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                                                                    Exhibit 10.5


            CATASTROPHE EQUITY SECURITIES ISSUANCE OPTION AGREEMENT

     This Catastrophe Equity Securities Issuance Option Agreement (this
"Agreement") is entered into as of July 1, 1999 between LaSalle Re Holdings
Limited, a Bermuda company ("Company"), on the one hand, and European
Reinsurance Company of Zurich, a corporation organized under the laws of
Switzerland; and Allianz Risk Transfer, a corporation organized under the laws
of Switzerland (each an "Option Writer" and collectively, "Option Writers"), on
the other hand.

                                    RECITALS

     WHEREAS, Company is a holding company with direct and indirect subsidiaries
which insure and/or reinsure, directly or through syndicates, property and
casualty insurance risks;

     WHEREAS, Option Writers are companies in the business of insuring and/or
reinsuring certain property/casualty insurance risks;

     WHEREAS, Company and Option Writers wish to enter into an arrangement under
which, during a specified time period, Company shall have the option  (the
"Securities Issuance Option", as defined in Article 1) to require Option Writers
to purchase up to 4,000,000 of the Series B Preferred Shares of Company (the
"Preferred Shares", as defined in Article 1) in the event that Company
Subsidiaries experience a Qualifying Catastrophic Event (as defined in Article
1); and

     WHEREAS, Company and Option Writers desire to memorialize their agreement
with respect to the Securities Issuance Option on the terms and conditions set
forth below;

     NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Company and Option Writers agree as follows:

                                   AGREEMENT

     1.  Definitions.  Terms used in this Agreement shall have the respective
meanings ascribed to them below.

         "A.M. Best Rating" means a rating of financial condition and
performance, as published from time to time, by A.M. Best Company.

         "Affiliate" of, or Person "affiliated" with, a specified Person means a
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled, by, or is under common control with, such specified Person.

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     "Agreement Year" means a one (1) year period, during the Exposure Period,
as follows: (a) the initial Agreement Year shall run from 12:00 a.m. midnight on
July 1, 1999 through 12:00 a.m. midnight on July 1, 2000. After 12:00 a.m. on
July 1, 2000, the initial Agreement Year shall automatically shift to the period
from 12:00 a.m. midnight on October 1, 1999 through 12:00 a.m. midnight on
October 1, 2000; provided, however, that with respect to any series of events
constituting a Qualifying Catastrophic Event which occurs during the period from
12:00 a.m. midnight on July 1, 1999 through 12:00 a.m. midnight on July 1, 2000,
Company shall retain the right to exercise the Securities Issuance Option during
the Exercise Term for such period (which Exercise Term shall end at 12:00 a.m.
midnight on July 1, 2001), and (b) subsequent Agreement Years shall begin at
12:00 a.m. midnight on October 1 and end at 12:00 a.m. midnight on the next
following October 1, provided, however, that at the end of the final Agreement
Year at 12:00 a.m. on October 1, 2002, the Option Writers shall have the option
to extend the Agreement, upon the unanimous consent of all Option Writers, for
the Extension Period (upon payment of the Option Fee for the Extension Period as
set forth in Section 2.2), in which case the final Agreement Year shall
automatically shift to the period from 12:00 a.m. midnight on July 1, 2002
through the end of the Extension Period, but Company shall retain the right to
exercise the Securities Issuance Option with respect to any series of events
constituting a Qualifying Catastrophic Event which occurs during the period from
12:00 a.m. midnight on October 1, 2001 through 12:00 a.m. midnight on October 1,
2002. All times listed above are Bermuda time.

     "Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in any of Hamilton, Bermuda; Zurich, Switzerland;
Munich, Germany;  or London, England, are not required to be open.

     "Certificate of Designation" means the Certificate of Designation,
Preferences and Rights of Series B Preferred Shares of LaSalle Re Holdings
Limited, in the form attached as Exhibit 1.1.

     "Change of Control" means the earlier to occur of (a) the date of a public
announcement that a Person or group of affiliated Persons (an "Acquiring
Person") has acquired, or has obtained the right to acquire, legal or beneficial
ownership of fifty percent (50%) or more of the voting power of the issued and
outstanding shares of Company or any Company Subsidiary, (b) the date an
Acquiring Person acquires fifty percent (50%) or more of the assets of Company,
or (c) the date of any amalgamation, consolidation or merger of Company with any
Acquiring Person. For purposes hereof, the term "Acquiring Person" shall not
include (i) Company, any of its Subsidiaries or any employee benefit plan (or
related trust) sponsored or maintained by Company or any of its Subsidiaries, or
(ii) any other person where sixty percent (60%) or more of the combined voting
power of such Person's issued and outstanding shares or capital stock is
beneficially owned, directly or indirectly, by the Persons who were the holders
of the voting shares of Company immediately prior to such acquisition,
amalgamation, consolidation or merger (as the case may be).

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     "Company" means LaSalle Re Holdings Limited, a Bermuda company.

     "Company Common Stock" means the common shares of Company, par value
US$1.00 per share.

     "Company Financial Statements" means the financial statements of Company
specified in Section 3.7.

     "Company Subsidiaries" means any or all of LaSalle Re Limited, an insurance
company formed under the laws of Bermuda, LaSalle Re Corporate Capital Ltd., a
company formed under the laws of Bermuda, and such other direct or indirect
Subsidiaries of Company as may be agreed in writing between Company and Option
Writers.

     "Credit Agreement" means that certain credit agreement, as amended, dated
as of December 1, 1995, among Company, several banks and The Chase Manhattan
Bank (formerly known as Chemical Bank), as administrative agent, or any
substitute or replacement credit agreement.

     "Effective Date" means July 1, 1999.

     "Event" means a "loss occurrence" as defined in any excess of loss property
catastrophe reinsurance agreement under which any Company Subsidiary incurs an
Ultimate Loss.

     "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended,
and all rules and regulations promulgated thereunder.

     "Exercise Date" means the date of purchase and sale of Preferred Shares
pursuant to an exercise of the Securities Issuance Option which date shall be
specified in the Notice of Exercise and shall be the later of thirty (30) days
following the delivery of the Notice of Exercise or ten (10) days following
receipt of all regulatory approvals applicable to Company in connection with
such purchase and sale of Preferred Shares (including without limitation any
necessary approvals by the Bermuda Monetary Authority or Registrar of
Companies), provided that the Exercise Date shall not be later than the one
hundred eightieth (180th) day after delivery of the Notice of Exercise, or such
later date, if any, as may be determined by alternative dispute resolution under
Article 8 of this Agreement, which date shall be ten (10) days after the
rendering of a final decision under Article 8.

     "Exercise Term" means (a) with respect to a single Event which (i) is a
windstorm, the one (1) year period commencing upon the occurrence of a
Qualifying Catastrophic Event and ending at 12:00 a.m. midnight Bermuda Time on
the first anniversary of such occurrence (as the same may be extended under
Section 2.4) during which Company has the right to exercise the Securities
Issuance Option, or (ii) is other than a windstorm, the eighteen (18) month
period commencing upon the occurrence of a Qualifying Catastrophic

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Event and ending at 12:00 a.m. midnight Bermuda Time on the date which is
eighteen (18) months following such occurrence (as the same may be extended
under Section 2.4) during which Company has the right to exercise the Securities
Issuance Option, or (b) with respect to a series of Events, the period
commencing upon the occurrence of a Qualifying Catastrophic Event and ending one
(1) year following the end of the Agreement Year during which such series of
Events occurs, which one (1) year period ends at 12:00 a.m. midnight Bermuda
Time on the July 1 or October 1, as applicable, next following the end of such
Agreement Year (as the same may be extended under Section 2.4), during which
Company has the right to exercise the Securities Issuance Option.

     "Exposure Period" means the three (3) year and three (3) month period
beginning at 12:00 a.m. midnight Bermuda Time on July 1, 1999 and ending at
12:00 a.m. midnight Bermuda Time on October 1, 2002, provided, however that the
Exposure Period may be extended for the Extension Period as set forth in this
Agreement.

     "Extension Period" means the nine (9) month period from 12:00 a.m. midnight
Bermuda time on October 1, 2002 through 12:00 a.m. midnight Bermuda time on July
1, 2003.

     "GAAP" means U.S. generally accepted accounting principles, consistently
applied.

     "GAAP Net Worth" means the amount equal to Company's consolidated
shareholders' equity plus minority interest, as determined in accordance with
GAAP.

     "Majority Option Interest" means more than fifty percent (50%) of the total
percentage interest in the Securities Issuance Option as set forth in Schedule
1.1, as the same may be amended.

     "Mean Risk of Ruin" means Company's mean probability of incurring aggregate
Ultimate Losses in excess of one hundred percent (100%) of Company's GAAP Net
Worth during any one (1) year period, calculated using the Proprietary Model.

     "Non-assessable" means, with respect to shares of the Company, that no
further sums are required to be paid by the registered holders thereof in
connection with the issue of such shares.

     "Non-Property Catastrophe Business" means Company's insurance and
reinsurance business other than:  property-risk excess and prorata business;
property catastrophe prorata business; and property catastrophe excess of loss
business.

     "Notice of Exercise" means the written notice of Company's intent to
exercise the Securities Issuance Option as described in Section 2.3.

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     "Notice of Objection" means Option Writers' written notice of objection to
a Notice of Exercise, as described in Section 2.3.

     "Option Fee" means the amounts paid by Company to Option Writers as
consideration for the Securities Issuance Option, as set forth in Section 2.1.

     "Option Writers" means, collectively, European Reinsurance Company of
Zurich, a corporation organized under the laws of Switzerland; and Allianz Risk
Transfer, a corporation organized under the laws of Switzerland; each of which
individually shall be (a) entitled to the financial benefits and privileges, and
subject to the financial burdens and obligations, of Option Writers under this
Agreement in accordance with its respective percentage interest as set forth in
the attached Schedule 1.1, (b) obligated to fully comply with all
representations, warranties, conditions, covenants and agreements applicable to
Option Writers under this Agreement (despite the fact that it may hold only a
percentage interest in the financial benefits, privileges, burdens and
obligations of Option Writers under this Agreement), and (c) referred to in this
Agreement as an "Option Writer".

     "Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, government (or an agency or political subdivision
thereof) or other entity of any kind.

     "Preferred Share Purchase Price" means the higher of US$25 or par value per
Preferred Share payable by Option Writers to Company as set forth in Section
2.3.

     "Preferred Shares" means the Series B Preferred Shares of LaSalle Re
Holdings Limited, current par value US$1.00 per share.

     "Proprietary Model" means the probability and risk analysis model developed
by the Company in the form utilized by the Company at the Effective Date,
subject to material modifications as agreed by the Company and Option Writers.

     "Qualifying Catastrophic Event" means (a) with respect to any single Event,
an Event occurring during the Exposure Period pursuant to which the Company
Subsidiaries incur an Ultimate Loss in excess of US$140,000,000 (the "Single
Event Attachment Point"), or (b) with respect to any series of Events during any
Agreement Year within the Exposure Period, a series of Events that, when
considered in the aggregate, cause the Company Subsidiaries to incur an Ultimate
Loss in excess of US$220,000,000 (the "Multiple Event Attachment Point").  The
Single Event Attachment Point and the Multiple Event Attachment Point shall be
modified as of the beginning of each new Agreement Year based on the projected
Company loss, as shown by the Proprietary Model, of (i) a U.S. overall loss
(with respect to the Single Event Attachment Point) for which the probability of
exceedence is 7.9%, and (ii) an aggregate loss (with respect to the Multiple
Event Attachment Point) for which the probability of exceedence is 14.5%.
Notwithstanding the foregoing, in no case shall (A) the Single Event Attachment
Point be less than US$140,000,000 or greater than US$200,000,000, and (B) the
Multiple

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Event Attachment Point be less than US$220,000,000 or greater than
US$250,000,000. No loss shall be included in the calculation of Ultimate Loss
for more than one Qualifying Catastrophic Event. Any Qualifying Catastrophic
Event that commences during the Exposure Period, whether or not it terminates
within the Exposure Period, shall be deemed to have occurred within the Exposure
Period. A single Event that has occurred during the Exposure Period but which
has not developed into a Qualifying Catastrophic Event prior to the first
anniversary of the Event (or eighteen (18) months following the date of the
Event if the Event is other than a windstorm) shall not constitute a Qualifying
Catastrophic Event for purposes of this Agreement. A single Event that has
occurred during the Exposure Period and which develops into a Qualifying
Catastrophic Event prior to the first anniversary of the Event (or eighteen (18)
months following the date of the Event if the Event is other than a windstorm),
but after expiration of the Exposure Period (as the same may be extended), shall
constitute a Qualifying Catastrophic Event for purposes of this Agreement. With
respect to a single Event which develops into a Qualifying Catastrophic Event,
such Qualifying Catastrophic Event shall be deemed to have occurred as of the
date such single Event occurred. A series of Events that has occurred during any
Agreement Year within the Exposure Period but which has not developed into a
Qualifying Catastrophic Event prior to the end of one (1) year following the end
of such Agreement Year shall not constitute a Qualifying Catastrophic Event for
purposes of this Agreement. A series of Events that has occurred during any
Agreement Year within the Exposure Period and which develops into a Qualifying
Catastrophic Event prior to the end of one (1) year following the end of such
Agreement Year, but after expiration of the Exposure Period, shall constitute a
Qualifying Catastrophic Event for purposes of this Agreement. With respect to a
series of Events which develops into a Qualifying Catastrophic Event, such
Qualifying Catastrophic Event shall be deemed to have occurred during the
Agreement Year in which such series of Events occurred.

     "Registration Rights Agreement" means the Registration Rights Agreement
described in Section 6.2.

     "Rule 144A" means Rule 144A of the General Regulations of the Securities
Act.

     "S&P Rating" means a claims payment ability rating or credit rating, as
applicable, as published from time to time, by the Standard & Poor's Division of
The McGraw-Hill Companies.

     "SEC" means the U.S. Securities and Exchange Commission.

     "SEC Filings" means all documents and reports filed by Company with the SEC
from November of 1995 through the date of this Agreement.

     "Securities Act" means the U.S. Securities Act of 1933, as amended, and all
rules and regulations promulgated thereunder.

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     "Securities Issuance Option" means Company's option to obligate Option
Writers to purchase up to 4,000,000 Preferred Shares, subject to the terms and
conditions set forth in this Agreement.

     "Subsidiary" means, with respect to any Person, any corporation or other
entity (including, without limitation, partnerships, joint ventures, and
associations) regardless of its jurisdiction of organization or formation, at
least a majority of the total combined voting power of all classes of voting
stock or other ownership interests of which shall, at the time of which any
determination is being made, be owned by such Person, either directly or
indirectly through one or more other Subsidiaries.

     "Transaction Agreements" means this Agreement, its schedules and exhibits,
the Registration Rights Agreement and the Certificate of Designation.

       "Ultimate Loss" means the actual direct losses (including all paid
losses, all reserves for unpaid losses (including without limitation outstanding
loss reserves and incurred but not reported loss reserves), loss adjustment
expense and coinsurance paid by the Company Subsidiaries) incurred by the
Company Subsidiaries after accounting for that certain U.S. Property Catastrophe
Quota Share Reinsurance Agreement effective April 1, 1999 which is maintained by
the Company with affiliates of the CNA Financial Corporation as if such
agreement were in force at all relevant times, but prior to accounting for any
other retrocessional reinsurance.

       "U.S." or "US" means the United States of America.

       "US$" means United States Dollars.  To the extent any losses, liabilities
or other amounts described or referred to in this Agreement are stated or
denominated in currencies other than United States Dollars, such losses,
liabilities or amounts shall be stated, for purposes of this Agreement, in their
respective United States Dollar equivalents as shown on the books of Company.


       2.  Securities Issuance Option.
           --------------------------

       2.1  Option Fee.  To acquire the right to exercise the Securities
Issuance Option during the Exercise Term with respect to a Qualifying
Catastrophic Event, Company shall pay to Option Writers a fee (the "Option Fee")
as set forth on the attached Schedule 2.1.  The first Option Fee payment shall
be delivered upon the later of the Effective Date or the date of execution of
this Agreement, the second and third Option Fee payments shall be delivered on
October 1, 2000 and October 1, 2001, respectively, and the Option Fee for the
Extension Period, if any, shall be delivered on October 1, 2002 (or if any such
date is not a Business Day, on the Business Day immediately following such
date).  In consideration of the payment of the Option Fee as may be required
under this Agreement, Option Writers hereby grant to

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Company the right to exercise the Securities Issuance Option on the terms set
forth in this Agreement.

       2.2  Exercise Rights.  Company shall have the right to exercise the
Securities Issuance Option one or more times with respect to any one Qualifying
Catastrophic Event, subject to the following limitations:

       a.  The Securities Issuance Option must be exercised with respect to
Preferred Shares having a minimum aggregate Preferred Share Purchase Price of
US$10,000,000 or an integral multiple of US$1,000,000 above such amount.

       b.  In no case shall the Preferred Shares issued pursuant to all
exercises of the Securities Issuance Option have an aggregate Preferred Share
Purchase Price of greater than US$100,000,000.

       c.  In no case shall the Securities Issuance Option be exercised more
than one time in any calendar quarter.

       2.3 Method of Exercise. In the event that Company desires to exercise the
Securities Issuance Option with respect to a Qualifying Catastrophic Event,
Company shall provide written notice to each Option Writer during the Exercise
Term of its intent to exercise the Securities Issuance Option (a "Notice of
Exercise"). The Notice of Exercise shall specify (a) the aggregate Preferred
Share Purchase Price for the Preferred Shares to be issued pursuant to the
exercise of the Securities Issuance Option and the proposed Exercise Date, and
(b) with respect to the applicable Qualifying Catastrophic Event, the amount of
the Ultimate Loss relating to such Qualifying Catastrophic Event, including the
amount of (i) paid losses, (ii) losses reported but not yet then paid, and (iii)
losses incurred but not yet then reported, including assumptions underlying the
calculation of item (iii). Following delivery of a Notice of Exercise in
accordance with Section 10.2, Option Writers shall have until the end of the
thirty (30) day period following delivery of the Notice of Exercise to
investigate whether the conditions to exercise of the Securities Issuance Option
set forth in Section 5.2 have been satisfied and shall, by the end of such
thirty (30) day period, if any Option Writer determines that such conditions
have not been satisfied, issue a Notice of Objection (as defined below);
provided, however, that if the Exercise Date is extended for more than an
additional thirty (30) days (beyond the initial thirty (30) day notice period)
as described in the definition of Exercise Date in Article 1 above, such Option
Writer shall have a period of ten (10) business days to update its
investigation, which ten (10) business day period shall commence on the date
which is the later of (a) the date that Company certifies to such Option Writer
that all conditions to exercise of the Securities Issuance Option set forth in
Section 5.2 have been satisfied, or (b) the thirtieth (30th) day preceding the
actual Exercise Date. In connection with such investigation, Company shall
provide or procure for such Option Writer, or its designated agent, reasonable
access to loss records of the applicable Company Subsidiaries relating to the
Qualifying Catastrophic Event in question (including, without limitation, policy
files, claim files, and loss and loss reserve files or information), during
normal business hours of the applicable Company

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Subsidiaries, in order to allow such Option Writer to undertake such
investigation. In the event that such Option Writer determines that the
conditions for exercise of Securities Issuance Option have not been met, such
Option Writer shall deliver a written notice of objection to exercise of the
Securities Issuance Option (the "Notice of Objection") to Company within such
thirty (30) day period or the ten (10) business day update period described
above, as applicable. Such Notice of Objection shall specify in reasonable
detail the reason(s) for such Option Writer's objection to the exercise of the
Securities Issuance Option. If, within twenty (20) days following delivery of
the Notice of Objection to Company, Company and such Option Writer cannot reach
an agreement regarding the exercise of the Securities Issuance Option, their
dispute shall be submitted to dispute resolution in accordance with Article 8
below. With respect to each Option Writer, in the event that such Option Writer
has not issued a Notice of Objection in accordance with this Section 2.3, such
Option Writer shall deliver, on the Exercise Date (or the next following
Business Day if the Exercise Date is not a Business Day), by wire transfer of
immediately available funds, in U.S. dollars, its percentage interest (as stated
in Schedule 1.1) of the aggregate Preferred Share Purchase Price specified in
the Notice of Exercise, against the delivery by Company of the corresponding
number of Preferred Shares.

       2.4 Extension of Exercise Term. Notwithstanding anything in this
Agreement to the contrary, in the event that Company files, prior to the end of
any Exercise Term, preliminary proxy materials with the SEC relating to a
submission to registered holders of Company Common Stock for approval of the
issuance of the Preferred Shares (or the issuance of shares of Company Common
Stock upon conversion of the Preferred Shares), as required by any exchange
listing or other regulatory requirements, the Exercise Term shall be extended by
a period of ninety (90) days plus, if any such materials are not reviewed by the
staff at the SEC within thirty (30) days, an additional number of days (not to
exceed fifteen (15) days in any event) equal to the number of days in excess of
thirty (30) between the filing of such preliminary materials with the SEC and
the initial receipt by Company of written comments from the SEC staff.


       3. Representations and Warranties of Company. Company represents and
warrants to Option Writers as follows (it being understood that, subject to the
terms of Section 10.11, the representations and warranties contained in Sections
3.1, 3.2, 3.3, 3.4, 3.5(a), 3.6, 3.7, 3.8 and 3.9 shall be deemed to be repeated
by Company on each Exercise Date):

       3.1 Existence and Qualifications. Company is a company duly organized,
validly existing and in compliance with filing requirements and payment of
government fees required under the laws of Bermuda, and each of the Company
Subsidiaries is a company duly organized, validly existing and in compliance
with filing requirements and payment of government fees required under the laws
of its respective place of domicile specified in Article 1 above. Subject to
obtaining Bermuda governmental approvals for issuance of the Preferred Shares,
Company has the full corporate power and authority to execute and deliver the
Transaction Agreements, and to perform its obligations under, and to consummate
the

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transactions contemplated by, the Transaction Agreements, including, without
limitation, the delivery of the Preferred Shares pursuant to the exercise of the
Securities Issuance Option as described in this Agreement.

       3.2 No Violation or Conflict. The execution and delivery by Company of
the Transaction Agreements, and the performance of Company under the Transaction
Agreements, do not violate or conflict with any applicable law, any provision of
Company's memorandum of association or Bye-laws or any order or judgment of any
court or other government agency applicable to Company or any of its assets or
any of the Company Subsidiaries, or any contractual restriction binding upon or
affecting Company or any of the Company Subsidiaries or their respective assets
(other than as set forth in the Credit Agreement).

       3.3 Consents. All Bermuda governmental and other consents that are
required to have been obtained by Company with respect to the execution and
delivery of this Agreement have been obtained and are in full force and effect
and all conditions of any such consents have been complied with or, will have
been obtained or complied with (as the case may be) as of the applicable
Exercise Date or prior to any conversion of Preferred Shares into Company Common
Stock, provided always that any information requested from the Option Writers
necessary in connection with such consent or obtaining the same shall have been
supplied in a timely manner (as the circumstances may warrant).

       3.4 Licenses and Permits. The Company Subsidiaries have all requisite
material licenses, permits and authority (collectively, "Licenses") that are
necessary for the conduct of their respective insurance businesses, such
Licenses are in full force and effect, and no proceeding is pending or, to
Company's knowledge, threatened to suspend, revoke or limit any License which is
material to the operations of any such Company Subsidiaries.

       3.5  Absence of Litigation.
            ---------------------

            a. There is not pending or to its knowledge threatened, against
Company or the Company Subsidiaries, any action, suit or proceeding before any
court, tribunal, governmental body, agency or official or any arbitrator or
mediator that would reasonably be expected to materially and adversely affect
the legality, validity and enforceability against Company of any Transaction
Agreement.

            b. There is not pending or to its knowledge threatened, against the
Company or the Company Subsidiaries, any action, suit or proceeding before any
court, tribunal, governmental body, agency or official or any arbitrator or
mediator that, if adversely determined, could reasonably be expected to
materially and adversely affect the financial condition of the Company or any
Company Subsidiary.

       3.6 Options or Other Rights. Except for this Agreement, there is no
outstanding right, subscription, warrant, call, unsatisfied preemptive right,
option or other

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agreement of any kind to purchase or otherwise to receive from Company any
Preferred Shares, except as set forth in the Credit Agreement with respect to
the preferred shares of LaSalle Re Limited.

     3.7 Financial Statements. Company has furnished, or will upon request
furnish, Option Writers with true and complete copies of its audited
consolidated balance sheets as of September 30, 1996, 1997 and 1998 and audited
consolidated statements of operations for the periods ended September 30, 1996,
1997 and 1998 (collectively the "Company Financial Statements"). The Company
Financial Statements have been prepared in accordance with GAAP and present
fairly in all material respects the financial position of Company and the
results of its operations as of the dates indicated and for the periods then
ended.

     3.8 Binding Obligations. The execution of the Transaction Agreements has
been duly authorized by all necessary corporate action of Company, and such
Transaction Agreements (a) have been duly executed and delivered by Company, (b)
constitute legal, valid and binding obligations of Company, and (c) are
enforceable against Company in accordance with their terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general application).

     3.9 Preferred Shares. Company has, or will have as of the applicable
Exercise Date, authority to issue Preferred Shares with an aggregate Preferred
Share Purchase Price of US$100,000,000, and such Preferred Shares, when issued
pursuant to the exercise of the Securities Issuance Option, shall, upon delivery
of payment therefor, be validly issued, fully paid and Non-assessable. Upon
issuance pursuant to this Agreement, the Preferred Shares shall be free and
clear of any lien, encumbrance or other restriction (except as otherwise set
forth in the Transaction Agreements and in any consent issued by the Bermuda
Monetary Authority, provided always that Company shall use reasonable efforts to
have removed any restriction contained in such consent affecting the
transferability of the Preferred Shares), and upon delivery of and payment for
the Preferred Shares as provided in this Agreement, Option Writers will acquire
good title to the Preferred Shares purchased under this Agreement, free and
clear of any lien, encumbrance or other restriction (except as otherwise set
forth in the Transaction Agreements and in any consent issued by the Bermuda
Monetary Authority, provided always that Company shall use reasonable efforts to
have removed any restriction contained in such consent affecting the
transferability of the Preferred Shares to persons not designated as being
resident in Bermuda for foreign exchange control purposes).

     3.10 Company Common Stock. The shares of Company Common Stock into which
the Preferred Shares may be converted, as set forth in the Certificate of
Designation, shall, upon conversion, be validly issued, fully paid and Non-
assessable. Such shares of Company Common Stock shall be free and clear of any
lien, encumbrance or other restriction (except as otherwise set forth in the
Transaction Agreements and in any consent issued by the Bermuda Monetary
Authority, provided always that Company shall use reasonable efforts to

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have removed any restriction contained in such consent affecting the
transferability of the Preferred Shares), and upon conversion as provided in the
Certificate of Designation, Option Writers will acquire good title to the number
of shares of Company Common Stock into which such Preferred Shares are
converted, free and clear of any lien, encumbrance or other restriction (except
as otherwise set forth in the Transaction Agreements and in any consent issued
by the Bermuda Monetary Authority, provided always that Company shall use
reasonable efforts to have removed any restriction contained in such consent
affecting the transferability of the Preferred Shares to persons not designated
as being resident in Bermuda for foreign exchange control purposes). Such shares
of Company Common Stock shall be subject to the Registration Rights Agreement
described in Section 6.2.

       3.11 No Insolvency or Bankruptcy. Neither Company nor LaSalle Re Limited
(a) is the subject of any voluntary or involuntary petition under any
bankruptcy, insolvency or similar law affecting creditors generally, (b) is the
subject of any liquidation, transformation or rehabilitation proceeding, or (c)
has had a receiver or similar person or entity appointed for any of its
property.

     Notwithstanding the foregoing, (a) a breach of the representations and
warranties contained in Section 3.1, 3.2, 3.3, 3.4, 3.8 or 3.9 at any Exercise
Date shall prevent exercise of the Securities Issuance Option unless and until
such breach is cured in accordance with Section 10.11, and (b) a breach of the
representations and warranties contained in Sections 3.5(a), 3.6 or 3.7 at any
Exercise Date shall not in any way prevent or delay exercise of the Securities
Issuance Option. Notwithstanding the preceding sentence, each party shall have
the right to recover damages that may be available at law from any other party
for any loss or injury that is caused by any inaccuracy or breach of any
representation or warranty made by such other party.


     4. Representations and Warranties of Option Writers. Each Option Writer
represents and warrants to Company as follows (it being understood that, subject
to the terms of Section 10.11, the representations contained in Sections 4.1,
4.2, 4.3, 4.4 and 4.5 shall be deemed to be repeated by each Option Writer on
each Exercise Date:

       4.1 Existence and Qualifications of Option Writers. Each Option Writer is
a corporation duly organized, validly existing and in compliance with filing
requirements and payment of government fees required under the laws of its
respective domicile as set forth on Schedule 1.1, and each Option Writer has the
full corporate power and authority to execute and deliver the Transaction
Agreements, and to perform its obligations under, and consummate the
transactions contemplated by, the Transaction Agreements, including, without
limitation, the purchase of the Preferred Shares pursuant to the exercise of the
Securities Issuance Option by Company as described in this Agreement.

       4.2 No Violation or Conflict. The execution and delivery of the
Transaction Agreements by each Option Writer, and the performance of each Option
Writer under the

                                      12
<PAGE>

Transaction Agreements, do not violate or conflict with any applicable law, any
provision of such Option Writer's organizational documents or any order or
judgment of any court or other government agency applicable to such Option
Writer (or any of its assets or subsidiary or affiliated companies to the extent
any such order or judgment would have a material adverse effect on the rights or
privileges of Company under this Agreement), or any contractual restriction
binding upon or affecting such Option Writer (or any of its subsidiary or
affiliated companies or its assets to the extent any such restriction would have
a material adverse effect on the rights or privileges of Company under this
Agreement).

       4.3 Consents. All governmental and other consents that are required to
have been obtained by each Option Writer with respect to the execution and
delivery of this Agreement have been obtained by such Option Writer and are in
full force and effect and all conditions of any such consents have been complied
with.

       4.4 Absence of Litigation. There is not pending or to its knowledge,
threatened against any Option Writer or any of its Subsidiaries or Affiliates,
any action, suit or proceeding before any court, tribunal, governmental body,
agency or official or any arbitrator or mediator that would reasonably be
expected to materially and adversely affect the legality, validity and
enforceability against such Option Writer of any Transaction Agreement.

       4.5 Investment Representation. Each Option Writer understands that the
issuance of Preferred Shares under this Agreement and the issuance of Company
Common Stock upon conversion of Preferred Shares have not been and will not
(except as set forth in the Registration Rights Agreement) be registered under
the Securities Act and such Preferred Shares and Company Common Stock will be
issued in reliance upon the exemption afforded by Section 4(2) of the Securities
Act for transactions by an issuer not involving any public offering. Each Option
Writer represents that (a) it is acquiring the Preferred Shares and such Company
Common Stock solely for its own account, for investment purposes only, and not
with a view to distribution, fractionalization or resale thereof, (b) it will
not sell or otherwise dispose of the Preferred Shares or such Company Common
Stock except in compliance with the registration requirements or exemption
provisions of applicable securities laws including the Securities Act, (c) it
has not relied on Company for any explanation of the application of the various
U.S. state and federal securities laws with regard to the acquisition of the
Preferred Shares and such Company Common Stock, (d) it has access to complete
information regarding the business and finances of Company, and has received,
read and understood the contents of the SEC Filings, (e) it has such knowledge
and experience in business and financial matters that it has been able to fully
understand and completely evaluate the risks and merits of holding the Preferred
Shares and such Company Common Stock as provided in this Agreement, and (f) it
is able to bear the economic risk and limitation in liquidity of an investment
in the Preferred Shares and such Company Common Stock.

       4.6 Binding Obligations. The execution of the Transaction Agreements has
been duly authorized by all necessary corporate action of each Option Writer,
and such Transaction Agreements (a) have been duly executed and delivered by
each Option Writer, (b)

                                      13
<PAGE>

constitute legal, valid and binding obligations of each Option Writer, and (c)
are enforceable against each Option Writer in accordance with their terms
(subject to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application).

     Notwithstanding the foregoing, each party shall have the right to recover
damages that may be available at law from any other party for any loss or injury
that is caused by any inaccuracy or breach of any representation or warranty
made by such other party.


     5.   Conditions.
          ----------

          5.1  Conditions to Effectiveness of Agreement. The effectiveness of
this Agreement shall be subject to the satisfaction by Company at, or waiver by
Option Writers at or prior to its execution and delivery, of the following
conditions (it being understood that unless Option Writers make an objection at
or prior to such execution and delivery, this Agreement shall be deemed
effective for all purposes upon such execution and delivery):

               a.   Registration Rights Agreement. Company and Option Writers
shall have entered into the Registration Rights Agreement as described in
Section 6.2.

               b.   Compliance with Laws and Consents. Company shall have
complied with all laws and regulations applicable to the authorization and
issuance of the Preferred Shares and, subject to the following sentence, the
conversion of Preferred Shares into Company Common Stock, including the adoption
or authorization by the Board of Directors of Company of the Certificate of
Designation. Company and Option Writers shall have obtained all consents and
approvals (whether shareholder, regulatory, contractual or otherwise) necessary
for the authorization and issuance of the Preferred Shares (other than as set
forth in the Credit Agreement), the conversion of the Preferred Shares into
Company Common Stock, and the authorization and issuance of such Company Common
Stock, including without limitation the approval of any applicable insurance
regulatory body or agency, and the approval of any filing or application
required under applicable securities laws (whether of Bermuda, the U.S., any
state of the U.S., or any other applicable jurisdiction), provided, however,
that if any insurance regulator shall for any reason decline to approve the
conversion of the Preferred Shares and/or the issuance of Company Common Stock
pursuant to such conversion, but shall approve the authorization and issuance of
the Preferred Shares, then such approval of the conversion of the Preferred
Shares and/or the issuance of Company Common Stock pursuant to such conversion,
as applicable, shall not be a condition to exercise of the Securities Issuance
Option, provided further, however, that Company has reasonably cooperated with
Option Writers to obtain such approvals. Notwithstanding the foregoing, if any
consent, approval or other matter necessary for conversion of the Preferred
Shares into Company Common Stock is of such a nature that it cannot be obtained
or achieved until at or about the time of such conversion (including without
limitation the approvals of any members of the Board of Directors of Company
required under the Bermuda Companies Act of 1981, as

                                      14
<PAGE>

amended, or other applicable law), then such consent, approval or other matter
shall not be a condition to exercise of the Securities Issuance Option.

               c.   No Insolvency or Bankruptcy. Neither Company nor LaSalle Re
Limited (a) is the subject of any voluntary or involuntary petition under
bankruptcy, insolvency or similar law affecting creditors generally (provided,
however, that Company or LaSalle Re Limited, as applicable, shall not be in
breach of this condition with respect to an involuntary petition unless such
involuntary petition is not dismissed within sixty (60) days following Company's
or LaSalle Re Limited's receipt of notice of the filing of such petition), (b)
is the subject of any liquidation, transformation or rehabilitation proceeding,
or (c) has had a receiver or similar person or entity appointed for any of its
property.

          5.2 Conditions to Exercise of Securities Issuance Option. The right of
Company to exercise the Securities Issuance Option (or any increment of the
Securities Issuance Option) shall be subject to the satisfaction by Company at,
or waiver by Option Writers at or prior to, the Exercise Date, of the following
conditions:

               a.   Occurrence of Event. A Qualifying Catastrophic Event shall
have occurred with respect to the Company Subsidiaries.

               b.   Company Net Worth. After accounting for the applicable
Qualifying Catastrophic Event, Company's GAAP Net Worth shall not be less than
US$175,000,000, provided, however, that in no case will Preferred Shares
previously issued or proposed to be issued be included in such GAAP Net Worth
calculation.

               c.   Review of Financial Statements by Auditor. Company's regular
outside auditor or accounting firm shall have reviewed Company's consolidated
balance sheet and statement of operations for the most recent quarter ending
prior to the date of the applicable Notice of Exercise, and shall have issued a
review report solely to the Option Writers on such quarterly financial
statements. In addition, Company shall have provided an adjusted consolidated
balance sheet for Company as at the applicable Exercise Date, and Company shall
have represented and warranted, as of such Exercise Date, that such adjusted
consolidated balance sheet presents fairly, in all material respects, the
financial position of Company as of the date indicated.

               d.   No Insolvency or Bankruptcy. Neither Company nor LaSalle Re
Limited shall (a) be the subject of any voluntary or involuntary petition under
bankruptcy, insolvency or similar law affecting creditors generally (provided,
however, that Company or LaSalle Re Limited, as applicable, shall not be in
breach of this condition with respect to an involuntary petition unless such
involuntary petition is not dismissed within sixty (60) days following Company's
or LaSalle Re Limited's receipt of notice of the filing of such petition), (b)
be the subject of any liquidation, transformation or rehabilitation proceeding,
or (c) has had a receiver or similar person or entity appointed for any of its
property.

                                      15
<PAGE>

               e. Payment of Fees. All Option Fee payments then due shall have
been paid in full.

               f. Certification. With respect to any exercise of the Securities
Issuance Option, Company shall deliver to Option Writers, at or prior to the
applicable Exercise Date, a certificate, in the form attached as Exhibit 5.2(f),
executed by a duly authorized officer of Company and dated as of such Exercise
Date, provided, however, that in accordance with Article 3, the failure to
include, in such certificate, references to truth and accuracy of the
representations and warranties in any or all of Sections 3.5, 3.6 or 3.7 shall
not in any way prevent or delay such exercise of the Securities Issuance Option.

               g. Legal Opinion. With respect to the first exercise of the
Securities Issuance Option only, Option Writers shall have received, from
special counsel for Company, an opinion of counsel, dated on or about the
Exercise Date, which is substantially in the form attached as Exhibit 5.2(g).

               h. Credit Agreement. Company shall have satisfied its obligation
under Section 6.15 below.

               i. Amendment of Certain Documents. Company shall not, without the
prior approval of the holders of at least seventy-five percent (75%) of the
total percentage interest in the Securities Issuance Option as set forth in
Schedule 1.1, have amended the Bye-Laws in any manner which would materially and
adversely affect the ability of any Option Writer to purchase, transfer or
convert Preferred Shares as described in this Agreement.

     6.   Covenants and Agreements.

          6.1  Preferred Shares. In the event of the issuance of Preferred
Shares pursuant to an exercise of the Securities Issuance Option, such Preferred
Shares shall be subject to, and governed by, the provisions of the Certificate
of Designation and the Bye-laws of Company.

          6.2  Registration Rights. Concurrently with this Agreement, Company
and Option Writers shall enter into the Registration Rights Agreement,
substantially in the form attached as Exhibit 6.2.

          6.3  Preferred Share Resale Rights.

               a. The Preferred Shares will be freely transferable subject only
to the following sentence and to restrictions imposed by U.S. federal and state
securities laws, Bermuda regulatory authorities and the Bye-laws of Company.
Subject to the provisions of Section 6.14 below, (1) any transfer of Preferred
Shares during the first three (3) years following issuance of such Preferred
Shares shall require the prior written consent of the

                                      16
<PAGE>

Company, which consent shall not be unreasonably withheld, and (2) any transfer
of Preferred Shares after the first three (3) years following issuance of such
Preferred Shares shall require at least ten (10) days prior written notice to
the Company, and the Company shall have five days following receipt of such
notice to provide the proposed transferor with a list, not to exceed ten (10)
Persons, of "Prohibited Transferees" to which the proposed transferor will be
prohibited from transferring any Preferred Shares. For purposes of this Section
6.3(a), Prohibited Transferees shall include each of the up to ten (10) Persons
whose names are set forth on the list described above and all Affiliates of each
such Person. The provisions of this Section 6.3(a) shall apply to all transfers
of Preferred Shares, whether by an Option Writer or otherwise.

               The certificates evidencing the Preferred Shares shall bear
legends on the front and back which evidences restrictions upon transferability
of the Preferred Shares. The legend on the front of each certificate shall read
as follows:

     THIS CERTIFICATE IS RESTRICTED FROM TRANSFER AS INDICATED ON THE REVERSE
     SIDE.

The legend on the reverse side of each certificate shall read as follows:

     ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE, OR OTHER DISPOSITION OF THE SHARES
     REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO ALL OF THE PROVISIONS OF THE
     BYE-LAWS OF THE COMPANY AS THEY MAY BE AMENDED FROM TIME TO TIME, AND THE
     CATASTROPHE EQUITY SECURITIES ISSUANCE OPTION AGREEMENT DATED AS OF JULY 1,
     1999 BETWEEN THE COMPANY AND EUROPEAN REINSURANCE COMPANY OF ZURICH, A
     CORPORATION ORGANIZED UNDER THE LAWS OF SWITZERLAND; AND ALLIANZ RISK
     TRANSFER, A CORPORATION ORGANIZED UNDER THE LAWS OF SWITZERLAND; WHICH ARE
     AVAILABLE FOR EXAMINATION BY HOLDERS OF SHARES AT THE REGISTERED OFFICE OF
     THE COMPANY. IN ADDITION TO THE FOREGOING RESTRICTIONS, THESE SHARES HAVE
     NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT")
     OR ANY UNITED STATES SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR
     OTHERWISE DISPOSED OF UNLESS (I) A REGISTRATION STATEMENT IS IN EFFECT
     UNDER THE SECURITIES ACT WITH RESPECT TO SUCH SHARES OR A WRITTEN OPINION
     OF COUNSEL ACCEPTABLE TO THE COMPANY IS OBTAINED TO THE EFFECT THAT NO SUCH
     REGISTRATION IS REQUIRED AND (II) EXCEPT IN THE CASE OF PUBLICLY TRADED

                                      17
<PAGE>

     SHARES, THE TRANSFEREE IS OTHERWISE APPROVED BY APPLICABLE BERMUDA
     REGULATORY AUTHORITIES.

The legends shall be removed from any Preferred Share Certificates as to which,
in an opinion of counsel reasonably satisfactory to Company (which opinion shall
be paid for solely by the registered holder of such Preferred Shares), such
registration described in the legends is not necessary or required, and that the
transfer will not otherwise violate this Agreement, the Securities Act, the
Exchange Act, or applicable securities laws, and does not require the approval
of any Bermuda regulatory authorities; and any stop transfer instructions
previously given to Company's transfer agent shall be revoked as to such
Preferred Shares upon the delivery of the opinion of counsel described above.

               b.   The shares of Company Common Stock into which the Preferred
Shares may be convertible may be subject to registration as contemplated by the
Registration Rights Agreement.

               Prior to the registration of any shares of Company Common Stock
into which the Preferred Shares are converted, pursuant to the Registration
Rights Agreement or otherwise, the certificates representing such shares of
Company Common Stock shall bear legends on both the front and back which
evidence restrictions upon transferability of such shares of Company Common
Stock. The legend on the front of each certificate shall read as follows:

     THIS CERTIFICATE IS RESTRICTED FROM TRANSFER AS INDICATED ON THE REVERSE
     SIDE.

The legend on the reverse side of each certificate shall read as follows:


     ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE, OR OTHER DISPOSITION OF THE SHARES
     REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO ALL OF THE PROVISIONS OF THE
     BYE-LAWS OF THE COMPANY AS THEY MAY BE AMENDED FROM TIME TO TIME, WHICH ARE
     AVAILABLE FOR EXAMINATION BY HOLDERS OF SHARES AT THE REGISTERED OFFICE OF
     THE COMPANY. IN ADDITION TO THE FOREGOING RESTRICTIONS, THESE SHARES HAVE
     NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT")
     OR ANY UNITED STATES SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR
     OTHERWISE DISPOSED OF UNLESS (I) A REGISTRATION STATEMENT IS IN EFFECT
     UNDER THE SECURITIES ACT WITH RESPECT TO SUCH SHARES OR A WRITTEN OPINION
     OF COUNSEL ACCEPTABLE TO THE COMPANY IS OBTAINED TO THE EFFECT THAT NO SUCH
     REGISTRATION IS REQUIRED AND (II) EXCEPT IN THE CASE OF

                                      18
<PAGE>

          PUBLICLY TRADED SHARES, THE TRANSFEREE IS OTHERWISE APPROVED BY
          APPLICABLE BERMUDA REGULATORY AUTHORITIES.

The legends shall be removed from any certificate representing either (a) shares
of Company Common Stock sold under an effective registration statement under the
Securities Act in a sale approved by applicable Bermuda regulatory authorities,
or (b) shares of Company Common Stock as to which, in an opinion of counsel
reasonably satisfactory to Company (which opinion shall be paid for solely by
the registered holder of such shares of Company Common Stock), such registration
is not necessary or required, and that the transfer will not otherwise violate
the Securities Act, the Exchange Act, or applicable securities laws, and does
not require the approval of any Bermuda regulatory authorities; and stop
transfer instructions previously given to Company's transfer agent shall be
revoked as to such shares of Company Common Stock upon the occurrence of (a) or
(b) above.

          6.4 Preferred Share Liquidation Preference. The liquidation preference
of the Preferred Shares shall be at least equal to the highest liquidation
preference of any other class of shares of Company issued and outstanding at the
time of liquidation. During the period that the Securities Issuance Option
remains exercisable under this Agreement, and during any period when Preferred
Shares remain issued and outstanding following issuance under this Agreement,
Company shall not issue any debt securities convertible into equity securities
of Company or any preferred shares or other class of shares of Company which
ranks senior to the Preferred Shares with respect to dividend or distribution
rights or rights to distributions on liquidation without the prior written
approval, which approval shall not be unreasonably withheld, of (a) the holders
of the Majority Option Interest if no Preferred Shares are issued or
outstanding, or (b) if Preferred Shares are then issued and outstanding, the
registered holders of more than fifty percent (50%) of such Preferred Shares.

          6.5 Restrictions on Company. During the period when any Preferred
Shares remain issued and outstanding, without the prior written consent of the
registered holders of more than fifty percent (50%) of such Preferred Shares,
which consent shall not be unreasonably withheld, (a) Company shall not dispose
of any of its interest in any of its Subsidiaries, and (b) Company and the
Company Subsidiaries shall not (i) except in the ordinary course of business,
make any loan or advance to, or investment in, any person or entity, or (ii)
enter into related party transactions at other than arm's length.

          6.6 Option Writers' Securities Filings. Notwithstanding anything in
the Agreement to the contrary, each Option Writer shall be responsible for
making any regulatory filing required of it under Section 13(d) or Section 16 of
the Exchange Act, but the making of any such filings shall not be a condition to
the exercise of the Securities Issuance Option.

          6.7 Regulatory Filings for Conversion. Company, Option Writers and
their respective Affiliates shall make all regulatory filings which are
necessary or desirable to permit Option Writers to convert any Preferred Shares
into shares of Company Common Stock in

                                      19
<PAGE>

accordance with the terms of the Certificate of Designation as promptly as
possible following any request by Option Writers. Option Writers and Company
shall cooperate and use reasonable efforts to obtain any insurance and other
regulatory approvals for such conversion which have not previously been
obtained.

          6.8  Change of Control.  In the event of a Change of Control:

               a. If all or any portion of the Securities Issuance Option
remains unexercised, this Agreement shall automatically be terminated in
accordance with Section 7.2 unless such Change of Control shall have received
the prior approval of the holders of the Majority Option Interest. In the event
such Change of Control is so approved, this Agreement shall remain in full force
and effect.

               b. If any Preferred Shares are then issued and outstanding,
unless such Change of Control is approved by the registered holders of such
Preferred Shares as set forth in the Certificate of Designation, or unless such
Change of Control involves a sale of all or substantially all Company's assets
(in which case holders of the Preferred Shares shall have no voting or approval
rights as stated in the Certificate of Designation), the respective rights,
privileges and obligations of Company and such registered holders shall, subject
to the provisions of Section 42 of the Bermuda Companies Act of 1981 being
satisfied (if applicable), be as set forth in the Certificate of Designation.

          Notwithstanding the foregoing, the termination of this Agreement shall
not affect any rights or obligations arising out of or relating to events
occurring or circumstances existing prior to such termination.

          6.9 Information Supplied by Company. Company shall provide Option
Writers with such information as Option Writers may reasonably request in order
to determine whether Company has satisfied the conditions to exercise set forth
in Section 5.2 of this Agreement.

          6.10  [Untitled.]




                   [This Section Intentionally Left Blank.]





          6.11 Operational Covenant. Company shall comply with the operational
covenant set forth in the attached Exhibit 6.11.

                                      20
<PAGE>

          6.12  Option Writer Credit Support.  An Option Writer shall, promptly
upon request by Company, in the event that the S&P Rating of such Option Writer
falls below AA- or the A.M. Best Rating of such Option Writer falls below A-
during any period in which Company has the ability to exercise the Securities
Issuance Option, (a) purchase at such Option Writer's sole expense an
irrevocable standby letter of credit, from a financial institution reasonably
acceptable to Company, which letter of credit secures the performance of such
Option Writer under this Agreement and is issued by a bank which maintains an
S&P Rating of AA-, or (b) otherwise obtain credit support reasonably approved by
and acceptable to Company with respect to the obligations of such Option Writer
under this Agreement, which credit support may include a guaranty, in form and
substance reasonably acceptable to Company, from an affiliate of Option Writer
which maintains, throughout the period such guaranty is effective, an S&P Rating
of at least AA- or an A.M. Best Rating of at least A-.  Such letter of credit
shall remain in effect until the earlier of (a) five (5) days following the end
of the period during which Company has the ability to exercise the Securities
Issuance Option, or (b) the date that the rating(s) whose fall triggered the
credit support obligation in the first sentence of this Section 6.12 returns to
the requisite minimum level so that the S&P Rating of such Option Writer shall
again be at least AA-, and/or the A.M. Best Rating of such Option Writer shall
again be at least A-.  Such letter of credit shall initially be in a principal
amount equal to such Option Writer's percentage interest in the aggregate
Preferred Share Purchase Price of the Preferred Shares covered by any then
unexercised portion of the Securities Issuance Option, if any, and shall
subsequently be adjusted from time to time based on the aggregate Preferred
Share Purchase Price of the Preferred Shares subject to exercise under the
Securities Issuance Option.

          6.13  Indebtedness.  Company shall comply with the covenants regarding
indebtedness set forth on the attached Schedule 6.13.

          6.14  Additional Covenants.  Company shall comply with the additional
covenants set forth on the attached Exhibit 6.14.

          6.15  Credit Agreement.  To the extent the Credit Agreement contains
provisions which would materially and adversely affect Company's ability to
perform under this Agreement (including without limitation its ability to issue,
and pay dividends on, any Preferred Shares), or any Option Writer's ability to
purchase, transfer or convert Preferred Shares as described in this Agreement,
Company shall, prior to any Exercise Date, either (a) obtain an amendment to the
Credit Agreement which modifies or deletes any such Credit Agreement provisions
(provided that any such amendment does not create any new provisions which would
materially and adversely affect Company's ability to perform under this
Agreement, or any Option Writer's ability to purchase, transfer or convert
Preferred Shares as described in this Agreement), or (b) otherwise take action
reasonably acceptable to such Option Writer to ensure that such Credit Agreement
provisions are then no longer applicable.  If Company provides Option Writers
with a copy of an amended Credit Agreement or any substitute or replacement
credit agreement pursuant to this Section 6.15, and an Option Writer

                                      21
<PAGE>

shall not have objected in writing to any provision of such amended Credit
Agreement or substitute or replacement credit agreement as being inconsistent
with Company's obligation under this Section 6.15 within thirty (30) days after
delivery by Company, Company shall be deemed to have satisfied its obligation
under this Section 6.15 with respect to such Option Writer.

          6.16 Notices. Company shall promptly give notice to the Option Writers
of (a) any material breach of the representations and warranties contained in
Article 3 above of which the Chairman, President, Chief Financial Officer or the
Chief Underwriting Officer of Company become aware, and (b) any action, suit or
proceeding before any court, tribunal, governmental body, agency or official or
any arbitrator or mediator that is not covered by insurance or in which
injunctive or similar relief is sought which, if adversely determined, could
reasonably be expected to materially and adversely affect the financial
condition of the Company or any Company Subsidiary.



     7.   Termination.  This Agreement and the transactions contemplated by
this Agreement shall be terminated:

          7.1  By mutual written consent signed by Company and Option Writers at
any time prior to the end of the Exposure Period, in which case Option Writers
shall refund to Company a prorata portion of the annual Option Fee previously
paid for the then current year;

          7.2 Upon a Change of Control occurring while all or any portion of the
Securities Issuance Option remains unexercised, which Change of Control has not
received the prior approval of the Option Writers as set forth in Section
6.8(a), in which case Option Writers shall refund to Company a prorata portion
of the percentage of the annual Option Fee previously paid for the then current
year which is allocable to any then unexercised portion of the Securities
Issuance Option (provided, however, that the provision in the last paragraph of
Section 6.8 shall apply with respect to any Preferred Shares then outstanding);
or

          7.3  Upon the latest of:

               a.  Expiration of the Exposure Period;

               b.  Expiration of the Exercise Term for the latest Qualifying
Catastrophic Event (including an Event that develops into a Qualified
Catastrophic Event outside the Exposure Period);

               c.  The Exercise Date for which a Notice of Exercise was properly
delivered during the Exercise Term, as such date may be extended pursuant to the
submission of any matter to alternative dispute resolution under Article 8; or

                                      22
<PAGE>

               d. The first day on which no Preferred Shares issued pursuant to
this Agreement (including without limitation Preferred Shares issued on the
Exercise Date specified in paragraph (c) of Section 7.3) remain issued and
outstanding.


     8.   Alternative Dispute Resolution. Any dispute arising out of or in
connection with this Agreement, including any question regarding its existence,
validity or termination shall be referred to and finally resolved by arbitration
under the UNCITRAL model law.  There shall be a panel of three arbitrators.
Company shall appoint one arbitrator and the applicable Option Writer shall
appoint one arbitrator and the two arbitrators thus appointed shall appoint the
third.  If a party fails to appoint the arbitrator within thirty (30) days of
receipt of a request to do so from the other party, or if the two arbitrators
fail to agree on the third arbitrator within thirty (30) days of their
appointment, the appointment shall be made, upon request of a party, by the
Supreme Court of Bermuda.  The place of arbitration shall be Bermuda at the
Bermuda International Commercial Arbitration Centre and the language of the
arbitration shall be English.  Judgment upon the award entered by the
arbitrators may be entered in any court having jurisdiction thereof. The costs
and expenses of the arbitration shall be borne equally by the parties involved,
and any interest and fees and expenses of counsel shall be borne as the
arbitrators consider just under the circumstances, as directed in the award.  In
the event that a Notice of Objection specifies failure to satisfy the condition
in Section 5.2(a) as a reason for such Notice of Objection, then any dispute
over satisfaction of such Section 5.2(a) condition shall be subject to separate
arbitration pursuant to this paragraph, provided, however, that all three
arbitrators shall be independent Fellows of the Casualty Actuarial Society, and
such arbitrators shall review applicable loss data solely for the purpose of
determining whether the condition in Section 5.2(a) has been satisfied.


     9.   Intermediary.  Company and Option Writers represent and acknowledge
that Aon Re (Bermuda) Ltd. (with respect to Option Writers domiciled outside the
U.S.) and Aon Securities Corporation (with respect to Option Writers domiciled
within the U.S.) have acted as the sole intermediaries for all purposes with
respect to the negotiation of this Agreement, and that none of Company or Option
Writers has engaged any other broker or finder in connection with the
transactions contemplated by this Agreement.  Company and Option Writers agree
that all fees or commissions payable to Aon Re (Bermuda) Ltd. (with respect to
Option Writers domiciled outside the U.S.) and/or Aon Securities Corporation
(with respect to Option Writers domiciled within the U.S.) in connection with
this transaction shall be the sole responsibility of Option Writers.


     10.  Miscellaneous.

          10.1 Amendments. The provisions of this Agreement may not be waived,
altered, amended or repealed, in whole or in part, except by the written consent
of all parties to this Agreement.

                                      23
<PAGE>

          10.2  Notices.  Any notice or other communication required or
permitted under this Agreement shall be in writing and shall be deemed to have
been given (a) on the date of delivery if delivered personally or by facsimile
transmission, receipt confirmed, (b) twenty-four (24) hours after sending if
sent by reputable overnight delivery service, or (c) seventy-two (72) hours
after mailing if sent by certified, registered or express mail, postage prepaid,
if properly addressed or directed to such party at the appropriate address or
facsimile number set forth below, or such address or facsimile number as such
party may designate by written notice to the other parties:

          (i)  if to Company to:

               LaSalle Re Holdings Limited
               Continental Building
               25 Church Street
               Hamilton HM 12 Bermuda
               Attention: Guy Hengesbaugh
               Fax No.: (441) 292-2656

               with a copy to:

               Mayer, Brown & Platt
               190 South LaSalle Street
               Chicago, Illinois 60603-3441
               Attention: Richard Shepro
               Fax No.:  (312) 701-7711

               and a copy to:

               Aon Re (Bermuda) Ltd.
               Dorchester House
               7 Church Street
               P.O. Box HM 2020
               Hamilton HM HX Bermuda
               Attention: Paul Markey
               Fax No.: (441) 296-5130

                                      24
<PAGE>

               and a copy to:

               Aon Securities Corporation
               123 N. Wacker Drive
               Chicago, Illinois 60606
               Attention: Garrett P. Shumway
               Fax No.: (312) 701-2174


          (ii) if to Option Writers to the respective addresses set forth on the
attached Schedule 1.1.

          10.3 Entire Agreement. This Agreement (including the Exhibits and the
Schedules) contains the entire agreement between the parties, and supersedes all
prior agreements, written or oral, with respect to the Securities Issuance
Option.

          10.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of Bermuda (without regard to any choice of law or
conflict of law rules that would cause the application of any laws or rules of
any jurisdiction other than Bermuda).

          10.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns
and legal representatives, and any references to a specific party in this
Agreement shall include such party's permitted successors or assigns. Neither
party shall have the right to assign or otherwise transfer its rights or
obligations under this Agreement without the prior written consent of the other
party. The covenant of Company contained in Section 6.14 is personal to the
Option Writers, and, except as otherwise specifically stated in Section 6.14, in
no case shall the rights and privileges of Option Writers under Section 6.14 be
assignable or transferrable.

          10.6 Severability. Each term, covenant, condition or provision of this
Agreement shall be viewed as separate and distinct, and in the event that any
such term, covenant, condition or provision shall be deemed by a court of
competent jurisdiction to be invalid, the remaining provisions shall continue in
full force and effect.

          10.7 Necessary Acts. Each party to this Agreement shall perform any
further acts and execute and deliver any additional agreements, assignments,
documents or instruments that may be reasonably necessary or desirable to carry
out the provisions or effectuate the purposes of this Agreement.

          10.8 Legal Expenses. Subject to the provisions of Article 8, if any
legal action or any arbitration or other proceeding is brought to enforce the
provisions of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in

                                      25
<PAGE>

connection with any of the provisions of this Agreement, the successful or
prevailing party or parties, whether such party or parties have instituted the
action, shall be entitled to recover all attorneys' fees and other costs
incurred in such action or proceeding, in addition to any other relief to which
it or they may be entitled.

          10.9 Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.

          10.10 Headings. The headings in this Agreement are for reference only,
and shall not affect the interpretation of this Agreement.

          10.11 Right to Cure. In the event of a breach (a) by Company of any of
the representations and warranties set forth in Article 3, (b) by any Option
Writer of any of the representations and warranties set forth in Article 4, or
(c) by either Company or any Option Writer of its respective covenants and
agreements under Article 6, the entity committing such breach shall have sixty
(60) days following its receipt of notice of such breach in which to cure such
breach, unless such sooner cure is necessary in order to effect the terms of
this Agreement. Except as specifically set forth in Article 3 above, the
inability or failure of Company or any Option Writer to cure such breach shall
neither (i) give Company or any Option Writer the right to terminate this
Agreement nor (ii) excuse Company or any Option Writer from the performance of
their respective obligations hereunder. Notwithstanding the preceding sentence,
Company or any Option Writer shall have the right to recover any damages that
may result from any breach of this Agreement.

          10.12 Specific Performance. Each of the parties to this Agreement
acknowledges and agrees that in the event of any breach of this Agreement, the
non-breaching parties would be irreparably harmed and could not be made whole by
monetary damages. Accordingly, each of the parties to this Agreement agrees that
the other parties, in addition to any other remedies to which they may be
entitled at law or in equity, shall be entitled to compel specific performance
of this Agreement.

                                      26
<PAGE>

IN WITNESS WHEREOF, the parties to this Agreement have caused it to be duly
executed as of the date first written above.


LaSalle Re Holdings Limited

By:     /s/ Mark C. Stockton             By:     /s/ Clare Moran
   ---------------------------------        ---------------------------------

Title:  Senior Vice President            Title:  Senior Vice President
        and Chief Underwriting Officer           Treasurer and Interim CFO
      --------------------------------         ------------------------------

European Reinsurance Company of Zurich



By:    /s/ Scott Bradley                 By:    /s/ D. Whiting
   ---------------------------------        ---------------------------------

Title: Member of Senior Management       Title: Member of Senior Management
      ------------------------------           ------------------------------

Allianz Risk Transfer



By:   /s/ M. Markoff                     By:    /s/ Thomas Bruendler
   ---------------------------------        ---------------------------------

Title: Executive Vice President          Title: Executive Vice President
      ------------------------------           ------------------------------



                                      27