EXHIBIT 10.12

                            MASTER SERVICES AGREEMENT



This Master Services Agreement is made this 4th day of August, 2006 (the
      "Effective Date") between:

XL  Capital  Assurance  (UK)  Limited,  in respect of its  Spanish  Branch  (the
      "Company"); and

XL Services UK Limited, in respect of its Spanish Branch ("XL Services")

(each a Party and collectively the "Parties").

WHEREAS:

XL Services and the Company are currently  wholly owned  subsidiaries  of the XL
      Capital Ltd group of companies ("XL Group"); and

XL Services  provides  certain  services  to XL Group  companies  including  the
      Company; and

It is contemplated  that an initial public offering will be made of a portion of
      the  capital  stock of  Security  Capital  Assurance  Ltd, a parent of the
      Company,  resulting  in  partial  public  ownership  of  Security  Capital
      Assurance Ltd; and

XL Services  and the Company  both desire for XL Services to continue to provide
      certain  services to the Company  following the initial public offering of
      Security Capital Assurance Ltd; and

XL Services and the Company desire to enter into this Agreement to set forth the
      roles and  responsibilities  with  regard to services to be provided by XL
      Services to the Company.

Now, in consideration for the mutual benefits  contained in this Master Services
      Agreement, it is agreed as follows:

1     DEFINITIONS
      -----------

The following words and phrases shall have the meaning given to them below:

"Actual Cost" shall have the meaning specified in clause 17.2.

"Agreement" means this Master Services  Agreement,  the Schedules and Appendices
      attached to it and any  subsequent  amendments  or  alterations  agreed in
      writing by the Parties.

"AOP" shall have the meaning specified in clause 12.1.

"AOP" Objectives" shall have the meaning specified in clause 12.1.

"Business Service Functions" means, the functions detailed in the C Schedules as
      amended from time to time.

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"Core Functions" means the functions detailed in the B Schedules as amended from
      time to time.

"Employee  Costs"  shall have the meaning  specified in the  Schedules  attached
      hereto.

"Executive Functions" means the functions detailed in the A Schedules as amended
      from time to time

"Expiration Date" shall the meaning specified in clause 2.1.

"Fees" shall have the meaning specified in clause 17.1.

"Non-XL Third Party  Contractors"  means any individual,  company or other legal
      entity with whom XL Services enters into a contract for the benefit of the
      Company,  including (but not limited to) to enhance its ability to provide
      any part of the Services,  where such  individual,  company or other legal
      entity is not within the XL Capital Ltd group of companies.

"Representatives" shall have the meaning specified in clause 11.1.

"Services"  means  collectively  (i)  providing  Staff  or  Non-XL  Third  Party
      Contractors  to fulfil  the  Executive  Functions  and Core  Functions  in
      accordance  with the A and B Schedules as amended from time to time;  (ii)
      providing  the  Business  Service  Functions  in  accordance  with  the  C
      Schedules  as  amended  from  time  to  time;  and  (iii)  contracting  or
      subcontracting  with Third Party Contractors to fulfil specific functions,
      including, but not limited to, the Executive Functions, Core Functions and
      Business Service  Functions - in each case for the benefit of the Company.
      "Service" means any one of the above, as appropriate.

"Staff" means individuals employed by XL Services or with another company within
      the XL Group of companies.

"Steering Committee" shall have the meaning specified in clause 11.3.

"Support  Services" means Security Capital  Assurance Ltd's and/or the Company's
      proportional  share  of the  services  provided  to and in  support  of XL
      Services  by any  employees  of the XL Group,  determined  on a per capita
      basis.

"Third Party Contractors" means both XL Third Party Contractors and Non-XL Third
      Party Contractors.

"XL Third Party Contractors" means any individual, company or other legal entity
      with whom XL  Services  enters  into a  contract  for the  benefit  of the
      Company,  including (but not limited to) to enhance its ability to provide
      any part of the Services,  where such  individual,  company or other legal
      entity is within the XL Capital Ltd group of companies.

2     PERIOD OF THIS AGREEMENT
      ------------------------

2.1   This Agreement shall commence on the Effective Date and shall terminate on
      the second  anniversary  of the  Effective  Date (the  "Expiration  Date")
      unless earlier  terminated in accordance  with clause 12.1 or clause 20 of
      this Agreement.

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3     PROVISION OF SERVICES
      ---------------------

3.1   Each Schedule  attached to and made a part of this Agreement  describe the
      Services to be provided by XL  Services to the  Company,  as amended  from
      time to time by written agreement of the Parties.  The Parties have made a
      good faith  effort as of the date hereof to identify  the  Services and to
      complete the content of the Schedules  accurately.  It is anticipated that
      the Parties will modify the Services from time to time. In that case or to
      the extent that any  Schedule  is  incomplete,  the Parties  will use good
      faith  efforts to modify the  Schedules.  There are certain terms that are
      specifically  addressed in the Schedules  attached  hereto that may differ
      from the terms  provided  hereunder.  In those cases,  the specific  terms
      described in the Schedules shall govern.

3.2   The  Parties  may also  identify  additional  services  that  they wish to
      incorporate  into this  Agreement.  The  Parties  will  create  additional
      Schedules  setting forth the  description of such  services,  the Fees for
      such services and any other applicable terms.

3.3   Subject to the terms of this  Agreement,  XL  Services  undertakes  to and
      shall  provide  the  Services to the Company to the best of its ability at
      all times and to a standard  that would  reasonably be expected of it by a
      professional, independent person or body.

3.4   Without  prejudice to clause 3.3, to the extent that XL Services is unable
      to perform any part of the Services in accordance with this Agreement,  it
      shall advise the Company as soon as reasonably  practicable.  In addition,
      XL  Services  shall,  to the  extent  possible,  advise  the  Company of a
      timetable for it to be able to resume full  performance of the Services in
      accordance  with this Agreement and the steps it is taking in that regard.
      XL Services  shall  notify the Company to the extent there is likely to be
      any deviation from the timetable proposed.

3.5   The Parties  acknowledge and agree that XL Services and the Staff shall be
      entitled to provide  similar  services as the  Services to any other legal
      entity,  provided  that in doing so the  operation  of the  Company is not
      unreasonably  prejudiced  and the provision of the Services to the Company
      is not materially adversely affected.  The Parties further acknowledge and
      agree that the Company may retain any  individual or legal  entity,  other
      than XL Services and the Staff, to perform  services  similar or identical
      to the  Services,  provided that in doing so the ability of XL Services to
      perform any part of the Services in  accordance  with the Agreement is not
      materially adversely affected.

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4     PROVISION OF STAFF TO FULFIL THE EXECUTIVE FUNCTIONS AND CORE FUNCTIONS
      -----------------------------------------------------------------------

4.1   XL  Services  acknowledges  it has been given  sufficient  information  to
      understand and appreciate the  requirements  and operations of the Company
      relating to the Executive Functions and Core Functions currently described
      in the A and B  Schedules.  XL  Services  shall  use its  reasonable  best
      endeavours to provide at all times Staff or Non-XL Third Party Contractors
      of the requisite calibre, and with appropriate training and experience and
      in sufficient numbers as required by the Company and as agreed between the
      Parties and in accordance with the A and B Schedules.

4.2   The  Company  acknowledges  and agrees  that at the  commencement  of this
      Agreement the Staff or Non-XL Third Party Contractors  provided to perform
      the Executive  Functions and Core Functions are of the requisite  calibre,
      have appropriate experience and training and are of a sufficient number.

4.3   Clause  4.1 is  subject  to  the  Company's  business  plan  and  changing
      requirements.  If the  Company's  business  plan  and  requirements  alter
      materially  after the date this  Agreement  commences,  the Parties  shall
      endeavour to agree the additional or reduced  requirements  of the Company
      in relation to the Executive  Functions and Core Functions and XL Services
      shall  use  its   reasonable   best   endeavours  to  fulfil  such  agreed
      requirements  of the Company in relation to the  Executive  Functions  and
      Core Functions.

4.4   The  employment  and  local  management  of the Staff  provided  to fulfil
      Executive  Functions  and Core  Functions on behalf of the Company will be
      the responsibility  and under the control of XL Services.  Notwithstanding
      the  foregoing,  the Company  will have the  responsibility  and  ultimate
      control over the Staff  provided to fulfil  Executive  Functions  and Core
      Functions in respect of the regulated activities of the Company.

4.5   If XL Services cannot provide Staff to perform the Executive Functions and
      Core Functions,  it shall, with the agreement of the Company,  contract or
      subcontract with Non-XL Third Party  Contractors to provide all or part of
      the Executive  Functions and Core Functions.  The direction and management
      of the Non-XL  Third Party  Contractors  provided to fulfil the  Executive
      Functions  or  Core  Functions  on  behalf  of  the  Company  will  be the
      responsibility  of XL Services,  unless otherwise agreed by the Parties in
      writing,  but only to the extent that XL Services has contracted  directly
      with such Non-XL Third Party Contractors.

5     PROVISION OF BUSINESS SERVICE FUNCTIONS
      ---------------------------------------

5.1   XL  Services  acknowledges  it has been given  sufficient  information  to
      understand and appreciate the  requirements  and operations of the Company
      relating to the Business Service  Functions  currently  described in the C
      Schedules. XL Services shall use its reasonable best endeavours to provide
      at all times the Business Service Functions as required by the Company and
      as agreed between the Parties and in accordance with the C Schedules.

5.2   The  Company  acknowledges  and agrees  that at the  commencement  of this
      Agreement the Staff and Third Party  Contractors  performing  the Business
      Service  Functions  are of the  requisite  calibre,  have the  appropriate
      experience and training and are of a sufficient number.

5.3   Clause  5.1 is  subject  to  the  Company's  business  plan  and  changing
      requirements.  If the  Company's  business  plan  and  requirements  alter
      materially  after the date this


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      Agreement  commences,  the Parties shall endeavour to agree the additional
      or reduced requirements of the Company in relation to the Business Service
      Functions.  XL Services shall use its reasonable best endeavours to fulfil
      the agreed requirements of the Company in relation to the Business Service
      Functions.

5.4   The  direction  and  management  of the Staff and Third Party  Contractors
      providing the Business Service  Functions will be the  responsibility  and
      under the control of XL Services.

6     THIRD PARTY CONTRACTORS
      -----------------------

6.1   The Company acknowledges and agrees that the provision of the Services may
      in part be  delegated  or  contracted  or  subcontracted  to  Third  Party
      Contractors by XL Services.

6.2   XL  Services  may enter  into  contracts  with  Third  Party  Contractors,
      including,  but not limited to, for the provision of the Services,  either
      on its own  behalf or on its own  behalf  and on  behalf  of the  Company,
      whichever  XL  Services  reasonably  deems  appropriate  and in  the  best
      interests of the Company.

6.3   When entering into  contracts  with Third Party  Contractors,  XL Services
      will have regard to the stated  interests of the Company,  including,  but
      not limited to, the  identity  of the Third Party  Contractor,  the terms,
      costs and period of the contract.

6.4   To the extent XL Services delegates to, or contracts or subcontracts with,
      Third Party  Contractors to perform any part of the Services or to perform
      specific  functions,  XL Services shall (remain responsible and) be liable
      to the Company for the (non)  performance  of the  Services  and the (non)
      performance  of such  specific  functions in their  entirety  (and for the
      oversight and management of the Third Party Contractors) and in accordance
      with clause 7.1. below, unless otherwise agreed in writing by the Company.

7     LIABILITY
      ---------

7.1   Except to the extent set out in clauses  7.2,  to 7.5 below or as a result
      of a breach by the  Company  of its  obligations  under  clause  16.1,  XL
      Services shall be liable to indemnify the Company for any loss the Company
      incurs  (including  defence costs) caused by (i) the acts and/or omissions
      of XL Services,  its  employees,  directors  and officers in providing the
      Services, (ii) the breaches of obligations, acts and/or omissions of Third
      Party  Contractors,  and (iii) the  failure of XL Services to abide by the
      terms and  conditions  of this  Agreement.  Both  Parties  shall  take all
      reasonable steps to mitigate any loss including pursuing recovery from any
      third  party.  Where  appropriate,  the  Parties  further  agree they will
      consult each other in respect of such steps,  in accordance with clause 11
      below.

7.2   XL  Services  shall not be liable to the  Company  in  respect of any loss
      caused by acts of God, or any event beyond the  reasonable  control of the
      Parties,  including  but not  limited to  nationalization,  expropriation,
      devaluation,  seizure, or similar action by any government  authority,  de
      facto or de jure; or acts of war, terrorism, insurrection or revolution.

7.3   XL Services shall not be liable to the Company for the  performance of the
      Executive  Functions  and Core  Functions  by Staff.  The Company  will be
      responsible  and liable for the management and oversight of such Staff and
      the way in which  the  Staff


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      perform  the  Executive  Functions  and Core  Functions  on  behalf of the
      Company.  The Company shall indemnify XL Services for any loss XL Services
      incurs with respect to the Staff's  performance of the Executive Functions
      and Core Functions.  XL Services will,  however,  be liable to the Company
      for the performance of any Third Party Contractor  retained by XL Services
      for the benefit of the Company, including, but not limited to, Third Party
      Contractor's  performance of Executive  Functions and Core Functions,  but
      only to the extent  that XL Services  has  contracted  directly  with such
      Third Party Contractor.

7.4   To the extent that Staff provide or perform any service or function to, or
      on  behalf  of,  an  entity  not a party  to this  Agreement,  whether  an
      Executive  Function,  Core Function or Business  Service  Function,  it is
      agreed that the Company shall not be liable for the acts and/or  omissions
      of the Staff in performing such services or functions.

7.5   XL  Services  agrees  to take all  reasonable  steps to  recover  any loss
      suffered by the Company (for which XL Services is liable to indemnify  the
      Company under this  Agreement)  from any insurer or any third party liable
      to XL Services in respect of such loss. Provided that XL Services complies
      with such  obligation  in a timely  manner,  the  Company  agrees to delay
      commencing  proceedings  against XL Services to enforce payment in respect
      of any claim which it may have under this Agreement until such time as and
      to the extent that XL Services  has  obtained  recovery  against any third
      party (including but not limited to Third Party  Contractors and insurers)
      in respect of such losses.

8     INSURANCE
      ---------

8.1   XL Services  undertakes it or one of its  affiliates has and will maintain
      throughout  the duration and period of this Agreement  appropriate  errors
      and omissions  and  directors'  and officers'  insurance in full force and
      effect to cover its liabilities to third parties.

9     LIMITATION OF AUTHORITY
      -----------------------

9.1   Except as  expressly  provided for in this  Agreement,  or by the Company,
      neither XL Services nor the Staff shall enter into any contract (including
      verbal)  on behalf of the  Company  or commit or bind the  Company  to any
      agreement or obligation,  or hold it or themselves out as having authority
      to do so.

10    COMPLIANCE
      ----------

10.1  In  providing  the  Services XL Services  shall,  to the extent it is made
      aware  of and it is  within  its  control,  comply  with,  and will not do
      anything or fail to do anything, which would result in the Company failing
      to comply with, all  applicable  laws,  legislation  and  regulations.  In
      addition,   XL  Services   shall  comply  with  relevant   principles  and
      guidelines,  manuals,  codes and  policies  issued by the  Company  to the
      extent it is made aware of such principles and guidelines,  manuals, codes
      and policies. It is agreed and understood that this clause does not affect
      or reduce the  Company's  duty and  responsibility  with regard to its own
      regulatory and legal compliance.

10.2  XL Services  shall  direct all  enquiries  from any  regulatory  authority
      relating to this Agreement or the Services to the Company,  unless (i) the
      enquiry  is  specifically  addressed  to XL  Services  (in  which  case XL
      Services  shall  procure  that the  details or a copy of such  enquiry are
      promptly  relayed in writing to the  Company),  (ii) the  enquiry


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      relates  exclusively  to a third  party and not to the  Company,  or (iii)
      otherwise agreed in writing by the Parties.

11    PERSONS RESPONSIBLE FOR THE OPERATION OF THIS AGREEMENT
      -------------------------------------------------------

11.1  XL Services and the Company shall each appoint two individuals to be their
      respective  representatives (the "Representatives") for the purpose of the
      operation of this Agreement. The Representatives  (identified below) shall
      be responsible  for, among other things,  managing the  relationship,  and
      acting as the principal points of contact, between the Parties in relation
      to matters and disputes under this Agreement.

11.2  Any matters or disputes under this Agreement including matters or disputes
      affecting the relationship between the Parties or the performance of their
      respective obligations hereunder,  shall, in the first instance, be raised
      to and sought to be resolved by the Representatives.

11.3  If and to the extent that any  matters or  disputes  cannot be resolved by
      the Representatives  then the Representatives  shall raise such matters or
      disputes  with a committee  comprised  of the members set forth on Annex A
      hereto and  established  by the Parties for the purpose of overseeing  the
      relationship between the Parties with respect to matters set forth in this
      Agreement  (the "Steering  Committee").  The Steering  Committee  shall be
      responsible  for the  resolution  of those  matters and  disputes  brought
      before it.

11.4  The  Parties  may  each   appoint   Representatives,   in  lieu  of  their
      Representatives  listed below, provided that prior written notice is given
      to the other Party in accordance with clause 24 below.

      THE COMPANY'S REPRESENTATIVES:                  See Annex A hereto.

      XL SERVICES' REPRESENTATIVES:                   See Annex A hereto.

12    ANNUAL OPERATING PLAN AND PERFORMANCE REVIEW
      --------------------------------------------

12.1  The Parties will  coordinate the  development of an annual  operating plan
      ("AOP")  setting  forth  the  specific   objectives,   Service  standards,
      performance  measures,  activity  levels and a detailed budget setting out
      the cost estimates, types of services and allocation keys for the Services
      (collectively,  the "AOP Objectives"). The Parties shall implement the AOP
      Objectives  by January 1 of each calendar  year.  In the AOP


<PAGE>

      process,  the Parties  agree to use their best  efforts to  harmonize  the
      interests of the Company to have quality  services at affordable  cost and
      the  interests  of XL  Services  to recover  its costs of  performing  the
      Services.  Other than with  respect to the legal  services  to be provided
      hereunder, on or before August 15 of each calendar year, the Company shall
      submit to XL  Services a list of the types of  services  required  from XL
      Services,  upon  which XL  Services  shall  establish  its budget and cost
      estimate  calculations  for purposes of the AOP. On or before September 15
      of each calendar  year, an AOP for each Service for the next calendar year
      will be submitted to each of the  Representatives of the Company and of XL
      Services  for review and  approval.  Approval by each  Party's  respective
      Representative  will constitute approval by the Parties of the AOP. In the
      event  that  the  Parties  do not  approve  the AOP in whole or in part in
      respect of any  Services,  XL Services  shall have the right to  terminate
      this  Agreement (or any extension  hereof  entered into pursuant to clause
      20.2 below) in respect of any such  Services upon ninety (90) days written
      notice to the Company.

12.2  The  Parties  will meet  annually  on or about July 31 to review  progress
      against the AOP Objectives,  Service standards,  performance  measures and
      activity levels.  The Parties will use their good faith efforts to resolve
      any issues concerning Service standards,  performance  measures or changes
      in Fees from the AOP during these  meetings.  If the Parties are unable to
      resolve those issues,  they will refer the disputed  issues,  in the first
      instance to their respective Representatives and in the second instance to
      the Steering Committee, pursuant to clause 11 above.

13    DOCUMENTS AND RECORDS
      ---------------------

13.1  XL Services  shall  establish  and/or  maintain  records  relating to this
      Agreement and, to the extent reasonable and appropriate,  the Services, in
      accordance with the document  retention  policy  established by XL Capital
      Ltd or in accordance  with applicable laws and regulations if they provide
      for longer periods of retention.

13.2  Company,  its bona fide  agents,  auditors  and/or a  relevant  regulatory
      authority shall have the right on the giving of reasonable prior notice to
      inspect and audit any  records of or held by XL Services  relating to this
      Agreement  and the  Services  and shall  have the right to make  copies or
      extracts of any such records.

13.3  In the event that an audit reveals that XL Services is not complying  with
      the terms of this  Agreement,  or any applicable  regulation,  principles,
      guidelines,  laws or legislation in any material respect, the Company may,
      without  prejudice to its other rights  under this  Agreement,  require XL
      Services  to take all  necessary  remedial  action  within  four (4) weeks
      following disclosure to XL Services of such audit results.

13.4  All files,  materials,  policies and documents  prepared or obtained by XL
      Services  in the  course  of  carrying  out  its  obligations  under  this
      Agreement shall be and remain the property of the Company, and XL Services
      shall  treat them  accordingly  - including  keeping  them safe and secure
      whilst in XL Services' possession.

14    CONFIDENTIALITY
      ---------------

14.1  Confidential  Information  means all  information  disclosed by either the
      Company or XL Services  (whether in writing,  orally or by another  means)
      concerning  the  other  Party  which  comes  into  their  possession  as a
      consequence  of  the  operation  of  this  Agreement  including,   without
      limitation,  information  relating to the Parties'  products,


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      operations, processes, plans or intentions, product information, know-how,
      design rights, trade secrets, market opportunities and business affairs.

14.2  The Parties  undertake to hold the Confidential  Information in confidence
      and not to disclose the  Confidential  Information  (except as provided in
      this Agreement) without the prior written consent of the other Party.

14.3  Notwithstanding clause 14.2, and provided prior written notice is provided
      to the other Party,  the Parties are entitled to disclose  that portion of
      the  Confidential  Information  required in order to comply with any legal
      requirement or any regulation or rule, or the  requirements  of any rating
      agency,  or to the extent the  Confidential  Information is already in the
      public domain.

15    DATA PROTECTION
      ---------------

15.1  The Parties  undertake to comply with all applicable  data protection laws
      and  regulations in any relevant  jurisdiction  in which personal data (or
      any other  data,  the use or  transfer  of which is  regulated  by law and
      regulations  in that  jurisdiction)  is  transferred or used in connection
      with the provision of the Services.

16    BUSINESS CONTINUITY PLAN
      ------------------------

16.1  The Parties shall be jointly  responsible for devising a plan(s) to ensure
      the   continuity   of  the  Services  in  the  event  of  an   "unforeseen
      interruption"  (in accordance with the FSA Handbook) and any other prudent
      procedures  and  measures  which are  reasonably  necessary to prevent the
      disruption of the Services (collectively, the "Business Continuity Plan").
      The Company shall be responsible for  maintaining the Business  Continuity
      Plan and XL Services  shall,  in the event of an unforeseen  interruption,
      cooperate  to the best of its  ability  with the  Company  to  ensure  the
      uninterrupted provision of Services.

17    REMUNERATION AND FEES
      ---------------------

17.1  GENERAL:  Within  thirty  (30) days of the  receipt of an invoice  from XL
      Services, the Company shall pay XL Services monthly, in arrears on a "cost
      " basis for the  Executive  Functions  and Core  Functions  and on a "cost
      plus"  basis  for  each  Business  Service  Function  as set  forth in the
      attached  Schedules  (collectively,  the "Fees").  Each such invoice shall
      itemize  the  Fees,  the  Employee  Costs  (as  defined  in  the  attached
      Schedules),  and the methodology  for calculating the Employee Costs.  The
      Parties  agree  that the  annual  percentage  mark up, as set forth in the
      attached Schedules, will be determined with the assistance of an unrelated
      third party utilizing UK tax related transfer pricing  guidelines.  Except
      as specifically  provided  herein or in the Schedules,  or as subsequently
      agreed in an AOP or  otherwise  by the  Company,  the Company  will not be
      responsible  to XL Services or to any Non-XL Third Party  Contractor,  for
      any additional fees, charges,  costs or expenses relating to the Services,
      unless such  additional  fees,  charges,  costs or  expenses  are a direct
      result  of the  Company's  unilateral  deviation  from  the  scope  of the
      Services defined in the Schedules.

17.2  REVIEW OF FEES:

      (a)   Subject to the  provisions of clause 12.1, at the end of each annual
            period commencing as of January 1, 2006, XL Services will review the
            charges,  costs and  expenses  actually  incurred  by XL Services in
            providing  any Service,  as well as the  calculation  of any related
            Fees  (collectively,  "Actual Cost") during


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            the  previous  twelve  (12)  months.  In the event that XL  Services
            determines  that the Actual Cost for any Service  differs  from that
            set  forth in the AOP,  XL  Services  will  deliver  to the  Company
            documentation  for such Actual Cost, and will adjust the appropriate
            Fees retroactively and/or prospectively as necessary to reflect such
            differences;  provided,  however,  that  no  such  adjustment  shall
            increase or decrease  the Fees  payable in respect of any Service by
            more than 15% of the initial related Fees currently set forth in the
            related Schedules for such Service.

      (b)   As a part of the AOP  process  referred to in clause 12, the Parties
            will set Fees or new budgets  for each  ensuing  year,  and may make
            other changes to the Fees with respect to each  Service,  based upon
            an  increase  or  reduction  in the scope of  requirements  for such
            Service.  Once an AOP has been  finalized  (whether by  agreement or
            pursuant to the provisions of clause 12.2), the Fee for each Service
            set out in that AOP will apply for the ensuing year,  subject to any
            subsequent written agreements between the Parties.

18    TAXES
      -----

18.1  All sums payable  pursuant to this Agreement shall be exclusive of any VAT
      and other duties and taxes.  Any VAT or other  duties or taxes  payable on
      such sums shall be payable in addition to such sums.

19    COMPLAINTS
      ----------

19.1  In accordance  with clause 24 below,  the Parties shall notify one another
      immediately  upon becoming aware of any relevant matter arising out of the
      operation of, or in connection  with, this Agreement which has resulted or
      could  result  in a  complaint  to,  including  but not  limited  to,  any
      regulatory authority or which could give rise to litigation or proceedings
      against either Party.

20    TERMINATION
      -----------

20.1  At any time prior to the  Expiration  Date,  upon ninety (90) days written
      notice to XL Services,  this  Agreement  may be  terminated by the Company
      either in whole or with respect to one or more of the Services.

20.2  At any time  after the  Expiration  Date this  Agreement  may be  extended
      and/or  terminated  by the  Parties  in  writing,  either in whole or with
      respect  to one or more of the  Services;  provided,  however,  that  such
      extension  and/or  termination  shall only apply to the Services for which
      the Agreement was extended  and/or  terminated.  At least ninety (90) days
      prior to the Expiration  Date, the Company shall give XL Services  written
      notice of the  Company's  request to extend the term of or  terminate  the
      Agreement in respect of any  Services.  In addition,  the Parties shall be
      deemed to have (i)  extended  this  Agreement  with  respect to a specific
      Service  if the  Schedule  for such  Service  specifies  a  completion  or
      termination  date  beyond  the  aforementioned  Expiration  Date  and (ii)
      terminated  this  Agreement  with  respect  to a  specific  Service if the
      Schedule for such Service specifies a completion or termination date prior
      to the  aforementioned  Expiration Date.  Services shall be provided up to
      and including the date set forth in the  applicable  Schedule,  subject to
      earlier termination as provided herein.

20.3  Other than in respect of Internal  Audit  Services  provided in connection
      herewith,  which will continue  and/or  terminate in  accordance  with the
      other  relevant  provisions


<PAGE>

      of this Agreement,  this Agreement shall terminate in the event XL Capital
      Ltd group's  ownership of common stock of Security  Capital  Assurance Ltd
      falls to 35% or less in which  case the  Parties  shall have  ninety  (90)
      days,  from the date of such  event,  to  terminate  all  Services  unless
      otherwise agreed by the Parties; provided,  however, that if the reduction
      in the XL Group's  ownership  interests  referred to above is initiated by
      the XL  Group,  XL  Services  shall use its  reasonable  best  efforts  to
      maintain  the  General  Ledger  and  Human  Resources   Services  provided
      hereunder,  subject to applicable law, until the Expiration  Date, and any
      additional  costs  incurred  by  either  XL  Services  or the  Company  in
      connection  with  the  maintenance  of such  Services  shall be paid by XL
      Services.

20.4  Unless the other  Party  specifically  agrees to the  contrary in writing,
      this Agreement will be  automatically  terminated with immediate effect in
      the event that one Party shall:-

      (a)   enter voluntary or involuntary rehabilitation or liquidation;

      (b)   become the subject of an action in bankruptcy;

      (c)   make or  propose  any  composition  with its  creditors  or make any
            assignment for the benefit of its creditors or otherwise acknowledge
            its insolvency;

      (d)   have an  administrator  or  administrative  receiver  or  equivalent
            office holder appointed by a court of competent jurisdiction;

      (e)   have a receiver or equivalent  office holder appointed for the whole
            or any part of its business;

      (f)   any past or present  director,  officer,  partner or  employee of XL
            Services  is  convicted  of or  charged  with any  criminal  offence
            involving fraud or dishonesty or any similar  criminal offence which
            may materially affect the operation of this Agreement.

20.5  Each Party shall inform the other  immediately  upon becoming aware of the
      occurrence of any of the events set out in clause 20.4 above.

20.6  In the event of persistent  and material  breaches of any discreet part of
      the Services,  the Company shall inform the Representatives of XL Services
      in writing of the nature of such breaches.  The Representatives shall meet
      as soon as reasonably  practicable to discuss these breaches (such meeting
      being  expected to occur within seven (7) business  days of receipt of the
      written  notice)  and try to agree an action  plan  designed to remedy the
      breaches within a reasonable timeframe  acceptable to the Company.  Should
      an  action  plan not be  agreed  within  a  reasonable  timeframe,  or the
      implementation  of an  action  plan  not  result  in  the  Services  being
      performed to the specified standards, then the Representatives shall raise
      the matter  with the  Steering  Committee,  in  accordance  with clause 11
      above. If the material breaches  continue and the Steering  Committee does
      not provide a resolution to the matter within a reasonable timeframe, then
      the Company has the right to terminate  the relevant  part of the Services
      with  one (1)  month's  notice.  Such  termination  will  not  affect  the
      continuance  of the  Services not subject to the  persistent  and material
      breaches.

20.7  On termination  of any Service  provided for in any Schedule or the entire
      Agreement,  each Party shall bear its own  associated  costs;  XL Services
      will  cooperate  in good faith with the Company to provide the Company (or
      its designee)  with  reasonable


<PAGE>

      assistance  to make an  orderly  transition  from XL  Services  to another
      supplier of the Services.  XL Services undertakes to work with the Company
      to ensure a smooth  transition  and  hand-over  and to minimise  the costs
      associated  with  termination for each Party.  Such transition  assistance
      shall include the following:

      (a)   developing a transition plan with assistance from the Company or its
            designee; and

      (b)   organizing  and  delivering  to the Company  records  and  documents
            necessary  to  allow   continuation   of  the  Services,   including
            delivering  such  materials  in  electronic  forms and  versions  as
            requested by the Company.

20.8  Termination of this Agreement does not affect a Party's accrued rights and
      obligations at the date of termination.

21    LAW AND JURISDICTION
      --------------------

21.1  This Agreement  shall be construed in accordance  with the laws of England
      and Wales and the  Parties  agree to refer all  disputes  not  resolved in
      accordance  with clause 11 to arbitration in accordance  with the UNCITRAL
      Model Law.

22    THIRD PARTIES' RIGHTS
      ---------------------

22.1  For the avoidance of doubt,  no term of this Agreement is intended for the
      benefit of any third party, and the parties do not intend that any term of
      this  Agreement  should be  enforceable  by a third party either under the
      Contracts (Rights of Third Parties) Act 1999 or otherwise.

23    ASSIGNMENT
      ----------

23.1  This Agreement shall not be assignable by either Party without the express
      written  consent of the other,  and such consent shall not be unreasonably
      withheld, provided however that upon delivery of notice to the Company, XL
      Services may assign all or a portion of its rights under this Agreement to
      an affiliate.  For the purposes of this Agreement  "affiliate"  shall mean
      any  person,  corporation,  company,  partnership,   individual  or  group
      (collectively  a "Person"),  which directly or indirectly,  through one or
      more intermediaries,  controls or is controlled by, or owns or is owned by
      another Person,  with an equity or other financial interest of 35% or more
      of any management interest.

24    NOTICES
      -------

24.1  All notices  hereunder shall be sent to the Party at the address set forth
      below or at such other  address as shall be  specified by a Party as to it
      in a notice duly given. Notices shall be effective upon receipt, and shall
      be addressed as follows:

      If to XL Services:      XL Services UK Limited.
                              XL House
                              70 Gracechurch Street
                              London EC3V 0XL

                              Attention:
                              Telephone:
                              Facsimile:

<PAGE>

      If to the Company:      XL Capital Assurance (UK) Ltd
                              XL House
                              70 Gracechurch Street
                              London EC3V 0XL

                              Attention:
                              Telephone:
                              Facsimile:



      or to such other  address as a Party  shall have  designated  by notice in
      writing to the other Party in the manner provided by this clause 24.1.

25.   ENTIRE AGREEMENT
      ----------------

25.1  This Agreement,  including the attached  Schedules and Appendices,  is the
      complete and exclusive  statement of the agreement between the Parties and
      supersedes all prior proposals,  understandings  and all other agreements,
      oral and written,  between the Parties  relating to the subject  matter of
      this  Agreement.  This  Agreement may not be modified or altered except by
      written instrument duly executed by both Parties.

26.   FORCE MAJEURE
      -------------

26.1  Any delay or failure by either Party in the  performance of this Agreement
      will be excused  to the extent  that the delay or failure is due solely to
      causes or contingencies beyond the reasonable control of such Party.

27.   SEVERABILITY
      ------------

27.1  If any provision,  clause or part of this  Agreement,  or the  application
      thereof under certain  circumstances is held invalid or unenforceable  for
      any reason,  the remainder of this  Agreement,  or the application of such
      provision,  clause or part under other circumstances shall not be affected
      thereby.

      IN  WITNESS  WHEREOF,  the  Parties  have  signed  this  Agreement  on the
      Effective Date above.




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

 XL SERVICES UK LIMITED                XL CAPITAL ASSURANCE (UK) LIMITED
--------------------------------------------------------------------------------

 By /s/ Rhicert Webb                   By: /s/ Fred Hnat
--------------------------------------------------------------------------------

 Name: Rhicert Webb                    Name: Fred Hnat
--------------------------------------------------------------------------------

 Title: Director                       Title: Chief Operating Officer
--------------------------------------------------------------------------------



<PAGE>



                                   A SCHEDULES


DESCRIPTION OF SERVICES - EXECUTIVE FUNCTIONS

SCOPE

XL Services UK Ltd ("XL Services")  will provide  ______________________________
services to Security Capital Assurance Ltd ("SCA"),  either through XL Services'
own resources,  the resources of its  subsidiaries or affiliates,  as defined in
the  Master  Services  Agreement  (the  "Services   Agreement"),   dated  as  of
_______________,  by and between XL Services  and SCA,  or by  contracting  with
Non-XL Third Party Contractors, all in accordance with Agreement.



SPECIFIC SERVICES

The specific services that XL Services will provide are as follows:


1. _____________________________________________________________________________


2. _____________________________________________________________________________


3. _____________________________________________________________________________


4. _____________________________________________________________________________


5. _____________________________________________________________________________


Additional services may be included upon agreement of both parties.



SERVICE FEES

The Company will pay XL Services  semi-annually  on a "cost plus" basis for each
Service as set forth herein.


The Fee will include:

(i)   with respect to the Services  being  performed and Support  Services being
      provided by XL Services, any salaries, bonuses, benefits, fringe benefits,
      incentive  compensation  benefits (if  applicable)  payroll taxes or other
      applicable  taxes, and  depreciation/amortization  of office equipment and
      software  attributed  to the  employees  in the group  (collectively,  the
      "Employee  Costs"),  based upon the ratio of XL Services'  estimate of the
      time  spent  by the  employees  on  behalf  of SCA or in  connection  with
      providing  Support  Services  divided  by  the  total  time  spent  by the
      employees multiplied by the Employee Costs;

(ii)  a mark up of ____% of the aggregate amount calculated pursuant to (i);

(iii) third-party expenses, including travel and entertainment,  consulting fees
      and printing costs,  incurred on behalf of SCA by XL Services on behalf of
      SCA or in connection with providing Support Services; and

(iv)  any costs incurred by the XL Services in providing the Services not in the
      ordinary course of business.



ADDITIONAL TERMS

Period of coverage will be ongoing  subject to yearly  reviews during the annual
budgeting process.




<PAGE>

                                   B SCHEDULES



DESCRIPTION OF SERVICES - CORE FUNCTIONS



SCOPE

XL Services UK Ltd ("XL Services")  will provide  ______________________________
services to Security Capital Assurance Ltd ("SCA"),  either through XL Services'
own resources,  the resources of its  subsidiaries or affiliates,  as defined in
the  Master  Services  Agreement  (the  "Services   Agreement"),   dated  as  of
_______________,  by and between XL Services  and SCA,  or by  contracting  with
Non-XL Third Party Contractors, all in accordance with Agreement.



SPECIFIC SERVICES

The specific services that XL Services will provide are as follows:


1. _____________________________________________________________________________


2. _____________________________________________________________________________


3. _____________________________________________________________________________


4. _____________________________________________________________________________


5. _____________________________________________________________________________


Additional services may be included upon agreement of both parties.



SERVICE FEES

The Company will pay XL Services  semi-annually  on a "cost plus" basis for each
Service as set forth herein.


The Fee will include:

(i)   with respect to the Services  being  performed and Support  Services being
      provided by XL Services, any salaries, bonuses, benefits, fringe benefits,
      incentive  compensation  benefits (if  applicable)  payroll taxes or other
      applicable  taxes, and  depreciation/amortization  of office equipment and
      software  attributed  to the  employees  in the group  (collectively,  the
      "Employee  Costs"),  based upon the ratio of XL Services'  estimate of the
      time  spent  by the  employees  on  behalf  of SCA or in  connection  with
      providing  Support  Services  divided  by  the  total  time  spent  by the
      employees multiplied by the Employee Costs;

(ii)  a mark up of ____% of the aggregate amount calculated pursuant to (i);

<PAGE>

(iii) third-party expenses, including travel and entertainment,  consulting fees
      and printing costs,  incurred on behalf of SCA by XL Services on behalf of
      SCA or in connection with providing Support Services; and

(iv)  any costs incurred by the XL Services in providing the Services not in the
      ordinary course of business.





ADDITIONAL TERMS

Period of coverage will be ongoing  subject to yearly  reviews during the annual
budgeting process.







<PAGE>


                                   C SCHEDULES


DESCRIPTION OF SERVICES - BUSINESS SERVICE FUNCTIONS


SCOPE

XL Services UK Ltd ("XL Services")  will provide  ______________________________
services to Security Capital Assurance Ltd ("SCA"),  either through XL Services'
own resources,  the resources of its  subsidiaries or affiliates,  as defined in
the  Master  Services  Agreement  (the  "Services   Agreement"),   dated  as  of
_______________,  by and between XL Services  and SCA,  or by  contracting  with
other Third Party Contractors, all in accordance with Agreement.



SPECIFIC SERVICES

The specific services that XL Services will provide are as follows:


1. _____________________________________________________________________________


2. _____________________________________________________________________________


3. _____________________________________________________________________________


4. _____________________________________________________________________________


5. _____________________________________________________________________________


Additional services may be included upon agreement of both parties.



SERVICE FEES

The Company will pay XL Services  semi-annually  on a "cost plus" basis for each
Service as set forth herein.


The Fee will include:

(i)   with respect to the Services  being  performed and Support  Services being
      provided by XL Services, any salaries, bonuses, benefits, fringe benefits,
      incentive  compensation  benefits (if  applicable)  payroll taxes or other
      applicable  taxes, and  depreciation/amortization  of office equipment and
      software  attributed  to the  employees  in the group  (collectively,  the
      "Employee  Costs"),  based upon the ratio of XL Services'  estimate of the
      time  spent  by the  employees  on  behalf  of SCA or in  connection  with
      providing  Support  Services  divided  by  the  total  time  spent  by the
      employees multiplied by the Employee Costs;

<PAGE>

(ii)  a mark up of ____% of the aggregate amount calculated pursuant to (i);


(iii) third-party expenses, including travel and entertainment,  consulting fees
      and printing costs,  incurred on behalf of SCA by XL Services on behalf of
      SCA or in connection with providing Support Services; and


(iv)  any costs incurred by the XL Services in providing the Services not in the
      ordinary course of business.





ADDITIONAL TERMS

Period of coverage will be ongoing  subject to yearly  reviews during the annual
budgeting process.