Exhibit 10.4

EMPLOYMENT AGREEMENT

AGREEMENT,
made and entered into as of this 23rd day of January, 2007, by and
between, Security Capital Assurance Ltd, a Bermuda corporation (the Company),
and David P. Shea (the Executive).

WHEREAS,
the Executive has been employed by XL Capital Ltd as an Executive Vice
President, Chief Financial Officer of the Financial Products & Services
operations, which has included the business of the Company;

WHEREAS,
the Executive and the Company desire that the Executive cease to be an employee
of XL Capital Ltd and become the Chief Financial Officer of the Company on the
terms and subject to the conditions set forth herein, effective upon the
consummation of the initial public offering of the common stock of the Company
(the IPO);

NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein and for other good and valuable consideration, the Company, and the
Executive (the Parties) agree as follows:

1.
EMPLOYMENT.

The
Company hereby employs the Executive, and the Executive hereby accepts
employment with the Company, for the term of this Agreement as set forth in
Section 2, below, in the position and with duties and responsibilities set forth
in Section 3, below, and upon such other terms and conditions as are hereinafter
stated.

2.
TERM OF EMPLOYMENT.

The
stated term of employment under this Agreement shall commence at the time of
consummation of the IPO (the Date of the Agreement) and shall continue
through the close of business on the third anniversary of the Date of the
Agreement, subject to earlier termination as provided in Section 8, below, and
extension as provided in the next succeeding sentence. On the third anniversary
of the Date of the Agreement and on each anniversary thereafter, the stated
term of employment shall be automatically extended for an additional one year
unless the Company gives notice in writing to the Executive or the Executive
gives notice in writing to the Company at least three months prior to such
anniversary that the term is not to be so extended.

3.
POSITIONS, DUTIES AND RESPONSIBILITIES.

(a)
General.  The Executive shall be
employed as Chief Financial Officer of the Company. In such position, the Executive
shall have the duties, responsibilities and authority normally associated with
the office, position and titles of such an officer of a financial guaranty company,
or holding company, whose shares are publicly traded in the United States. In
carrying out his duties and responsibilities, the Executive shall report to the
Chief Executive Officer of the Company.
During the term of this Agreement, the Executive shall devote his full
business time to the business and affairs of the Company and its subsidiaries,
and shall use his best efforts, skills and abilities to promote the interests
of the Company and its subsidiaries.

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(b)
Performance of Services.  The
Executives services under this Agreement, which are global in nature, shall be
performed either in the greater New York City metropolitan area, as reasonably
requested by the Company, in accordance with the guidelines established by the
Company from time to time for the location of the performance of services on
behalf of the Company and its subsidiaries. The Executive acknowledges that the
Company may require the Executive to travel to the extent such travel is
reasonably necessary to perform the services hereunder and that such travel may
be extensive. To the extent reasonably requested by the Company, the Executive
shall allocate greater business time to a location other than his principal
business location, if necessary.

4.
BASE SALARY.

The
Executive shall be paid a Base Salary by the Company not less than
US$385,000.00, payable in accordance with the Companys regular pay
practices.  Such Base Salary shall be
subject to annual review in accordance with the Companys practices for executives
as in effect from time to time and may be increased at the discretion of the
Compensation Committee of the Board of Directors of the Company (the Compensation
Committee).

5.
BONUSES.

In
addition to the Base Salary provided for in Section 4, above, the Executive
shall be eligible for an annual cash bonus under the Companys Annual Incentive
Compensation Plan as in effect from time to time, with an annual target bonus
equal to 150% of the Executives Base Salary. The Executive may be awarded such
annual bonuses thereunder as may be approved by the Compensation Committee
based on corporate, individual and business unit performance measures, as
appropriate, established or approved from time to time, by the Compensation
Committee.  Any annual bonus shall be
paid in cash in a lump sum no later than March 15 following the year for which
the annual bonus is paid, unless deferred at the Executives option in
accordance with the provisions of any applicable deferred compensation plan of
the Company or it subsidiaries in effect from time to time and in compliance
with Section 409A of the United States Internal Revenue Code of 1986, as
amended (the Code).  Nothing in this
Section 5 shall confer upon the Executive any right to a minimum annual bonus.

6.
EMPLOYEE BENEFIT PROGRAMS.

During
the term of the Executives employment under this Agreement, the Executive
shall be entitled to participate in all employee retirement, pension, welfare
and benefit programs of the Company as are in effect from time to time and in
which similarly situated senior executives of the Company are eligible to
participate.

7.
BUSINESS EXPENSE REIMBURSEMENT AND FRINGE BENEFITS.

During
the term of the Executives employment under this Agreement, the Executive
shall be entitled to participate in the Companys travel and entertainment
expense reimbursement programs and its executive fringe benefit plans and
arrangements, all in accordance with the terms and conditions of such programs,
plans and arrangements as in effect from time to time as applied to the
Companys similarly situated executives.

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8.
TERMINATION OF EMPLOYMENT.

(a)
Termination due to Death.  In the
event the Executive dies during the term of employment hereunder, the
Executives spouse, if the spouse survives the Executive, (or, if the
Executives spouse does not survive him, the estate or other legal representative
of the Executive) shall be entitled to receive the Base Salary as provided in
Section 4, above, at the rate in effect at the time of Executives death, to be
paid in accordance with the Companys regular payroll practices, through the
end of the sixth month after the month in which the Executive dies. In addition
to the above, the estate or other legal representative of the Executive shall
be entitled to:

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| | (i)
  any annual bonus awarded in accordance with the Companys bonus program but
  not yet paid under Section 5, above, to be paid at the time such bonus would
  otherwise be due under the applicable program, and reimbursement of business
  expenses incurred prior to death in accordance with Section 7(a) above,                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (ii)
  within 45 days after the date of death, a pro rata bonus for the year of
  death in an amount determined by the Compensation Committee, but in no event less
  than a pro rata portion of the Executives average annual bonus for the
  immediately preceding three years (or the period of the Executives
  employment with the Company, if less),                                                                                                                                                                                                                                                                                                                                                                                      
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| | (iii)
  the rights under any options to purchase equity securities of the Company or
  other rights with respect to equity securities of the Company, including any
  restricted stock or other securities, held by the Executive determined in accordance
  with the terms thereof,                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (iv)
  for a period of six months following the Executives death, continued medical
  benefit plan coverage (including dental and vision benefits if provided under
  the applicable plans) for the Executives dependents, if any, under the
  Companys medical benefit plans upon substantially the same terms and
  conditions (including cost of coverage to the dependents) as is then in
  existence for other executives during the coverage period; provided, that,
  if the Executives dependents cannot continue to participate in the Company
  plans providing such benefits, the Company shall otherwise provide such
  benefits on substantially the same after-tax basis as if continued
  participation had been permitted, and
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| | (v)
  the vested accrued benefits, if any, under the employee benefit programs of
  the Company, as provided in Section 6, above, determined in accordance
  with the applicable terms and provisions of such programs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

(b)
Termination due to Disability. In the event the Executives employment
hereunder is terminated due to his disability, as determined under the
Companys long-term disability plan, the Executive shall be entitled to:

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| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)
  the Base Salary as provided in Section 4, above, through the end of the sixth
  month after the month in which the Executives employment terminates

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| | due to
  disability, to be paid in accordance with the Companys regular payroll
  practices,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (ii)
  any annual bonus awarded in accordance with the Companys bonus program but
  not yet paid under Section 5, to be paid at the time such bonus would
  otherwise be due under the applicable program, and reimbursement of business
  expenses incurred prior to termination of employment in accordance with
  Section 7(a) above,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (iii)
  within 45 days after the date of termination, a pro rata bonus for the year
  of termination in an amount determined by the Compensation Committee, but in
  no event less than a pro rata portion of the Executives average annual bonus
  for the immediately preceding three years (or the period of the Executives
  employment with the Company, if less),                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (iv)
  the rights under any options to purchase equity securities of the Company or
  other rights with respect to equity securities of the Company, including any
  restricted stock or other securities, held by the Executive, determined in accordance
  with the terms thereof,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (v)
  for a period of six months following the termination of the Executives
  employment, continued medical benefit plan coverage (including dental and
  vision benefits if provided under the applicable plans) for the Executive
  (and the Executives dependents, if any) under the Companys medical benefit
  plans upon substantially the same terms and conditions (including cost of
  coverage to the Executive) as is then in existence for other executives
  during the coverage period; provided, that, if the Executive
  cannot continue to participate in the Company plans providing such benefits,
  the Company shall otherwise provide such benefits on substantially the same
  after-tax basis as if continued participation had been permitted; provided
  further, however, that, in the event the Executive becomes
  reemployed with another employer and becomes eligible to receive medical
  benefits from such employer, the medical benefits described herein shall immediately
  cease, and
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (vi)
  the vested accrued benefits, if any, under the employee benefit programs of
  the Company, as provided in Section 6 above, determined in accordance with
  the applicable terms and provisions of such programs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

(c)
TERMINATION FOR CAUSE.

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| | (i)
  The employment of the Executive under this Agreement may be terminated by the
  Company for Cause, such termination to be effective upon the Company giving
  the Executive written notice of termination in accordance with the provisions
  of this Agreement. For this purpose, Cause shall mean:

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| | (A) | conviction of the Executive of a felony involving moral turpitude, dishonesty
  or laws to which the Company or its Affiliates are subject in connection with
  the conduct of its or their business;

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| | (B)                                                                                                                     | the Executive, in carrying out his duties for the Company under this
  Agreement, has been guilty of (1) willful misconduct or (2) substantial and
  continual refusal by the Executive to perform the duties assigned to the Executive
  pursuant to the terms hereof; provided, however, that any act
  or failure to act by the Executive shall not constitute Cause for purposes of
  this Section 8(c)(i)(B) if such act or failure to act was committed, or
  omitted, by the Executive in good faith and in a manner he reasonably believed
  to be in the overall best interests of the Company, as the case may be. The
  determination of whether the Executive acted in good faith and that he
  reasonably believed his action to be in the Companys overall best interest,
  as the case may be, will be in the reasonable and good faith judgment of the
  Compensation Committee and/or the Audit Committee; or
| |                                                                                                                        
| | (C)                                                                                                                     | the Executives continued willful refusal to obey any lawful policy or requirement
  duly adopted by the Company Board and the continuance of such refusal after
  receipt of written notice.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                        
| | (ii)
  In the event of a termination for Cause under Section 8(c)(i), above, the
  Executive shall be entitled only to:

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (A) | Base Salary
  as provided in Section 4, above, at the rate in effect at the time of his
  termination of employment for Cause, through the date on which termination
  for Cause occurs, to be paid in accordance with the Companys regular payroll
  practices,                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (B) | the rights
  under any options to purchase equity securities of the Company or other
  rights with respect to equity securities of the Company, including any
  restricted stock or other securities, held by the Executive, determined in
  accordance with the terms thereof, and                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (C) | the vested
  accrued benefits, if any, under employee benefit programs of the Company, as
  provided in Section 6, above, and re-imbursement of properly incurred
  unreimbursed business expenses under the business expense reimbursement
  program as described in Section 7, above, determined in accordance with the
  applicable terms and provisions of such employee benefit and expense
  reimbursement programs; provided that the Executive shall not be
  entitled to any such benefits unless the terms and provisions of such
  programs expressly state that the Executive shall be entitled thereto in the
  event his employment is terminated for Cause (as defined in this Agreement or
  otherwise).

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| | (d)
  TERMINATION WITHOUT CAUSE.                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                              
| | (i)
  Anything in this Agreement to the contrary notwithstanding, the Executives
  employment may be terminated by the Company without Cause as provided in this
  Section 8(d). A termination due to death or disability, as described in
  Section 8(a) or (b), above, or a termination for Cause, as described in Section

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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| | 8(c), above,
  shall not be deemed a termination without Cause under this Section 8(d).  For the avoidance of doubt, if a notice of
  non-renewal of this Agreement pursuant to Section 2 is issued by the Company
  and, within three (3) months thereafter, a written notice is issued (x) by
  the Company to the Executive of its intention to terminate the employment
  relationship with Executive at the end of the Term or (y) by the Executive to
  the Company of Executives intention to terminate the employment relationship
  with the Company at the end of the Term, the termination of the Executives
  employment at the end of the Term shall be considered a termination by the
  Company without Cause hereunder.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (ii) In the
  event the Executives employment is terminated by the Company without Cause
  (x) prior to a Change in Control (other than as provided in the last
  paragraph of Section 8(d)(iii), in which case the provisions of Section
  8(d)(iii) shall apply in lieu of this Section 8(d)(ii)) or (y) following the
  Post-Change Period (as hereinafter defined), the Executive shall be entitled
  to:                                                                                                                                                                                                                                                                                                                           

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| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (A) | Base Salary
  as provided in Section 4, above, at the rate in effect at the time of his
  termination of employment without Cause, through the date on which
  termination without Cause occurs, to be paid in accordance with the Companys
  regular payroll practices,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (B) | provided the
  Executive executes and does not revoke a reasonable general release of
  employment liability claims against the Company and its affiliates in form
  and substance satisfactory to the Company, a cash lump sum payment made
  within 30 days after termination of employment equal to (x) two times the
  Executives annual Base Salary, at the annual rate in effect in accordance
  with Section 4, above, immediately prior to such termination and (y) one
  times the higher of the targeted annual bonus for the year of such
  termination, if any, or the average of the Executives annual bonus payable
  by the Company or its subsidiaries for the three years immediately preceding
  the year of termination (or such shorter period during which the Executive
  has been employed by any of such entities),
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (C) | any annual
  bonus awarded in accordance with the Companys bonus program but not yet paid
  under Section 5, above, to be paid at the time such bonus would otherwise be
  due under the applicable program, and reimbursement of business expenses
  incurred prior to termination of employment in accordance with Section 7(a)
  above,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (D) | the rights
  under any options to purchase equity securities of the Company or other
  rights with respect to equity securities of the Company, including any
  restricted stock or other securities or other long-term cash incentives, held
  by the Executive, determined in accordance with the terms thereof,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (E) | for a period
  of twenty-four months following the termination of the Executives
  employment, continued medical benefit plan coverage (including dental and
  vision benefits if provided under the applicable plans) for the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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| |     | Executive
  (and the Executives dependents, if any) under the Companys medical benefit
  plans upon substantially the same terms and conditions (including cost of
  coverage to the Executive) as is then in existence for other executives during
  the coverage period; provided, that, if the Executive cannot continue
  to participate in the Company plans providing such benefits, the Company
  shall otherwise provide such benefits on substantially the same after-tax
  basis as if continued participation had been permitted; provided, however,
  that, in the event the Executive becomes reemployed with another employer and
  becomes eligible to receive medical benefits from such employer, the medical
  benefits described herein shall immediately cease, and
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (F) | the vested
  accrued benefits, if any, under the employee benefit programs of the Company,
  as provided in Section 6 above, determined in accordance with the applicable
  terms and provisions of such programs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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| | (iii)
  In the event the Executives employment is terminated by (x) the Company
  without Cause within the twenty-four month period following a Change in
  Control (as defined in Exhibit A hereto) (the Post-Change Period)
  or (y) the Executive terminates his employment for Good Reason (as
  defined in Exhibit B hereto) during the Post-Change Period, the
  Executive shall be entitled to the following, paid in the case of amounts set
  forth in (A), (B), (C) and (D) below within 30 days after termination of employment:

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| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (A) | Base Salary
  as provided in Section 4, above, at the rate in effect at the time of his
  termination of employment, through the date on which termination occurs,                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (B) | a cash lump
  sum payment equal to two times the Executives annual Base Salary, at the rate
  in effect in accordance with Section 4, above, or immediately prior to such
  termination or Change in Control, whichever is greater,                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (C) | a cash lump
  sum payment equal to two times the higher of (i) the average annual
  bonus awarded to the Executive by the Company or its subsidiaries in the
  three years prior to the year in which the Change in Control occurs (or
  shorter period during which the Executive had been employed by any of such
  entities), or (ii) the Executives target annual bonus, if any, for the
  year of such termination,                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (D) | an amount
  equal to (i) the higher of (x) the bonus actually awarded to the Executive by
  the Company for the year immediately preceding the year in which the Change
  in Control occurs or (y) the targeted amount of bonus, if any, that would
  have been awarded to the Executive in respect of the year in which the
  termination of employment occurs, multiplied by (ii) a fraction, the numerator
  of which is the number of months or fraction thereof

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| |     | in which the Executive
  was employed by the Company in the year of termination of employment, and the
  denominator of which is 12,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (E) | options to
  purchase equity securities of the Company or other rights with respect to
  equity securities of the Company held by the Executive shall immediately vest
  in full and shall continue to be exercisable for three years from the date of
  termination of employment, notwithstanding the Executives termination of
  employment, or the original full term of the option or other right, if
  shorter,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (F) | for a period
  of twenty-four months following the termination of the Executives
  employment, continued medical benefit plan coverage (including dental and
  vision benefits if provided under the applicable plans) for the Executive
  (and the Executives dependents, if any) under the Companys medical benefit
  plans upon substantially the same terms and conditions (including cost of
  coverage to the Executive) as is then in existence for other executives
  during the coverage period; provided, that, if the Executive
  cannot continue to participate in the Company plans providing such benefits,
  the Company shall otherwise provide such benefits on substantially the same
  after-tax basis as if continued participation had been permitted; provided,
  however, that, in the event the Executive becomes reemployed with
  another employer and becomes eligible to receive medical benefits from such
  employer, the medical benefits described herein shall immediately cease, and
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (G) | full and
  immediate vesting under the Companys retirement plans as of the date of
  termination, to the extent permitted by applicable law; provided, however,
  that if such full and immediate vesting cannot be provided under a retirement
  plan under applicable law, then economically equivalent benefits shall be
  provided through arrangements outside the applicable retirement plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

Anything
in this Agreement to the contrary notwithstanding, the Executive shall be
entitled to the benefits described in (A)-(G) above, if the Executives
employment with the Company is terminated by the Company (other than for Cause)
within one year prior to the date on which a Change in Control occurs, and it
is reasonably demonstrated that such termination (i) was at the request of a
third party who has taken steps reasonably calculated or intended to effect the
Change in Control or (ii) otherwise arose in connection with or anticipation of
the Change in Control; provided, however, that in such event,
amounts will be payable hereunder only following the Change in Control (and
within 10 days thereafter).

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| | (iv)
  If, in situations where Section 8(d)(iii) does not apply, at any time during
  the term of the Executives employment hereunder, duties are assigned to the
  Executive that are materially inconsistent with his position, or the Company
  does not cure any other material breach by it of any provision of Sections 3
  through 7, 14 and 17 of this Agreement within 30 calendar days following

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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| | written
  notice of same by the Executive (which written notice must be given within 30
  calendar days after such breach), the Executive shall have the right to
  terminate his employment within 30 calendar days of the Companys failure to
  rescind such assignment in accordance with the proviso below or of such
  failure to cure a breach, as the case may be, and such termination shall be
  deemed a termination by the Company without Cause under Section 8(d)(ii),
  above, provided, in the case of assignment of inconsistent duties, the
  Executive shall have given the Company written notice of his decision within
  30 calendar days of such assignment and shall not, within 30 calendar days
  thereafter, have had the assignment of inconsistent duties rescinded.

(e)
VOLUNTARY TERMINATION BY THE EXECUTIVE.
The Executive may voluntarily terminate his employment prior to the
expiration of the term of this Agreement upon at least three months prior
written notice to the Company, provided such termination shall constitute a
voluntary termination and, except as provided in Section 8(d)(iii) or Section
8(d)(iv), above, in such event the Executive shall be limited to the same
rights and benefits as applicable to a termination by the Company for Cause as
provided in Section 8(c), above. A voluntary termination in accordance with
this Section 8(e) shall not be deemed a breach of this Agreement. A termination
of the Executives employment due to disability or death as described in
Section 8(b) or 8(a), above, a termination by the Executive which the Executive
is entitled to treat as a termination by the Company pursuant to Section 8(d),
above, or a termination by the Executive under Section 8(d)(iv), above, shall
not be deemed a voluntary termination within the meaning of this Section
8(e).  For the avoidance of doubt, a
notice of non-renewal of the Agreement pursuant to Section 2 above issued
by the Executive shall not be considered a voluntary termination within the
meaning of this Section 8(e).

9.
EXCISE TAX PAYMENTS.

(a)
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that (i) any payment or distribution made, or benefit
provided (including, without limitation, the acceleration of any payment,
distribution or benefit or accelerated vesting or exercisability of any award)
by the Company to or for the benefit of the Executive (whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 9) (a Payment) would be subject to the excise tax
imposed by Section 4999 of the Code (or any successor provision or similar
excise tax), or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the Excise Tax),
(ii) the aggregate amount of the Executives Parachute Payments (as defined in
Section 280G(b)(2)(A) of the Code) is less than 3.25 times the Executives Base
Amount (as defined in Section 280G(b)(3)(A) of the Code), and (iii) no such
Payment would be subject to the Excise Tax if the payments set forth in Section
8(d)(iii)(B) and (C) hereof were each reduced by up to 20 percent, then the
payments set forth in Section 8(d)(iii)(B) and (C) will each be reduced to the
smallest extent possible (and in no event by more than 20 percent in the aggregate)
such that no Payment is subject to the Excise Tax.

-9-

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(b)
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that (i) the aggregate amount of the Executives Parachute
Payments equals or exceeds 3.25 times the Executives Base Amount, (ii) the
aggregate amount of the Executives Parachute Payments is less than 3.25 times
the Base Amount but one or more Payments would be subject to the Excise Tax
even if the payments set forth in Section 8(d)(iii)(B) and (C) hereof were each
reduced by 20 percent, or (iii) notwithstanding a reduction in payments pursuant
to Section 9(a) above, an Excise Tax is payable by the Executive on one or more
Payments, then, in any such case, Payments shall not be reduced and the
Executive shall be entitled to receive an additional payment (a Gross-Up Payment)
in an amount such that after payment by the Executive of all taxes (including
any income or Excise Tax) imposed upon the Gross-Up Payment and any interest or
penalties imposed with respect to such taxes, the Executive retains from the
Gross-Up Payment an amount equal to the Excise Tax imposed upon the Payments.

(c)
Subject to the provisions of Section 9(d), all determinations required to be
made under this Section 9, including determination of whether a Gross-Up
Payment is required and of the amount of any such Gross-Up Payment, shall be
made by a nationally recognized public accounting firm selected by the Company
(the Accounting Firm) which shall provide detailed supporting calculations
both to the Company and the Executive within 15 business days of the date of
termination of the Executives employment, if applicable, or such earlier time
as is reasonably requested. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 9(c), shall be paid to the Executive within five
business days of the receipt of the Accounting Firms determination. If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive with a written opinion that he has substantial authority
not to report any Excise Tax on his Federal income tax return. Any
determination by the Accounting Firm meeting the requirements of this Section
9(c) shall be binding upon the Company and the Executive, subject only to
payments pursuant to the following sentence based on a determination that
additional Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such additional
payments are referred to herein as the Gross-Up Underpayment). In the
event that the Company exhausts its remedies pursuant to Section 9(d) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Gross-Up Underpayment that
has occurred and any such Gross-Up Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive. The fees and disbursements of
the Accounting Firm shall be paid by the Company.

(d)
The Executive shall notify the Company in writing of any claim by the United
States Internal Revenue Service that, if successful, would require the payment
by the Executive of any Excise Tax and, therefore, the payment by the Company
of a Gross-Up Payment. Such notification shall be given as soon as practicable
but not later than 30 business days after the Executive receives written notice
of such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which he gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such
period that it desires, in good faith, to contest such claim (which notice
shall set forth the bases for such contest) and that it will bear the costs and
provide the indemnification as required by this sentence, the Executive shall,
in good faith:

-10-

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| |                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)
  give the Company any information reasonably requested by the Company relating
  to such claim,                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                           
| | (ii)
  take such action in connection with contesting such claim as the Company
  shall, in good faith, reasonably request in writing from time to time, including,
  without limitation, accepting legal representation with respect to such claim
  by an attorney selected by the Company and reasonably acceptable to the
  Executive,
| |                                                                                                                                                                                                                                                                                                                                           
| | (iii)
  cooperate with the Company in good faith in order effectively to contest such
  claim, and                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                           
| | (iv)
  permit the Company to participate, in good faith, in any proceedings relating
  to such claim;                                                                                                                                                                                                                                     

provided, however, that the Company
shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis to the
Executive, for any Excise Tax or income tax, including interest and penalties
with respect thereto, imposed as a result of such representation and payment of
all costs and expenses.

Without
limitation on the foregoing provisions of this Section 9(d), the Company shall,
exercising good faith, control all proceedings taken in connection with such
contest and, at its sole option (but in good faith), may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option (but in
good faith), either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and sue for a refund,
the Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis to the Executive, from any Excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to the
payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Companys control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(d), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the
Companys complying with the requirements of Section 9(d)) promptly pay to the
Company, as the case may be, the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Company pursuant to
Section 9(d), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive

-11-

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in writing of its
intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then any obligation of the Executive to repay such advance
shall be forgiven and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.

Notwithstanding
any provision herein to the contrary, the Executives failure to strictly
comply with the notice provisions set forth in this Section 9, so long as such
failure does not prevent the Company from contesting an excise tax claim, shall
not adversely affect the Executives rights under this Section 9.

10.
NO MITIGATION; NO OFFSET.

In
the event of any termination of employment under Section 8, above, the Executive
shall be under no obligation to mitigate damages or seek other employment, and,
except as expressly set forth herein, there shall be no offset against amounts
due the Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that he may obtain.

11.
NONCOMPETITION AND NONSOLICITATION.

The
Executive represents and warrants that, to the best of his knowledge, he is not
using the confidential or proprietary information of any other person in
violation of any agreement or rights of others known to him. The Executive
agrees that the products of the Company and its Affiliates shall constitute the
exclusive property of the Company and its Affiliates.

For
the avoidance of doubt, all trademarks, policy language or forms, products or
services (including products and services under development), trade names,
trade secrets, service marks, designs, computer programs and software, utility
models, copyrights, know-how and confidential information, applications for
registration of any of the foregoing and the right to apply for them in any
part of the world (whether any of the foregoing shall be registered or
unregistered) created or discovered or participated in by the Executive during
the course of his employment (whether or not pursuant to the terms of this
Agreement) or under the instructions of the Company or its Affiliates are and
shall be the absolute property of the Company and its Affiliates, as
appropriate. Without limiting the foregoing, the Executive hereby assigns to
the Company any and all of the Executives right, title and interest, if any,
pertaining to the financial products insurance and reinsurance (including,
without limitation, finite insurance and reinsurance), risk assumption, risk management,
brokerage, financial and other products or services developed or improved upon
by the Executive (including, without limitation, any related know-how) while
employed by the Company or its Affiliates, including any patent, trademark,
trade name, copyright, ownership or other right that may pertain thereto.

Since
Executive has obtained and is likely to obtain in the course of Executives
employment with the Company and its Affiliates knowledge of trade names, trade
secrets, know-how, products and services (including products and services under
development), techniques, methods, lists, computer programs and software and
other confidential information relating to the Company and its Affiliates, and
their employees, clients, business or business opportunities, Executive hereby
undertakes that:

-12-

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)
  Executive will not (either alone or jointly with or on behalf of others and
  whether directly or indirectly) encourage, entice, solicit or endeavor to
  encourage, entice or solicit away from employment with the Company or its
  Affiliates, or hire or cause to be hired, any officer or employee of the
  Company or its Affiliates (or any individual who was within the prior twelve
  months an officer or employee of the Company or its Affiliates), or
  encourage, entice, solicit or endeavor to encourage, entice or solicit any
  individual to violate the terms of any employment agreement or arrangement
  between such individual and the Company or any of its Affiliates;                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (ii)
  Executive will not (either alone or jointly with or on behalf of others and
  whether directly or indirectly) interfere with or disrupt or seek to
  interfere with or disrupt (A) the relationships between the Company and its
  Affiliates, on the one hand, and any customer or client of the Company and
  its Affiliates, on the other hand, (including any reinsured party) who during
  the period of twenty-four months immediately preceding such termination shall
  have been such a customer or client, or (B) the supply to the Company and its
  Affiliates of any services by any supplier or agent or broker who during the
  period of twenty-four months immediately preceding such termination shall
  have supplied services to any such person, nor will Executive interfere or
  seek to interfere with the terms on which such supply or agency or brokering
  services during such period as aforesaid have been made or provided; and
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (iii)
  Executive will not (either alone or jointly with or on behalf of others and
  whether directly or indirectly) whether as an employee, consultant, partner,
  principal, agent, distributor, representative or stockholder (except solely
  as a less than one percent stockholder of a publicly traded company), engage
  in any activities in Bermuda, the United Kingdom or the United States if such
  activities are competitive with the businesses that (i) are then being
  conducted by the Company or its Affiliates and (ii) during the period of the
  Executives employment were either being conducted by the Company or its
  Affiliates or actively being developed by the Company or its Affiliates.                                                                                                                                                                                                                                         

The
provisions of the immediately preceding sentence shall continue as long as the
Executive is employed by the Company or its Affiliates and such provisions
shall continue in effect after such employment is terminated for any reason
under Section 8 until the first anniversary of such termination, provided that
if such employment is terminated by the Company under Section 8(d)(iii) or by
the Executive under Section 8(d)(iii), the provisions of clauses (ii) and (iii)
shall automatically terminate upon such termination of employment, unless the
Company elects, in writing, upon such termination to continue the provisions of
clauses (ii) and (iii) in effect through the six-month anniversary of such
termination of employment, in which case the Company shall be obligated to pay
the Executive, in addition to any of the Executives rights under Section
8(d)(iii), a lump sum payment equal to the sum of (x) six months of his
Base Salary and (y) one half of the Executives average annual bonus
payable by the Company or its subsidiaries for the three years (or shorter
period of employment by any of such entities) immediately preceding the year of
termination, and such lump sum payment shall be made within 30 days following
termination of employment.

-13-

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For
purposes of this Agreement, an Affiliate of the Company means any
person, directly or indirectly, through one or more intermediaries, controlled
by the Company, and such term shall specifically include, without limitation,
the Companys majority-owned subsidiaries.

The
limitations on the Executive set forth in this Section shall also apply to any
agent or other representative acting on behalf of Executive.

While
the restrictions aforesaid are stated to be reasonable in all the circumstances
it is also recognized that restrictions of the nature in question may fail for
reasons unforeseen and accordingly it is hereby declared and agreed that if any
of such restrictions or the geographic or other scope thereof shall be adjudged
to be void as going beyond what is reasonable in the circumstances for the
protection of the interests of the Company and its Affiliates but would be
valid if part of the wording thereof were deleted and/or the periods (if any)
thereof reduced and/or geographic or other area dealt with thereby reduced in
scope then said restrictions shall apply with such modifications as may be
necessary to make them valid and effective.

Nothing
contained in this Section 11 shall limit in any manner any additional
obligations to which Executive may be bound pursuant to any other agreement or
any applicable law, rule or regulation and Section 11 shall apply, subject to
its terms, after employment has terminated for any reason.

12.
CONFIDENTIAL INFORMATION.

The
Executive covenants that he shall not, without the prior written consent of the
Company, use for the Executives own benefit or the benefit of any other person
or entity other than the Company and its Affiliates or disclose to any person,
other than an employee of the Company or other person to whom disclosure is
necessary to the performance by the Executive of his duties in the employ of
the Company, any confidential, proprietary, secret, or privileged information
about the Company or its Affiliates or their business or operations, including,
but not limited to, information concerning trade secrets, know-how, software,
data processing systems, policy language and forms, inventions, designs,
processes, formulae, notations, improvements, financial information, business
plans, prospects, referral sources, lists of suppliers and customers, legal
advice and other information with respect to the affairs, business, clients,
customers, agents or other business relationships of the Company or its
Affiliates. Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret, confidential proprietary or privileged information or data
relating to the Company or any of its Affiliates or predecessor companies, and
their respective businesses, which shall have been obtained by Executive during
his employment, unless and until such information has become known to the
public generally (other than as a result of unauthorized disclosure by the
Executive) or unless he is required to disclose such information by a court or
by a governmental body with apparent authority to require such disclosure. The
foregoing covenant by the Executive shall be without limitation as to time and
geographic application and this Section 12 shall apply in accordance with its
terms after employment has terminated for any reason. The Executive
acknowledges and agrees that he shall have no authority to waive any
attorney-client or other privilege without the express prior written consent of
the Compensation Committee as evidenced by the signature of the Companys
General Counsel.

-14-

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13.
WITHHOLDING.

Anything
in this Agreement to the contrary notwithstanding, all payments required to be
made by the Company hereunder to the Executive shall be subject to withholding
of such amounts relating to taxes as the Company may reasonably determine
should be withheld pursuant to any applicable law or regulation. In lieu of
withholding such amounts, in whole or in part, the Company may, in its sole
discretion, accept other provision for payment of taxes as required by law,
provided it is satisfied that all requirements of law affecting its responsibilities
to withhold such taxes have been satisfied.

14.
SUBSIDIARY SERVICES AND GUARANTEE.

(a)
Each of SCA Holdings US Inc and XL Financial Assurance Ltd (together, the
Guarantors) hereby agrees to be jointly and severally liable, together with
the Company, for the performance of all obligations and duties, and the payment
of all amounts, due to the Executive under this Agreement.

(b)
All of the terms and provisions of this Agreement relating to the Executives
employment by the Company shall likewise apply mutatis mutandis to the Executives
employment by any of its subsidiaries, it being understood that if the
Executives employment with the Company is terminated, his employment with its
subsidiaries shall also be terminated and the Executive shall be required to
resign immediately from all directorships and other positions held by the
Executive in the Company and its subsidiaries or in any other entities in
respect of which the Executive was acting as a representative or designee of
the Company or its subsidiaries in connection with his employment.

15.
ENTIRE AGREEMENT.

This
Agreement, together with the Exhibits, contains the entire agreement between
the Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, between the Company and the Executive with respect thereto.

16.
ASSIGNABILITY; BINDING NATURE.

This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors, heirs and assigns. No rights or obligations of the
Executive under this Agreement may be assigned or transferred by the Executive
other than his right to compensation and benefits hereunder, which may be
transferred by will or operation of law subject to the limitations of this Agreement.
No rights or obligations of the Company under this Agreement may be assigned or
transferred by the Company except that such rights or obligations may be
assigned or transferred pursuant to a merger or consolidation or amalgamation
or scheme of arrangement in which the Company is not the continuing entity, or
the sale or liquidation of all or substantially all of the assets of the
Company, provided that the assignee or transferee is the successor to all or substantially
all of the assets of the Company and such assignee or transferee assumes by
operation of law or in writing duly executed by the assignee or transferee all
of the liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law.

-15-

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17.
INDEMNIFICATION.

The
Executive shall be provided indemnification by the Company to the maximum
extent permitted by applicable law and its charter documents. In addition, he
shall be covered by a directors and officers liability policy with coverage
for all directors and officers of the Company in an amount equal to at least
US$25,000,000. Such directors and officers liability insurance shall be maintained
in effect for a period of six years following termination of the Executives employment
for any reason other than pursuant to Section 8(c) or Section 8(e) hereof.

18.
SETTLEMENT OF DISPUTES.

(a)
Any dispute between the Parties arising from or relating to the terms of this
Agreement or the Executives employment with the Company or its Affiliates
shall, except as provided in Section 18(b) or Section 18(c), be resolved by
binding arbitration held in New York City in accordance with the rules of the
American Arbitration Association.

(b)
Executive acknowledges that the Company and its Affiliates will suffer
irreparable injury, not readily susceptible of valuation in monetary damages,
if Executive breaches his obligations under Section 11 or 12. Accordingly,
Executive agrees that the Company and its Affiliates will be entitled, in
addition to any other available remedies, to obtain injunctive relief against
any breach or prospective breach by Executive of his obligations under Section
11 or 12 in any Federal or state court sitting in the City and State of New
York or court sitting in Bermuda or the United Kingdom, or, at the Companys or
any Affiliates election, in any other jurisdiction in which Executive
maintains his residence or his principal place of business. Executive hereby
submits to the non-exclusive jurisdiction of all those courts for the purposes
of any actions or proceedings instituted by the Company or its Affiliates to
obtain such injunctive relief, and Executive agrees that process in any or all
of those actions or proceedings may be served by registered mail or delivery,
addressed to the last address of Executive known to the Company or its
Affiliates, or in any other manner authorized by law. Executive further agrees
that, in addition to any other remedies available to the Company or its
Affiliates by operation of law or otherwise, because of any breach by Executive
of his obligations under Section 11 or 12 he will forfeit any and all bonus and
rights to any payments to which he might otherwise then be entitled by virtue
hereof and such payments may be suspended so long as any good faith dispute
with respect thereto is continuing; provided, however, that
payments, benefits and other rights and privileges of the Executive under this
Agreement following termination of the Executives employment during a Post
Change Period shall not be forfeited, suspended, offset, diminished or
otherwise altered in any way on account of any breach or prospective breach of
Section 11, Section 12 or any other provision of this Agreement alleged by the
Company.

(c)
Notwithstanding any other provision of this Agreement, the Executive may elect
to resolve any dispute involving a breach or alleged breach of this Agreement
following termination of the Executives employment during a Post-Change Period
in any Federal or State court sitting in the City and State of New York or
court sitting in Bermuda or the United Kingdom. The Company hereby submits to
the non-exclusive jurisdiction of all those courts for the purposes of any such
actions or proceedings instituted by the Executive, and the

-16-

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Company agrees
that process in any or all of such actions or proceedings may be served by
registered mail or delivery, addressed to the Company as set forth in Section
20, or in any other manner authorized by law. The Company shall pay all costs
associated with any court proceeding under this Section 18(c) without regard to
the outcome of such proceeding, including all legal fees and expenses of the
Executive, who shall be reimbursed for all such costs promptly upon written
demand therefor by the Executive.

(d)
Each Party shall bear its own costs incurred in connection with any proceeding
under Sections 18(a) or 18(b) hereof, including all legal fees and expenses; provided,
however, that the Company shall bear all such costs of the Executive (to
the extent such costs are reasonable) if the Executive substantially prevails
in the proceeding. The Executive shall be reimbursed by the Company for all
such reasonable costs promptly upon written demand therefor by the Executive
which is made within a reasonable time following the proceeding and is supported
by documentation of such costs.

19.
AMENDMENT OR WAIVER.

No
provision in this Agreement may be amended unless such amendment is agreed to
in writing, signed by the Executive and by a duly authorized officer of the
Company. No waiver by any Party of any breach by the other Party of any
condition or provision of this Agreement to be performed by such other Party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same or any prior or subsequent time.
Except as set forth in Exhibit B, any waiver must be in writing and
signed by the Executive or a duly authorized officer of the Company, as the
case may be.

20.
NOTICES.

Any
notice required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
sent by courier, or by certified or registered mail, postage prepaid, return
receipt requested, duly addressed to the Party concerned at the address
indicated below or to such changed address as such Party may subsequently by
similar process give notice of:

| |                                   
| | ----------------------------------
| | If to the
  Company:              
| |                                   
| | Security
  Capital Assurance Ltd  
| | One
  Bermudiana Road             
| | Hamilton
  HM11, Bermuda          
| | Attn:  Chief Executive Officer   
| |                                   
| | If to the
  Executive:            
| |                                   
| | To the last
  address delivered to
| | the Company
  by the Executive in 
| | the manner
  set forth herein.    

-17-

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21.
IPO CONTINGENCY.

For
the avoidance of doubt, the effectiveness of this Agreement is contingent upon
the consummation of the IPO, and if the IPO is not consummated by December 1,
2006 this Agreement shall be null and void.

22.
SEVERABILITY.

In
the event that any provision or portion of this Agreement shall be determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.

23.
SURVIVORSHIP.

The
respective rights and obligations of the Parties shall survive any termination
of this Agreement to the extent necessary to the intended preservation of such
rights and obligations.

24.
REFERENCE.

In
the event of the Executives death or a judicial determination of his
incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his estate or other legal representative.

25.
GOVERNING LAW.

This
Agreement shall be governed by and construed and interpreted in accordance with
the laws of the State of New York without reference to the principles of
conflict of laws.

26.
SECTION 409A.

It
is intended that this Agreement will comply with Section 409A of the Code (and
any regulations and guidelines issued thereunder) to the extent the Agreement
is subject thereto, and the Agreement shall be interpreted on a basis
consistent with such intent.  If an
amendment of the Agreement is necessary in order for it to comply with Section
409A, the parties hereto will negotiate in good faith to amend the Agreement in
a manner that preserves the original intent of the parties to the extent
reasonably possible.

27.
HEADINGS.

The
heading of the sections contained in this Agreement are for convenience only
and shall not be deemed to control or affect the meaning or construction of any
provision of this Agreement.

28.
COUNTERPARTS.

This
Agreement may be executed in one or more counterparts.

-18-

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IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.

| |                                  |                       
| | -------------------------------- | ----------------------
| | SECURITY
  CAPITAL ASSURANCE LTD
| |                                  |                       
| | By:                              | /s/ Paul S.
  Giordano
| |                                  |                       
| |                                  |                       
| | DAVID P.
  SHEA                 
| |                                  |                       
| | /s/ David P.
  Shea             
| |                                  |                       
| | GUARANTORS:                     
| |                                  |                       
| | SCA HOLDINGS
  US INC           
| |                                  |                       
| | By: /s/ Paul
  S. Giordano_     
| |                                  |                       
| | XL FINANCIAL
  ASSURANCE LTD    
| |                                  |                       
| | By: /s/ Paul
  S. Giordano      

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EXHIBIT A

CHANGE IN CONTROL

For
purposes of this Agreement, Change in Control shall mean:

(i)
the acquisition
by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange
Act (a Person), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) of 30% or more of either (1) the then outstanding shares of
common stock of the Company (the Outstanding Company Common Stock) or (2) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the Outstanding
Company Voting Securities);provided, however, that the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition by the Company or any of its Subsidiaries; (ii) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any of its Subsidiaries; (iii) any acquisition by any corporation with
respect to which, following such acquisition, more than 60% of, respectively,
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such acquisition in substantially the same proportions as their
ownership, immediately prior to such acquisition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be
(unless a Persons ownership of the acquiring corporation results in that
Person directly or indirectly owning 30% or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities); or (iv) any acquisition
by XL Capital Ltd or its wholly-owned subsidiaries unless, at any time after
the Effective Date and prior to such acquisition, XL Capital Ltd and its
subsidiaries own less than 30% of the Outstanding Company Voting Securities;

(ii)
during any period of two consecutive years, individuals who, as of the beginning
of such period, constitute the Board (the Incumbent Board) cease for any
reason to constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the beginning of such
period whose election, or nomination for election by the Companys
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act);

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(iii)
consummation of a reorganization, scheme of arrangement, merger, consolidation
or similar transaction (collectively, a Transaction), in each case, with
respect to which all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and outstanding Company Voting Securities immediately prior to such
Transaction, do not, following such Transaction, beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Transaction in substantially the
same proportions as their ownership, immediately prior to such Transaction, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be;

(iv)
consummation of a sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation with respect to which
following such sale or other disposition, more than 60% of, respectively, the
then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation entitled
to vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such sale or other disposition in substantially the same proportions
as their ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be; or

(v)
approval by the shareholders of the Company of a complete liquidation or
dissolution (or similar transaction) of the Company.

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EXHIBIT B

GOOD REASON

For
purposes of this Agreement, Good Reason shall mean any of the
following, unless done with the prior express written consent of the Executive:

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)
  (A) The assignment to Executive of duties inconsistent with Executives
  position (including duties, responsibilities, status, titles or offices as
  set forth in Section 3 hereof); or (B) any elimination, diminution or
  reduction of Executives duties or responsibilities except in connection with
  the termination of Executives employment for Cause, disability or as a
  result of Executives death or by Executive other than for Good Reason; and
  for purposes for this clause (i), the determination of whether there has been
  a reduction of duties or responsibilities or an assignment of duties
  inconsistent with the Executives position shall take into account the Executives
  duties, responsibilities and position with the ultimate parent of the
  parent/subsidiary group as a whole which includes the Company;
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (ii)
  The (A) reduction in Executives Base Salary from the level in effect immediately
  prior to the Change in Control, or (B) payment of an annual bonus in an
  amount less than the lesser of (x) the most recent annual bonus paid prior to
  the Change in Control or (y) the greater of (I) the most recent target bonus,
  if any, established prior to the Change in Control or (II) the annual average
  bonus paid for the preceding three complete years prior to the Change in
  Control (or such lesser number of complete years as the Executive shall have
  been employed by the Company);                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (iii)
  The failure by the Company to obtain the specific written assumption of this
  Agreement by any successor or assign of the Company or any person acquiring substantially
  all of the Companys assets;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (iv)
  Any breach by the Company of any provision of this Agreement or any
  agreements entered into pursuant thereto that remains uncured for 20 calendar
  days following written notice of same by the Executive;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (v)
  Notwithstanding the provisions of Section 3(b) of this Agreement, requiring
  the Executive to be based at any office or location that is greater than 35
  miles from the office or location at which the Executive was principally
  located immediately prior to the Change in Control;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (vi)
  During the Post Change Period, (A) the failure to continue in effect any
  compensation or incentive plan in which Executive participates immediately
  prior to the time of the Change in Control unless an equitable arrangement
  (embodied in an ongoing substitute or alternative plan providing Executive
  with at least the same aggregate economic opportunity on an after-tax basis
  available to the Executive immediately prior to the Change in Control) has
  been made with respect to such plan in connection with the Change in Control,
  or the failure to continue Executives participation therein on substantially                                                                                                                                                                                                              

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the same
  basis both in terms of the amount of benefits provided and the level of his
  participation relative to other participants, as existed at the time of the
  Change in Control; or (B) the failure to continue to provide Executive with
  benefits and coverage at least as favorable in the aggregate as those enjoyed
  by him under the Companys pension, life insurance, medical, health and
  accident, disability, deferred compensation or savings plans in which he was
  participating at the time of the Change in Control; or
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (vii) The failure by the Company to pay within 7 calendar days of the due
  date any amounts due under any benefit or compensation plan, including any
  deferred compensation plan.                                                                                                                                                                                                                                                                                                                                                                

Notwithstanding
any provision in this Agreement to the contrary, the Executive must give
written notice of his intention to terminate his employment for Good Reason
within sixty (60) days after the act or omission which constitutes Good Reason,
and any failure to give such written notice within such period will result in a
waiver by the Executive of his right to terminate for Good Reason as a result
of such act or omission.

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