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                                                                    Exhibit 4.21














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                                     FORM OF
                    PREFERRED SECURITIES GUARANTEE AGREEMENT
                        ENDURANCE SPECIALTY HOLDINGS LTD.

                                 Dated as of [ ]

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                           TABLE OF CONTENTS
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                    ARTICLE 1 DEFINITIONS AND INTERPRETATION

<S>                 <C>                                                                          <C>
SECTION 1.01.         Definitions and Interpretation..............................................1


                          ARTICLE 2 TRUST INDENTURE ACT

SECTION 2.01.         Trust Indenture Act; Application............................................4
SECTION 2.02.         Lists of Holders of Securities..............................................4
SECTION 2.03.         Reports by the Preferred Guarantee Trustee..................................4
SECTION 2.04.         Periodic Reports to Preferred Guarantee Trustee.............................5
SECTION 2.05.         Evidence of Compliance with Conditions Precedent............................5
SECTION 2.06.         Events of Default; Waiver...................................................5
SECTION 2.07.         Event of Default; Notice....................................................5
SECTION 2.08.         Conflicting Interests.......................................................5

           ARTICLE 3 POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE
                                    TRUSTEE

SECTION 3.01.         Powers and Duties of the Preferred Guarantee Trustee........................6
SECTION 3.02.         Certain Rights of Preferred Guarantee Trustee...............................7
SECTION 3.03.         Not Responsible for Recitals or Issuance of Guarantee.......................9

                      ARTICLE 4 PREFERRED GUARANTEE TRUSTEE

SECTION 4.01.         Preferred Guarantee Trustee; Eligibility....................................9
SECTION 4.02.         Appointment, Removal and Resignation of Preferred Guarantee Trustee........10

                               ARTICLE 5 GUARANTEE

SECTION 5.01.         Guarantee..................................................................11
SECTION 5.02.         Waiver of Notice and Demand................................................11
SECTION 5.03.         Obligations Not Affected...................................................11
SECTION 5.04.         Rights of Holders..........................................................12
SECTION 5.05.         Guarantee of Payment.......................................................12
SECTION 5.06.         Subrogation................................................................12
SECTION 5.07.         Independent Obligations....................................................13
SECTION 5.08.         [Reserved].................................................................13
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               ARTICLE 6 LIMITATION OF TRANSACTIONS; SUBORDINATION

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SECTION 6.01.         Limitation of Transactions.................................................14
SECTION 6.02.         Ranking....................................................................15

                              ARTICLE 7 TERMINATION

SECTION 7.01.         Termination................................................................15

                            ARTICLE 8 INDEMNIFICATION

SECTION 8.01.         Exculpation................................................................15
SECTION 8.02.         Indemnification............................................................16

                             ARTICLE 9 MISCELLANEOUS

SECTION 9.01.         Successors and Assigns.....................................................17
SECTION 9.02.         Amendments.................................................................17
SECTION 9.03.         Notices....................................................................17
SECTION 9.04.         Benefit....................................................................18
SECTION 9.05.         Governing Law..............................................................18
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                    PREFERRED SECURITIES GUARANTEE AGREEMENT

         This PREFERRED SECURITIES GUARANTEE AGREEMENT (the "Preferred
Securities Guarantee"), dated as of ______, is executed and delivered by
Endurance Specialty Holdings, an exempted company incorporated in Bermuda as a
holding company (the "Guarantor"), and The Bank of New York, a New York banking
corporation, as trustee (the "Preferred Guarantee Trustee"), for the benefit of
the Holders (as defined herein) from time to time of the Preferred Securities
(as defined herein) of [Endurance Holdings Capital Trust], a Delaware statutory
trust (the "Issuer").

         WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of ______, among the trustees of the Issuer named
therein, the Guarantor, as Sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof [ ] Preferred Securities, having an aggregate stated
liquidation preference of [ ], designated the [ ]% Preferred Securities (the
"Preferred Securities"); and

         WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.

                                   ARTICLE 1
                         DEFINITIONS AND INTERPRETATION

      SECTION 1.01 Definitions and Interpretation.

         In this Preferred Securities Guarantee, unless the context otherwise
requires:

         (a) Capitalized terms used in this Preferred Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to them
in this Section 1.01;

         (b) a term defined anywhere in this Preferred Securities Guarantee has
the same meaning throughout;

         (c) all references to "the Preferred Securities Guarantee" or "this
Guarantee" are to this Preferred Securities Guarantee as modified, supplemented
or amended from time to time;

         (d) all references in this Preferred Securities Guarantee to Articles
and Sections are to Articles and Sections of this Preferred Securities Guarantee
unless otherwise specified;


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         (e) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires; and

         (f) a reference to the singular includes the plural and vice versa.

         "Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.

         "Common Securities" means the common securities representing common
undivided beneficial interests in the assets of the Issuer.

         "Covered Person" means any Holder or beneficial owner of Preferred
Securities.

         "Debentures" means the series of junior subordinated debentures of the
Guarantor designated [[]% Junior Subordinated Debentures due _________]
held by the Institutional Trustee of the Issuer (as defined in the Declaration).

         "Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee.

         "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined
in Annex I to the Declaration) that are required to be paid on such Preferred
Securities to the extent the Issuer has funds available therefor, (ii) the
amount payable upon redemption to the extent the Issuer has funds available
therefor, with respect to any Preferred Securities called for redemption by the
Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or
termination of the Issuer (other than in connection with the distribution of
Debentures to the Holders in exchange for Preferred Securities as provided in
the Declaration or the redemption of all of the Preferred Securities upon the
maturity or redemption of all of the Debentures as provided in the Declaration),
the lesser of (a) the aggregate of the liquidation preference and all accrued
and unpaid Distributions on the Preferred Securities to the date of payment, to
the extent the Issuer shall have funds available therefor, and (b) the amount of
assets of the Issuer remaining available for distribution to Holders upon
liquidation of the Issuer (in either case, the "Liquidation Distribution").

         "Holder" shall mean any holder, as registered on the books and records
of the Issuer of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.


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         "Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives or agents of the
Preferred Guarantee Trustee.

         "Indenture" means the Indenture dated as of ______, among the Guarantor
(the "Debenture Issuer") and The Bank of New York, as trustee, and any indenture
supplemental thereto pursuant to which the Debentures are to be issued to the
Institutional Trustee of the Issuer.

         "Majority in liquidation preference of the Securities" means, except as
provided by the Trust Indenture Act, Holders, voting separately as a class,
representing more than 50% of the stated liquidation preference (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined) of all Preferred Securities.

         "Officers' Certificate" means, with respect to any Person, a
certificate signed by two duly authorized officers of such Person. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:

         (a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definition relating thereto;

         (b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;

         (c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and

         (d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.

         "Person" means a legal person, including any individual, corporation,
estate, company, limited liability company, trust, partnership, limited
liability partnership, joint venture, association, joint stock company,
unincorporated association, or government or any agency or political subdivision
thereof, or any other entity of whatever nature.

         "Preferred Guarantee Trustee" means The Bank of New York until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.

         "Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any vice-president, any assistant vice-president, any assistant
treasurer, any trust officer or assistant trust officer or any other officer of
the Preferred Guarantee Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.


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         "Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.

         "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.

                                   ARTICLE 2
                               TRUST INDENTURE ACT

         SECTION 2.01. Trust Indenture Act; Application.

         (a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee, which are incorporated by reference hereto, and shall, to
the extent applicable, be governed by such provisions; and

         (b) if and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.

         SECTION 2.02. Lists of Holders of Securities.

         (a) The Guarantor shall provide the Preferred Guarantee Trustee (i)
within 15 days after each record payment date of Distributions, a list, in such
form as the Preferred Guarantee Trustee may reasonably require, of the names and
addresses of the Holders ("List of Holders") as of such date, and (ii) at any
other time, within 30 days of receipt by the Guarantor of a written request for
a List of Holders as of a date no more than 15 days before such List of Holders
is given to the Preferred Guarantee Trustee, provided that the Guarantor shall
not be obligated to provide such List of Holders at any time the List of Holders
does not differ from the most recent List of Holders given to the Preferred
Guarantee Trustee by the Guarantor. The Preferred Guarantee Trustee may destroy
any List of Holders previously given to it on receipt of a new List of Holders.

         (b) The Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.

         SECTION 2.03. Reports by the Preferred Guarantee Trustee.

         Within 60 days after April 15 of each year, the Preferred Guarantee
Trustee shall provide to the Holders such reports, if any, as are required by
Section 313 of the Trust Indenture Act in the form and in the manner provided by
Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.


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         SECTION 2.04. Periodic Reports to Preferred Guarantee Trustee.

         The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information,if any, as required by Section 314 of the
Trust Indenture Act and the compliance certificate required by Section 314 of
the Trust Indenture Act in the form, in the manner and at the times required by
Section 314 of the Trust Indenture Act.

         SECTION 2.05. Evidence of Compliance with Conditions Precedent.

         The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officers' Certificate.

         SECTION 2.06. Events of Default; Waiver.

         The Holders of a Majority in liquidation preference of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Preferred Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.

         SECTION 2.07. Event of Default; Notice.

         (a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders, notices of all Events of Default known to a Responsible
Officer of the Preferred Guarantee Trustee, unless such defaults have been cured
before the giving of such notice, provided, that, the Preferred Guarantee
Trustee shall be protected in withholding such notice if and so long as or a
Responsible Officer of the Preferred Guarantee Trustee in good faith determines
that the withholding of such notice is in the interests of the Holders.

         (b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default except any Event of Default as to which the
Preferred Guarantee Trustee shall have received written notice or a Responsible
Officer charged with the administration of the Declaration shall have received
written notice.

         SECTION 2.08. Conflicting Interests.

         The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.



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                                   ARTICLE 3
            POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE

         SECTION 3.01.Powers and Duties of the Preferred Guarantee Trustee.

         (a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders, and the Preferred Guarantee
Trustee shall not transfer its rights, title and interest in this Preferred
Securities Guarantee to any Person except a Holder exercising his or her rights
pursuant to Section 5.04(b) or to a Successor Preferred Guarantee Trustee on
acceptance by such Successor Preferred Guarantee Trustee of its appointment to
act as Successor Preferred Guarantee Trustee. The right, title and interest of
the Preferred Guarantee Trustee shall automatically vest in any Successor
Preferred Guarantee Trustee, and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and delivered
pursuant to the appointment of such Successor Preferred Guarantee Trustee.

         (b) Upon written notice that an Event of Default has occurred and is
continuing, the Preferred Guarantee Trustee shall enforce this Preferred
Securities Guarantee for the benefit of the Holders of the Preferred Securities.

         (c) The Preferred Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.06), the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Preferred Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.

         (d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

                  (i) prior to the occurrence of any Event of Default and after
         the curing or waiving of all such Events of Default that may have
         occurred:

                           (A) the duties and obligations of the Preferred
                  Guarantee Trustee shall be determined solely by the express
                  provisions of this Preferred Securities Guarantee, and the
                  Preferred Guarantee Trustee shall not be liable except for the
                  performance of such duties and obligations as are specifically
                  set forth in this Preferred Securities Guarantee, and no
                  implied covenants or obligations shall be read into this
                  Preferred Securities Guarantee against the Preferred Guarantee
                  Trustee; and



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                           (B) in the absence of bad faith on the part of the
                  Preferred Guarantee Trustee, the Preferred Guarantee Trustee
                  may conclusively rely, as to the truth of the statements and
                  the correctness of the opinions expressed therein, upon any
                  certificates or opinions furnished to the Preferred Guarantee
                  Trustee and conforming to the requirements of this Preferred
                  Securities Guarantee; but in the case of any such certificates
                  or opinions that by any provision hereof are specifically
                  required to be furnished to the Preferred Guarantee Trustee,
                  the Preferred Guarantee Trustee shall be under a duty to
                  examine the same to determine whether or not they conform to
                  the requirements of this Preferred Securities Guarantee;

                  (ii) the Preferred Guarantee Trustee shall not be liable for
         any error of judgment made in good faith by a Responsible Officer of
         the Preferred Guarantee Trustee, unless it shall be proved that the
         Preferred Guarantee Trustee was negligent in ascertaining the pertinent
         facts upon which such judgment was made;

                  (iii) the Preferred Guarantee Trustee shall not be liable with
         respect to any action taken or omitted to be taken by it in good faith
         in accordance with the direction of the Holders of not less than a
         Majority in liquidation preference of the Preferred Securities at the
         time outstanding, relating to the time, method and place of conducting
         any proceeding for any remedy available to the Preferred Guarantee
         Trustee, or exercising any trust or power conferred upon the Preferred
         Guarantee Trustee under this Preferred Securities Guarantee; and

                  (iv) no provision of this Preferred Securities Guarantee shall
         require the Preferred Guarantee Trustee to expend or risk its own funds
         or otherwise incur personal financial liability in the performance of
         any of its duties or in the exercise of any of its rights or powers, if
         the Preferred Guarantee Trustee shall have reasonable grounds for
         believing that the repayment of such funds or liability is not
         reasonably assured to it under the terms of this Preferred Securities
         Guarantee or indemnity satisfactory to it against such risk or
         liability is not reasonably assured to it.

         SECTION 3.02. Certain Rights of Preferred Guarantee Trustee.

         (a) Subject to the provisions of Section 3.01:

                  (i) the Preferred Guarantee Trustee may conclusively rely and
         shall be fully protected in acting or refraining from acting upon any
         resolution, certificate, statement, instrument, opinion, report,
         notice, request, direction, consent, order, bond, debenture, note,
         other evidence of indebtedness or other paper or document believed by
         it to be genuine and to have been signed, sent or presented by the
         proper party or parties;

                  (ii) any direction or act of the Preferred Securities
         Guarantor contemplated by this Preferred Securities Guarantee shall be
         sufficiently evidenced by an Officers' Certificate;


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                  (iii) whenever, in the administration of this Preferred
         Securities Guarantee, the Preferred Guarantee Trustee shall deem it
         desirable that a matter be proved or established before taking,
         suffering or omitting any action hereunder, the Preferred Guarantee
         Trustee (unless other evidence is herein specifically prescribed) may,
         in the absence of bad faith on its part, request and conclusively rely
         upon an Officers' Certificate which, upon receipt of such request,
         shall be promptly delivered by the Guarantor;

                  (iv) the Preferred Guarantee Trustee shall have no duty to see
         to any recording, filing or registration of any instrument (or any
         rerecording, refiling or registration thereof);

                  (v) the Preferred Guarantee Trustee may consult with counsel
         of its selection, and the advice or opinion of such counsel with
         respect to legal matters shall be full and complete authorization and
         protection in respect of any action taken, suffered or omitted by it
         hereunder in good faith and in accordance with such advice or opinion.
         Such counsel may be counsel to the Guarantor or any of its Affiliates
         and may include any of the Guarantor's employees. The Preferred
         Guarantee Trustee shall have the right at any time to seek instructions
         concerning the administration of this Preferred Securities Guarantee
         from any court of competent jurisdiction;

                  (vi) the Preferred Guarantee Trustee shall be under no
         obligation to exercise any of the rights or powers vested in it by this
         Preferred Securities Guarantee at the request or direction of any
         Holder, unless such Holder shall have provided to the Preferred
         Guarantee Trustee such adequate security and indemnity as would satisfy
         a reasonable person in the position of the Preferred Guarantee Trustee,
         against the costs, expenses (including reasonable attorneys' fees and
         expenses) and liabilities that might be incurred by it in complying
         with such request or direction, including such reasonable advances as
         may be requested by the Preferred Guarantee Trustee; provided that
         nothing contained in this Section 3.02(a)(vi) shall be taken to relieve
         the Preferred Guarantee Trustee, upon the occurrence of an Event of
         Default, of its obligation to exercise the rights and powers vested in
         it by this Preferred Securities Guarantee;

                  (vii) the Preferred Guarantee Trustee shall not be bound to
         make any investigation into the facts or matters stated in any
         resolution, certificate, statement, instrument, opinion, report,
         notice, request, direction, consent, order, bond, debenture, note,
         other evidence of indebtedness or other paper or document, but the
         Preferred Guarantee Trustee may make such further inquiry or
         investigation into such facts or matters as it may see fit;

                  (viii) the Preferred Guarantee Trustee may execute any of the
         trusts or powers hereunder or perform any duties hereunder either
         directly or by or through agents or attorneys, and the Preferred
         Guarantee Trustee shall not be responsible for any misconduct or
         negligence on the part of any agent or attorney appointed with due care
         by it hereunder;


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<PAGE>

                  (ix) any action taken by the Preferred Guarantee Trustee or
         its agents hereunder shall bind the Holders of the Preferred
         Securities, and the signature of the Preferred Guarantee Trustee or its
         agents alone shall be sufficient and effective to perform any such
         action. No third party shall be required to inquire as to the authority
         of the Preferred Guarantee Trustee to so act or as to its compliance
         with any of the terms and provisions of this Preferred Securities
         Guarantee, both of which shall be conclusively evidenced by the
         Preferred Guarantee Trustee's or its agent's taking such action; and

                  (x) whenever in the administration of this Preferred
         Securities Guarantee the Preferred Guarantee Trustee shall deem it
         desirable to receive instructions with respect to enforcing any remedy
         or right or taking any other action hereunder, the Preferred Guarantee
         Trustee (i) may request instructions from the Holders of a Majority in
         liquidation preference of the Preferred Securities or the Guarantor,
         (ii) may refrain from enforcing such remedy or right or taking such
         other action until such instructions are received, and (iii) shall be
         protected in acting in accordance with such instructions.

         (b) No provision of this Preferred Securities Guarantee shall be deemed
to impose any duty or obligation on the Preferred Guarantee Trustee to perform
any act or acts or exercise any right, power, duty or obligation conferred or
imposed on it, in any jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available to
the Preferred Guarantee Trustee shall be construed to be a duty.

         SECTION 3.03. Not Responsible for Recitals or Issuance of Guarantee.

         The recitals contained in this Preferred Securities Guarantee shall be
taken as the statements of the Guarantor, and the Preferred Guarantee Trustee
does not assume any responsibility for their correctness. The Preferred
Guarantee Trustee makes no representations as to the validity or sufficiency of
this Preferred Securities Guarantee.

                                   ARTICLE 4
                           PREFERRED GUARANTEE TRUSTEE

         SECTION 4.01. Preferred Guarantee Trustee; Eligibility.

         (a) There shall at all times be a Preferred Guarantee Trustee which
shall:

                  (i) not be an Affiliate of the Guarantor; and

                  (ii) be a corporation organized and doing business under the
         laws of the United States of America or any State or Territory thereof
         or of the District of Columbia, or a corporation or Person permitted by
         the Securities and Exchange Commission to act as an institutional
         trustee under the Trust Indenture Act, authorized under such laws to
         exercise corporate trust powers, having a combined capital and surplus
         of at least 50 million U.S. dollars ($50,000,000), and subject to
         supervision or examination by Federal, State, Territorial or District
         of Columbia authority. If such corporation publishes reports of
         condition at least annually, pursuant to law or to the requirements of
         the supervising or examining authority referred to above, then, for the
         purposes of this Section 4.01(a)(ii), the combined capital and surplus
         of such corporation shall be deemed to be its combined capital and
         surplus as set forth in its most recent report of condition so
         published.



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<PAGE>

         (b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.01(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02(c).

         (c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.

         SECTION 4.02. Appointment, Removal and Resignation of Preferred
Guarantee Trustee.

         (a) Subject to Section 4.02(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.

         (b) The Preferred Guarantee Trustee shall not be removed in accordance
with Section 4.02(a) until a Successor Preferred Guarantee Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Preferred Guarantee Trustee and delivered to the Guarantor.

         (c) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been appointed
or until its removal or resignation. The Preferred Guarantee Trustee may resign
from office (without need for prior or subsequent accounting) by an instrument
in writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.

         (d) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.02 within 60
days after delivery to the Guarantor of an instrument of resignation, the
resigning Preferred Guarantee Trustee may petition any court of competent
jurisdiction at the expense of the Guarantor for appointment of a Successor
Preferred Guarantee Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Preferred Guarantee
Trustee.


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                                    ARTICLE 5
                                    GUARANTEE

         SECTION 5.01. Guarantee.

         The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), as and when due, regardless of any defense, right of
set-off or counterclaim that the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holders.

         SECTION 5.02. Waiver of Notice and Demand.

         The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.

         SECTION 5.03. Obligations Not Affected.

         The obligations, covenants, agreements and duties of the Guarantor
under this Preferred Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:

         (a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;

         (b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, the amount payable upon redemption, Liquidation
Distribution or any other sums payable under the terms of the Preferred
Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the Preferred Securities (other
than an extension of time for payment of Distributions, the amount payable upon
redemption, Liquidation Distribution or other sum payable that results from the
extension of any interest payment period on the Debentures or any extension of
the maturity date of the Debentures permitted by the Indenture);

         (c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Issuer granting indulgence or extension of any
kind;

         (d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;


                                       11
<PAGE>

         (e) any invalidity of, or defect or deficiency in the Preferred
Securities;

         (f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or

         (g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.03 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.

         There shall be no obligation of the Holders or any other Person to give
notice to, or obtain consent of, the Guarantor with respect to the happening of
any of the foregoing.

         SECTION 5.04. Rights of Holders.

         (a) The Holders of a Majority in liquidation preference of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Preferred Guarantee
Trustee in respect of this Preferred Securities Guarantee or exercising any
trust or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee.

         (b) If the Preferred Guarantee Trustee fails to enforce this Preferred
Securities Guarantee, any Holder may, after such Holder makes a written request
to the Preferred Guarantee Trustee to enforce this Preferred Securities
Guarantee, institute a legal proceeding directly against the Guarantor to
enforce its rights under this Preferred Securities Guarantee, without first
instituting a legal proceeding against the Issuer, the Preferred Guarantee
Trustee or any other Person.

         SECTION 5.05. Guarantee of Payment.

         This Preferred Securities Guarantee creates a guarantee of payment and
not of collection.

         SECTION 5.06. Subrogation.

         The Guarantor shall be subrogated to all (if any) rights of the Holders
of Preferred Securities against the Issuer in respect of any amounts paid to
such Holders by the Guarantor under this Preferred Securities Guarantee;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Preferred
Securities Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Preferred Securities Guarantee. If any amount shall be
paid to the Guarantor in violation of the preceding sentence, the Guarantor
agrees to hold such amount in trust for the Holders and to pay over such amount
to the Holders.


                                       12
<PAGE>

         SECTION 5.07. Independent Obligations.

         The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.03.

         SECTION 5.08. [Reserved]



                                       13
<PAGE>


                                   ARTICLE 6
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

         SECTION 6.01. Limitation of Transactions.

         So long as any Preferred Securities remain outstanding, if there shall
have occurred an Event of Default, an event that, with the giving of notice or
the lapse of time or both, would constitute an Event of Default under the
Indenture or a selection by the Guarantor of an Extended Interest Payment Period
as provided in the Indenture and such period, or any extension thereof, shall be
continuing, then (a) the Guarantor shall not declare or pay any dividend on, or
make any distribution with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than stock
dividends declared and paid by the Guarantor which stock dividends consist of
the stock of the same class as that on which the dividend is being paid), (b)
the Guarantor shall not make any payment of interest, principal or premium, if
any, on or repay, purchase or redeem any debt securities issued by the Guarantor
which rank pari passu with or junior to the Debentures (other than stock
dividends declared and paid by the Guarantor which stock dividends consist of
the stock of the same class as that on which the dividend is being paid) and (c)
shall not make any guarantee payments with respect to the foregoing (other than
pursuant to the Preferred Securities Guarantee).


                                       14
<PAGE>

         Notwithstanding the foregoing, the Guarantor may at any time (a)
purchase or acquire its capital stock in connection with the satisfaction by the
Guarantor of its obligations under any employee benefit plans or pursuant to any
contract or security outstanding on the first day of any such event requiring
the Guarantor to purchase its capital stock; (b) reclassify its capital stock or
exchange or convert one class or series of its capital stock for another class
or series of its capital stock; (c) purchase fractional interests in its capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged; (d) declare dividends or
distributions in its capital stock, including stock dividends paid by the
Guarantor which consist of the stock of the same class as that on which any
dividend is being paid; (e) redeem or purchase any rights pursuant to a rights
agreement; and (f) make payments under any Guarantee related to any Preferred
Securities.

         SECTION 6.02. Ranking.

         This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Guarantor, except any liabilities that
may be made pari passu expressly by their terms, (ii) pari passu with the most
senior preferred or preference stock now or hereafter issued by the Guarantor
and with any guarantee now or hereafter entered into by the Guarantor in respect
of any preferred or preference stock or Preferred Security of any Affiliate of
the Guarantor, and (iii) senior to the Guarantor's common stock.

                                    ARTICLE 7
                                   TERMINATION

         SECTION 7.01. Termination.

         This Preferred Securities Guarantee shall terminate upon (i) full
payment of the amount payable upon redemption of all Preferred Securities, (ii)
the distribution of the Debentures to the Holders of all of the Preferred
Securities or (iii) full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this
Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder must restore payment
of any sums paid under the Preferred Securities or under this Preferred
Securities Guarantee.

                                   ARTICLE 8
                                 INDEMNIFICATION

         SECTION 8.01. Exculpation.

         (a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for all and any
loss, damage, claim or expense (including taxes, other than those based upon,
measured by or determined by the income of the Guarantee Trustee) incurred by
reason of any act or omission performed or omitted by such Indemnified Person in
good faith in accordance with this Preferred Securities Guarantee and in a
manner that such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Preferred
Securities Guarantee or by law, except that an Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of such Indemnified
Person's negligence, fraud, dishonesty, bad faith or willful misconduct with
respect to such acts or omissions.


                                       15
<PAGE>

         (b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.

         SECTION 8.02. Indemnification.

         (a) To the fullest extent permitted by applicable law, the Guarantor
shall indemnify and hold harmless each Indemnified Person from and against any
and all loss, damage, claim or expense (including taxes, other than those based
upon, measured by or determined by the income of the Guarantee Trustee) incurred
by such Indemnified Person by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Preferred
Securities Guarantee and in a manner such Indemnified Person reasonably believed
to be within the scope of authority conferred on such Indemnified Person in
accordance with this Preferred Securities Guarantee, except that no Indemnified
Person shall be entitled to be indemnified in respect of any loss, damage, claim
or expense incurred by such Indemnified Person by reason of negligence, fraud,
dishonesty, bad faith or willful misconduct with respect to such acts or
omissions.

         (b) To the fullest extent permitted by applicable law, expenses
(including reasonable legal fees and expenses) incurred by an Indemnified Person
in defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Guarantor prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Guarantor of an
undertaking by or on behalf of the Indemnified Person to repay such amount if it
shall be determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 8.02(a).


                                       16
<PAGE>

                                    ARTICLE 9
                                  MISCELLANEOUS

         SECTION 9.01. Successors and Assigns.

         All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in connection with any
permitted amalgamation, merger or consolidation of the Guarantor with or into
another entity or any permitted sale, transfer or lease of the Guarantor's
assets to another entity, the Guarantor may not assign its rights or delegate
its obligations under the Preferred Securities Guarantee without the prior
approval of the Holders of at least 66-2/3% of the aggregate stated liquidation
preference of the Preferred Securities then outstanding.

         SECTION 9.02. Amendments.

         Except with respect to any changes that do not adversely affect the
rights of Holders (in which case no consent of Holders will be required), this
Preferred Securities Guarantee may only be amended with the prior approval of
the Holders of not less than a majority in liquidation preference of all the
outstanding Preferred Securities. The provisions of Section 12.02 of the
Declaration with respect to meetings of Holders apply to the giving of such
approval.

         SECTION 9.03. Notices.

         All notices provided for in this Preferred Securities Guarantee shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:

         (a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders):

                  The Bank of New York
                  101 Barclay Street, 8W
                  New York, NY  10286
                  Attn:  Corporate Trust Administration
                  Fax: (212) 815-5707

         (b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders):

                  Endurance Specialty Holdings Ltd.
                  Wellesley House, 90 Pitts Bay Road
                  Pembroke HM 08, Bermuda

         (c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Issuer.


                                       17
<PAGE>

         All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

         SECTION 9.04. Benefit.

         This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.01(a), is not
separately transferable from the Preferred Securities.

         SECTION 9.05. Governing Law.

         THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND ALL
RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS.

         THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year
first above written.

                                            ENDURANCE SPECIALTY HOLDINGS
                                                 LTD.,
                                            as Guarantor


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

                                            THE BANK OF NEW YORK, as
                                            Preferred Guarantee Trustee

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



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