SECURITIES AND EXCHANGE COMMISSION

                          WASHINGTON, D.C. 20549
                          ----------------------
                                FORM 10-Q
                          ----------------------

     (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1996

                                    OR

     ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                     SECURITIES AND EXCHANGE ACT OF 1934
               FOR THE TRANSITION PERIOD FROM    TO
           -----------------------------------------------------
                               CAPITAL RE CORPORATION
          (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
           -----------------------------------------------------
DELAWARE                      1-10995                          52-1567009
(STATE OR OTHER       (COMMISSION FILE NUMBER)              (IRS EMPLOYER
JURISDICTION OF                                     IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)

                      1325 AVENUE OF THE AMERICAS
                               18TH FLOOR
                       NEW YORK, NEW YORK 10019
                             (212) 974-0100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)


INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD
THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.  YES   X   NO
(REGISTRANT BECAME SUBJECT TO THE FILING REQUIREMENTS ON APRIL 8, 1992.)

AS OF NOVEMBER 12, 1996, THERE WERE OUTSTANDING 15,855,175 SHARES OF
COMMON STOCK, PAR VALUE $.01 PER SHARE, OF THE REGISTRANT.


                 CAPITAL RE CORPORATION AND SUBSIDIARIES

                                 INDEX


PART I    FINANCIAL INFORMATION                                    PAGE

ITEM 1.   FINANCIAL STATEMENTS (UNAUDITED)
           CAPITAL RE CORPORATION
           AND SUBSIDIARIES

          CONSOLIDATED BALANCE SHEETS - SEPTEMBER 30, 1996
          (UNAUDITED) AND DECEMBER 31, 1995                          3

          CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)
           THREE AND NINE MONTHS ENDED SEPTEMBER 30,1996
           AND SEPTEMBER 30, 1995                                    4

          CONSOLIDATED STATEMENT OF STOCKHOLDERS'
           EQUITY - NINE MONTHS ENDED
           SEPTEMBER 30, 1996 (UNAUDITED)                            5

          CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
           NINE MONTHS ENDED SEPTEMBER 30, 1996
           AND SEPTEMBER 30 1995                                     6

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)   7-8

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS          9-17


PART II   OTHER INFORMATION


ITEM 3    EXHIBITS AND REPORTS ON FORM 8-K                       18-20

SIGNATURES                                                          21

<TABLE>

             CAPITAL RE CORPORATION AND SUBSIDIARIES
                    Consolidated Balance Sheets
           (Dollars in thousands except per share amounts)

                                    September 30,        December 31,
                                        1996                 1995
                                    -------------        ------------
                                      (Unaudited)
<S>                                   <C>                    <C>
ASSETS
Fixed maturity securities
  available for sale, at market
  (amortized cost: $742,042 in
  1996 and $652,966 in 1995)            $760,712             $687,657
Short-term investments, at cost,
  which approximates market              120,014               84,110
                                         -------              -------
Total Investments                        880,726              771,767

Cash                                       1,992                4,537
Accrued investment income                 10,110                9,481
Deferred acquisition costs               112,709              102,353
Prepaid reinsurance premiums              74,087               62,133
Reinsurance recoverable on
  ceded losses                             6,619                2,524
Funds held under reinsurance
  agreements                               3,884                3,832
Premiums receivable                       16,345               17,907
Other assets                               7,889                7,351
                                      ----------             --------
    Total Assets                      $1,114,361             $981,885
                                      ==========             ========

LIABILITIES
Deferred premium revenue                $347,436             $314,451
Reserve for losses and loss
  adjustment expenses                     19,629               12,783
Profit commission liability               15,488                8,806
Ceded balances payable                     8,036                8,000
Deferred federal income
  taxes payable                           53,384               50,187
Bank note payable                         16,000                    0
Subordinated notes payable                     0               16,000
Long-term debt                            74,772               74,744
Other liabilities                         36,682                9,971
                                        --------             --------
    Total Liabilities                   $571,427             $494,942
                                        --------             --------

COMPANY OBLIGATED MANDATORILY
REDEEMABLE PREFERRED SECURITIES
OF CAPITAL RE LLC                         75,000               75,000

STOCKHOLDERS' EQUITY
Preferred stock - $.01 par value
  per share; 25,000,000 shares
  authorized; no shares issued
  and outstanding in 1996 and 1995          ---                   ---
Common stock - $.01 par value per
  share; 75,000,000 shares
  authorized, 15,853,175 and
  14,805,055 shares issued and
  outstanding in 1996 and
  1995, respectively                         160                  150
Additional paid-in capital               221,110              191,654
Retained earnings                        238,399              201,228
Treasury stock; 189,700 and
  182,700 shares in 1996 and
  1995, respectively                      (3,870)              (3,638)
Net unrealized gain on fixed
  maturities securities available
  for sale, net of tax                    12,135               22,549
                                         -------              -------
Total Stockholders' Equity               467,934              411,943
                                         -------              -------
Total Liabilities, Preferred
  Securities of Capital Re LLC
  and Stockholders' Equity            $1,114,361             $981,885
                                      ==========             ========

See Accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>
<TABLE>
              CAPITAL RE CORPORATION AND SUBSIDIARIES
                 Consolidated Statements of Income
                            (Unaudited)
          (Dollars in thousands except per share amounts)

                                  Three Months Ended   Nine Months Ended
                                      September 30,        September 30,
                                   ---------------      ----------------
                                    1996     1995       1996     1995
                                   ---------------      ----------------
<S>                              <C>       <C>       <C>        <C>
REVENUES:
Gross premiums written           $43,221   $23,977   $108,433   $69,368
Ceded premiums                     2,721     3,188     22,971     7,529
                                 -------   -------    -------   -------
     Net premiums written         40,500    20,789     85,462    61,839
     Increase in deferred
       premium revenue           (18,495)   (7,467)   (21,031)  (18,004)
                                 -------   -------    -------   -------
    Net premiums earned           22,005    13,322     64,431    43,835
Net investment income             13,010    11,687     37,792    34,448
Net realized (loss)gain             (228)     (141)    (1,039)      120
Other income                          25        35        788       173
                                 -------   -------    -------   -------
    Total Revenues                34,812    24,903    101,972    78,576
                                 -------   -------    -------   -------

EXPENSES:
Loss and loss adjustment
  expenses                         1,854       252     5,621      1,548
Acquisition costs                 13,838     8,431    31,621     23,015
Increase in deferred
  acquisition costs               (5,958)   (4,281)  (10,357)    (8,005)
Profit commission expense          1,851        48     4,191        802
Other operating expenses           1,347     2,031     7,253      7,134
Interest expense                   1,676     1,732     5,156      5,173
Foreign exchange loss                (40)      157       (24)       157
Minority interest in
  Capital Re LLC                   1,434     1,434     4,303      4,303
                                 -------   -------   -------    -------
    Total Expenses                16,002     9,804    47,764     34,127
                                 -------   -------   -------    -------

    Income before provision
     for federal income taxes     18,810    15,099    54,208     44,449

Provision for federal income taxes
   Current                         2,392     2,240     5,397      6,212
   Deferred                        2,462     1,506     8,804      4,543
                                 -------   -------   -------    -------
Total Provision for federal
  income taxes                     4,854     3,746    14,201     10,755
                                 -------   -------   -------    -------

Net Income                       $13,956   $11,353   $40,007    $33,694
                                 =======   =======   =======    =======

Earnings per common share          $0.88     $0.77     $2.57      $2.28
                                 =======   =======   =======    =======

Cash dividends per common share    $0.06     $0.05     $0.18      $0.15
                                 =======   =======   =======    =======

Weighted average number of common
  shares outstanding              15,798    14,784    15,589     14,784
                                 =======   =======   =======    =======


See Accompanying Notes to Unaudited Consolidated Financial Statements
</TABLE>
<TABLE>
               CAPITAL RE CORPORATION AND SUBSIDIARIES
            Consolidated Statement of Stockholders' Equity
                            (Unaudited)
             (Dollars in thousands except share amounts)

                                       ADDITIONAL
                             COMMON     PAID-IN    RETAINED   TREASURY
                             STOCK      CAPITAL    EARNINGS     STOCK
                             -----------------------------------------
<S>                          <C>       <C>         <C>        <C>
Balance, January 1, 1996      $150     $191,654    $201,228   ($3,638)
Net Income                      -          -         40,007       -
Issuance of common stock
  (1,048,120 shares)            10       29,456        -          -
Purchase of treasury stock
  at cost (7,000 shares)        -          -           -         (232)
Fixed maturities securities
  available for sale
  adjustments                   -          -           -          -
Dividend ($.06 per
  common share)                 -          -        (2,836)       -
                            ------------------------------------------
Balance, September 30, 1996   $160     $221,110    $238,399   ($3,870)
                            ==========================================


                                NET UNREALIZED
                                GAIN/(LOSS) ON
                               FIXED MATURITIES
                                  SECURITIES               TOTAL
                                AVAILABLE FOR           STOCKHOLDERS'
                                     SALE                  EQUITY
                            -----------------------------------------
<S>                                  <C>                  <C>
Balance, January 1, 1996             $22,549              $411,943
Net Income                              -                   40,007
Issuance of common stock
  (1,048,120 shares)                    -                   29,466
Purchase of treasury stock
  at cost (7,000 shares)                -                    (232)
Fixed maturities securities
  available for sale adjustments    (10,414)              (10,414)
 Dividend ($.06 per
  common share)                         -                  (2,836)
                                    --------              --------
Balance, September 30, 1996          $12,135              $467,934
                                    ========              ========
See accompanying Notes to Unaudited Consolidated Financial Statements.
</TABLE>
<TABLE>
                CAPITAL RE CORPORATION AND SUBSIDIARIES
                 Consolidated Statements of Cash Flows
                              (Unaudited)
                        (Dollars in thousands)

                                                  Nine Months Ended
                                                    September 30,
                                             -------------------------
                                                  1996            1995
                                             -------------------------
<S>                                            <C>             <C>
OPERATING ACTIVITIES:

Net income                                     $40,007         $33,694
Adjustments to reconcile net
  income to net cash provided
  by operating activities:
  Amortization of bond discount
  on long-term debt                                 28              28
  Net amortization of security
   premiums                                        477           1,086
  Provision for deferred federal
   income taxes                                  8,804           4,521
  Acquisition costs deferred                   (31,621)        (23,015)
  Amortization of deferred
   acquisition costs                            21,264          15,010
  Change in accrued investment income             (629)          1,037
  Change in premiums receivable, net               (46)         (6,324)
  Change in deferred premium revenue, net       21,031          18,004
  Change in outstanding loss reserves, net       2,751             927
  Net realized loss (gains) on investments       1,039            (120)
  Other                                         13,850           4,434
                                              --------         -------
Net Cash Provided by Operating Activities       76,955          49,283


INVESTING ACTIVITIES:

Securities available-for-sale:
  Purchases - fixed maturities                (492,547)       (147,373)
  Sales-fixed maturities                       395,675         108,802
  Maturities- fixed maturities                   6,280           6,700
Securities held-to-maturity:
  Maturities- fixed maturities                       0           2,698
(Purchases) Maturities of short-term
   investments, net                            (35,904)         (7,829)
Other investing activities                      20,599            (237)
                                              ---------        --------
Net Cash Used in Investing Activities         (105,898)        (37,240)

FINANCING ACTIVITIES:
Net proceeds from sale of stock                 29,466              31
Purchase of treasury stock at cost                (232)              0
Dividends paid                                  (2,836)         (2,219)
                                              ---------        --------
Net Cash Provided (Used) by
  Financing Activities                          26,398          (2,188)
Effect of exchange rate changes on cash              0              20
                                              ---------        --------
(Decrease)Increase in Cash                      (2,545)          9,876
Cash at Beginning of Period                      4,537           3,523
                                              ---------        --------
  Cash at End of Period                         $1,992         $13,399
                                              =========        ========

See Accompanying Notes to Unaudited Consolidated Financial Statements.
</TABLE>


             CAPITAL RE CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         (UNAUDITED)

                     September 30, 1996


1.   BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements and footnotes
have been prepared in accordance with the instructions to Form 10-Q and
the preparation of unaudited interim financial statements under Rules and
Regulations of the Securities and Exchange Commission and do not include
all the information and disclosures required by generally accepted
accounting principles.  These statements should be read in conjunction
with the audited consolidated financial statements of Capital Re
Corporation and Subsidiaries (the "Corporation") included in the
Corporation's 1995 Annual Report on Form 10-K.  The accompanying unaudited
consolidated financial statements include all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly the
Corporation's financial position and results of operations.  The results
of operations for the three and nine months ended September 30, 1996 may
not be indicative of the results that may be expected for the year ending
December 31, 1996.

2.   REINSURANCE

Ceded earned premium for the three and nine months ended September 30,
1996 and 1995, was $4.2 million and $11.0 million, and $2.1 million, and
$5.9 million, respectively.  Ceded losses for the same periods was $1.7
million and $5.7 million, and $1.2 million and $2.2 million, respectively.

3.   INVESTMENTS

During 1996, the Corporation entered into mortgage dollar roll
transactions.   A mortgage dollar roll is a combined sell and purchase
agreement, whereby mortgage-backed securities are sold to a counterparty
with a repurchase agreement of similar securities at some future date.
The Corporation treats these agreements as financing transactions, and as
such, the obligation under the repurchase agreement is included in other
liabilities.  As of September 30, 1996, the repurchase commitment related
to mortgage dollar roll transactions amounted to $25.5 million.

4.   INCOME TAXES

The effective tax rate for the nine months ended September 30, 1996 and
1995 is lower than the federal corporate tax rate on ordinary income of
35% due principally to the effect of tax-exempt interest income.  Income
taxes paid for the nine months ended September 30, 1996 and 1995 was $5.9
million and $6.4 million, respectively.

5.   OTHER

Interest paid for each of the nine months ended September 30, 1996 and
1995 was $3.9 million.
























             MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Capital Re Corporation (the "Corporation") was incorporated in the State
of Delaware in December 1991, and is the successor by merger to a Maryland
corporation incorporated in 1986. The Corporation is an insurance holding
company and has as operating subsidiaries five wholly owned specialized
professional reinsurance companies.  Capital Reinsurance Company ("Capital
Reinsurance"), domiciled in the state of Maryland, commenced operations in
January 1988.  Capital Reinsurance is principally engaged in the business
of financial guaranty reinsurance, which includes the reinsurance of
municipal and non-municipal bond insurance policies.  Capital Mortgage
Reinsurance Company ("Capital Mortgage"), a New York domiciled company,
commenced operations in February 1994.  Capital Mortgage reinsures only
residential mortgage guaranty insurance obligations.  Capital Mortgage
Reinsurance Company (Bermuda) Ltd. ("Capital Mortgage Bermuda"), a Bermuda
domiciled company, commenced operations in March 1994.  Capital Mortgage
Bermuda is engaged in the business of  reinsuring financial guaranty,
mortgage guaranty and trade credit and other specialty insurance policies,
both as a direct reinsurer of third party primary insurers and as a
retrocessionaire of Capital Reinsurance, Capital Mortgage, and Capital
Credit Reinsurance Company, Ltd. ("Capital Credit").  Capital Credit, also
a Bermuda-domiciled insurance company, commenced operations in February
1990.  Capital Credit reinsures  trade credit and other specialty
insurance lines, financial guaranty insurance, mortgage guaranty insurance
and also assumes business as a retrocessionaire of Capital Reinsurance and
Capital Mortgage.   Capital Title Reinsurance Company ("Capital Title"), a
New York domiciled insurance company, commenced operations in March 1996.
Capital Title is engaged in the business of reinsuring title insurance
policies.

On October 7, 1996, the Corporation announced an agreement to acquire
Tower Street Holdings Limited, the holding company for RGB Underwriting
Agencies Ltd ("RGB").  RGB is a Lloyd's managing agency and presently
manages five syndicates.  In connection with this acquisition and with the
completion of reconstruction, the Corporation will establish a corporate
member at Lloyd's to support underwriting on the managed syndicates.   The
acquisition is subject to the completion of due diligence, Lloyd's
approval, and the execution of definitive documents, in addition to
customary closing conditions.  Completion of this acquisition is expected
by year end 1996.







RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS THREE MONTHS ENDED SEPTEMBER
30, 1995

Net income for the three months ended September 30, 1996, increased 22.8%
to $14.0 million from $11.4 million for the same period of 1995.  On a per
share basis, net income increased to $0.88 for the three months ended
September 30, 1996 from $0.77 for the same period of 1995, or 14.3%.  In
addition, net operating income (net income excluding realized gains and
losses) increased 22.6% to $14.1 million for the three months ended
September 30, 1996 from $11.4 million for the same period in 1995.  On a
per share basis, net operating income increased to $0.89 for the three
months ended September 30, 1996 from $0.77 for the same period of 1995, or
15.6%.  Growth in net premiums earned to $22.0 million from $13.3 million,
or 65.4%, was the principal cause of the increase in net income.  Growth
in net premiums earned is a result of the Corporation's successful
diversification into the mortgage, trade credit and other specialty
reinsurance lines of business.

Gross premiums written increased 80.0% to $43.2 million for the three
months ended September 30, 1996 from $24.0 million for the same period of
1995.  This increase was primarily due to growth in the mortgage guaranty,
trade credit and other specialty lines of business.  In addition, Capital
Title established additional reinsurance relationships in the third
quarter of 1996, which contributed $0.8 million in premiums written for
the quarter. The following table shows gross written premiums by line of
business for the three months ended September 30, 1996 and September 30,
1995.

                       GROSS PREMIUMS WRITTEN
                        THREE MONTHS ENDED
                           SEPTEMBER 30,
                          1996       1995
                       (dollars in millions)

   MUNICIPAL             $17.8      $15.2
   MORTGAGE AND TITLE     18.7        6.3
   NON-MUNICIPAL           2.4        1.6
   CREDIT AND SPECIALTY    4.3        0.9
                         -----      -----
                         $43.2      $24.0


Net premiums written increased by 94.7% to $40.5 million for the three
months ended September 30, 1996 from $20.8 million for the same period in
1995. This increase is commensurate with the increase in gross premiums
written explained above. The following table shows net premiums written by
line of business for the three months ended September 30, 1996 and
September 30, 1995.

                       NET PREMIUMS WRITTEN
                        THREE MONTHS ENDED
                          SEPTEMBER 30,
                          1996       1995
                       (dollars in millions)

   MUNICIPAL             $15.1      $13.0
   MORTGAGE AND TITLE     18.9        5.3
   NON-MUNICIPAL           2.4        1.5
   CREDIT AND SPECIALTY    4.1        1.0
                         -----      -----
                         $40.5      $20.8


For the three months ended September 30, 1996, net premiums earned
increased 65.4% to $22.0 million from $13.3 million for the comparable
1995 period.  This increase was primarily due to growth in net premiums
earned in the mortgage, and credit and specialty reinsurance lines of
business.  For the three months ended September 30, 1996, net refunded
earned premium increased to $1.0 from $0.0 million for the comparable
period in 1995. Excluding the effects of net refunded earned premium, net
premiums earned increased 57.9% to $21.0 million from $13.3 million for
the three months ended September 30, 1996 and 1995, respectively.   A
refunding extinguishes the Corporation's reinsurance liability for the
refunded obligation and the Corporation then recognizes revenue equal to
the remaining related deferred premium revenue.  The following table shows
net premiums earned by line of business for the three months ended
September 30, 1996 and September 30, 1995. For the three month period
ended September 30, 1996 and 1995, ceded earned premium was $4.2 million
and $2.1 million, respectively.

                       NET PREMIUMS EARNED
                       THREE MONTHS ENDED
                         SEPTEMBER 30,
                          1996       1995
                      (dollars in millions)

   MUNICIPAL              $5.9       $5.7
   MORTGAGE AND TITLE     10.8        4.6
   NON-MUNICIPAL           1.8        2.5
   CREDIT AND SPECIALTY    3.5        0.5
                         -----      -----
                         $22.0      $13.3

For the three months ended September 30, 1996, net investment income
increased 11.1% to $13.0 million from $11.7 million for the comparable
period in 1995. Growth in investment income was primarily attributable to
a larger investment portfolio caused by (i) an increase in invested assets
from positive operating cash flows during the twelve months ended
September 30, 1996 and (ii) a public offering in the first quarter of 1996
of the Corporation's common stock which generated $25.9 million in net
proceeds to the Corporation.  In addition, the Corporation recognized net
realized losses of $0.2 million for the three months ended September 30,
1996 compared to net realized losses of $0.1 million for same period in
1995.  Realized gains and losses are expected in connection with the
Corporation's new emphasis on a total return investment strategy
implemented during 1996.

Loss and loss adjustment expenses increased to $1.9 million from $0.3
million for the three months ended September 30, 1996 and 1995,
respectively.  Losses recorded in the three months ended September 30,
1996 were primarily attributable to the mortgage guaranty and credit
reinsurance lines of business.  This increase is reflective of the
maturation of the books of business assumed in prior years and is
consistent with the expected loss development patterns for these lines of
business. Ceded losses for the three months ended September 30, 1996 and
1995 were $1.7 million and $1.2 million, respectively.

Total expenses, including loss and loss adjustment expenses, increased
63.3% to $16.0 million for the three months ended September 30, 1996 from
$9.8 million in the same period of 1995.  This increase was primarily
attributable to commissions associated with the increased level of
premiums assumed, normal loss development from the mortgage and credit
lines of business and increased net profit commissions payable under
certain of the Corporation's reinsurance contracts.  In addition, the
combined ratio increased to 58.8% for the three months ended September 30,
1996 from 49.8% for the comparable 1995 period.  This increase is an
expected result of the Corporation's diversification strategy, which is
shifting business from historically lower combined ratio financial
guaranty reinsurance toward lines with relatively higher combined ratios.

For the three months ended September 30, 1996, the total tax provision
increased to $4.9 million from $3.8 million for the same period in 1995.
In addition, the effective tax rate increased to 25.9% in the third
quarter of 1996 from 24.9% in the same period of 1995.  This increase
occurred in response to the Corporation's strategy of using a greater
proportion of new cash flow to purchase taxable securities during 1996.

NINE MONTHS ENDED SEPTEMBER 30, 1996 VERSUS NINE MONTHS ENDED SEPTEMBER
30, 1995

Net income for the nine months ended September 30, 1996, increased 18.7%
to $40.0 million from $33.7 million for the same period of 1995.  On a per
share basis, net income increased to $2.57 for the nine months ended
September 30, 1996 from $2.28 for the same period of 1995, or 12.7%.  In
addition, net operating income (net income excluding realized gains and
losses) increased 21.1% to $40.7 million for the nine months ended
September 30, 1996 from $33.6 million for the same period in 1995.  On a
per share basis, net operating income increased to $2.61 for the nine
months ended September 30, 1996 from $2.27 for the same period of 1995, or
15.0%.  Growth in net premiums earned to $64.4 million from $43.8 million,
or 47.0%,  was the principal cause of the increase in net income.  Growth
in net premiums earned is a result of significant increases in earnings
from the mortgage, trade credit and other specialty reinsurance lines of
business.

Gross premiums written increased 56.2% to $108.4 million for the nine
months ended September 30, 1996 from $69.4 million for the same period of
1995.  This increase was primarily due to growth in the mortgage guaranty,
non-municipal, trade credit and other specialty lines of business. In
addition, as discussed above, Capital Title established its first
reinsurance relationships in 1996, which contributed $1.1 million in
premiums written for the first nine months of 1996. The following table
shows gross written premiums by line of business for the nine months ended
September 30, 1996 and September 30, 1995.



                       GROSS PREMIUMS WRITTEN
                         NINE MONTHS ENDED
                           SEPTEMBER 30,
                          1996       1995
                       (dollars in millions)

   MUNICIPAL             $39.2      $35.6
   MORTGAGE AND TITLE     48.5       22.9
   NON-MUNICIPAL           9.6        5.7
   CREDIT AND SPECIALTY   11.1        5.2
                        ------     ------
                        $108.4      $69.4


Net premiums written increased by 38.4% to $85.5 million for the nine
months ended September 30, 1996 from $61.8 million for the same period in
1995. This increase was offset by an increase in ceded premiums. Ceded
premiums for the first nine months of 1996 increased to $23.0 million from
$7.5 million in the first nine months of 1995.  Of the $23.0 million in
premiums ceded, $13.6 million represents a non-recurring upfront premium
cession associated with a single mortgage guaranty reinsurance
transaction.  In that transaction gross premiums written are payable to
the Corporation in annual installments.  Therefore, to date, although 100%
of ceded premiums have been paid to retrocessionaires, the Corporation has
only collected approximately 30% of all premiums expected under the
assumed contract.  As a result of the non-recurring ceded premium
transaction, the majority of the Corporation's 1996 ceded premium budget
had been realized in the three months of 1996.  The following table shows
net premiums written by line of business for the nine months ended
September 30, 1996 and September 30, 1995.

                       NET PREMIUMS WRITTEN
                        NINE MONTHS ENDED
                          SEPTEMBER 30,
                          1996       1995
                      (dollars in millions)

   MUNICIPAL             $30.1      $31.1
   MORTGAGE AND TITLE     34.9       20.2
   NON-MUNICIPAL           9.7        5.7
   CREDIT AND SPECIALTY   10.8        4.8
                        ------     ------
                         $85.5      $61.8


For the nine months ended September 30, 1996, net premiums earned
increased 47.0% to $64.4 million from $43.8 million for the comparable
1995 period.  This increase was primarily due to growth in net premiums
earned in the mortgage and credit and other specialty reinsurance lines of
business.  For the nine months ended September 30, 1996, net refunded
earned premium increased to $3.5 million from $0.8 million for the comparable
period in 1995. Excluding the effects of net refunded earned premium, net
premiums earned increased 41.9% to $60.9 million from $43.0 million for
the nine months ended September 30, 1996 and 1995, respectively.  For the
nine month period ended September 30, 1996 and 1995, ceded earned premium
was $11.0 million and $5.9 million, respectively.   The following table
shows net premiums earned by line of business for the nine months ended
September 30, 1996 and September 30, 1995.

                       NET PREMIUMS EARNED
                        NINE MONTHS ENDED
                          SEPTEMBER 30,
                          1996       1995
                      (dollars in millions)

   MUNICIPAL             $19.2      $18.8
   MORTGAGE AND TITLE     32.0       15.9
   NON-MUNICIPAL           5.1        4.5
   CREDIT AND SPECIALTY    8.1        4.6
                         -----      -----
                         $64.4      $43.8

For the nine months ended September 30, 1996, net investment income
increased 9.9% to $37.8 million from $34.4 million for the comparable
period in 1995. Growth in investment income was primarily attributable to
a larger investment portfolio resulting from, (i) an increase in invested
assets from positive operating cash flows during the twelve months ended
September 30, 1996 and (ii) a public offering in the first quarter of 1996
of the Corporation's common stock which generated $25.9 million in net
proceeds to the Corporation.  In addition, the Corporation recognized net
realized losses of $1.0 million for the nine months ended September 30,
1996 compared to net realized gains of $0.1 million for the same period in
1995.

Loss and loss adjustment expenses increased to $5.6 million from $1.5
million for the nine months ended September 30, 1996 and 1995,
respectively.  Losses recorded in the nine months ended September 30, 1996
were primarily attributable to the mortgage guaranty and credit
reinsurance lines of business. This increase is reflective of the
maturation of the books of business assumed in prior years and is
consistent with the expected loss development patterns for these lines of
business.  Ceded losses for the nine months ended September 30, 1996 and
1995 were $5.7 million and $2.2 million, respectively.

Total expenses increased 40.2% to $47.8 million for the nine months ended
September 30, 1996 from $34.1 million in the same period of 1995.  This
increase was primarily attributable to commissions associated with the
increased level of premiums assumed, normal loss development from the
mortgage and credit lines of business and net profit commissions payable
under certain of the Corporation's reinsurance contracts.  In addition,
the combined ratio increased slightly to 59.5% for the nine months ended
September 30, 1996 from 56.2% for the comparable 1995 period.

For the nine months ended September 30, 1996, the total tax provision
increased to $14.2 million from $10.8 million for the same period in 1995.
In addition, the effective tax rate increased to 26.2%  in the first nine
months of 1996 from 24.2% in the same period of 1995. This increase
occurred in response to the Corporation's strategy of using a greater
proportion of new cash flow to purchase taxable securities during 1996.

LIQUIDITY AND CAPITAL RESOURCES

The Corporation relies on dividends from Capital Reinsurance for funds
used in its operations. The major sources of liquidity for Capital
Reinsurance are funds generated from reinsurance premiums, net investment
income and maturing investments. Capital Reinsurance is domiciled in the
state of Maryland, and under Maryland insurance law, the amount of the
surplus of Capital Reinsurance available for distribution as dividends is
subject to certain statutory restrictions. The amount available for
distribution from Capital Reinsurance during 1996 with notice to, but
without prior approval of, the Maryland Insurance Commissioner is limited
to 10% of Capital Reinsurance's policyholders' surplus as of December 31,
1995, or approximately $32.9 million.  For the nine months ended September
30, 1996, Capital Reinsurance paid $4.0 million in dividends to the
Corporation.

Credit Re Corporation relies on dividends from its wholly owned
subsidiary, Capital Credit, for funds which it provides the Corporation.
Capital Credit's major sources of liquidity are also funds generated from
reinsurance premiums, net investment income and maturing investments.
Capital Credit is a Bermuda domiciled insurer whose distributions are
governed by Bermuda law. Under Bermuda law and the by-laws of Capital
Credit, dividends may be paid out of the profits of the company (defined
as accumulated realized profits less accumulated realized losses).
Distributions to shareholders may also be paid out of Capital Credit's
surplus limited by requirements that such company must at all times (i)
maintain the minimum share capital required under Bermuda Law, and (ii)
have relevant assets in an amount equal to or greater than 75% of relevant
liabilities, all as defined under Bermuda Law. Since its organization,
Capital Credit has not declared nor paid any dividends.

Capital Mortgage and Capital Title are subject to the dividend
restrictions imposed under New York Insurance Law. Accordingly, dividends
may only be declared and distributed out of earned surplus (as defined
under New York Insurance Law). Additionally, no dividend may be declared
or distributed in an amount which, together with all dividends declared or
distributed by Capital Mortgage during the preceding twelve months,
exceeds the lesser of 10% of the company's surplus to policyholders as
shown by its last Annual Statutory Statement on file with the New York
Insurance Department, or 100% of adjusted net investment income (as
defined under New York Insurance Law) during such period, unless, upon
prior application, the Superintendent of Insurance approves a greater
dividend distribution based upon his finding that Capital Mortgage will
retain sufficient surplus to support its obligations and writings. Capital
Mortgage Bermuda's dividends and distributions to its sole shareholder,
Capital Mortgage, are governed by Bermuda law, and are subject to the same
restrictions as those described in the preceding paragraph for Capital
Credit.  To date, Capital Mortgage, Capital Mortgage Bermuda and Capital
Title have not declared or paid any dividends.

In January 1994, the Corporation formed and capitalized, through the
purchase of common shares, Capital Re LLC. Capital Re LLC exists solely
for the purpose of issuing preferred and common shares and lending the
proceeds of such issuance to the Corporation to fund its business
operations. In January 1994, Capital Re LLC issued $75.0 million of
Company obligated mandatorily redeemable preferred securities, the
proceeds of which were loaned to the Corporation. The Corporation has,
among other undertakings, unconditionally guaranteed all legally declared
and unpaid dividends of Capital Re LLC. The Company obligated mandatorily
redeemable preferred securities were issued at $25 par value per share and
pay monthly dividends at a rate of 7.65% per annum. Also in January 1994,
Capital Reinsurance and Capital Credit invested an aggregate of $120.0
million to capitalize Capital Mortgage. Of the total original contribution
of $120.0 million, Capital Reinsurance invested $94.8 million and Capital
Credit invested $25.2 million.

On February 12, 1996, the Corporation completed a public offering of
approximately 3.5 million shares of common stock.  Of the 3.5 million
shares, an institutional shareholder sold 2.6 million shares and the
Corporation sold 853,120 shares in the public offering generating net
proceeds to the Corporation of approximately $25.9 million of which $21.5
million was used to complete the $25 million capitalization of Capital
Title.  The remaining $4.4 million was used for Corporation expenses
associated with the public offering and general corporate purposes.  The
Corporation received no proceeds from the institutional shareholder's sale
of shares.

During 1992, the Corporation's Board of Directors established an initial
policy of declaring quarterly dividends at the rate of $0.05 per share, or
$0.20 annually, on the Corporation's issued common stock.  In October of
1995, the Corporation's Board of Directors authorized an increase of the
quarterly common stock dividend rate to $0.06 per share, or $0.24
annually.  For the nine months ended September 30, 1996, common dividends
were declared and paid in the amount of $2.8 million or $0.06 per share.

Cash flows from operations for the nine months ended September 30, 1996
and 1995, consisting of reinsurance premiums collected net of expenses,
investment income and income taxes, were $77.0 million and $49.2 million,
respectively. The Corporation believes that current levels of cash flow
from operations provide the Corporation with sufficient liquidity to meet
its operating needs. The Corporation's non-operating cash outflows are
primarily dedicated to (i) fixed-income investment activity, (ii) the
payment of dividends on its common shares, (iii) payments of interest on
long-term debt and (iv) the payment of its loan obligations to Capital Re
LLC.

At September 30, 1996, cash and investments approximated $882.7 million,
an increase of $106.4 million, or 13.7%, from $776.3 million at December
31, 1995. In managing its investment portfolio, the Corporation places a
high priority on quality and liquidity. As of September 30, 1996, the
entire investment portfolio was invested in highly-rated fixed income
securities.

At September 30, 1996, approximately $181.75 million or 20.6% of the
Corporation's investment portfolio is comprised of mortgage-backed
securities ("MBS").  Of the MBS portfolio, approximately $128.6 million or
70.8% is backed by agencies or entities sponsored by the U.S. government
as to the full amount of principal and interest.  As of September 30,
1996, the entire MBS portfolio was invested in  triple A rated securities.

Prepayment risk is an inherent risk of holding MBS. However, the degree of
prepayment risk is particular to the type of MBS held. The Corporation
limits its exposure to prepayments by purchasing less volatile types of
MBS.  As of September 30, 1996, $49.4 million or approximately 27.2% of
the MBS portfolio was invested in collateralized mortgage obligations
("CMOs") which are characterized as planned amortization class CMOs
(''PACs''). PACs are securities whose cash flows are designed to remain
constant over a variety of mortgage prepayment environments. Other classes
in the CMO security are structured to accept the volatility of mortgage
prepayment changes, thereby insulating the PAC class. Of the remaining MBS
portfolio, $132.3 million, or 72.8%, was invested in mortgage-backed pass-
throughs or sequential CMOs. Pass-throughs are securities in which the
monthly cash flows of principal and interest (both scheduled and
prepayments) generated by the underlying mortgages are distributed on a
pro-rata basis to the holders of securities. A sequential MBS is
structured to divide the CMO security into sequentially ordered classes.
Receipt of principal payments within classes is contingent on the
retirement of all previously paying classes. Generally, interest payments
are made currently on all classes. While these securities are more
sensitive to prepayment risk than PACs, they are not considered highly
volatile securities. While the Corporation may consider investing in any
tranche of a sequential MBS, the individual security's characteristics
(duration, relative value, underlying collateral, etc.) along with
aggregate portfolio risk management determine which tranche of sequential
MBS will be purchased. At September 30, 1996, the Corporation has no
securities such as interest only securities, principal only securities, or
MBS purchased at a substantial premium to par that have the potential for
loss of a significant portion of the original investment due to changes in
the prepayment rate of the underlying loans supporting the security.

On January 27, 1996, the Corporation extended its existing agreement with
Deutsche Bank AG for the provision of a $25.0 million liquidity facility
(the ''DB Liquidity Facility'') which is available for general corporate
purposes. The DB Liquidity Facility was extended for one year and is
scheduled to expire on January 27, 1997.  The Corporation has not borrowed
under the DB Liquidity Facility. Capital Reinsurance also entered into an
agreement on January 31, 1994 with Deutsche Bank AG for a credit facility
of up to $75.0 million specifically designed to provide rating agency
qualified capital to further support Capital Reinsurance's claims-paying
resources. This agreement expires January 27, 2003.

In addition, on August 20, 1996, the Corporation entered into a credit
agreement with Chase Manhattan Bank for the provision of a $25.0 million
credit facility (the "Chase Facility") which is available for general
corporate purposes.  Furthermore, on August 26, 1996, the Corporation
utilized $16 million of the Chase Facility for purposes of paying
subordinated notes which came due.  Interest on the bank note issued under
the Chase Facility is payable quarterly based upon the Corporation's
chosen interest rate option under the terms of the Chase Facility.












PART II - OTHER INFORMATION



ITEM 3  -  EXHIBITS AND REPORTS ON FORM 8-K

            (A) THE FOLLOWING IS ANNEXED AS AN EXHIBIT:


            EXHIBIT
            NUMBER       DESCRIPTION

             11          STATEMENT RE: COMPUTATION OF PER SHARE
                            EARNINGS (UNAUDITED)

            (B) REPORTS ON FORM 8-K

            ON OCTOBER 9, 1996, CAPITAL RE CORPORATION FILED A
            FORM 8-K, PURSUANT TO SECTION 13 OR 15(D) OF THE
            SECURITIES AND EXCHANGE ACT OF 1934, ANNOUNCING
            AN AGREEMENT TO ACQUIRE TOWER STREET HOLDINGS, LIMITED
            AND ITS SUBSIDIARIES.























                              INDEX TO EXHIBITS




EXHIBIT
NUMBER          DESCRIPTION                                     PAGE

11              STATEMENT RE: COMPUTATION OF PER
                   SHARE EARNINGS (UNAUDITED)                      20





                              SIGNATURES




PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.



                                            CAPITAL RE CORPORATION



DATE:              NOVEMBER 12, 1996        BY /S/DAVID A. BUZEN
                                            ---------------
                                            DAVID A. BUZEN
                                            EXECUTIVE VICE PRESIDENT,
                                            CHIEF FINANCIAL OFFICER


DATE:              NOVEMBER 12, 1996        BY /S/ALAN S. ROSEMAN
                                            -----------------
                                            ALAN S. ROSEMAN
                                            SENIOR VICE PRESIDENT,
                                            GENERAL COUNSEL AND
                                            SECRETARY