary Authority if IPCRe
failed to meet its solvency margin and minimum liquidity ratio
on the last day of the previous fiscal year. The maximum amount
of dividends which could be paid by IPCRe to IPC Holdings at
January 1, 2003 without such notification is approximately
$321 million. In addition, IPCRe is prohibited under the
Insurance Act from reducing its opening total statutory capital
by more than 15% without the approval of the Authority. As a
result of these factors, there can be no assurance that our
dividend policy will not change or that we will declare or pay
any dividends.

On January 23, 2003 we declared a dividend
of $0.16 per share, paid on March 5, 2003 to shareholders
of record on February 19, 2003.

Sales of
Unregistered Shares

Information Required by Item 701 of
Regulation S-K:



| |                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) On December 12, 2001 2,847,000
    common shares of the Company were sold via a private placement.
    In addition, AIG exercised the AIG Option to acquire 2,113,700
    common shares.                      
|
| | b) The shares were sold to AIG.                                                                                                                                                                                  
|
| | c) The offering price for the private
    placement was $26.00 per share; no discounts or commissions were
    applicable. The AIG Option was exercisable at a price of
    $12.7746 per share.                  
|
| | d) Exemption from registration was claimed
    pursuant to Section 4(2) of the Securities Act of 1933. The
    shares were not sold pursuant to a registration statement or
    Rule 144 under the Securities Act

The information required in respect of the Equity
Compensation Plan is incorporated herein by reference to the
information contained under the caption Executive
Compensation in the Proxy Statement.

23



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##### Table of Contents








|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

The historical consolidated financial data
presented below as of and for each of the periods ended
December 31, 2002, 2001, 2000, 1999, and 1998 were derived
from our consolidated financial statements which are
incorporated herein by reference to the Annual Report. The
selected consolidated financial data should be read in
conjunction with our consolidated financial statements and
related notes thereto, and with Managements
Discussion and Analysis of Financial Condition and Results of
Operations also contained in the Annual Report and
incorporated herein by reference.

|                                            |  |                                          |            |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|------------------------------------------- |  | ---------------------------------------- | ---------- | ---- |  | ---- | ---------- | ---- |  | ---- | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                            |  |                                         
|                                            |  | Year Ended December 31,                 
|                                            |  |                                         
|                                            |  | 2002                                     |            | 2001 |  | 2000 |            | 1999 |  | 1998
|                                            |  |                                          |            |      |  |      |            |      |  |     
|                                            |  |                                         
|                                            |  | (in thousands, except per share amounts)
|Statement of Income Data:                   |  |                                          |            |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Gross premiums written                      |  | $                                        | 259,685    |      |  | $    | 133,057    |      |  | $    | 93,757     |   |  | $ | 97,162     |   |  | $ | 111,265    |  
|Net premiums earned                         |  |                                          | 226,404    |      |  |      | 123,375    |      |  |      | 86,961     |   |  |   | 94,967     |   |  |   | 120,125    |  
|Net investment income                       |  |                                          | 49,320     |      |  |      | 32,245     |      |  |      | 31,089     |   |  |   | 30,327     |   |  |   | 30,053     |  
|Other income                                |  |                                          | 2,684      |      |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Loss and loss adjustment expenses incurred  |  |                                          | 38,775     |      |  |      | 137,551    |      |  |      | 53,661     |   |  |   | 129,362    |   |  |   | 61,459     |  
|Acquisition costs                           |  |                                          | 24,521     |      |  |      | 12,686     |      |  |      | 9,049      |   |  |   | 13,028     |   |  |   | 16,968     |  
|General and administrative expenses         |  |                                          | 13,893     |      |  |      | 9,381      |      |  |      | 9,311      |   |  |   | 9,641      |   |  |   | 10,680     |  
|Exchange loss/(gain), net                   |  |                                          | (1,554     | )    |  |      | 551        |      |  |      | 2,348      |   |  |   | 411        |   |  |   | 371        |  
|Net realized gains/(losses), on investments |  |                                          | (44,867    | )    |  |      | 616        |      |  |      | 544        |   |  |   | 30,355     |   |  |   | 7,014      |  
|Net income (loss)                           |  | $                                        | 157,906    |      |  | $    | (3,933     | )    |  | $    | 44,225     |   |  | $ | 3,207      |   |  | $ | 67,714     |  
|Net income (loss) per common share(1)       |  | $                                        | 3.27       |      |  | $    | (0.15      | )    |  | $    | 1.73       |   |  | $ | 0.12       |   |  | $ | 2.55       |  
|Weighted average shares outstanding(1)      |  |                                          | 48,266,444 |      |  |      | 26,266,019 |      |  |      | 25,497,671 |   |  |   | 25,988,116 |   |  |   | 26,547,062 |  
|Cash dividend per common share              |  | $                                        |           |      |  | $    | 0.16       |      |  | $    |           |   |  | $ | 1.1125     |   |  | $ | 2.07       |  
|Other Data:                                 |  |                                          |            |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Loss and loss adjustment expense ratio(2)   |  |                                          | 17.1       | %    |  |      | 111.5      | %    |  |      | 61.7       | % |  |   | 136.2      | % |  |   | 51.2       | %
|Expense ratio(2)                            |  |                                          | 17.0       | %    |  |      | 17.9       | %    |  |      | 21.1       | % |  |   | 23.9       | % |  |   | 23.0       | %
|Combined ratio(2)                           |  |                                          | 34.1       | %    |  |      | 129.4      | %    |  |      | 82.8       | % |  |   | 160.1      | % |  |   | 74.2       | %
|Return on average equity(3)                 |  |                                          | 16.6       | %    |  |      | (0.7       | )%   |  |      | 8.3        | % |  |   | 0.6        | % |  |   | 12.4       | %
|Balance Sheet Data (at end of
    period)   |  |                                          |            |      |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Total cash and investments                  |  | $                                        | 1,387,162  |      |  | $    | 1,232,301  |      |  | $    | 598,531    |   |  | $ | 594,754    |   |  | $ | 599,981    |  
|Reinsurance balances receivable             |  |                                          | 50,328     |      |  |      | 42,356     |      |  |      | 25,419     |   |  |   | 21,460     |   |  |   | 20,747     |  
|Total assets                                |  |                                          | 1,473,975  |      |  |      | 1,301,716  |      |  |      | 647,490    |   |  |   | 640,942    |   |  |   | 643,091    |  
|Reserve for losses and loss expenses        |  |                                          | 119,355    |      |  |      | 162,207    |      |  |      | 61,358     |   |  |   | 111,441    |   |  |   | 52,226     |  
|Unearned premiums                           |  |                                          | 51,902     |      |  |      | 24,440     |      |  |      | 19,068     |   |  |   | 16,364     |   |  |   | 17,602     |  
|Total shareholders equity                  |  | $                                        | 1,291,483  |      |  | $    | 1,105,794  |      |  | $    | 559,270    |   |  | $ | 504,931    |   |  | $ | 565,952    |  
|Basic book value per common share(4)        |  | $                                        | 26.81      |      |  | $    | 22.95      |      |  | $    | 22.34      |   |  | $ | 20.17      |   |  | $ | 22.61      |  
|Diluted book value per common share(5)      |  | $                                        | 26.75      |      |  | $    | 22.92      |      |  | $    | 21.93      |   |  | $ | 19.43      |   |  | $ | 21.32      |  




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net income per common share is calculated upon
    the weighted average number of common shares outstanding during
    the relevant year. The weighted average number of shares
    includes common shares and the dilutive effect of the AIG Option
    and employee stock options, using the treasury stock method. The
    net (loss) per common share for the year ended
    December 31, 2001 is calculated on the weighted average
    number of shares outstanding during the year, excluding the
    dilutive effect of the AIG Option and employee stock options,.

24



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The loss and loss adjustment expense ratio is
    calculated by dividing the losses and loss expenses incurred by
    the net premiums earned. The expense ratio is calculated by
    dividing the sum of acquisition costs and general and
    administrative expenses by net premiums earned. The combined
    ratio is the sum of the loss and loss expense ratio and the
    expense ratio.                                                                                                           
|   
|(3) | Return on average equity is calculated as the
    annual net income (loss) divided by the average of the
    shareholders equity on the first and last day of the
    respective year.                                                                                                                                                                                                                                                                                                                   
|   
|(4) | Basic book value per common share is calculated
    on the number of common shares outstanding on the balance sheet
    date.                                                                                                                                                                                                                                                                                                                                                                             
|   
|(5) | Diluted book value per common share is calculated
    on the number of common shares outstanding on the balance sheet
    date, after considering the dilutive effects of the AIG Option
    (where applicable) and the options granted to employees,
    calculated on the basis described in note (1) above. At
    December 31, 2002 the average weighted number of shares
    outstanding, including the dilutive effect of employee stock
    options using the treasury stock method was 48,275,123.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

The information required for this item is
incorporated herein by reference to the narrative contained
under the caption Managements Discussion and
Analysis of Financial Condition and Results of Operations
in the Annual Report.






|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    About Market Risk

The information required for this item is
incorporated herein by reference to the section entitled
Managements Discussion and Analysis 
Quantitative and Qualitative Disclosure about Market Risk
in the Annual Report.






|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

The information required for this item is
incorporated herein by reference to the consolidated financial
statements of the Company contained in the Annual Report.






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

On April 17, 2002 the Board of Directors
decided not to propose the re-appointment of Arthur Andersen as
its independent auditors to the shareholders at IPCs
Annual General Meeting on June 14, 2002. The filing also
indicated that the Board of Directors had decided to propose the
appointment of KPMG as IPCs independent auditors to serve
until the next Annual General Meeting of IPCs
shareholders. The decision not to propose the renewal of
Andersens engagement was made by the Board of Directors
based upon the recommendation of its Audit Committee. Andersen
had served as IPCs independent auditors for the nine years
since IPCs formation, during which period management and
the Board of Directors believes that they had always adhered to
a high standard of professionalism.

On June 14, 2002 IPCs shareholders
resolved to appoint KPMG as IPCs independent auditors, to
serve until the next Annual General Meeting of IPCs
shareholders. As a result of the shareholders action,
Arthur Andersen was dismissed as IPCs independent auditors
and KPMG was appointed IPCs independent auditors, each
effective as of June 14, 2002.

During IPCs two most recent fiscal years
ended December 31, 2001 and during any interim periods from
December 31, 2001 through June 14, 2002, there were no
disagreements between IPC and Andersen on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not
resolved to Andersens satisfaction, would have caused
Andersen to make reference to the matter of the disagreement in
connection with their reports. The audit reports of Andersen on
IPCs consolidated financial statements as of and for the
years ended December 31, 2001 and 2000 did not contain any
adverse opinion or disclaimer of opinion, nor were these
opinions qualified or modified as to uncertainty, audit scope or
accounting principles. We provided Arthur Andersen with a copy
of the foregoing disclosures, and a letter

25



---



##### Table of Contents



from Arthur Andersen confirming its agreement
with these disclosures was filed as an exhibit to the
Companys Current Report on Form 8-K, dated
June 14, 2002.


During IPCs two most recent fiscal years
ended December 31, 2001 and during any interim periods from
December 31, 2001 through June 14, 2002, there were no
reportable events as defined in Item 304(a)(1)(v) of
Regulation S-K.




PART III






|         |                                     
|-------- | ------------------------------------
|Item 10. | Directors and Executive
    Officers

The information concerning directors required for
this item is incorporated herein by reference to the information
contained under the captions Election of Directors,
Executive Officers and Section 16(a)
Beneficial Ownership Reporting Compliance in the Proxy
Statement.






|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

The information required for this item is
incorporated herein by reference to the information contained
under the caption Executive Compensation in the
Proxy Statement.






|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management

The information required for this item is
incorporated herein by reference to the information contained
under the caption Beneficial Ownership of Common
Shares in the Proxy Statement.






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

The information required for this item is
incorporated herein by reference to the information contained
under the caption Certain Relationships and Related
Transactions in the Proxy Statement.






|         |                        
|-------- | -----------------------
|Item 14. | Controls and Procedures

Within the ninety day period prior to the filing
of this report, an evaluation was carried out under the
supervision and with the participation of IPCs management,
including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in
Rule 13a-14c under the Securities Exchange Act of 1934).
Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the design and operation
of these disclosure controls and procedures were effective. No
significant changes were made in our internal controls or in
other factors that could significantly affect these controls
subsequent to the date of their evaluation.




PART IV






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

(a) Financial Statements and Exhibits



|   |                     
|-- | --------------------
|1. | Financial Statements

The following Consolidated Financial Statements
of IPC Holdings and Report of Independent Auditors are
incorporated herein by reference to pages 23 to 45 of the
Annual Report:



| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Report of Independent Public Accountants                                                                
| | Consolidated balance sheets as of
    December 31, 2002 and 2001                                        
| | Consolidated statements of income (loss) for
    the years ended December 31, 2002, 2001 and 2000       
| | Consolidated statements of comprehensive income
    for the years ended December 31, 2002, 2001 and 2000

26



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##### Table of Contents



| |                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------
| | Consolidated statements of changes in
    shareholders equity for the years ended December 31,
    2002, 2001 and 2000
| | Consolidated statements of cash flows for the
    years ended December 31, 2002, 2001 and 2000                         
| | Notes to the consolidated financial statements                                                                         

2.     Financial
Statement Schedules



| |                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------
| | Report of Independent Public Accountants on
    Schedules                                                                     
| | Schedule II  Condensed Financial
    Information of Registrant                                                               
| | Schedule III  Supplementary
    Insurance Information of Subsidiary for the years ended
    December 31, 2002, 2001 and 2000.
| | Schedule IV  Supplementary
    Information concerning Reinsurance for the years ended
    December 31, 2002, 2001 and 2000.  

Certain schedules have been omitted, either
because they are not applicable, or because the information is
included in our consolidated financial statements incorporated
by reference to the Annual Report.

3.     Exhibits

|        |        |             |  |                                                                                                                                        |  |  |                | 
|------- | ------ | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  |  | -------------- | 
|Exhibit |        |             |  | Method                                                                                                                                
|Number  |        | Description |  | of filing                                                                                                                             
|        |        |             |  |                                                                                                                                       
|        | 3.1    |             |  | Memorandum of Association of the Company                                                                                               |  |  | *              | 
|        | 3.2    |             |  | Amended and Restated Bye-Laws of the Company                                                                                           |  |  | Filed herewith | 
|        | 3.3    |             |  | Form of Memorandum of Increase of Share Capital                                                                                        |  |  | *              | 
|        | 4.1    |             |  | Form of Registration Rights Agreement                                                                                                  |  |  | *              | 
|        | 4.2    |             |  | Form of Share Certificate                                                                                                              |  |  | *              | 
|        | 10.1   |             |  | Termination Agreement among the Company and its
    previous shareholders                                                              |  |  | *              | 
|        | 10.2   |             |  | Form of Amended and Restated Option Agreement
    entered into between the Company and AIG                                             |  |  | *              | 
|        | 10.3  |             |  | Amended and Restated IPC Holdings, Ltd. Stock
    Option Plan                                                                          |  |  | oo             | 
|        | 10.4  |             |  | IPCRe Defined Contribution Plan                                                                                                        |  |  | *              | 
|        | 10.5   |             |  | Amended and Restated Administrative Services
    Agreement among the Company, IPCRe and AICL                                           |  |  | *              | 
|        | 10.6   |             |  | Investment Management Agreement between IPCRe and
    AIGIC, as amended                                                                |  |  | **             | 
|        | 10.7   |             |  | Investment Sub-Advisory Agreement between AIGIC
    and AIGIC (Europe) (formerly known as Dempsey & Company
    International Limited) |  |  | *              | 
|        | 10.8   |             |  | Custodial Agreement between AIGTS and IPCRe                                                                                            |  |  | *              | 
|        | 10.9  |             |  | Retirement Agreement between IPCRe and James P.
    Bryce                                                                              |  |  | *              | 
|        | 10.10 |             |  | Retirement Agreement between IPCRe and Peter J.A.
    Cozens                                                                           |  |  | *              | 
|        | 10.11 |             |  | Amended and Restated IPC Holdings, Ltd. Deferred
    Compensation Plan                                                                 |  |  | o              | 
|        | 10.12  |             |  | Credit Agreement between IPCRe Limited, the First
    National Bank of Chicago, and other Lenders named therein, as
    amended        |  |  | +              | 
|        | 10.13  |             |  | Form of Limited Waiver to Credit Agreement
    between IPCRe Limited, BankOne N.A. and other Lenders named
    therein                 |  |  | o              | 
|        | 10.14  |             |  | Purchase Agreement between the Company and AIG                                                                                         |  |  | #              | 
|        | 10.15  |             |  | Underwriting Agency Agreement between Allied
    World Assurance Company Ltd. and IPCUSL                                               |  |  |               | 
|        | 10.16  |             |  | Amended Schedule I (Investment Policy
    Guideline) to Investment Management Agreement between IPCRe and
    AIGIC                    |  |  |               | 

27



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##### Table of Contents



|        |      |             |  |                                                                    |  |  |                | 
|------- | ---- | ----------- |  | ------------------------------------------------------------------ |  |  | -------------- | 
|Exhibit |      |             |  | Method                                                            
|Number  |      | Description |  | of filing                                                         
|        |      |             |  |                                                                   
|        | 11.1 |             |  | Statement regarding Computation of Per Share
    Earnings          |  |  | Filed herewith | 
|        | 13.1 |             |  | Portions of the Annual Report incorporated herein
    by reference |  |  | Filed herewith | 
|        | 16.1 |             |  | Letter of Arthur Andersen, dated June 21,
    2002                 |  |  | ##             | 
|        | 21.1 |             |  | Subsidiaries of the Registrant                                     |  |  | Filed herewith | 
|        | 23.1 |             |  | Consent of KPMG                                                    |  |  | Filed herewith | 




|   |  |                                                                                                                                                                                                                                       
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*  |  | Incorporated by reference to the corresponding
    exhibit in our Registration Statement on Form S-1
    (No. 333-00088).                                                                                                             
|+  |  | Incorporated by reference to Exhibit 4.2 to
    our Registration Statement on Form S-3 (No. 333-73828).                                                                                                                               
|** |  | Incorporated by reference to Exhibit 10.1 to
    our Form 10-Q for the quarter ended June 30, 1997
    (File No. 0-27662), and Exhibit 10.1 to our
    Form 10-Q for the quarter ended June 30, 2002 (File
    No. 0-27662).          
|++ |  | Incorporated by reference to Exhibits 10.1 and
    10.2 to our Form 10-Q for the quarter ended June 30,
    1998 (File No. 0-27662), and Exhibit 10.2 to our
    Form 10-Q for the quarter ended June 30, 2002 (File
    No. 0-27662).
|o  |  | Incorporated by reference to Exhibits 10.1
    and 10.2 to our Form 10-Q for the quarter ended
    September 30, 1999 (File No.  0-27662).                                                                                            
|oo |  | Incorporated by reference to Exhibit 10.3 to
    our Form 10-K for the year ended December 31, 1999
    (File No. 0-27662).                                                                                                           
|#  |  | Incorporated by reference to Exhibit 10 to
    our Registration Statement on Form S-3 (No. 333-73828).                                                                                                                                
|  |  | Incorporated by reference to Exhibit 10.15
    to our Form 10-K for the year ended December 31, 2001
    (File No. 0-27662).                                                                                                          
|## |  | Incorporated by reference to Exhibit 16.1 to
    our Current Report on Form 8-K, dated as of June 14,
    2002.                                                                                                                       
|  |  | Management contract or compensatory plan,
    contract or arrangement.                                                                                                                                                                

(b) Reports on Form 8-K.

No reports were filed on Form 8-K during the
fourth quarter of 2002.

28



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##### Table of Contents



IPC HOLDINGS, LTD.

INDEX TO SCHEDULES

|                                                          |              |  |    |                                                                                                            |  |  |    | 
|--------------------------------------------------------- | ------------ |  | -- | ---------------------------------------------------------------------------------------------------------- |  |  | -- | 
|SCHEDULE/REPORT                                           |              |  |    | Page                                                                                                      
|                                                          |              |  |    |                                                                                                           
|Report of Independent Public Accountants on
    Schedules |              |  | 30 |                                                                                                           
|                                                          | Schedule II  |  |    | Condensed Financial Information of the Registrant                                                          |  |  | 32 | 
|                                                          | Schedule III |  |    | Supplementary Insurance Information of Subsidiary
    for the years ended December 31, 2002, 2001 and 2000 |  |  | 35 | 
|                                                          | Schedule IV  |  |    | Supplementary Information concerning Reinsurance
    for the years ended December 31, 2002, 2001 and 2000  |  |  | 36 | 

29



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##### Table of Contents



REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS

To the Board of Directors and Shareholders
of

IPC Holdings, Ltd.:


Under date of February 3, 2003, we reported
on the consolidated balance sheet of IPC Holdings, Ltd. and
subsidiaries as of December 31, 2002, and the related
consolidated statements of income, comprehensive income,
shareholders equity and cash flows for the year ended
December 31, 2002, as contained in the December 31,
2002 annual report to shareholders. These consolidated financial
statements and our report thereon are incorporated by reference
in the annual report on Form 10-K. In connection with our
audit of the 2002 consolidated financial statements, we also
have audited the related consolidated financial schedules as
listed in the accompanying index. These consolidated financial
statement schedules are the responsibility of the Companys
management. Our responsibility is to express an opinion on the
related 2002 consolidated financial statement schedules based on
our audit. The consolidated balance sheet of IPC Holdings, Ltd.
and subsidiaries as of December 31, 2001, and the related
consolidated statements of (loss) income, comprehensive
income, shareholders equity and cash flows for each of the
years in the two year period ended December 31, 2001 and
the related consolidated financial statement schedules as listed
in the accompanying index, were audited by other auditors who
have ceased operations. Those auditors expressed an unqualified
opinion on those consolidated financial statements and the
related consolidated financial statement schedules in their
report dated February 8, 2002.

In our opinion, the related 2002 consolidated
financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set
forth therein.



| |                      
| | ---------------------
| | /s/ KPMG             
| |                      
| | Chartered Accountants

Hamilton, Bermuda

February 3, 2003


30



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##### Table of Contents



The following report is a copy of a report
previously issued by Arthur Andersen and has not been reissued
by Arthur Andersen. This report applies to the consolidated
financial statements of IPC Holdings, Ltd. and subsidiaries
included in IPC Holdings, Ltd.s annual report to
shareholders for the fiscal years ended December 31, 2001
and December 31, 2000:

REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS

To the Board of Directors and Shareholders
of

IPC Holdings, Ltd.


We have audited in accordance with generally
accepted auditing standards the consolidated financial
statements of IPC Holdings, Ltd. and subsidiaries included in
IPC Holdings, Ltd.s annual report to shareholders
incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 8, 2002. Our audit
was made for the purpose of forming an opinion on those
financial statements taken as a whole. The schedules listed in
the accompanying index are the responsibility of the
Companys management and are presented for purposes of
complying with the Securities and Exchange Commissions
rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial
data required to be set forth therein in relation to the basic
financial statements taken as a whole.

ARTHUR ANDERSEN

Hamilton, Bermuda

February 8, 2002


31



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##### Table of Contents



SCHEDULE II

IPC HOLDINGS, LTD.

CONDENSED FINANCIAL INFORMATION OF
REGISTRANT

BALANCE SHEET

(PARENT COMPANY)


(Expressed in thousands of United States
Dollars)


|                                                                                                                                   |  |                    |           |      |  |   |           | 
|---------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | ---- |  | - | --------- | 
|                                                                                                                                   |  |                   
|                                                                                                                                   |  | As of December 31,
|                                                                                                                                   |  |                   
|                                                                                                                                   |  | 2002               |           | 2001
|                                                                                                                                   |  |                    |           |     
|ASSETS:                                                                                                                            |  |                    |           |      |  |   |           | 
|Cash                                                                                                                               |  | $                  | 106       |      |  | $ | 163       | 
|Investment in wholly-owned subsidiaries                                                                                            |  |                    | 1,292,606 |      |  |   | 1,108,328 | 
|Other assets                                                                                                                       |  |                    | 228       |      |  |   | 99        | 
|                                                                                                                                   |  |                    |           |      |  |   |           | 
|                                                                                                                                   |  | $                  | 1,292,940 |      |  | $ | 1,108,590 | 
|                                                                                                                                   |  |                    |           |      |  |   |           | 
|LIABILITIES:                                                                                                                       |  |                    |           |      |  |   |           | 
|Payable to subsidiaries                                                                                                            |  | $                  | 1,310     |      |  | $ | 2,225     | 
|Other liabilities                                                                                                                  |  |                    | 147       |      |  |   | 571       | 
|                                                                                                                                   |  |                    |           |      |  |   |           | 
|                                                                                                                                   |  |                    | 1,457     |      |  |   | 2,796     | 
|                                                                                                                                   |  |                    |           |      |  |   |           | 
|SHAREHOLDERS EQUITY:                                                                                                              |  |                    |           |      |  |   |           | 
|Share capital  2002: 48,179,805 shares
    outstanding, par value $0.01;
    2001: 48,172,776 shares outstanding, par value $0.01 |  |                    | 482       |      |  |   | 482       | 
|Additional paid in capital                                                                                                         |  |                    | 846,397   |      |  |   | 846,101   | 
|Retained earnings                                                                                                                  |  |                    | 404,345   |      |  |   | 246,568   | 
|Accumulated other comprehensive income                                                                                             |  |                    | 40,259    |      |  |   | 12,643    | 
|                                                                                                                                   |  |                    |           |      |  |   |           | 
|                                                                                                                                   |  |                    | 1,291,483 |      |  |   | 1,105,794 | 
|                                                                                                                                   |  |                    |           |      |  |   |           | 
|                                                                                                                                   |  | $                  | 1,292,940 |      |  | $ | 1,108,590 | 
|                                                                                                                                   |  |                    |           |      |  |   |           | 

32



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##### Table of Contents



SCHEDULE II

continued


IPC HOLDINGS, LTD.

CONDENSED FINANCIAL INFORMATION OF
REGISTRANT  continued

STATEMENT OF INCOME (LOSS)

(PARENT COMPANY)


(Expressed in thousands of United States
Dollars)


|                                                                           |                                   |                         |         |       |  |      |        |     |  |   |        |     | 
|-------------------------------------------------------------------------- | --------------------------------- | ----------------------- | ------- | ----- |  | ---- | ------ | --- |  | - | ------ | --- | 
|                                                                           |                                   |                        
|                                                                           |                                   | Year ended December 31,
|                                                                           |                                   |                        
|                                                                           |                                   | 2002                    |         | 2001  |  | 2000
|                                                                           |                                   |                         |         |       |  |     
|Interest income                                                            |                                   | $                       | 0       |       |  | $    | 2      |     |  | $ | 3      |    
|Expenses:                                                                  |                                   |                         |         |       |  |      |        |     |  |   |        |    
|                                                                           | Operating costs and expenses, net |                         |         | 1,256 |  |      |        | 920 |  |   |        | 811 | 
|                                                                           |                                   |                         |         |       |  |      |        |     |  |   |        |    
|(Loss)/profit before equity in net income of
    wholly-owned subsidiaries |                                   |                         | (1,256  | )     |  |      | (918   | )   |  |   | (808   | )  
|Equity in net income (loss) of wholly-owned
    subsidiaries               |                                   |                         | 159,162 |       |  |      | (3,015 | )   |  |   | 45,033 |    
|                                                                           |                                   |                         |         |       |  |      |        |     |  |   |        |    
|Net income (loss) available to common shareholders                         |                                   | $                       | 157,906 |       |  | $    | (3,933 | )   |  | $ | 44,225 |    
|                                                                           |                                   |                         |         |       |  |      |        |     |  |   |        |    

STATEMENT OF COMPREHENSIVE INCOME

(PARENT COMPANY)


(Expressed in thousands of United States
Dollars)


|                            |                                                                           |      |         |         |   |      |        |       |   |   |        |        |  
|--------------------------- | ------------------------------------------------------------------------- | ---- | ------- | ------- | - | ---- | ------ | ----- | - | - | ------ | ------ | -
|                            |                                                                           | 2002 |         | 2001    |   | 2000
|                            |                                                                           |      |         |         |   |     
|Net income (loss)           |                                                                           | $    | 157,906 |         |   | $    | (3,933 | )     |   | $ | 44,225 |       
|                            |                                                                           |      |         |         |   |      |        |       |   |   |        |       
|Other comprehensive income: |                                                                           |      |         |         |   |      |        |       |   |   |        |       
|                            | Holding (losses) gains, net on investments during
    period              |      |         | (17,251 | ) |      |        | 8,679 |   |   |        | 10,562 |  
|                            | Reclassification adjustment for losses (gains)
    included in net income |      |         | 44,867  |   |      |        | (616  | ) |   |        | (544   | )
|                            |                                                                           |      |         |         |   |      |        |       |   |   |        |       
|                            |                                                                           |      | 27,616  |         |   |      | 8,063  |       |   |   | 10,018 |       
|                            |                                                                           |      |         |         |   |      |        |       |   |   |        |       
|Comprehensive income        |                                                                           | $    | 185,522 |         |   | $    | 4,130  |       |   | $ | 54,243 |       
|                            |                                                                           |      |         |         |   |      |        |       |   |   |        |       

33



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##### Table of Contents



SCHEDULE II

continued


IPC HOLDINGS, LTD.

CONDENSED FINANCIAL INFORMATION OF
REGISTRANT  continued


STATEMENT OF CASH FLOWS

(PARENT COMPANY)


(Expressed in thousands of United States
Dollars)


|                                                             |                                               |                         |         |          |      |      |          |       |      |   |        |         |       |  
|------------------------------------------------------------ | --------------------------------------------- | ----------------------- | ------- | -------- | ---- | ---- | -------- | ----- | ---- | - | ------ | ------- | ----- | -
|                                                             |                                               |                        
|                                                             |                                               | Year ended December 31,
|                                                             |                                               |                        
|                                                             |                                               | 2002                    |         | 2001     |      | 2000
|                                                             |                                               |                         |         |          |      |     
|CASH FLOWS FROM OPERATING ACTIVITIES                         |                                               |                         |         |          |      |      |          |       |      |   |        |        
|Net income (loss)                                            |                                               | $                       | 157,906 |          |      | $    | (3,933   | )     |      | $ | 44,225 |        
|Adjustments to reconcile net income to cash
    provided by: |                                               |                         |         |          |      |      |          |       |      |   |        |        
|                                                             | Equity in net loss (income) from subsidiaries |                         |         | (159,162 | )    |      |          | 3,015 |      |   |        | (45,033 | )    
|                                                             | Changes in, net:                              |                         |         |          |      |      |          |       |      |   |        |         |      
|                                                             |                                               | Other assets            |         |          | (129 | )    |          |       | 321  |   |        |         | 1,128 |  
|                                                             |                                               | Payable to subsidiaries |         |          | (915 | )    |          |       | (408 | ) |        |         | (259  | )
|                                                             |                                               | Other liabilities       |         |          | (424 | )    |          |       | 495  |   |        |         | (78   | )
|                                                             |                                               |                         |         |          |      |      |          |       |      |   |        |        
|                                                             |                                               |                         | (2,724  | )        |      |      | (510     | )     |      |   | (17    | )      
|                                                             |                                               |                         |         |          |      |      |          |       |      |   |        |        
|CASH FLOWS FROM FINANCING ACTIVITIES                         |                                               |                         |         |          |      |      |          |       |      |   |        |        
|Additional share capital received                            |                                               |                         | 167     |          |      |      | 546,404  |       |      |   | 96     |        
|Additional investment in subsidiaries                        |                                               |                         |        |          |      |      | (545,921 | )     |      |   |       |        
|Dividends received from subsidiaries                         |                                               |                         | 2,500   |          |      |      | 4,099    |       |      |   |       |        
|Dividends paid to shareholders                               |                                               |                         |        |          |      |      | (4,010   | )     |      |   |       |        
|                                                             |                                               |                         |         |          |      |      |          |       |      |   |        |        
|                                                             |                                               |                         | 2,667   |          |      |      | 572      |       |      |   | 96     |        
|                                                             |                                               |                         |         |          |      |      |          |       |      |   |        |        
|Net (decrease) increase in cash and cash
    equivalents     |                                               |                         | (57     | )        |      |      | 62       |       |      |   | 79     |        
|Cash and cash equivalents, beginning of year                 |                                               |                         | 163     |          |      |      | 101      |       |      |   | 22     |        
|                                                             |                                               |                         |         |          |      |      |          |       |      |   |        |        
|Cash and cash equivalents, end of year                       |                                               | $                       | 106     |          |      | $    | 163      |       |      | $ | 101    |        
|                                                             |                                               |                         |         |          |      |      |          |       |      |   |        |        

34



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##### Table of Contents



SCHEDULE III

IPC HOLDINGS, LTD. AND SUBSIDIARIES

SUBSIDIARY SUPPLEMENTARY INSURANCE
INFORMATION

(Expressed in thousands of United States
Dollars)


|        |                    |             |   |                |  |          |   |         |  |            |   |            |  |              |   |           |  |          |   |        |  |  |   |         |  |  |   |        |  |  |   |        |  |  |   |         | 
|------- | ------------------ | ----------- | - | -------------- |  | -------- | - | ------- |  | ---------- | - | ---------- |  | ------------ | - | --------- |  | -------- | - | ------ |  |  | - | ------- |  |  | - | ------ |  |  | - | ------ |  |  | - | ------- | 
|        |                    |             |   | Future policy  |  |          |   |         |  |            |   | Benefits,  |  | Amortization |   |           |  |         
|        |                    | Deferred    |   | benefits,      |  |          |   |         |  |            |   | claims,    |  | of deferred  |   |           |  |         
|        |                    | policy      |   | losses, claims |  |          |   |         |  | Net        |   | losses and |  | policy       |   | Other     |  | Gross   
|        |                    | acquisition |   | and loss       |  | Unearned |   | Premium |  | investment |   | settlement |  | acquisition  |   | operating |  | premiums
|Segment |                    | costs       |   | expense        |  | premiums |   | revenue |  | income     |   | expenses   |  | costs        |   | expenses  |  | written 
|        |                    |             |   |                |  |          |   |         |  |            |   |            |  |              |   |           |  |         
|2002:   |                    |             |   |                |  |          |   |         |  |            |   |            |  |              |   |           |  |          |   |        |  |  |   |         |  |  |   |        |  |  |   |        |  |  |   |        
|        | Property & Similar |             | $ | 6,095          |  |          | $ | 119,355 |  |            | $ | 51,902     |  |              | $ | 226,404   |  |          | $ | 49,320 |  |  | $ | 38,775  |  |  | $ | 24,521 |  |  | $ | 12,633 |  |  | $ | 259,685 | 
|2001:   |                    |             |   |                |  |          |   |         |  |            |   |            |  |              |   |           |  |          |   |        |  |  |   |         |  |  |   |        |  |  |   |        |  |  |   |        
|        | Property & Similar |             | $ | 2,833          |  |          | $ | 162,207 |  |            | $ | 24,440     |  |              | $ | 123,375   |  |          | $ | 32,244 |  |  | $ | 137,551 |  |  | $ | 12,686 |  |  | $ | 8,443  |  |  | $ | 133,057 | 
|2000:   |                    |             |   |                |  |          |   |         |  |            |   |            |  |              |   |           |  |          |   |        |  |  |   |         |  |  |   |        |  |  |   |        |  |  |   |        
|        | Property & Similar |             | $ | 2,249          |  |          | $ | 61,358  |  |            | $ | 19,068     |  |              | $ | 86,961    |  |          | $ | 31,086 |  |  | $ | 53,661  |  |  | $ | 9,049  |  |  | $ | 8,427  |  |  | $ | 93,757  | 

35



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##### Table of Contents



SCHEDULE IV

REINSURANCE

(Expressed in thousands of United States
Dollars)


|      |                    |              |   |           |  |            |   |               |  |                |   |         |  |  |   |         |  |  |  |     |  
|----- | ------------------ | ------------ | - | --------- |  | ---------- | - | ------------- |  | -------------- | - | ------- |  |  | - | ------- |  |  |  | --- | -
|      |                    |              |   | Ceded to  |  | Assumed    |   |               |  | Percentage of 
|      |                    |              |   | other     |  | from other |   |               |  | amount        
|      |                    | Gross Amount |   | companies |  | companies  |   | Net Amount(1) |  | assumed to net
|      |                    |              |   |           |  |            |   |               |  |               
|2002: |                    |              |   |           |  |            |   |               |  |                |   |         |  |  |   |         |  |  |  |    
|      | Property & Similar |              | $ |          |  |            | $ | 5,410         |  |                | $ | 259,685 |  |  | $ | 254,275 |  |  |  | 102 | %
|2001: |                    |              |   |           |  |            |   |               |  |                |   |         |  |  |   |         |  |  |  |    
|      | Property & Similar |              | $ |          |  |            | $ | 4,418         |  |                | $ | 133,057 |  |  | $ | 128,639 |  |  |  | 103 | %
|2000: |                    |              |   |           |  |            |   |               |  |                |   |         |  |  |   |         |  |  |  |    
|      | Property & Similar |              | $ |          |  |            | $ | 4,828         |  |                | $ | 93,757  |  |  | $ | 88,929  |  |  |  | 105 | %




|    |                 
|--- | ----------------
|(1) | Premiums Written

36



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##### Table of Contents



IPC HOLDINGS, LTD.

SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, in
Pembroke, Bermuda, on the 18th day of March, 2003.



| |                   
| | ------------------
| | IPC HOLDINGS, LTD.
|
| | /s/ JAMES P. BRYCE
| |                   

| |     |               
| | --- | --------------
| | By: | James P. Bryce

| |                                          
| | -----------------------------------------
| | President and Chief Executive
    Officer

Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, this report has been signed by
the following persons on behalf of the Registrant and in the
capacities indicated and on the dates indicated.

|                                                       |  |                                                                                     |  |               
|------------------------------------------------------ |  | ----------------------------------------------------------------------------------- |  | --------------
|Signature                                              |  | Title                                                                               |  | Date          
|                                                       |  |                                                                                     |  |               
|/s/ JOSEPH C.H. JOHNSONJoseph C.H. Johnson             |  | Chairman of the Board of Directors                                                  |  | March 18, 2003
|                                                      
|/s/ JAMES P. BRYCEJames P. Bryce                       |  | President, Chief Executive Officer and Director                                     |  | March 18, 2003
|                                                      
|/s/ JOHN R. WEALEJohn R. Weale                         |  | Senior Vice President, Chief Financial Officer
    and principal accounting officer |  | March 18, 2003
|                                                      
|/s/ FRANK MUTCHFrank Mutch                             |  | Deputy Chairman of Board of Directors                                               |  | March 18, 2003
|                                                      
|/s/ ANTHONY PILLINGAnthony M. Pilling                  |  | Director                                                                            |  | March 18, 2003
|                                                      
|/s/ CLARENCE JAMESDr. The Honourable Clarence E. James |  | Director                                                                            |  | March 18, 2003
|                                                      
|/s/ JACKIE CLEGGJackie Clegg                           |  | Director                                                                            |  | March 18, 2003

37



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##### Table of Contents



CERTIFICATIONS

I, James P. Bryce, certify that:

1.     I have reviewed
this annual report on Form 10-K of IPC Holdings, Ltd.;

2.     Based on my
knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;

3.     Based on my
knowledge, the financial statements, and other financial
information included in this annual report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;

4.     The
registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5.     The
registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of
registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6.     The
registrants other certifying officers and I have indicated
in this annual report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

Date: March 14, 2003



| |                        
| | -----------------------
| | /s/ JAMES P. BRYCE     
| |                        
| | James P. Bryce         
| | Chief Executive Officer

38



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##### Table of Contents



I, John R. Weale, certify that:

1.     I have reviewed
this annual report on Form 10-K of IPC Holdings, Ltd.;

2.     Based on my
knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;

3.     Based on my
knowledge, the financial statements, and other financial
information included in this annual report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;

4.     The
registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5.     The
registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of
registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6.     The
registrants other certifying officers and I have indicated
in this annual report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.

Date: March 14, 2003



| |                        
| | -----------------------
| | /s/ JOHN R. WEALE      
| |                        
| | John R. Weale          
| | Chief Financial Officer

39



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##### Table of Contents



EXHIBIT INDEX

|        |        |             |  |                                                                                                                                        |  |  |                | 
|------- | ------ | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  |  | -------------- | 
|Exhibit |        |             |  | Method                                                                                                                                
|Number  |        | Description |  | of filing                                                                                                                             
|        |        |             |  |                                                                                                                                       
|        | 3.1    |             |  | Memorandum of Association of the Company                                                                                               |  |  | *              | 
|        | 3.2    |             |  | Amended and Restated Bye-Laws of the Company                                                                                           |  |  | Filed herewith | 
|        | 3.3    |             |  | Form of Memorandum of Increase of Share Capital                                                                                        |  |  | *              | 
|        | 3.4    |             |  | Form of Registration Rights Agreement                                                                                                  |  |  | *              | 
|        | 4.1    |             |  | Form of Share Certificate                                                                                                              |  |  | *              | 
|        | 10.1   |             |  | Termination Agreement among the Company and its
    previous shareholders                                                              |  |  | *              | 
|        | 10.2   |             |  | Form of Amended and Restated Option Agreement
    entered into between the Company and AIG                                             |  |  | *              | 
|        | 10.3  |             |  | Amended and Restated IPC Holdings, Ltd. Stock
    Option Plan                                                                          |  |  | oo             | 
|        | 10.4  |             |  | IPCRe Defined Contribution Plan                                                                                                        |  |  | *              | 
|        | 10.5   |             |  | Amended and Restated Administrative Services
    Agreement among the Company, IPCRe and AICL                                           |  |  | *              | 
|        | 10.6   |             |  | Investment Management Agreement between IPCRe and
    AIGIC, as amended                                                                |  |  | **             | 
|        | 10.7   |             |  | Investment Sub-Advisory Agreement between AIGIC
    and AIGIC (Europe) (formerly known as Dempsey & Company
    International Limited) |  |  | *              | 
|        | 10.8   |             |  | Custodial Agreement between AIGTS and IPCRe                                                                                            |  |  | *              | 
|        | 10.9  |             |  | Retirement Agreement between IPCRe and James P.
    Bryce                                                                              |  |  | *              | 
|        | 10.10 |             |  | Retirement Agreement between IPCRe and Peter J.A.
    Cozens                                                                           |  |  | *              | 
|        | 10.11 |             |  | Amended and Restated IPC Holdings, Ltd. Deferred
    Compensation Plan                                                                 |  |  | o              | 
|        | 10.12  |             |  | Credit Agreement between IPCRe Limited, the First
    National Bank of Chicago, and other Lenders named therein, as
    amended        |  |  | ++             | 
|        | 10.13  |             |  | Form of Limited Waiver to Credit Agreement
    between IPCRe Limited, BankOne N.A. and other Lenders named
    therein                 |  |  | o              | 
|        | 10.14  |             |  | Purchase Agreement between the Company and AIG                                                                                         |  |  | #              | 
|        | 10.15  |             |  | Underwriting Agency Agreement between Allied
    World Assurance Company Ltd. and IPCUSL                                               |  |  |               | 
|        | 10.16  |             |  | Amended Schedule I (Investment Policy
    Guideline) to Investment Management Agreement between IPCRe and
    AIGIC                    |  |  |               | 
|        | 11.1   |             |  | Statement regarding Computation of Per Share
    Earnings                                                                              |  |  | Filed herewith | 
|        | 13.1   |             |  | Portions of the Annual Report incorporated herein
    by reference                                                                     |  |  | Filed herewith | 
|        | 16.1   |             |  | Letter of Arthur Andersen, dated June 21,
    2002                                                                                     |  |  | ##             | 
|        | 21.1   |             |  | Subsidiaries of the Registrant                                                                                                         |  |  | Filed herewith | 
|        | 23.1   |             |  | Consent of KPMG                                                                                                                        |  |  | Filed herewith | 




|   |  |                                                                                                                           
|-- |  | --------------------------------------------------------------------------------------------------------------------------
|*  |  | Incorporated by reference to the corresponding
    exhibit in our Registration Statement on Form S-1
    (No. 333-00088). 
|+  |  | Incorporated by reference to Exhibit 4.2 to
    our Registration Statement on Form S-3 (No. 333-73828).                   
|** |  | Incorporated by reference to Exhibit 10.1 to
    our Form 10-Q for the quarter ended June 30, 1997
    (File No. 0-27662).



---



##### Table of Contents



|   |  |                                                                                                                                          
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|++ |  | Incorporated by reference to Exhibits 10.1
    and 10.2 to our Form 10-Q for the quarter ended
    June 30, 1998 (File No. 0-27662).     
|o  |  | Incorporated by reference to Exhibits 10.1
    and 10.2 to our Form 10-Q for the quarter ended
    September 30, 1999 (File No. 0-27662).
|oo |  | Incorporated by reference to Exhibit 10.3 to
    our Form 10-K for the year ended December 31, 1999
    (File No. 0-27662).              
|#  |  | Incorporated by reference to Exhibit 10 to
    our Registration Statement on Form S-3 (No. 333-73828).                                   
|  |  | Incorporated by reference to Exhibit 10.3 to
    our Form 10-K for the year ended December 31, 2001
    (File No. 0-27662).              
|## |  | Incorporated by reference to Exhibit 16.1 to
    our Current Report on Form 8-K, dated as of June 14,
    2002.                          
|  |  | Management contract or compensatory plan,
    contract or arrangement.