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 MARCH 31, 1997

                                    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 MAY 12, 1997, THERE WERE OUTSTANDING 15,854,262 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 SHEET -MARCH 31, 1997
          (UNAUDITED) AND DECEMBER 31, 1996                            3

          CONSOLIDATED STATEMENT OF INCOME - THREE MONTHS
            ENDED MARCH 31,1997(UNAUDITED)AND
            MARCH 31, 1996 (UNAUDITED)                                 4

          CONSOLIDATED STATEMENT OF STOCKHOLDERS'
           EQUITY - THREE MONTHS ENDED MARCH 31, 1997
           (UNAUDITED)                                                 5

          CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE
           MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND
           MARCH 31 1996 (UNAUDITED)                                   6

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)     7-8


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS             9-16


PART II   OTHER INFORMATION


ITEM 3    EXHIBITS AND REPORTS ON FORM 8-K                          17-19

SIGNATURES                                                             20

<TABLE>

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

                                       March 31,         December 31,
                                          1997               1996
                                      ----------         ------------
                                      (Unaudited)
<S>                                   <C>                <C>
ASSETS
Fixed maturity securities
  available for sale, at market
  amortized cost: $812,846 in
  1997 and $800,137 in 1996)            $818,468             $825,678
Short-term investments, at cost,
  which approximates market              119,390               75,424
                                         -------              -------
Total Investments                        937,858              901,102

Cash                                      20,775               15,285
Accrued investment income                 11,461               12,287
Deferred acquisition costs               118,482              111,364
Prepaid reinsurance premiums              76,528               72,034
Reinsurance recoverable on
  ceded losses                             2,158                1,833
Funds held under reinsurance
  agreements                               3,861                3,861
Premiums receivable, net                  16,527                5,745
Other assets                               9,467                9,273
Investment in subsidiary                  10,233               10,000
Goodwill                                  13,043               13,567
                                      ----------           ----------
    Total Assets                      $1,220,393           $1,156,351
                                      ==========           ==========

LIABILITIES
Deferred premium revenue                $367,424             $337,104
Reserve for losses and loss
  adjustment expenses                     19,924               19,902
Profit commission liability               15,989               13,329
Deferred federal income taxes payable     54,349               58,474
Bank note payable                         25,000               25,000
Long-term debt                            74,791               74,781
Liability for securities purchased        71,145               42,749
Other liabilities                         24,574               20,666
                                        --------             --------
    Total Liabilities                   $653,196             $592,005
                                        --------             --------

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 1997 and 1996          ---                   ---
Common stock - $.01 par value per
  share; 75,000,000 shares
  authorized, 15,871,762 and
  15,856,762 shares issued and
  outstanding in 1997 and
  1996, respectively                         161                  160
Additional paid-in capital               222,817              222,525
Retained earnings                        269,833              253,807
Foreign exchange translation               (347)                  122
Treasury stock; 189,700 and 189,700
  shares in 1997 and 1996, respectively  (3,870)              (3,870)
Net unrealized gain on fixed
  maturities securities available
  for sale, net of tax                    3,603                16,602
                                        -------               -------
Total Stockholders' Equity              492,197               489,346
                                        -------               -------
Total Liabilities, Preferred
  Securities of Capital Re LLC
  and Stockholders' Equity           $1,220,393            $1,156,351
                                     ==========            ==========

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

                                           Three Months Ended
                                                March 31,
                                               (Unaudited)
                                           --------------------
                                            1997         1996
                                           --------------------
<S>                                      <C>            <C>
REVENUES:
Gross premiums written                   $64,525        $34,255
Ceded premiums                             8,255         16,195
                                         -------        -------
     Net premiums written                 56,270         18,060
     Increase in deferred
       premium revenue                   (25,721)         2,044
                                         -------        -------
    Net premiums earned                   30,549         20,104
Net investment income                     13,815         12,286
Net realized gain/(loss)                   2,785           (95)
Fee Income                                   445              0
Other income                                  25            244
Equity income in subsidiary                  233              0
                                          ------         ------
    Total Revenues                        47,852         32,539
                                          ------         ------


EXPENSES:
Loss and loss adjustment
  expenses                                 4,818          1,409
Acquisition costs                         17,325          8,857
Increase in deferred
  acquisition costs                      (7,085)        (2,221)
Profit commission expense                  1,996            953
Other operating expenses                   3,047          3,147
Amortization of goodwill                     167              0
Interest expense                           1,878          1,741
Foreign exchange loss                        394             26
Minority interest in
  Capital Re LLC                           1,434          1,434
                                          ------         ------
    Total Expenses                        23,974         15,346
                                          ------         ------

    Income before provision
     for federal income taxes             23,878         17,193

Provision for federal income taxes
   Current                                 3,490          2,062
   Deferred                                3,252          2,364
                                           -----          -----
Total provision for federal income taxes   6,742          4,426
                                           -----          -----

Net Income                               $17,136        $12,767
                                         =======        =======

Earnings per common share                  $1.08          $0.84
                                         =======        =======

Cash dividends per common share            $0.07          $0.06
                                         =======        =======

Weighted average number of common
  shares outstanding                      15,861         15,268
                                         =======        =======


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

                                       ADDITIONAL
                             COMMON     PAID-IN    RETAINED   TREASURY
                             STOCK      CAPITAL    EARNINGS     STOCK
                             -----------------------------------------
<S>                          <C>       <C>         <C>        <C>
Balance, January 1, 1997      $160     $222,525    $253,807   ($3,870)
Net Income                      -          -         17,136       -
Exercise of stock options,
  including tax benefit
  (15,000 shares)               1         292          -          -
Fixed maturities securities
  available for sale
  adjustments                   -          -           -          -
Foreign exchange translation    -          -           -          -
Dividend ($.07 per
  common share)                 -          -        (1,110)       -
                            ------------------------------------------
Balance, March 31, 1997       $161     $222,817    $269,833   ($3,870)
                            ==========================================

                                          NET UNREALIZED
                                             GAIN ON
                                         FIXED MATURITIES
                            FOREIGN         SECURITIES         TOTAL
                            EXCHANGE       AVAILABLE FOR   STOCKHOLDERS'
                           TRANSLATION        SALE            EQUITY
                            ------------------------------------------
<S>                             <C>        <C>                <C>
Balance, January 1, 1997        $122       $16,602            $489,346
Net Income                        -           -                 17,136
Excercise of stock options,
  including tax benefit
  (15,000 shares)                 -           -                    293
Fixed maturities securities
  available for sale adjustments  -        (12,999)           (12,999)
Foreign exchange translation    (469)         -                  (469)
Dividend ($.07 per
  common share)                   -           -                (1,110)
                            ---------     --------            --------
Balance, March 31, 1997        $(347)       $3,603            $492,197
                            =========     ========            ========

See accompanying Notes to Unaudited Consolidated Financial Statements.
</TABLE>
<TABLE>
                CAPITAL RE CORPORATION AND SUBSIDIARIES
                 Consolidated Statements of Cash Flows
                         (Dollars in thousands)


                                                  Three Months Ended
                                                       March 31,
                                             -------------------------
                                                  1997          1996
                                             -------------------------
<S>                                          <C>               <C>
OPERATING ACTIVITIES:

Net income                                     $17,136         $12,767
Adjustments to reconcile net
  income to net cash provided
  by operating activities:
  Amortization of bond discount
  on long-term debt                                  9              10
  Net amortization of security
   premiums                                      (225)             335
  Provision for deferred federal
   income taxes                                  2,875           2,364
  Acquisition costs deferred                  (17,326)         (8,857)
  Amortization of deferred
   acquisition costs                            10,241           6,637
  Equity income in affiliate                     (233)               0
  Change in accrued investment income              826             297
  Change in premiums receivable, net          (13,468)           5,732
  Change in deferred premium revenue, net       25,721         (2,045)
  Change in outstanding loss reserves, net       (311)           1,724
  Net realized loss (gain) on investments      (2,785)              95
  Change in ceded balances payable               2,794               0
  Other                                          6,428           5,929
                                              --------         -------
Net Cash Provided by Operating Activities       31,682          24,989


INVESTING ACTIVITIES:

Securities available-for-sale:
  Purchases - fixed maturities               (294,870)        (19,764)
  Sales-fixed maturites                        285,202          26,698
  Maturities- fixed maturities                       0           2,400
Securities held-to-maturity:
  Maturities- fixed maturities                       0               0
(Purchases) Maturities of short-term
   investments, net                           (43,966)        (58,415)
Investment in Subsidiaries                           0               0
Other investing activities                      28,260           (219)
                                             --------         --------
Net Cash Used in Investing Activities         (25,374)        (49,301)

FINANCING ACTIVITIES:
Net proceeds from sale of stock                    292          25,731
Purchase of treasury stock at cost                   0               0
 Issuance/(Repayment) of notes payable               0               0
Dividends paid                                 (1,110)           (940)
                                             ---------        --------
Net Cash Provided (Used) by
  Financing Activities                           (817)          24,791
                                             ---------        --------
(Decrease)Increase in Cash                       5,490             480
Cash at Beginning of Period                     15,285           4,537
                                             ---------        --------
  Cash at End of Period                        $20,775          $5,017
                                             =========        ========

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


              CAPITAL RE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          (UNAUDITED)

                         March 31, 1997


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 the 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
1996  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   months
ended  March  31, 1997 may not be indicative of the results  that
may be expected for the year ending December 31, 1997.

In February 1997, the Financial Accounting Standards Board issued
Statement  of Financial Standards No. 128, "Earnings  per  Share"
("FAS  128"), effective for years after December 15,  1997.   FAS
128  requires the calculation and presentation on the face of the
income   statement  of   "basic"  earnings  per  share  and,   if
applicable,  "diluted" earnings per share.   Basic  earnings  per
share  is calculated based on the weighted average common  shares
outstanding.   In calculating dilutive earnings  per  share,  the
number of shares is increased to include all potentially dilutive
common shares, including stock options.  The adoption of FAS  128
is  not  expected to have a material effect on reported  earnings
per share.

2.   REINSURANCE

Ceded  earned premium for the three months ended March  31,  1997
and  1996 was $3.8 million and $3.0 million, respectively.  Ceded
losses  for the same periods were $0.9 million and $1.9  million,
respectively.

3.   INVESTMENTS

The  Corporation  enters 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  March  31,
1997,  the repurchase commitment related to mortgage dollar  roll
transactions amounted to $71.1 million.

4.   INCOME TAXES

The  effective tax rate for the three months ended March 31, 1997
and 1996 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 three  months  ended
March  31,  1997  and 1996 were $0.0 million  and  $0.5  million,
respectively.

5.   OTHER

Interest paid for the three months ended March 31, 1997 and 1996
was $0.4 million and $0.5 million, respectively.






                                
              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  six  wholly owned operating subsidiaries.   Capital
Reinsurance  Company ("Capital Reinsurance"),  domiciled  in  the
State of Maryland, commenced operations in January 1988.  Capital
Reinsurance  is  engaged in the business  of  financial  guaranty
reinsurance,  primarily 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.   KRE  Reinsurance, Ltd. (formerly Capital  Mortgage
Reinsurance Company (Bermuda) Ltd.) ("KRE"), a Bermuda  domiciled
company,  commenced operations in March 1994.  KRE 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 concentrated  in
Western Europe and the United States and is 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.

In  November  1996, the Corporation acquired, through  its  newly
formed  United Kingdom holding company, Capital Re (UK) Holdings,
100%  of the issued shares of Tower Street Holdings Limited  (now
known  as  RGB  Holdings,  Ltd.), the  holding  company  for  RGB
Underwriting Agencies Ltd ("RGB").  RGB is a managing agency  and
presently  manages three syndicates operating in the  Lloyd's  of
London  insurance  market.  In connection with this  acquisition,
the  Corporation   established a corporate name at  Lloyd's,  CRC
Capital,  Ltd.  ("CRC"), to support underwriting on  the  managed
syndicates.    CRC  participates  in  a  non-marine  and  a  life
syndicate.   At March 31, 1996, the results of RGB  and  CRC  are
consolidated in the Corporation's financial statements.

In  December  1996, the Corporation entered into a joint  venture
with  GCR  Holdings  Limited to form  a  Bermuda  based  insurer,
Capital   Global  Underwriters  Limited  ("CGUL"),   which   will
specialize   in   financial  reinsurance,   including   financial
guaranty,  mortgage  guaranty and finite risk  reinsurance.   The
Corporation,  through its subsidiary, KRE, owns a  fifty  percent
interest  in  CGUL  and controls 9.9% of its voting  stock.   The
Corporation accounts for its investment in CGUL under the  equity
method.


RESULTS OF OPERATIONS

Three Months Ended March 31, 1997 versus Three Months Ended March
31, 1996

Net  income  for the three months ended March 31, 1997  increased
33.6% to $17.1 million from $12.8 million for the same period  of
1996.   On  a per share basis, net income increased to $1.08  for
the  three  months ended March 31, 1996 from $0.84 for  the  same
period of 1996, or 28.6%.  In addition, net operating income (net
income  excluding realized gains and losses) increased  21.9%  to
$15.6  million  for the three months ended March  31,  1997  from
$12.8 million for the same period in 1996.  On a per share basis,
net  operating  income increased to $0.98 for  the  three  months
ended  March 31, 1997 from $0.84 for the same period of 1996,  or
16.6%.  Growth in net premiums earned to $30.5 million from $20.1
million, or 51.7%, was the principal cause of the increase in net
income.  Growth  in  net  premiums earned  is  a  result  of  the
Corporation's  further diversification into the  mortgage,  trade
credit and other specialty reinsurance lines of business.

Gross  premiums written increased 88.0% to $64.5 million for  the
three months ended March 31, 1997 from $34.3 million for the same
period  of 1996.  This large increase was due to the addition  of
the  new  Lloyd's line of business from CRC as well as growth  in
the  municipal and credit lines of business.  Growth in municipal
gross  premiums written to $17.9 million in the first quarter  of
1997  from $9.1 million in the first quarter of 1996 was  due  to
two  large  structured facultative transactions.   The  following
table  shows gross premiums written by line of business  for  the
three months ended March 31, 1997 and March 31, 1996.

<TABLE>
                    Gross Premiums Written
                      Three Months Ended
                          March 31,
                       1997      1996
                      -----     -----
                     (dollars in millions)
<S>                     <C>      <C>

 Municipal              $17.9    $9.1
 Mortgage                15.7     7.6
 Non-Municipal            3.3     4.2
 Credit and Specialty     6.4     3.4
 Title                    0.8     0.0
 Lloyd's                 20.4     0.0
                       ------  ------
                        $64.5   $34.3

</TABLE>

Net premiums written increased by 211.0% to $56.3 million for the
three months ended March 31, 1997 from $18.1 million for the same
period  in 1996. This increase is commensurate with the  increase
in  gross  premiums written explained above as well as due  to  a
large   increase   in  mortgage  premiums  written   beneficially
influenced by the timing of assumed and ceded premiums related to
a  significant  transaction in the first  quarter  of  1996.  The
following  table shows net premiums written by line  of  business
for the three months ended March 31, 1997 and March 31, 1996.


<TABLE>
                      Net Premiums Written
                       Three Months Ended
                            March 31,
                         1997      1996
                        ------    ------
                     (dollars in millions)
<S>                     <C>      <C>
Municipal               $15.6    $6.5
Mortgage                 15.7     4.0
Non-Municipal             3.3     4.2
Credit and Specialty      6.4     3.4
Title                     0.8     0.0
Lloyd's                  14.5     0.0
                        -----     -----
                        $56.3   $18.1

</TABLE>

For  the  three months ended March 31, 1997, net premiums  earned
increased  51.7%  to  $30.5 million from $20.1  million  for  the
comparable  1996  period.  This increase  was  primarily  due  to
growth  in  net premiums earned in the mortgage, and  credit  and
specialty  reinsurance lines of business as well as the  addition
of  the new Lloyd's line of business.  For the three months ended
March  31,  1997, net refunded earned premium decreased  to  $0.5
from  $1.9  million for the comparable period in 1996.  Excluding
the  effects of net refunded earned premium, net premiums  earned
increased 64.8% to $30.0 million from $18.2 million for the three
months  ended March 31, 1997 and 1996, 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 March 31, 1997 and March 31, 1996. For the
three  months ended March 31, 1997 and 1996, ceded earned premium
was $3.8 million and $3.0 million, respectively.


<TABLE>
                      Net Premiums Earned
                      Three Months Ended
                           March 31,
                        1997       1996
                      ------     ------
                     (dollars in millions)
<S>                      <C>      <C>
Municipal                $7.1     $8.1
Mortgage                 13.5      8.6
Non-Municipal             3.0      1.2
Credit and Specialty      4.5      2.2
Title                     0.7      0.0
Lloyd's                   1.7      0.0
                        -----    -----
                        $30.5    $20.1

</TABLE>
For  the three months ended March 31, 1997, net investment income
increased  12.2%  to  $13.8 million from $12.3  million  for  the
comparable  period  in  1996. 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 March 31, 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  gains of $2.8 million for the three months ended  March
31, 1997 compared to net realized losses of $0.1 million for same
period  in  1996.   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 $4.8 million from
$1.4  million for the three months ended March 31, 1997 and 1996,
respectively.   Losses recorded in the three months  ended  March
31,  1997  were  primarily  attributable  to  the  expected  loss
recognition associated with the addition of the Lloyd's  line  of
business  as  well  as normal loss development  in  the  mortgage
guaranty   and   credit  reinsurance  lines  of  business   which
constitute  an  increasing portion of the  Corporation's  assumed
book  of business.  Ceded losses for the three months ended March
31,   1997   and  1996  were  $0.9  million  and  $1.9   million,
respectively.

Total  expenses,  including  loss and loss  adjustment  expenses,
increased 56.8% to $24.0 million for the three months ended March
31,  1997  from $15.3 million in the same period of  1996.   This
increase  was  primarily  attributable to commissions  associated
with  the  increased  level  of  premiums  written,  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 increase in
expenses   was  attributable  to  operating  and  loss   expenses
associated with the consolidations of RGB and CRC's share of  the
Lloyd's  syndicates.  Furthermore, the combined ratio,  excluding
expenses  associated with non insurance operations, increased  to
64.7%  for  the three months ended March 31, 1997 from 60.4%  for
the  comparable 1996 period.  This increase is an expected result
of the Corporation's diversification strategy, which is producing
more  business from lines with relatively higher combined  ratios
than the financial guaranty reinsurance business.

For  the  three  months  ended March  31,  1997,  the  total  tax
provision  increased to $6.7 million from $4.4  million  for  the
same  period  in  1996.   In addition,  the  effective  tax  rate
increased to 28.0% in the first quarter of 1997 from 25.6% in the
same  period of 1996.  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 1997 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, 1996, or  approximately
$33.0  million.   For  the three months  ended  March  31,  1997,
Capital  Reinsurance  paid  $8.0  million  in  dividends  to  the
Corporation.

Credit   Re  Corporation,  a  wholly  owned  subsidiary  of   the
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 by Capital Mortgage or
Capital  Title  in an amount which, together with  all  dividends
declared or distributed by Capital Mortgage or Capital Title,  as
the  case may be, during the preceding twelve months, exceeds the
lesser of 10% of such 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 or Capital Title, as the case may be, will
retain   sufficient  surplus  to  support  its  obligations   and
writings.   KRE'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,  KRE 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.

In December 1996, the Corporation's Board of Directors authorized
an  increase of the quarterly common stock dividend rate to $0.07
per  share, or $0.28 annually.  For the three months ended  March
31,  1997, common dividends were declared and paid in the  amount
of $1.1 million or $0.07 per share.

Cash  flows from operations for the three months ended March  31,
1997  and 1996, consisting of reinsurance premiums collected  net
of  expenses,  investment  income and income  taxes,  were  $31.7
million and $25.0 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  March  31,  1997,  cash and investments  approximated  $958.6
million,  an  increase  of $42.2 million, or  4.6%,  from  $916.4
million  at  December  31,  1996.   In  managing  its  investment
portfolio, the Corporation places a high priority on quality  and
liquidity. As of March 31, 1997, the entire investment  portfolio
was invested in highly-rated fixed income securities.

At  March 31, 1997, approximately $164.2 million or 17.5% of  the
Corporation's  investment portfolio was  comprised  of  mortgage-
backed  securities ("MBS").  Of the MBS portfolio,  approximately
$141.0  million  or  85.9%  is backed  by  agencies  or  entities
sponsored  by  the  U.S.  government as to  the  full  amount  of
principal  and  interest.  As of March 31, 1997, 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 March 31, 1997, $9.7  million
or  approximately  5.9%  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, $154.5  million,  or
94.1%,   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 March  31,
1997,  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  31,  1997,  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  26,  1998.  Capital Reinsurance  also  entered  into  an
agreement on January 31, 1994 with Deutsche Bank AG for a  credit
facility  (the  "DB  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. The Corporation has  not
borrowed under either the DB Liquidity Facility or the DB  Credit
Facility.

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.  In  November
of 1996, the Corporation utilized the remaining $9 million of the
Chase Facility for purposes of acquiring RGB.






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
                   None



                        INDEX TO EXHIBITS




Exhibit
Number           Description                      Page
-----            -----------                      ----

11              Statement Re: Computation of Per
                    Share Earnings (Unaudited)     19





                              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: May 12, 1997              By:  /s/ David A. Buzen
                                     ------------------
                                     David A. Buzen
                                     Executive Vice President,
                                     Chief Financial Officer


Date: May 12, 1997              By: /s/ Alan S. Roseman
                                    -------------------
                                    Alan S. Roseman
                                    Senior Vice President,
                                    General Counsel and Secretary