EXHIBIT 10.4

                                 XL CAPITAL LTD
                               ONE BERMUDIANA ROAD
                             HAMILTON HM 11, BERMUDA


                                                                  August 2, 2006
Paul Giordano
[Address]

Dear Mr. Giordano:

            Effective upon (and subject to) pricing (the "pricing") of
the initial public offering (the "IPO") of common shares of Security Capital
Assurance Ltd. ("SCA"), the unexercised stock options, unvested restricted
shares and long-term incentive award granted by XL Capital Ltd ("XL") to you
(the stock options and restricted shares are listed on Exhibit A attached
hereto) will be irrevocably cancelled. In substitution for your options to
purchase XL shares (other than those granted on December 4, 1998 and those
granted on January 5, 2005) you will receive options to purchase SCA shares, in
substitution for your unvested restricted XL shares (and your options granted on
December 4, 1998 and those granted on January 5, 2005) you will receive
restricted SCA shares, and in substitution for your XL long-term incentive award
you will receive a cash-based long-term incentive award from SCA, each as
described below.

            Each SCA stock option issued in substitution for an XL stock option
(i) will have the same term as the corresponding XL option (including
post-termination exercise provisions), (ii) will have an exercise price per
share equal to the price paid by the public per share in the IPO, and (iii) will
be to purchase the number of SCA shares which results in the value of the SCA
option (using the Black-Scholes valuation model based on the assumptions set
forth in Exhibit B hereto) equal to the value of the corresponding XL option
(using the Black-Scholes valuation model based on the assumptions set forth in
Exhibit B hereto). The SCA stock options will vest as set forth on Exhibit A
attached hereto, subject to the terms of the applicable award agreement. The SCA
restricted shares will have a fair market value (based on the IPO price per
share) equal to the value of the corresponding XL restricted shares (based on
their closing trading price on May 31, 2006) or, in the case of SCA restricted
shares issued in substitution for your options granted on December 4, 1998 and
those granted on January 5, 2005, a fair market value (based on the IPO price
per share) equal to the value of such options (using the Black-Scholes valuation
model based on the assumptions set forth in Exhibit B hereto). The SCA
restricted shares will vest as set forth on Exhibit A attached hereto, subject
to the terms of the applicable award agreement. The cash-based long-term
incentive award granted by SCA will have a target award equal to $1,075,000, the
target award of the corresponding XL long-term incentive award. The SCA
long-term incentive award will vest on December 31, 2008, subject to the terms
set forth in the applicable award agreement.

<PAGE>


            Please acknowledge your agreement to the foregoing with respect to
your outstanding XL Capital long-term incentives by signing a copy of this
letter below and returning it to Nicholas West, Global Stock Plan Administrator,
XL House, One Bermudiana Road, PO Box HM 2245, Hamilton HM JX, Bermuda.

                                        Very truly yours,

                                        XL CAPITAL LTD



                                        By:  /s/ Kirstin R. Gould
                                            _______________________________
                                               Secretary

Accepted and Agreed


/s/ Paul Giordano
___________________________
Paul Giordano

Date: August 2, 2006
      ____________________