EXHIBIT 4.2







                                 XL CAPITAL LTD


                                       TO


                              THE BANK OF NEW YORK,


                                   AS TRUSTEE


                          THIRD SUPPLEMENTAL INDENTURE


                          DATED AS OF DECEMBER 9, 2005


                             SENIOR DEBT SECURITIES



                SUPPLEMENT TO INDENTURE DATED AS OF JUNE 2, 2004



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                  THIRD SUPPLEMENTAL INDENTURE, dated as of December 9, 2005
(the "THIRD SUPPLEMENTAL INDENTURE"), by and between XL CAPITAL LTD, a Cayman
Islands exempted limited company (the "COMPANY"), having its principal office at
XL House, One Bermudiana Road, Hamilton HM11, Bermuda, and THE BANK OF NEW YORK,
a New York banking corporation, having a Corporate Trust Office at 101 Barclay
Street, Floor 8W, New York, New York 10286, as trustee (the "TRUSTEE") under the
Indenture.

                  WHEREAS, the Company and the Trustee have as of June 2, 2004
entered into an Indenture (the "BASE INDENTURE") providing for the issuance by
the Company from time to time of its senior debt securities;

                  WHEREAS, the Company and the Trustee have executed that
certain First Supplemental Indenture, dated as of August 23, 2004, and that
certain Second Supplemental Indenture, dated as of November 12, 2004, pursuant
to which the Company issued a series of its 5.25% Senior Notes due 2014 ("2014
Securities") and a series of its 6.375% Senior Notes due 2024 ("2024
Securities") under the Base Indenture and provided for certain additional
provisions of such 2014 Securities and 2024 Securities;

                  WHEREAS, pursuant to Section 9.01(11) of the Base Indenture,
the Company and the Trustee may enter into supplemental indentures to establish
the form or terms of securities of any series as permitted by Sections 2.01 and
3.01 of the Base Indenture;

                  WHEREAS, the Company desires to issue another series of senior
debt securities under the Base Indenture, and has duly authorized the creation
and issuance of such series of senior debt securities and the execution and
delivery of this Third Supplemental Indenture to modify the Base Indenture and
provide certain additional provisions as hereinafter described (the Base
Indenture, as amended and supplemented by the Third Supplemental Indenture is
hereinafter referred to as the "Indenture");

                  WHEREAS, the Company and the Trustee deem it advisable to
enter into this Third Supplemental Indenture for the purposes of establishing
the terms of such senior debt securities and providing for the rights,
obligations and duties of the Trustee with respect to such senior debt
securities;

                  WHEREAS, the execution and delivery of this Third Supplemental
Indenture has been authorized by a resolution of the Board of Directors of the
Company or a duly authorized committee thereof;

                  WHEREAS, concurrent with the execution hereof, the Company has
delivered an Officers' Certificate and has caused its counsel to deliver to the
Trustee an Opinion of Counsel; and

                  WHEREAS, all conditions and requirements of the Base Indenture
necessary to make this Third Supplemental Indenture a valid, binding and legal
instrument in accordance with its terms have been performed and fulfilled by the
parties hereto and the execution and delivery thereof have been in all respects
duly authorized by the parties hereto.
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                  NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH:

                  For and in consideration of the mutual premises and agreements
herein contained, the Company and the Trustee covenant and agree, for the equal
and proportionate benefit of all Holders of the Notes (as defined below), as
follows:

                                    ARTICLE I

                                   DEFINITIONS

         Section 1.1.      Definition of Terms.

                  Unless otherwise provided herein or unless the context
otherwise requires:

                  (a)      a term defined in the Base Indenture has the same
         meaning when used in this Third Supplemental Indenture;

                  (b)      a term defined anywhere in this Third Supplemental
         Indenture has the same meaning throughout;

                  (c)      the singular includes the plural and vice versa;

                  (d)      headings are for convenience of reference only and do
         not affect interpretation;

                  (e)      the following terms have the meanings given to them
         in the Purchase Contract Agreement (as defined below), as in effect on
         the date hereof: Clearing Agency, Clearing Agency Participant, Last
         Failed Remarketing; Normal Unit; Purchase Price; Redemption Price;
         Remarketing Agent; Remarketing Notice; Remarketing Fee; Remarketing
         Period; Separate Notes; Stock Purchase Date; Subsequent Remarketing
         Date; Trading Day; and Underwriting Agreement; and

                  (f)      the following terms have the meanings given to them
         in this Section 1.1(f):

                  "BUSINESS DAY" means, with respect to any Notes, any day other
than a Saturday, Sunday or other day in the City of New York, in Bermuda or in
any Place of Payment on which banking institutions are authorized by law or
regulations to close.

                  "DTC" has the meaning set forth in Section 2.7 of the Third
Supplemental Indenture.

                  "GLOBAL NOTE" means a Global Security representing the Notes.

                  "ISSUE DATE" means December 9, 2005.

                  "ISSUE PRICE" means 100% of the aggregate principal amount.

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                  "PLEDGE AGREEMENT" means the Pledge Agreement, dated as of
December 9, 2005, between the Company, The Bank of New York, as Purchase
Contract Agent, and as attorney-in-fact for Holders of the Units, and The Bank
of New York, as Collateral Agent, Custodial Agent and Securities Intermediary.

                  "PURCHASE CONTRACT AGENT" means The Bank of New York, a New
York banking corporation, as purchase contract agent under the Purchase Contract
Agreement (as defined below), until a successor Purchase Contract Agent shall
have become such pursuant to the applicable provisions of the Purchase Contract
Agreement, and thereafter "Purchase Contract Agent" shall mean such successor.

                  "PURCHASE CONTRACT AGREEMENT" means the Purchase Contract
Agreement, dated as of December 9, 2005, between the Company and The Bank of New
York, as purchase contract agent.

                  "RELEVANT DATE" means, in respect of any payment, the date on
which such payment first becomes due and payable, but if the full amount of the
moneys payable has not been received by the Trustee on or prior to such due
date, it means the first date on which, the full amount of such moneys having
been so received and being available for payment to Holders, notice to that
effect shall have been duly given to the Holders of the Notes.

                  "REMARKETING" means any remarketing conducted pursuant to and
in accordance with the Remarketing Agreement.

                  "REMARKETING AGREEMENT" means the Remarketing Agreement to be
entered into by and among the Company, a remarketing agent and the Purchase
Contract Agent.

                  "REMARKETING DATE" means the ninth Business Day before the
Stock Purchase Date, which shall be February 3, 2009.

                  "REMARKETING VALUE" means, with respect to any Note, the
principal amount of such Note.

                  "RESET DATE" means the date following the Remarketing Date or
a Subsequent Remarketing Date, as applicable, on which the trades in a
successful remarketing of the Notes pursuant to the Purchase Contract Agreement
and the Remarketing Agreement settle. Notwithstanding whether a successful
remarketing occurs on the Remarketing Date or on a Subsequent Remarketing Date,
the settlement date for such remarketing, if successful, shall be on the Stock
Purchase Date; provided that the Company with the consent of the Remarketing
Agent and the Purchase Contract Agent shall have the option to provide for a
settlement date of a successful remarketing that is earlier than the Stock
Purchase Date so long as the Company shall pay on the Stock Purchase Date to the
Holders of the Normal Units and the Separate Notes an interest payment on the
Notes for the period from and including the Payment Date immediately preceding
the Stock Purchase Date to but excluding the Stock Purchase Date at the Initial
Interest Rate.

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                  "RESET RATE" has the meaning set forth in Section 2.19 of the
Third Supplemental Indenture.

                                   ARTICLE II

                              CREATION OF THE NOTES

         Section 2.1.      Designation of Series.

                  Pursuant to the terms hereof and Sections 2.01 and 3.01 of the
Base Indenture, the Company hereby creates a series of its senior debt
securities designated as the 5.25% Senior Notes due 2011 (the "NOTES"), which
Notes shall be deemed "Securities" for all purposes under the Indenture.

         Section 2.2.      Form of Notes.

                  The definitive form of the Notes shall be substantially in the
form set forth in EXHIBIT A attached hereto, which is incorporated herein and
made part hereof.

                  The Final Maturity of the Notes shall be February 15, 2011.

         Section 2.3.      Interest and Interest Rate Reset.

                  (a)      Each Note will bear interest from the Issue Date or
         from the most recent Interest Payment Date to which interest has been
         paid or duly provided for, as the case may be, initially at the rate of
         5.25% per annum (the "INITIAL INTEREST RATE") up to but excluding the
         Reset Date, payable in immediately available funds, in such coin or
         currency of the United States of America as at the time of payment
         shall be legal tender for the payment of public and private debts;
         provided that in the event that a Last Failed Remarketing occurs, each
         Note shall continue to bear interest at the Initial Interest Rate until
         the principal of the Notes is paid or made available for payment. In
         the event the Notes are successfully remarketed pursuant to the
         Purchase Contract Agreement and the Remarketing Agreement, each Note
         shall bear interest at the Reset Rate from and including the Reset Date
         to the date on which the principal of the Notes is paid or made
         available for payment; provided that any principal and installment of
         interest which is overdue shall bear interest (to the extent that
         payment of such interest is enforceable under applicable law) at the
         Initial Interest Rate up to but excluding the Reset Date, if any, and
         thereafter at the Reset Rate, from the dates such amounts are due until
         they are paid or made available for payment, and such interest shall be
         payable on demand. Interest on the Notes initially shall be payable
         quarterly in arrears on February 15, May 15, August 15 and November 15
         of each year (each, an "INTEREST PAYMENT DATE"), commencing February
         15, 2006, through and including February 15, 2009 and then
         semi-annually in arrears on the Interest Payment Dates of February 15
         and August 15 of each year, commencing August 15, 2009, until the
         principal thereof is paid or made available for payment. The Regular
         Record Date shall be the 15th calendar day (whether or not a Business
         Day) prior to the relevant Interest Payment Date.

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                  (b)      The amount of interest payable for any period on any
         Interest Payment Date will be computed (1) for any full quarterly or
         semi-annual period on the basis of a 360-day year consisting of twelve
         30-day months and (2) for any period shorter than a full quarterly or
         semi-annual period, on the basis of a 30-day month and, for periods of
         less than a month, on the basis of the actual number of days elapsed
         per 30-day month. In the event that any date on which interest is
         payable on the Notes is not a Business Day, then payment of interest
         payable on such date will be made on the next succeeding day which is a
         Business Day (and without any interest or other payment in respect of
         any such delay), except that, if such Business Day is in the next
         succeeding calendar year, such payment shall be made on the immediately
         preceding Business Day, in each case with the same force and effect as
         if made on such date.

         Section 2.4.      Limit on Amount of Notes.

                  The Notes will be limited in aggregate principal amount to
$745,000,000 and may, upon execution of this Third Supplemental Indenture, be
executed by the Company and delivered to the Trustee for authentication, and the
Trustee shall thereupon authenticate and deliver said Notes in accordance with a
Company Order.

         Section 2.5.      Nature of Notes/Minimum Denomination.

                  (a)      The Notes shall constitute senior, unsecured and
         unsubordinated obligations of the Company and shall rank pari passu
         with all other unsecured and unsubordinated indebtedness of the Company
         from time to time outstanding.

                  (b)      The Notes shall be issuable only in registered form
         and without coupons in denominations of $1,000 and any integral
         multiples thereof except that an interest in a Note held as part of a
         Normal Unit represents an ownership interest of 1/40th, or 2.5%, of a
         Note in aggregate principal amount of $1,000 and will therefore
         correspond to the stated amount of $25 per Normal Unit.

         Section 2.6.      No Sinking Fund.

                  The Notes do not have the benefit of any sinking fund
obligation and, subject to Section 2.21 hereof are not redeemable at the option
of the Holders.

         Section 2.7.      Issuance of Notes and Payment.

                  (a)      The Notes, on original issuance, shall be issued in
         the form of (i) one or more definitive, fully registered Notes
         registered initially in the name of The Bank of New York, as Purchase
         Contract Agent and (ii) with respect to any Notes that are no longer a
         component of Normal Units and released from the lien of the Pledge
         Agreement, one fully registered Global Note registered in the name of
         The Depository Trust Company ("DTC"), as Depositary, or its nominee,
         --- and deposited with the Trustee, as custodian for DTC, for credit by
         DTC to the respective accounts of beneficial owners of the Separate
         Notes represented thereby (or such other accounts as they may direct).

<PAGE>

                  (b)      The principal of and the interest on the Notes will
         be payable at the Corporate Trust Office or, at the option of the
         Company, by check mailed to the address of the Person entitled thereto
         at such Person's address as it appears on the Register or by wire
         transfer to the account maintained in the United States designated by
         written notice given ten Business Days prior to the applicable payment
         date by such Person.

         Section 2.8.      Notes Not Convertible or Exchangeable.

                  The Notes will not be convertible or exchangeable for other
securities or property.

         Section 2.9.      Global Note.

                  (a)      DTC shall serve as the initial Depositary for the
         Global Note.

                  (b)      Unless and until it is exchanged for definitive Notes
         in accordance with the terms of the Base Indenture, a Global Note may
         be transferred, in whole but not in part, only to another nominee of
         the Depositary, or to a successor Depositary selected or approved by
         the Company or to a nominee of such successor Depositary.

         Section 2.10.     Defeasance.

                  The defeasance provisions of Sections 4.03 and 4.04 of the
Base Indenture shall not apply to the Notes.

         Section 2.11.     Redemption.

                  Pursuant to 3.01(6) and Section 11.01 of the Base Indenture,
so long as any of the Notes are Outstanding, the following provisions shall be
applicable to the Notes:

                  (a)      If certain events specified in EXHIBIT A attached
         hereto shall occur and be continuing, the Company may, at its option,
         redeem the Notes then Outstanding in whole (but not in part) at any
         time at the Redemption Price and in accordance with the terms and
         conditions set forth in EXHIBIT A.

                  (b)      Notwithstanding Section 1104 of the Indenture, notice
         of redemption shall (i) be sufficient if instead of setting forth a
         specific price with respect to the Redemption Price, it sets forth the
         manner of calculation thereof and (ii) shall be mailed to the Holders
         not less than 30 nor more than 60 days prior to the redemption date.

         Section 2.12.     Listing.

                  In the event that the Notes become separately traded from the
Normal Units to the extent that applicable exchange listing requirements are
met, the Company covenants and agrees to use commercially reasonable efforts to
cause such Notes to be listed on the securities exchange on which the Normal
Units are then listed.

         Section 2.13.     Remarketing.

<PAGE>

                  The Notes may be remarketed at a specified price on certain
dates, all as specified in EXHIBIT A and Section 2.19 of this Third Supplemental
Indenture, in Section 5.4(b) of the Purchase Contract Agreement and in Section
4.5(d) of the Pledge Agreement and the remarketing procedures set forth in such
sections shall apply to the Notes.

         Section 2.14.     Guarantees.

                  The Notes will not be guaranteed by any third party.

         Section 2.15.     Place of Payment.

                  The Paying Agent for the Notes shall initially be the Trustee,
and the Place of Payment for the Notes shall initially be the Corporate Trust
Office, which as of the date hereof for such purpose is located at 101 Barclay
Street, Floor 8W, New York, New York 10286. The Company may from time to time
designate one or more additional offices or agencies where Notes may be
presented or surrendered for payment.

         Section 2.16.     Events of Default.

            The following shall constitute additional Events of Default pursuant
to Section 5.01 of the Base Indenture with respect to the Notes with the same
effect as if expressly set forth in such Section 5.01:

                  (a)      default by the Company under any instrument or
         instruments under which there is or may be secured or evidenced any of
         the Company's indebtedness (other than the Notes) having an outstanding
         principal amount of $50,000,000 (or its equivalent in any other
         currency or currencies) or more, individually or in the aggregate, that
         has caused the holders thereof to declare such indebtedness to be due
         and payable prior to its stated maturity, unless such declaration has
         been rescinded within 30 days;

                  (b)      default by the Company in the payment when due of the
         principal or premium, if any, of any bond, debenture, note or other
         evidence of the Company's indebtedness, in each case for money
         borrowed, or in the payment of principal or premium, if any, under any
         mortgage, indenture, agreement or instrument under which there may be
         issued or by which there may be secured or evidenced any indebtedness
         of the Company for money borrowed, which default for payment of
         principal or premium, if any, is in an aggregate principal amount
         exceeding $50,000,000 (or its equivalent in any other currency or
         currencies), if such default shall continue unremedied or unwaived for
         more than 30 days after the expiration of any grace period or extension
         of the time for payment applicable thereto;

                  (c)      default in the payment of any Additional Amounts
         payable with respect to interest on any Notes, when such Additional
         Amounts become due and payable, and continuance of such default for a
         period of 30 days;

                  (d)      default in the payment of any Additional Amounts
         payable with respect to any principal of or premium, if any, on any
         Notes, when such Additional Amounts

<PAGE>

         become due and payable either at maturity, upon any redemption, by
         declaration of acceleration or otherwise; and

                  (e)      default in the payment of the Put Price on the Notes
         following the exercise of the Put Right by any Holder of Notes on the
         date that such payment is due and payable.

         In addition, with respect to the Notes, the reference to "60 days" in
Section 5.01(1) of the Base Indenture shall be amended to be "30 days" with
respect to the Notes.

         The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice of any Event of Default or any event which,
after notice or lapse of time or both, would constitute an Event of Default.

         Section 2.17.     Covenants.

         The Notes shall be entitled to the benefit of each of the covenants in
Article Ten of the Base Indenture and the following additional covenants (which
shall be deemed to be a provision of the Indenture and, when referred to as a
provision of the Indenture, shall be identified by reference to the Section
number that is set forth immediately preceding the covenant):

                  SECTION 10.09. LIMITATION ON LIENS ON STOCK OF DESIGNATED
                  SUBSIDIARIES. The Company covenants that, so long as any Notes
                  are outstanding, the Company will not, nor will the company
                  permit any Designated Subsidiary to, create, assume, incur,
                  guarantee or otherwise permit to exist any indebtedness
                  evidenced by notes, debentures, bonds or similar instruments,
                  which is secured by any mortgage, pledge, lien, security
                  interest or other encumberance upon any shares of Capital
                  Stock of the Company or any Designated Subsidiary (whether
                  such shares of stock are now owned or hereafter acquired)
                  without effectively providing concurrently that the Notes will
                  be secured equally and ratably with such indebtedness for at
                  least the time period such other indebtedness is so secured.

                  "DESIGNATED SUBSIDIARY" means any present or future
                  consolidated subsidiary of the Company that is a regulated
                  insurance company, the assets of which constitute at least 20%
                  of the Company's consolidated assets.

                  SECTION 10.10.  ADDITIONAL AMOUNTS.

                           All amounts payable (whether in respect of principal,
                  interest or otherwise) in respect of the Notes will be made
                  free and clear of and without withholding or deduction for or
                  on account of any present or future taxes, duties, levies,
                  assessments or governmental charges of whatever nature imposed
                  or levied by or on behalf of the Cayman Islands or Bermuda or
                  any political subdivision thereof or any authority or agency
                  therein or thereof having power to tax, unless the withholding
                  or deduction of such taxes, duties, levies, assessments or
                  governmental charges is required by law. In that event, the
                  Company will pay, or cause to be paid, such additional amounts
                  as may be necessary in order that the

<PAGE>

                  net amounts receivable by a Holder after such withholding or
                  deduction (including any withholding or deduction on such
                  payment of additional amounts) shall equal the respective
                  amounts that would have been receivable by such Holder had no
                  such withholding or deduction been required ("ADDITIONAL
                  AMOUNTS"), except that no such Additional Amounts shall be
                  payable in relation to any payment in respect of any of the
                  Notes (a) to, or to a third party on behalf of, a Person who
                  would be able to avoid such withholding or deduction by
                  complying with such Person's statutory requirements or by
                  making a declaration of non-residence or similar claim for
                  exemption but, in either case, fails to do so, or is liable
                  for such taxes, duties, levies, assessments or governmental
                  charges in respect of such Note by reason of his having some
                  connection with (including, without limitation, being a
                  citizen of, being incorporated or engaged in a trade or
                  business in, or having a residence or principal place of
                  business or other presence in) the Cayman Islands or Bermuda,
                  as the case may be, other than (i) the mere holding of such
                  Note or (ii) the receipt of principal, interest, or other
                  amount in respect of such Note; (b) presented for payment more
                  than 30 days after the Relevant Date, except to the extent
                  that the relevant Holder would have been entitled to such
                  Additional Amounts on presenting the same for payment on or
                  before the expiry of such period of 30 days; (c) on account of
                  any inheritance, gift, estate, personal property, sales or
                  transfer or similar taxes, duties, levies, assessments or
                  similar governmental charges; or (d) on account of any taxes,
                  duties, levies, assessments or governmental charges that are
                  payable otherwise than by withholding from payments in respect
                  of such Note.

                           If the Company becomes subject generally at any time
                  to any taxing jurisdiction other than or in addition to the
                  Cayman Islands and Bermuda, references in this section to the
                  Cayman Islands and Bermuda shall be read and construed as
                  references to such other jurisdiction(s) and/or to the Cayman
                  Islands and Bermuda.

                           Any reference in the Indenture to principal, premium
                  or interest in respect of the Notes, any redemption amount and
                  any other amounts in the nature of principal, shall be deemed
                  also to refer to any Additional Amounts that may be payable
                  under the Indenture, and the express mention of the payment of
                  Additional Amounts (if applicable) in any provision hereof
                  shall not be construed as excluding Additional Amounts in
                  those provisions hereof where such express mention is not
                  made.

                           Except as otherwise provided in or pursuant to the
                  Indenture, if the Notes require the payment of Additional
                  Amounts, at least 30 days prior to each date on which any
                  payments under or with respect to the Notes are due and
                  payable (unless such obligation to pay Additional Amounts
                  arises shortly before or after the 30th day prior to such
                  date, in which case it shall be promptly thereafter) the
                  Company, or its designee shall furnish to the Trustee, the
                  Registrar and the Paying Agent an Officers' Certificate
                  stating the fact that Additional Amounts will be payable, the
                  amounts so payable, and any other information to enable the
                  Trustee

<PAGE>

                  or such Paying Agent to pay such Additional Amounts to Holders
                  on the payment date.

                           The Company will pay any present or future stamp,
                  court or documentary taxes, or any other excise or property
                  taxes, charges or similar levies which arise in any
                  jurisdiction from the execution, delivery or registration of
                  any Notes or any other document or instrument referred to
                  therein (other than a transfer of the Notes), or the receipt
                  of any payments with respect to the Notes, excluding any such
                  taxes, charges or similar levies imposed by any jurisdiction
                  outside the Cayman Islands or Bermuda in which a Paying Agent
                  is located, other than those resulting from, or required to be
                  paid in connection with, the enforcement of the Notes, the
                  Indenture or any other such document or instrument following
                  the occurrence of any Event of Default with respect to the
                  Notes.

         Section 2.18.     Non-Applicability of Certain Sections.

                  Sections 11.08, 11.09 and 11.10 of the Base Indenture shall
not apply to the Notes.

         Section 2.19.     REMARKETING.

                  (a) Unless a Special Event Redemption has occurred, the
         Company shall engage, no later than 30 days prior to the Remarketing
         Date, a nationally recognized investment bank (the "REMARKETING Agent")
         pursuant to a Remarketing Agreement to be entered into between the
         Company and the Remarketing Agent, but providing for remarketing
         procedures substantially as set forth below, to sell the Notes of
         Holders of Normal Units, other than Holders that have elected not to
         participate in the remarketing pursuant to the procedures set forth in
         paragraph (b) below, and Holders of Separate Notes that have elected to
         participate in the remarketing pursuant to the procedures set forth in
         Section 2.20 below and in Section 4.5(d) of the Pledge Agreement.

                  (b) The Pledged Notes comprising part of Normal Units and the
         Separate Notes of Holders of Separate Notes that have elected to
         participate in the Remarketing shall be remarketed by the Remarketing
         Agent on the Remarketing Date, and, if necessary, on each Subsequent
         Remarketing Date. A Holder of Normal Units may elect not to participate
         in a Remarketing and retain the Notes underlying such Normal Units by
         notifying the Purchase Contract Agent of such election and delivering
         the Purchase Price to the Collateral Agent prior to 5:00 p.m., New York
         City time, on the thirteenth Business Day immediately preceding the
         Stock Purchase Date, which such amount will be paid to the Company on
         the Stock Purchase Date in settlement of such Holder's obligations
         under the Purchase Contracts. A Holder of Normal Units that has not
         settled the related Purchase Contract through a Cash Settlement or an
         Early Settlement pursuant to Sections 5.4(a) and 5.9 of the Purchase
         Contract Agreement or by electing not to participate in the Remarketing
         pursuant to this paragraph (b) and Section 5.4(b)(iv) of the Purchase
         Contract Agreement shall be deemed to have elected to participate in
         the Remarketing.

<PAGE>

                  (c) No later than 10:00 a.m. (New York City time) on the
         seventh Business Day preceding the Remarketing Date, the Company, or
         the Purchase Contract Agent, at the Company's request, shall deliver
         the Remarketing Notice to Holders of Normal Units and Holders of
         Separate Notes, of the Remarketing to take place on the Remarketing
         Date, and, if necessary, on each Subsequent Remarketing Date. The
         Remarketing Notice will include the amount of cash that must be
         delivered by Holders of Normal Units that elect not to participate in
         the remarketing and the deadline for such delivery, as well as
         information with respect to the exercise of the Put Right. If such
         Normal Units or Separate Notes are held in global form, the Company, or
         the Purchase Contract Agent, at the Company's request, will cause the
         Clearing Agency to notify the Clearing Agency Participants of the
         Remarketing by no later than the seventh Business Day preceding the
         Remarketing Date.

                  (d) The Purchase Contract Agent shall notify, by 10:00 a.m.,
         New York City time, on the eleventh Business Day immediately preceding
         the Stock Purchase Date, the Remarketing Agent and the Collateral Agent
         of the aggregate principal amount of Notes of Normal Units Holders to
         be remarketed. On the the eleventh Business Day immediately preceding
         the Stock Purchase Date, no later than by 10:00 a.m. New York City
         time, pursuant to the terms of the Pledge Agreement, the Custodial
         Agent will notify the Remarketing Agent of the aggregate principal
         amount of Separate Notes to be remarketed. No later than 10:00 a.m.,
         New York City time, on the tenth Business Day immediately preceding the
         Stock Purchase Date, the Collateral Agent and the Custodial Agent,
         pursuant to the terms of the Pledge Agreement, will deliver for
         Remarketing to the Remarketing Agent all Notes to be remarketed.

                  (e) The right of each Holder of Notes to have its Notes
         tendered for purchase will be limited to the extent that (i) the
         Remarketing Agent conducts a Remarketing pursuant to the terms of the
         Remarketing Agreement, (ii) the Notes included in the Remarketing have
         not been called for redemption upon the occurrence of a Special Event;
         (iii) the Remarketing Agent is able to find a purchaser or purchasers
         for the remarketed Notes at a Reset Rate such that the aggregate value
         of such remarketed Notes is equal to 100.25% of the Remarketing Value
         and (iv) such purchaser or purchasers deliver the purchase price
         therefor to the Remarketing Agent.

                  (f) Upon receipt of the notice provided above in paragraph (d)
         from the Purchase Contract Agent and the Custodial Agent and such Notes
         from the Collateral Agent and the Custodial Agent, the Remarketing
         Agent will, on the Remarketing Date, and, if necessary, on each
         Subsequent Remarketing Date, use its reasonable best efforts to (i)
         establish a rate of interest that, in the opinion of the Remarketing
         Agent, will, when applied to the outstanding Notes, enable the then
         current aggregate market value of the Notes to have a value equal to
         100.25% of the Remarketing Value as of the Remarketing Date or as of
         any Subsequent Remarketing Date, as the case may be (the "RESET RATE")
         and (ii) sell such Notes on such date at a price equal to 100.25% of
         the Remarketing Value.

                  (g) If, in spite of using its reasonable best efforts, the
         Remarketing Agent cannot establish the Reset Rate and remarket the
         Notes included in the remarketing at a price

<PAGE>

         equal to 100.25% of the Remarketing Value on the Remarketing Date, the
         Remarketing Agent will attempt to establish the Reset Rate and remarket
         the Notes included in the remarketing at a price equal to 100.25% of
         the Remarketing Value on each Subsequent Remarketing Date, if
         necessary. If, in spite of using its reasonable best efforts, the
         Remarketing Agent fails to remarket the Notes included in the
         remarketing at a price equal to 100.25% of the Remarketing Value on or
         before 4:00 p.m., New York City time, on the third Business Day
         immediately preceding the Stock Purchase Date, the remarketing will be
         deemed to have failed (the "LAST FAILED REMARKETING").

                  (h) On the Remarketing Date and any Subsequent Remarketing
         Date, the Remarketing Agent shall advise the Company, by telephone, of
         any successful or unsuccessful Remarketing as soon as practicable after
         such determination.

                  (i) If a successful Remarketing shall have occurred, the
         Remarketing Agent will, on or prior to the third Business Day following
         the date on which the Notes were successfully remarketed, in accordance
         with the Purchase Contract Agreement and the Remarketing Agreement:

                           (i)      deduct and retain for itself the Remarketing
                  Fee;

                           (ii)     pay the proceeds from such successful
                  Remarketing related to the Notes of Holders of Normal Units
                  that were remarketed to the Collateral Agent, which, for the
                  benefit of the Company, will thereupon apply such proceeds, in
                  accordance with the Pledge Agreement in direct settlement of
                  the Holders' obligations under the Purchase Contracts;

                           (iii)    if any Separate Notes were remarketed, remit
                  to the Custodial Agent for payment to the Holders of such
                  Separate Notes sold in the Remarketing the remaining proceeds
                  from such successful Remarketing attributable to the Separate
                  Notes; and

                           (iv)     if there remain any proceeds from such
                  successful Remarketing, after the application of such proceeds
                  as set forth in clauses (i) through (iii) of this sentence,
                  then remit such remaining proceeds to the Purchase Contract
                  Agent for the benefit of the Holders of the Normal Units that
                  were remarketed, all determined on a pro rata basis.

                  (j) If a successful Remarketing occurs, the Remarketing Agent
         shall, as soon as practicable on the Remarketing Date or on the
         Subsequent Remarketing Date, as the case may be, in the case of the
         Company, and by approximately 4:30 p.m. (New York City time) on the
         Trading Day following the Remarketing Date, or the Subsequent
         Remarketing Date, as the case may be, advise, by telephone:

                           (i)      the Depositary and the Company of the Reset
                  Rate determined in the Remarketing and the aggregate principal
                  amount of Notes sold in the Remarketing;

<PAGE>

                           (ii)     each purchaser (or the Depository
                  Participant thereof) of the Reset Rate and the aggregate
                  principal amount of remarketed Notes such purchaser is to
                  purchase; and

                           (iii)    each purchaser to give instructions to its
                  Depository Participant to pay the purchase price on the date
                  of settlement for such Remarketing in same day funds against
                  delivery of the remarketed Notes purchased through the
                  facilities of DTC.

                  (k) Any distribution to Holders of excess funds and interest
         described in this Section 2.19 shall be payable at the office of the
         Purchase Contract Agent in the Borough of Manhattan, New York City, or,
         if the Units do not remain in book-entry only form, at the option of
         the Company, by check mailed to the address of the Person entitled
         thereto at such Person's address as it appears on the Register or by
         wire transfer to the account maintained in the United States designated
         by written notice given ten Business Days prior to the applicable
         payment date by such Person.

                  (l) If a failed remarketing occurs, the Remarketing Agent and
         the Company, as applicable, shall take the following actions:

                           (i)      the Remarketing Agent shall notify by
                  telephone the Company and the Depositary that a failed
                  remarketing has occurred;

                           (ii)     The Company will cause a notice of failed
                  remarketing to be published by 9:00 a.m., New York City time,
                  on the Business Day following such failed remarketing; and

                           (iii)    The Company will release this information by
                  means of Bloomberg and Reuters (or any successor or equivalent
                  newswires) newswires.

                  (m) The Remarketing Agent shall remit, within three Business
         Days following the Last Failed Remarketing, the Pledged Notes that were
         to be remarketed to the Collateral Agent and the Separate Notes that
         were to be remarketed to the Custodial Agent. The Collateral Agent, for
         the benefit of the Company, may exercise its rights as a secured party
         with respect to such Notes, including those actions specified in
         Section 2.19(n) below; provided that, if upon the Last Failed
         Remarketing the Collateral Agent exercises such rights for the benefit
         of the Company with respect to such Notes, any accumulated and unpaid
         interest on such Notes will become payable by the Company to the
         Purchase Contract Agent for payment to the Holders of the Normal Units
         to which such Notes relate. Such payment will be made by the Company on
         or prior to 2:00 p.m., New York City time, on the Stock Purchase Date
         in lawful money of the United States by certified or cashier's check or
         wire transfer in immediately available funds payable to or upon the
         order of the Purchase Contract Agent.

                  (n) With respect to any Notes which constitute part of Normal
         Units which are subject to the Last Failed Remarketing, the Collateral
         Agent for the benefit of the Company reserves all of its rights as a
         secured party with respect thereto and, subject to applicable law and
         Section 5.4(e) of the Purchase Contract Agreement, may, among other

<PAGE>

         things permit the Company to, (A) retain and cancel such Notes or (B)
         cause the Notes to be sold, in either case, in full satisfaction of the
         Holders' obligations under the Purchase Contracts.

                  (o) In the event of a Last Failed Remarketing, the interest
         rate payable on the Notes will not be reset.

                  (p) In accordance with DTC's normal procedures, on the date of
         settlement of such Remarketing, the transactions described above with
         respect to each Note remarketed in the Remarketing shall be executed
         through DTC, and the accounts of the respective Depository Participants
         shall be debited and credited and such remarketed Notes delivered by
         book-entry as necessary to effect purchases and sales of such
         remarketed Notes. DTC shall make payment in accordance with its normal
         procedures.

                  (q) The Remarketing Agent is not obligated to purchase any
         Notes that otherwise would remain unsold in the Remarketing. Neither
         the Company nor the Remarketing Agent shall be obligated in any case to
         provide funds to make payment upon tender of the Notes for Remarketing.

                  (r) Under the Remarketing Agreement, the Company, in its
         capacity as issuer of the Notes, shall be liable for, and shall pay,
         any and all costs and expenses incurred in connection with the
         Remarketing, other than the Remarketing Fee.

                  (s) The settlement procedures set forth herein, including
         provisions for payment by purchasers of the remarketed Notes in the
         Remarketing, shall be subject to modification to the extent required by
         DTC or if the book-entry system is no longer available for the
         remarketed Notes at the time of the Remarketing, to facilitate the
         Remarketing of the remarketed Notes in certificated form, and shall
         provide for the authentication and delivery of Notes in a principal
         amount equal to the unremarketed portion of such Notes. In addition,
         the Remarketing Agent may modify the settlement procedures set forth
         herein in order to facilitate the settlement process.

         Section 2.20.     OPTIONAL REMARKETING.

                  (a) On or prior to the thirteenth Business Day immediately
         preceding the Stock Purchase Date but no earlier than the sixteenth
         Business Day immediately preceding the Stock Purchase Date, Holders of
         Separate Notes may elect to have their Separate Notes remarketed by
         delivering their Separate Notes, together with a notice of such
         election, substantially in the form of Exhibit C to the Pledge
         Agreement, to the Custodial Agent. On the eleventh Business Day
         immediately prior to the Stock Purchase Date, by 10:00 a.m., New York
         City time, the Custodial Agent shall notify the Remarketing Agent of
         the aggregate principal amount of such Separate Notes to be remarketed.
         The Custodial Agent will hold such Separate Notes in an account
         separate from the Collateral Account. A Holder of Separate Notes
         electing to have its Separate Notes remarketed will also have the right
         to withdraw such election by written notice to the Custodial Agent,
         substantially in the form of Exhibit D to the Pledge Agreement, on or
         prior to the thirteenth Business

<PAGE>

         Day immediately preceding the Stock Purchase Date, upon which notice
         the Custodial Agent will return such Separate Notes to such Holder.

                  (b) On the tenth Business Day immediately preceding the Stock
         Purchase Date, the Custodial Agent at the written direction of the
         Remarketing Agent will deliver to the Remarketing Agent for Remarketing
         all Separate Notes delivered to the Custodial Agent pursuant to Section
         4.5(d) of the Pledge Agreement and not withdrawn pursuant to the terms
         thereof prior to such date. If the Holder of the Separate Notes
         delivers only such notice but not the Separate Notes subject to such
         notice, then none of such Holder's Separate Notes shall be included in
         the Remarketing. Once the Holder of Separate Notes elects to
         participate in the Remarketing, such Separate Notes will be remarketed
         in the Remarketing, unless such notice is properly withdrawn. In
         accordance with Section 4.5(d) of the Pledge Agreement, upon the
         occurrence of a Last Failed Remarketing, the Remarketing Agent will
         promptly return such Separate Notes to the Custodial Agent for
         redelivery to such Holders of such Separate Notes.

         Section 2.21.     PUT RIGHT.

                  Any Remarking Notice delivered pursuant to Section 2.19(c)
hereof shall include information relating to the Put Right provided for in this
Section 2.21. In the case of the Last Failed Remarketing, the Holders of Notes
that remain outstanding and that are not Pledged Notes (as defined in the Pledge
Agreement) will have the right to put on February 15, 2009 (the "Put Right")
their Notes to the Company for an amount equal to the principal amount of the
Notes, plus accrued and unpaid interest to February 15, 2009 (the "Put Price"),
by providing notice to the Company on or prior to the date set forth in the
Remarketing Notice and by following the procedures for delivery of such Notes to
be set forth therein. The Put Price shall be due and payable by the Company upon
receipt of the Notes from the Holders that have exercised their Put Right, on
February 15, 2009.

                                  ARTICLE III

                    APPOINTMENT OF THE TRUSTEE FOR THE NOTES

         Section 3.1.      Appointment of Trustee.

                  Pursuant and subject to the Indenture, the Company and the
Trustee hereby constitute the Trustee as trustee to act on behalf of the Holders
of the Notes, and as the principal Paying Agent and Security Registrar for the
Notes, effective upon execution and delivery of this Third Supplemental
Indenture. By execution, acknowledgment and delivery of this Third Supplemental
Indenture, the Trustee hereby accepts appointment as trustee, Paying Agent and
Security Registrar with respect to the Notes, and agrees to perform such trusts
upon the terms and conditions set forth in the Indenture and in this Third
Supplemental Indenture.

         Section 3.2.      Rights, Powers, Duties and Obligations of the
                           Trustee.

<PAGE>

                  Any rights, powers, duties and obligations by any provisions
of the Indenture conferred or imposed upon the Trustee shall, insofar as
permitted by law, be conferred or imposed upon and exercised or performed by the
Trustee with respect to the Notes.

                                   ARTICLE IV

                                  MISCELLANEOUS

         Section 4.1.      Application of Third Supplemental Indenture.

                  Each and every term and condition contained in the Third
Supplemental Indenture that modifies, amends or supplements the terms and
conditions of the Base Indenture shall apply only to the Notes created hereby
and not to any future series of Securities issued under the Base Indenture.

         Section 4.2.      Benefits of Third Supplemental Indenture.

                  Nothing contained in this Third Supplemental Indenture shall
or shall be construed to confer upon any person other than a Holder of the
Notes, the Company and the Trustee any right or interest to avail itself or
himself, as the case may be, of any benefit under any provision of the Base
Indenture or this Third Supplemental Indenture.

         Section 4.3.      Amendment of Third Supplemental Indenture.

                  The Company and the Trustee, at any time and from time to
time, may amend, modify or supplement this Third Supplemental Indenture in
accordance with the provisions of Article Nine of the Base Indenture.

         Section 4.4.      Effective Date.

                  This Third Supplemental Indenture shall be effective as of the
date first above written and upon the execution and delivery hereof by each of
the parties hereto.

         Section 4.5.      Governing Law; Submission to Jurisdiction; Judgment
                           Currency.

                  THIS THIRD SUPPLEMENTAL INDENTURE AND EACH NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.

                  The Company and the Trustee hereby submit to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York state court sitting in the Borough of Manhattan in
New York City for the purposes of all legal proceedings arising out of or
relating to the Indenture. The Company and the Trustee irrevocably waive, to the
fullest extent permitted by applicable law, any objection which they may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum. The Company hereby designates and appoints CT
Corporation System, 111 Eighth Avenue, New York, New York 10011 as its
authorized agent upon which process may be served

<PAGE>

in any legal suit, action or proceeding arising out of or relating to the
Indenture which may be instituted in any federal or state court in the Borough
of Manhattan, The City of New York, New York, and agrees that service of process
upon such agent, and written notice of said service to the Company by the Person
serving the same, shall be deemed in every respect effective service of process
upon the Company in any such suit, action or proceeding and further designates
its domicile, the domicile of CT Corporation System specified above and any
domicile CT Corporation System may have in the future as its domicile to receive
any notice hereunder (including service of process). If for any reason CT
Corporation System (or any successor agent for this purpose) shall cease to act
as agent for service of process as provided above, the Company will promptly
appoint a successor agent for this purpose reasonably acceptable to the Trustee.
The Company agrees to take any and all actions as may be necessary to maintain
such designation and appointment of such agent in full force and effect.

                  The Company agrees, to the fullest extent that it may
effectively do so under applicable law, that (a) if for the purpose of obtaining
judgment in any court it is necessary to convert the sum due (the "REQUIRED
CURRENCY") into a currency in which a judgment will be rendered (the "JUDGMENT
CURRENCY"), the rate of exchange used shall be the rate at which in accordance
with normal banking procedures the Trustee could purchase in The City of New
York the requisite amount of the Required Currency with the Judgment Currency on
the New York Banking Day preceding the day on which a final unappealable
judgment is given and (b) its obligations under the Indenture to make payments
in the Required Currency (i) shall not be discharged or satisfied by any tender,
or any recovery pursuant to any judgment (whether or not entered in accordance
with clause (a)), in any currency other than the Required Currency, except to
the extent that such tender or recovery shall result in the actual receipt, by
the payee, of the full amount of the Required Currency expressed to be payable
in respect of such payments, (ii) shall be enforceable as an alternative or
additional cause of action for the purpose of recovering in the Required
Currency the amount, if any, by which such actual receipt shall fall short of
the full amount of the Required Currency so expressed to be payable and (iii)
shall not be affected by judgment being obtained for any other sum due under the
Indenture. For purpose of the foregoing, "NEW YORK BANKING DAY" means any day
except a Saturday, Sunday or a legal holiday in The City of New York or a day on
which banking institutions in The City of New York are authorized or obligated
by law, regulation or executive order to be closed.

         Section 4.6.      Tax Treatment.

                  The Company agrees, and by acceptance of a beneficial
ownership interest in the Notes, each beneficial Holder of Notes will be deemed
to have agreed (1) to treat the acquisition of a Normal Unit as the acquisition
of the Note and the Purchase Contract constituting the Normal Unit and to
allocate the purchase price of the Normal Unit between the Note and the Purchase
Contract as $25 and $0, respectively and (2) to treat the Notes as indebtedness
for United States federal income tax purposes.

         Section 4.7.      Counterparts.

                  This Third Supplemental Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.

<PAGE>

         Section 4.8.      Ratification of Base Indenture.

                  The Base Indenture, as supplemented by this Third Supplemental
Indenture, is in all respects ratified and confirmed, and this Third
Supplemental Indenture shall be deemed part of the Base Indenture in the manner
and to the extent herein and therein provided.

         Section 4.9.      Validity and Sufficiency.

                  The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Third Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
are made solely by the Company.

<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this Third
Supplemental Indenture to be duly executed by their respective officers hereunto
duly authorized, all as of the day and year first above written.

                                           XL CAPITAL LTD, as Issuer

                                           _____________________________________
                                           Name:
                                           Title:

                                           THE BANK OF NEW YORK, as Trustee

                                           _____________________________________
                                           Name:
                                           Title:

<PAGE>

                    EXHIBIT A TO THIRD SUPPLEMENTAL INDENTURE

                                  FORM OF NOTE

                  [If the Note is a Global Note, insert - THIS NOTE IS A GLOBAL
NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF THE DEPOSITORY OR A NOMINEE OF THE DEPOSITORY, WHICH
MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND
HOLDER OF THIS NOTE FOR ALL PURPOSES, INCLUDING THE PAYMENT OF PRINCIPAL AND
INTEREST.

                  UNLESS AND UNTIL THIS NOTE IS EXCHANGED IN WHOLE OR IN PART
FOR NOTES IN DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO
IN THE INDENTURE, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY
TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR
ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY.]

                  [If the Depository is The Depository Trust Company, insert -
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE COMPANY OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.]

<PAGE>

                                                       No.
                                                       CUSIP No. [____________]
                                                       $________________




                                 XL CAPITAL LTD
                           5.25% SENIOR NOTE DUE 2011

                  XL CAPITAL LTD, an exempted limited company duly organized and
existing under the laws of the Cayman Islands (the "COMPANY", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to , the principal sum of
________________ United States dollars (U.S.$______________) [If the Note is a
Global Note, insert - , as such amount may be increased or decreased as set
forth on the Schedule of Increases or Decreases in Global Note annexed hereto,]
on February 15, 2011 (such date is hereinafter referred to as the "STATED
MATURITY"), and to pay interest thereon, from December 9, 2005, or from the most
recent Interest Payment Date (as defined below) for which interest has been paid
or duly provided for, initially at the rate of 5.25% per annum (the "INITIAL
INTEREST RATE") up to, but excluding, the Reset Date; provided that in the event
a Failed Remarketing occurs, this Note shall continue to bear interest at the
Initial Interest Rate until the principal of the Notes is paid or made available
for payment.

                  In the event the Notes are successfully remarketed pursuant to
the Indenture, the Purchase Contract Agreement and the Remarketing Agreement,
this Note shall bear interest at the Reset Rate, from and including the Reset
Date to the date on which principal hereof is paid or made available for
payment; provided that any principal and installment of interest which is
overdue shall bear interest (to the extent that payment of such interest is
enforceable under applicable law) at the Initial Interest Rate up to but
excluding the Reset Date, if any, and thereafter at the Reset Rate, from the
dates such amounts are due until they are paid or made available for payment,
and such interest shall be payable on demand. Interest on this Note initially
shall be payable quarterly in arrears on February 15, May 15, August 15 and
November 15 of each year (each, an "INTEREST PAYMENT DATE"), commencing February
15, 2006 through and including February 15, 2009, and then semi-annually in
arrears on the Interest Payment Dates of February 15 and August 15 of each year,
commencing on August 15, 2009, until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Note (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be, the 15th calendar day (whether or not a
Business Day) prior to the relevant Interest Payment Date.

                  Any such interest not so punctually paid or duly provided for
will forthwith cease to be payable to the Holder on such Regular Record Date and
may either be paid to the Person in whose name this Note (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice of which shall be given to Holders of Securities of this series
not less than 10

                                      A-1
<PAGE>

days prior to such Special Record Date and shall otherwise be payable, all as
more fully provided in the Indenture.

                  The principal of and the interest on the Notes will be payable
at the Corporate Trust Office or, at the option of the Company, by check mailed
to the address of the Person entitled thereto at such Person's address as it
appears on the Register or by wire transfer to the account maintained in the
United States designated by written notice given ten Business Days prior to the
applicable payment date by such Person.

                  The amount of interest payable for any period on any Interest
Payment Date shall be (1) for any full quarterly or semi-annual period on the
basis of a 360-day year consisting of twelve 30-day months and (2) for any
period shorter than a full quarterly or semi-annual period, on the basis of a
30-day month and, for periods of less than a month, on the basis of the actual
number of days elapsed per 30-day month. In the event that any date on which
interest is payable on the Notes is not a Business Day, then payment of interest
payable on such date will be made on the next succeeding day which is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date.

                  Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if fully set forth at this place.

                  Unless the certificate of authorization hereon has been
executed by the Trustee referred to on the reverse hereof by the manual
signature of one of its respective authorized signatories, this Note shall not
be entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.

      [Remainder of Page Intentionally Left Blank; Signature Pages Follow]


                                      A-2
<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this Note to be
executed and delivered under its corporate seal.

Dated:

                                   XL CAPITAL LTD

                                   By:____________________________________
                                      Name:
                                      Title:


                                   [Corporate Seal]


                                   Attest:________________________________
                                      Name:
                                      Title:

                                      A-3
<PAGE>

                          CERTIFICATE OF AUTHENTICATION

                  This is one of the Securities of the series designated herein
referred to in the within-mentioned Indenture.

                                        The Bank of New York, as Trustee

                                        By:____________________________
                                            Authorized Signatory

                                        Dated:_________________________

                                      A-4
<PAGE>

                                [FORM OF REVERSE]

                  This Note is one of a duly authorized issue of securities of
the Company designated as its "5.25% Senior Notes due 2011" (herein sometimes
referred to as the "NOTES"), limited in aggregate principal amount to
$745,000,000, issued and to be issued under and pursuant to an Indenture, dated
as of June 2, 2004 (the "BASE INDENTURE"), duly executed and delivered between
the Company and The Bank of New York, as Trustee (the "TRUSTEE"), and a Third
Supplemental Indenture, dated as of December 9, 2005 (the "Third Supplemental
Indenture"), between the Company and the Trustee (such Base Indenture as amended
and supplemented by the Third Supplemental Indenture, the "INDENTURE"), to which
Indenture and all subsequent indentures supplemental thereto relating to the
Notes reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Notes and of the terms upon which the Notes are,
and are to be, authenticated and delivered.

                  The Notes are issuable only in registered form without
coupons, in denominations of $1,000 and any integral multiple thereof except
that an interest in a Note held as part of a Normal Unit represents an ownership
interest of 1/40th, or 2.5%, of a Note in aggregate principal amount of $1,000
and will therefore correspond to the stated amount of $25 per Normal Unit. As
provided in the Indenture and subject to certain limitations therein set forth,
Notes of this series so issued are exchangeable for a like aggregate principal
amount of Notes of a different authorized denomination, as requested by the
Holder surrendering the same.

                  The Notes were initially issued as components of the Company's
7.00% Equity Security Units that are in the form of Normal Units, each such
Normal Unit initially consisting of (a) a stock purchase contract (each, a
"PURCHASE CONTRACT") under which (i) the Holder will agree to purchase from the
Company on February 15, 2009, a specified number of newly issued Class A
Ordinary Shares, par value $0.01 per share, of the Company and (ii) the Company
will pay to the Holder quarterly contract adjustment payments and (b) a 1/40, or
2.5%, ownership interest in a Note of $1,000 principal amount. In accordance
with the terms of the Purchase Contract Agreement, on their initial issuance,
the Notes were pledged by the Purchase Contract Agent, on behalf of the Holders
of the Normal Units, to The Bank of New York, as collateral agent, custodial
agent and securities intermediary (the "COLLATERAL AGENT"), pursuant to the
Pledge Agreement, dated as of December 9, 2005 (the "PLEDGE AGREEMENT"), among
the Company, the Purchase Contract Agent and the Collateral Agent, to secure
such Holders' obligations to purchase Class A Ordinary Shares of the Company
under the Purchase Contracts.

                  The Notes that are a component of Normal Units or that so
elect under Section 2.20 of the Supplemental Indenture will be subject to
Remarketing and, in the case of the Last Failed Remarketing, the Collateral
Agent for the benefit of the Company reserves all of its rights as a secured
party of the Pledged Notes with respect thereto and, subject to applicable law
and Section 5.4 of the Purchase Contract Agreement, may, among other things,
permit the Company to cause the Notes to be sold or to retain and cancel such
Notes, in either case, in full satisfaction of the Holders' obligations under
the Purchase Contracts. Pursuant to the Remarketing Agreement, the Remarketing
Agent shall use its reasonable best efforts to remarket the Notes that are
included in Normal Units and the Separate Notes included pursuant to Section
2.20 of the Third Supplemental Indenture at a specified price on certain dates,
all as specified in Section

                                      A-5
<PAGE>

2.19 of the Third Supplemental Indenture and in Section 5.4(b) of the Purchase
Contract Agreement.

                  If a Special Event (as herein defined) shall occur and be
continuing, the Company may, at its option, redeem the Notes then Outstanding in
whole (but not in part) at any time ("SPECIAL EVENT REDEMPTION") at the
Redemption Price (as herein defined). If such Special Event Redemption occurs
prior to the earlier of a successful remarketing pursuant to Section 5.4 of the
Purchase Contract Agreement and February 15, 2009, the Redemption Price payable
with respect to the Notes pledged to the Collateral Agent under the Pledge
Agreement will be paid to the Collateral Agent on the Special Event Redemption
Date on or prior to 12:00 p.m., New York City time, by wire transfer in
immediately available funds at such place and at such account as may be
designated by the Collateral Agent in exchange for the Notes pledged to the
Collateral Agent. In such event, the Collateral Agent shall apply such
Redemption Price pursuant to the terms of the Purchase Contract Agreement and
the Pledge Agreement.

                  Notice of any redemption (which notice will be irrevocable)
will be mailed at least 30 days but not more than 60 days before the date of
redemption (the "SPECIAL EVENT REDEMPTION DATE") to each registered Holder of
Notes to be redeemed at its registered address as more fully provided in the
Indenture. Unless the Company defaults in payment of the Redemption Price, on
and after the Special Event Redemption Date interest shall cease to accrue on
such Notes. Notwithstanding the foregoing, in case of a Special Event Redemption
for a Tax Event, no such notice of redemption will be given (a) earlier than 90
days prior to the earliest date on which the payor would be obligated to make
such payment or withholding if a payment in respect of Notes by it were then due
and (b) unless at the time such notice is given, such obligation to pay such
Additional Amounts remains in effect. Prior to the publication or mailing of any
notice of redemption of Notes pursuant to the foregoing, the Company will
deliver to the Paying Agent (a) an Officer's Certificate stating that the
Company is entitled to effect such redemption and setting forth a statement of
facts showing that any factual conditions precedent to the Company's right so to
redeem have been satisfied and (b) a legal opinion of an outside nationally
recognized tax counsel to the effect that the circumstances referred to below in
"Tax Event" exist.

                  "QUOTATION AGENT" means Goldman, Sachs & Co. or any of its
successors or any other primary U.S. government securities dealer in New York
City selected by the Company.

                  "ACCOUNTING EVENT REDEMPTION" means the receipt, at any time
prior to the earlier of the date of any successful remarketing of the Notes
pursuant to the Purchase Contract Agreement and the Remarketing Agreement and
the Stock Purchase Date, by the audit committee of the Board of Directors of the
Company or a written report in accordance with Statement on Auditing Standards
("SAS") No. 97, "Amendment to Statement on Auditing Standards No. 50, Reports on
the Application of Accounting Principles" from the Company's independent
auditors, provided at the request of management of the Company, to the effect
that, as a result of any change in accounting rules applicable to the Company or
interpretations thereof after December 6, 2005, the Company must either (i)
account for the Purchase Contracts as derivatives under Statement of Financial
Accounting Standards ("FAS") No. 133, "Accounting for Derivatives and Hedging
Activities" (or any successor accounting standard) or (ii) account

                                      A-6
<PAGE>

for the Units using the if-converted method under FAS No. 128, "Earnings Per
Share", and that such accounting treatment will cease to apply upon redemption
of the Notes.

                  "REDEMPTION PRICE" means, for each Note, whether or not
included in a Normal Unit, the greater of (a) the principal amount of the Note
and (b) the product of (i) the principal amount of such Note and (ii) a fraction
whose numerator is the Treasury Portfolio Purchase Price (as herein defined) and
whose denominator is the applicable Special Event Redemption Principal Amount
(as herein defined).

                  "SPECIAL EVENT" means either an Accounting Redemption Event or
a Tax Event.

                  "TAX EVENT" means a determination by the Company that, as a
result (1) any change in, or amendment to, the law or treaties (or any
regulations or rulings promulgated thereunder) of the Cayman Islands, Bermuda or
any other jurisdiction in which the Company generally becomes subject to
taxation; or (2) any change in position regarding the application,
administration or interpretation of such laws, treaties, regulations or rulings
(including a holding, judgment or order by a court of competent jurisdiction)
(each of the foregoing clauses (1) and (2), a "CHANGE IN TAX LAW"), the Company
is, or on the next Interest Payment Date would be, required to pay more than DE
MINIMIS Additional Amounts (as defined in Section 10.10 of the Indenture) and
such obligations cannot be avoided by taking commercially reasonable measures
available to the Company. The Change in Tax Law must become effective after
December 6, 2005. In the case of a successor entity, the Change in Tax Law must
become effective after the date that such successor entity first becomes an
obligor on the Notes (unless the Change in Tax Law had already occurred prior to
such date, but occurring after December 6, 2005, with respect to the original
entity).

                  "SPECIAL EVENT REDEMPTION PRINCIPAL AMOUNT" means (i) in the
case of a Special Event Redemption Date occurring prior to a successful
remarketing of the Notes pursuant to the Purchase Contract Agreement, the
aggregate principal amount of Notes included in Normal Units on such date, and
(ii) in the case of a Special Event Redemption Date occurring after a successful
remarketing of the Notes pursuant to the Purchase Contract Agreement or the
Stock Purchase Date, the aggregate principal amount of the Notes.

                  "TREASURY PORTFOLIO" means: (i) if a Special Event Redemption
occurs prior to a successful remarketing of the Notes pursuant to the provisions
of the Purchase Contract Agreement, a portfolio (A) of zero coupon U.S. Treasury
securities consisting of principal or interest strips of U.S. Treasury
securities that mature on or prior to February 15, 2009 in an aggregate amount
equal to the applicable Special Event Redemption Principal Amount and (B) with
respect to each scheduled Interest Payment Date on the Notes that occurs after
the Special Event Redemption Date and on or before February 15, 2009, interest
or principal strips of U.S. Treasury securities that mature on or prior to such
Interest Payment Date in an aggregate amount equal to the aggregate interest
payment that would be due on the applicable Special Event Redemption Principal
Amount on such date if the interest rate of the Notes were not reset on the
Reset Date, and (ii) solely for purposes of determining the Treasury Portfolio
Purchase Price in the case of a Special Event Redemption Date occurring after a
successful remarketing of the Notes pursuant to the Purchase Contract Agreement
or February 15, 2009, a portfolio (A) of zero coupon U.S. Treasury securities
consisting of principal or interest strips of U.S. Treasury

                                      A-7
<PAGE>

securities that mature on or prior to February 15, 2011 in an aggregate amount
equal to the applicable Special Event Redemption Principal Amount and (B) with
respect to each scheduled Interest Payment Date on the Notes that occurs after
the Special Event Redemption Date and on or before February 15, 2011, interest
or principal strips of U.S. Treasury securities that mature on or prior to such
Interest Payment Date in an aggregate amount equal to the aggregate interest
payment that would be due on the applicable Special Event Redemption Principal
Amount of the Notes Outstanding on the Special Event Redemption Date.

                  "TREASURY PORTFOLIO PURCHASE PRICE" means the lowest aggregate
price quoted by a primary U.S. government securities dealer in New York City to
the Quotation Agent on the third Business Day immediately preceding the Special
Event Redemption Date for the purchase of the Treasury Portfolio for settlement
on the Special Event Redemption Date.

                  The Notes shall constitute the senior, unsecured and
unsubordinated obligations of the Company and shall rank equally in right of
payment with all existing and future senior, unsecured and unsubordinated
obligations of the Company.

                  In the event of the Last Failed Remarketing, any Holder of
Notes that remain outstanding on February 15, 2009 and that are not subject to
the pledge of the Pledge Agreement, shall have the benefit of the Put Right set
forth in Section 2.21 of the Third Supplemental Indenture.

                  No sinking fund is provided for the Notes.

                  In the event of a redemption of the Notes, the Company will
not be required (a) to register the transfer or exchange of Notes for a period
of 15 days immediately preceding the selection of Notes for redemption or (b) to
register the transfer or exchange of any Note, or portion thereof, called for
redemption.

                  In the case of an Event of Default described in Section
5.01(5) or 5.01(6) of the Indenture, all unpaid principal of and accrued
interest and Additional Amounts on the Notes then Outstanding shall be due and
payable immediately without any declaration or other act on the part of the
Trustee or the Holders of any Notes. In the case all other Events of Default, if
such Event of Default shall occur and be continuing, the principal of all of the
Notes, together with accrued interest to the date of declaration, may be
declared due and payable in the manner and with the effect provided in the
Indenture.

                  The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the written consent of the Holders of not less than a majority
in principal amount of the Securities at the time Outstanding and affected
thereby. The Indenture also contains, with certain exceptions as therein
provided, provisions permitting Holders of not less than a majority in principal
amount of the Securities of any series at the time Outstanding, on behalf of the
Holders of all the Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note shall

                                      A-8
<PAGE>

be conclusive and binding upon such Holder and upon all future Holders of this
Note and of any Note issued in exchange herefor or in lieu hereof whether or not
notation of such consent or waiver is made upon this Note or such other Note.

                  As provided in and subject to the provisions of the Indenture,
the Holder of this Note shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless (i) such Holder shall have previously
given the Trustee written notice of a continuing Event of Default, (ii) the
Holders of not less than 25% in principal amount of the Notes that are
Outstanding shall have made a written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and offered the
Trustee indemnity satisfactory to it, (iii) the Trustee shall not have received
from the Holders of a majority in principal amount of the Notes that are
Outstanding a direction inconsistent with such request, and (iv) the Trustee
shall have failed to institute any such proceeding for 60 days after receipt of
such notice, request and offer of indemnity. The foregoing shall not apply to
any suit instituted by any Holder of this Note for the enforcement of any
payment of principal hereof, or any premium of interest hereon on or after the
respective due dates expressed herein.

                  No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, premium, if any,
and interest on this Note at the times, places and rate, and in the coin or
currency, herein prescribed.

                  As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable on the
Security Register upon surrender of this Note for registration of transfer at
the Corporate Trust Office of the Trustee or at such other office or agency of
the Company as may be designated by it for such purpose in the Borough of
Manhattan, The City of New York (which shall initially be an office or agency of
the Trustee), or at such other offices or agencies as the Company may designate,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Security Registrar duly executed by, the Holder thereof or
his attorney duly authorized in writing, and thereupon one or more new Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees by the Security Registrar. No
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to recover any tax or
other governmental charge payable in connection therewith.

                  Prior to due presentation of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered, as the owner thereof
for all purposes, whether or not such Note be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.

                  No recourse for the payment of the principal (and premium, if
any) or interest on this Note and no recourse under or upon any obligation,
covenant or agreement of the Company in the Indenture or any indenture
supplemental thereto or in any Note, or because of the creation of any
indebtedness represented thereby, shall be had against any incorporator,
stockholder,

                                      A-9
<PAGE>

employee, agent, officer or director or subsidiary, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of consideration for the issue hereof, expressly waived and released.

                  The Company agrees, and by acceptance of a beneficial
ownership interest in the Notes, each beneficial Holder of Notes will be deemed
to have agreed (1) to treat the acquisition of a Normal Unit as the acquisition
of the Note and the Purchase Contract constituting the Normal Unit and to
allocate the purchase price of the Normal Unit between the Note and the Purchase
Contract as $25 and $0, respectively and (2) to treat the Notes as indebtedness
for United States federal income tax purposes.

                  [If Note is a Global Note, insert - This Note is a Global Note
and is subject to the provisions of the Indenture relating to Global Notes,
including the limitations in Section 2.03 of the Base Indenture on transfers and
exchanges of Global Notes.]

                  THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                  All capitalized terms used in this Note which are defined in
the Indenture shall have the meanings assigned to them in the Indenture.

                                      A-10
<PAGE>

                                  ABBREVIATIONS

         The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM--as tenants in common        UNIF GIFT MIN ACT- ______ Custodian _______
                                                        (Cust)           (Minor)

TEN ENT--as tenants by the entireties

JT TEN--as joint tenants with rights of                   under Uniform Gifts to
survivorship and not as tenants in common            Minors Act ________________
                                                                    (State)

Additional abbreviations may also be used though not on the above list.

                                      A-11
<PAGE>

                                   ASSIGNMENT

                 FOR VALUE RECEIVED, the undersigned assigns and transfers this
Note to:



     ----------------------------------------------------------------------

     ----------------------------------------------------------------------

     ----------------------------------------------------------------------
        (Insert assignee's social security or tax identification number)


     ----------------------------------------------------------------------

     ----------------------------------------------------------------------

     ----------------------------------------------------------------------
                    (Insert address and zip code of assignee)

and irrevocably appoint agent to transfer this Note on the Security Register.
The agent may substitute another to act for him or her.

Dated:

Signed:

Signature Guarantee:

(Sign exactly as your name appears on the other side of this Note)

Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

                                      A-12
<PAGE>

                        [TO BE ATTACHED TO GLOBAL NOTES]

                SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

The following increases or decreases in this Global Note have been made:

   Amount of         Amount of
  Decrease in       Increase in    Stated Amount of    Signature of
 Stated Amount     Stated Amount   the Global Note     Authorized
 of the Global     of the Global    Following Such     Officer of
     Note              Note        Decrease/Increase     Trustee        Date
----------------  --------------- ------------------- -------------- -----------

                                      A-13