EXHIBIT 4.2

                                                                  EXECUTION COPY







                                 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.
<PAGE>


              "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, as applicable, 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, as aoolicable, 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).
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              (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.
<PAGE>


       Section 2.13. Remarketing.

              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

                                      -29-
<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.
<PAGE>


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

              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 as a deed by their respective
officers hereunto duly authorized, all as of the day and year first above
written.

                                        XL CAPITAL LTD, as Issuer

                                        /s/ Kirstin Romann Gould
                                        ----------------------------------------
                                        Name:  Kirstin Romann Gould
                                        Title: Senior Vice President, Chief
                                               Corporate Legal Officer and
                                               Secretary

                                        THE BANK OF NEW YORK, as Trustee

                                        /s/ Kisha A. Holder
                                        ----------------------------------------
                                        Name:  Kisha A. Holder
                                        Title: Assistant Vice President

<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. 98372PAH1
                                                             $
                                                              --------------




                                 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 computed (1) for any full quarterly or semi-annual period,
as applicable, 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, as
applicable, 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 authentication 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 as a deed.

Dated:

                                        XL CAPITAL LTD



                                        By:____________________________________
                                            Name:
                                            Title:



                                        By:____________________________________
                                            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 to 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 Officers' 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 REDEMPTION EVENT" 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" (or any successor accounting standard), 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           of the         Following Such       Officer of
 Global Note      Global Note     Decrease/Increase       Trustee        Date
-------------    -------------    -----------------    ------------    ---------


                                      A-13