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                                                                   EXHIBIT 10.32

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                                                              [Stamped: RECEIVED
                                                                     SEP 19 2002
                                                           REGISTER OF COMPANIES
                                                                        BERMUDA]

                                PLEDGE AGREEMENT

PLEDGE AGREEMENT, dated as of 19 SEPTEMBER 2002, (this "Agreement") made among
Allied World Assurance Company Ltd, a company organized and existing under the
laws of Bermuda (the "Pledgor"), and Citibank, N.A. (the "Pledgee").

      PRELIMINARY STATEMENTS.

      (1)   The Pledgor and the Pledgee have entered into a master agreement (as
            form time to time amended, the "Master Agreement") pursuant to which
            the Pledgee may, from time to time in its sole discretion, issue for
            the account of the Pledgor letters of credit or similar or
            equivalent instruments (each a "Credit" and, collectively, the
            "Credits").

      (2)   The Pledgor has agreed to collateralize its obligations to the
            Pledgee that result from time to time under the Master Agreement and
            in respect of the Credits issued thereunder, whether now existing or
            from time to time hereafter incurred or arising, as such obligations
            are more fully defined in Section 3 of this Agreement as the Secured
            Obligations.

      (3)   The Pledgor and the Pledgee desire to execute and deliver this
            Agreement for the purpose of securing the Secured Obligations (as
            such term is defined in Section 3 below) and subjecting the property
            hereinafter described to the Lien of this Agreement as security for
            the performance of the Secured Obligations.

      (4)   The Pledgor has opened account number (the "Account") with Mellon
            Bank at its office at One Mellon Bank Centre, Room 151 - 1570,
            Pittsburgh, PA 15258-0001 United States of America.

      NOW, THEREFORE, in consideration of the premises and in order to induce
      the Pledgee to enter into transactions with and to provide services to the
      Pledgor and its subsidiaries pursuant to separate agreements or
      arrangements between such persons and the Pledgee, the parties hereto
      hereby agree as follows:

      Section 1. Defined Terms. Except as otherwise expressly provided herein,
      capitalized terms used herein shall have the meaning assigned to such
      terms in Appendix A.

      Section 2. Grant of Security. Subject to and in accordance with the
      provisions of this Agreement, the Pledgor hereby assigns, pledges and
      grants to the Pledgee a first priority security interest in and a Lien on
      all of the Pledgor's right, title and interest, whether now owned or
      hereafter acquired, in all of the following (collectively, the
      "Collateral"):

            (i)   the Account;

            (ii)  the Securities and any Instruments or other Financial Assets
            credited to the Account (the "Pledged Securities") including,
            without limitation Securities of the type and in the aggregate
            amounts specified in Schedule I hereto and any Securities Account
            and Security Entitlement in respect of the Account, the Pledged
            Securities or any of them;

            (iii) all additional Investment Property (including without
            limitation) Securities, Security Entitlements, Financial Assets, or
            other property and all funds, cash or cash equivalents (together
            with any applicable Account or Securities Account) from time to
            time; and

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            (iv)  All proceeds (including, without limitation, cash proceeds) of
            any or all of the foregoing, including without limitation, proceeds
            that constitute property of the types described in clauses (i), (ii)
            and (iii) above.

      Section 3. Security of Obligations. This Agreement secures the payment of
      all obligations of the Pledgor now or hereafter existing under the Master
      Agreement and in respect of the Credits issued thereunder, and this
      Agreement, whether for principal, interest, fees, expenses or otherwise
      and the payment of any and all expenses (including reasonable counsel fees
      and expenses) incurred by the Pledgee in enforcing any rights under this
      Agreement (all such obligations being the "Secured Obligations").

      Section 4. Delivery of Security Collateral. On or prior to the date
      hereof, the Pledgor shall transfer or credit, or cause to be transferred
      or credited, all of the Pledged Securities to the Pledgee or to an Account
      or a Securities Account under arrangements acceptable to the Pledgee in
      its sole discretion. Pledgor shall deliver all other Collateral to the
      Pledgee or to a Securities Intermediary subject to the control of the
      Pledgee under arrangements acceptable to the Pledgee in its sole
      discretion. Upon the occurrence and during the continuance of an Event
      Default (as hereafter defined), the Pledgee shall have the right, at any
      time it reasonably determines is necessary or desirable to enable the
      Pledgee to better perfect or protect the security interests granted
      hereunder, upon notice to the Pledgor, to transfer to or to register in
      the name of the Pledgee or any of its nominees any or all of the
      Collateral.

      Section 5. Use of Proceeds. Proceeds that are received in respect of any
      Collateral shall be held as cash held as Collateral as provided in Section
      2 of this Agreement.

      Section 6. Representations and Warranties. The Pledgor represents and
      warrants as follows:

            (a)   The Pledgor is a corporation duly organized and, validly
            existing under the laws of its incorporation and has all requisite
            corporate power and authority (including, without limitation, all
            governmental licenses, permits and other approvals except where such
            failure would not have a material adverse effect on the Pledgor's
            business), to own or lease and operate its properties and to carry
            on its business as now conducted and as proposed to be conducted.
            All of the outstanding capital stock of the Pledgor has been validly
            issued, is fully paid and non-assessable.

            (b)   The execution, delivery and performance by the Pledgor of this
            Agreement, and the consummation of the transactions contemplated
            hereby, are within the Pledgor's corporate powers and have been duly
            authorized by all necessary corporate action.

            (c)   The execution, delivery and performance by the Pledgor of this
            Agreement and the consummation of the transactions contemplated
            hereby, do not and will not (i) violate any provision of law, rule
            or regulation applicable to the Pledgor; (ii) conflict with the
            charter or bylaws or substantively similar constitutive documents of
            the Pledgor; or (iii) conflict with or result in a breach of, or
            constitute a default under, or result in the creation or imposition
            of any Lien upon any of the property or assets of the Pledgor or any
            of its subsidiaries, under any indenture, loan agreement, mortgage,
            deed of trust or other instrument or agreement to which the Pledgor
            or any of its subsidiaries may be or become a party or by which it
            may be or become bound or to which the property or assets of the
            Pledgor of any of its subsidiaries may be or become subject.

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            (d)   No consent of any other Person and no authorization, approval
            or other action by, and no notice to or filing with, any
            governmental authority or regulatory body or other third party is
            required either (i) for the grant by the Pledgor of the assignment
            and security interest granted hereby, for the pledge by the Pledgor
            of the Collateral pursuant hereto or for the execution, delivery or
            performance of this Agreement by the Pledgor, (ii) for the
            perfection or maintenance of the pledge, assignment and security
            interest created hereby (including the first priority nature of such
            pledge, assignment or security interest) or (iii) for the exercise
            by the Pledgee of its rights provided for in this Agreement or the
            remedies in respect of the Collateral pursuant to this Agreement,
            except as may be required in connection with the disposition of any
            portion of the Collateral by laws affecting the offering and sale of
            securities generally or as may be applicable to the Pledgee.

            (e)   This Agreement has been duly executed and delivered by the
            Pledgor. This Agreement constitutes, or when executed and delivered
            will constitute, the legal, valid and binding obligation of the
            Pledgor enforceable against the Pledgor in accordance with its
            terms, subject as to enforceability to applicable bankruptcy,
            insolvency, and similar laws affecting creditors' rights generally.

            (f)   The Pledgor is the legal and beneficial owner of the
            Collateral and Pledgor has and shall at all times have rights in,
            and good and valid title to, the Collateral, free and clear of all
            Liens and "adverse claims" (as such term is defined in Section
            8-102(a)(1) of the NYUCC).

            (g)   To the best of the Pledgor's knowledge, no default has
            occurred under or with respect to any Collateral as of the date
            hereof.

            (h)   (i) This agreement and the pledge and assignment of the
            Collateral pursuant hereto create a valid security in the
            Collateral, securing the payment of the Secured Obligations, (ii)
            this Agreement and the related Account Control Agreement, dated 19
            SEPTEMBER, 2002, by and among the Pledgor, the Pledgee and Mellon
            Bank are sufficient to perfect such security interest, and (iii)
            assuming the Pledgee has no notice of any Liens or "adverse claims"
            (as such terms is defined in Section 8- 102(a)(1) of the NYUCC) with
            respect to the collateral, the Pledgee will take the Collateral free
            and clear of all Lien and adverse claims.

            (i)   The Pledgor is subject to civil and commercial law with
            respect to its obligations hereunder, and the execution, delivery
            and performance by the Pledgor of its obligations under this
            Agreement constitute private and commercial acts rather than public
            or governmental acts. Neither the Pledgor or any of its properties
            has any immunity from jurisdiction of any court or from set-off or
            any legal process (whether through service or notice, attachment
            prior to judgment, attachment in aid of execution, execution or
            otherwise) under the laws Bermuda.

            (j)   (A) This Agreement is in proper legal form under all
                  applicable laws of Bermuda for the enforcement thereof against
                  the Pledgor in accordance with its terms. To ensure the
                  legality, validity, enforceability or admissibility into
                  evidence of this Agreement it is not necessary that this
                  Agreement or any other document be filed or recorded with any
                  governmental authority of Bermuda or that any stamp or similar
                  tax be paid on or in respect of this Agreement or any other
                  document delivered pursuant hereto.

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                  (B) It is not necessary (X) in order for the Pledgee to
                  enforce any rights or remedies under this Agreement or (Y)
                  solely by reason of the execution delivery and performance of
                  this Agreement by the Pledgee, that the Pledgee be licensed or
                  qualified with Bermudian governmental authority or be entitled
                  to carry on business in Bermuda.

            (k)   The Pledgor shall cause Securities of the type specified on
            Schedule I to be pledged as Collateral so that at all times the fair
            market value of such Securities shall equal or exceed an amount
            equal to 115% of the aggregate amount of the then outstanding
            Credits; and without limiting the foregoing, if at any time the
            Pledgor is not in compliance with the requirements of this
            subsection (k), the Pledgor shall forthwith cause additional
            Securities of the type specified on Schedule I to be held as
            Collateral pursuant to Section 2 to the extent required to cause the
            Pledgor to be in compliance with this subsection (k).

      Section 7 Further Assurances.

            (a)   The Pledgor agrees that from time to time, at the expense of
            the Pledgor, the Pledgor will promptly execute and deliver all
            further Instruments and documents, and take all further action, that
            may be necessary or desirable, or that the Pledgee may reasonably
            request, in order to continue, perfect and protect any pledge,
            assignment or security interest granted or purported to be granted
            hereby or to enable the Pledgee to exercise and enforce its rights
            and remedies hereunder with respect to any Collateral. Without
            limiting the generality of the foregoing, the Pledgor will execute
            and file such financing or continuation statements, or amendments
            thereto, and such other Instruments or notices, as may be necessary
            or desirable, or as the Pledgee may request, in order to perfect and
            preserve the pledge, assignment and security interest granted or
            purported to be granted hereby.

            (b)   The Pledgor hereby authorizes the Pledgee to file one or more
            financing or continuation statements, and amendments thereto,
            relating to all or any part of the Collateral without the signature
            of the Pledgor where permitted by law. A photocopy or other
            reproduction of this Agreement or any financing statement covering
            the Collateral or any part thereof shall be sufficient as a
            financing statement where permitted by law.

            In making the representations and warranties hereunder, Pledgor has
            assumed that the Pledgee has registered a charge with respect to the
            Collateral pursuant to Section 55 of the Bermuda Companies Act of
            1981.

      Section 8. Distributions.

            (a)   Other than upon and during the continuance of an Event of
            Default (as hereinafter defined), the Pledgor shall be entitled to
            receive and retain any and all distributions paid in respect of the
            Pledged Securities; provided, however, that any and all

                        (i) distributions paid or payable other than in cash in
                        respect of, and Instruments, Financial Assets and other
                        property received, receivable or otherwise distributed
                        in respect of, or in exchange for, any Collateral and

                        (ii) cash paid, payable or otherwise distributed in
                        respect of principal of, or in redemption of, or in
                        exchange for, any Collateral,

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                        shall be, and shall be forthwith delivered to the
                        Pledgee to hold as Collateral subject to the Pledgor's
                        right to withdraw all Collateral in excess of the
                        Required Account Value as Provided in Section 3 of the
                        Account Control Agreement and shall, if received by the
                        Pledgor, be received in trust for the benefit of the
                        Pledgee, be segregated from the other property or funds
                        of the Pledgor and be forthwith delivered to the Pledgee
                        as Collateral in the same form as so received (with any
                        necessary endorsement) to the extent the Collateral is
                        less than the Required Account Value.

            (b)   For the purpose of this section 8 and Sections 4 and 14
            hereof, the terms "Events of Default" shall mean a failure of the
            Pledgor to perform in any in any material respect any of its
            obligations under the Master Agreement or this Agreement, which
            failure shall continue unremedied for ten (10) business days after
            written notice thereof shall have been given by the Pledgee to the
            Pledgor.

            (c)   The Pledgee shall execute and deliver (or cause to be executed
            and delivered) to the Pledgor all such proxies and other instruments
            as the Pledgor may reasonably request for the purpose of enabling
            the Pledgor to receive the interest payments that it is authorized
            to receive and retain pursuant to paragraph (a) above.

      Section 9. Transfer and Other Liens. The Pledgor shall not (i) sell,
      assign or otherwise dispose of, or grant any option with respect to, any
      of the Collateral, or (ii) create or suffer to exist any Lien upon or with
      respect to any of the Collateral, including any right to give any
      Entitlement Order with respect to the Collateral, except for the pledge,
      assignment and security interest created by this Agreement.

      Section 10. Pledgee Appointed Attorney-in-Fact. The Pledgor hereby
      irrevocably appoints the Pledgee the Pledgor's attorney-in-fact, with
      fully authority upon failure to perform any of the obligations under the
      Master Agreement or this Agreement in the place and stead of the Pledgor
      and in the name of the Pledgor or otherwise, from time to time to take any
      action and to execute any instrument that the Pledgee may deem necessary
      or advisable to accomplish the purposes of this Agreement.

      Section 11. Pledgee May Perform. If the Pledgor fails to perform any
      agreement contained herein, after receipt of a written request from the
      Pledgee to do so, the Pledgee may (but shall have no obligation to) itself
      perform, or cause performance of, such agreement, and the reasonable
      expenses of the Pledgee incurred in connection therewith shall be payable
      by the Pledgor under Section 15(b) hereof.

      Section 12. The Pledgee's Duties. The powers conferred on the Pledgee
      hereunder are solely to protect its interest in the Collateral and shall
      not impose any duty upon it to exercise any such powers. Except for the
      safe custody of any Collateral in its possession and the accounting for
      moneys actually received by it hereunder, the Pledgee shall have no duty
      as to any Collateral, as to ascertaining or taking action with respect to
      calls, conversions, exchanges, maturities, tenders or other matters
      relative to any Collateral, whether or not the Pledgee has or is deemed to
      have knowledge of such matters, or as to the taking of any necessary steps
      to preserve rights against any parties or any other rights pertaining to
      any Collateral. The Pledgee shall be deemed to have exercised reasonable
      care in the custody and preservation of any Collateral in its possession
      if such Collateral is accorded treatment substantially equal to that which
      the Pledgee accords its own property.

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      Section 13. Security Interest Absolute. The obligations of the Pledgor
      under this Agreement are independent of the Secured Obligations and any
      agreement with respect to the Secured Obligations, and a separate action
      or actions may be brought and prosecuted against the Pledgor to enforce
      this Agreement, irrespective of whether any action is brought against the
      Pledgor or whether the Pledgor is joined in any such action or actions.
      All rights of the Pledgee and the pledge, assignment and security interest
      hereunder, and all obligations of the Pledgor hereunder, shall be absolute
      and unconditional, irrespective of:

            (a)   any lack of validity or enforceability of the Master Agreement
            or any other agreement or instrument relating thereto;

            (b)   any change in the time, manner or place of payment of, or in
            any other term of, all or any of Secured Obligations or any other
            amendment or waiver of or any consent to any departure from this
            Agreement or the Master Agreement, including, without limitation,
            any increase in the Secured Obligations;

            (c)   any taking, exchange, release or non-perfection of any other
            collateral, or any taking, release or amendment or waiver of or
            consent to departure from any guaranty for all or any of the Secured
            Obligations;

            (d)   any manner of application of the Collateral, or proceeds
            thereof, to all or any of the Secured Obligations, or any manner of
            sale or other disposition of any Collateral for all or any of the
            Secured Obligations or any other assets of the Pledgor or any of its
            subsidiaries;

            (e)   any change, restructuring or termination of the corporate
            structure or existence of the Pledgor or any of its subsidiaries; or

            (f)   any other circumstance that might otherwise constitute a
            defense available to, or a discharge of, the Pledgor or a third
            party grantor of a security interest.

      Section 14. Remedies. If an Event of Default shall occur and be
      continuing:

            (a)   The Pledgee may exercise in respect of the Collateral, in
            addition to other rights and remedies provided for herein or
            otherwise available to it, all the rights and remedies of a secured
            party upon default under the NYUCC and also may without notice
            except as specified below, sell the Collateral or any part thereof
            in one or more parcels at public or private sale, at any of the
            Pledgee's offices or elsewhere, for cash, on credit or for future
            delivery, and upon such other terms as the Pledgee may deem
            commercially reasonable. The Pledgor agrees that, to the extent
            notice of sale shall be required by law, at least ten days' notice
            to the Pledgor of the time and place of any public sale or the time
            after which any private sale is to be made shall constitute
            reasonable notification. The Pledgee shall not be obligated to make
            any sale of Collateral regardless of notice of sale having been
            given. The Pledgee may adjourn any public or private sale from time
            to time by announcement at the time and place fixed therefor, and
            such sale may, without further notice, be made at the time and place
            to which it was so adjourned.

            (b)   All cash proceeds received by the Pledgee in respect of any
            sale of, collection from, or other realization upon all or any part
            of the Collateral may, in the discretion of the Pledgee, be held by
            the Pledgee as collateral for, and/or then or at any time thereafter
            applied (after payment of any amounts payable to the Pledgee
            pursuant to Section 15) in whole or in part by the Pledgee against,
            all or any part of the Secured Obligations in such order as the
            Pledgee shall elect. Any surplus of such cash or cash proceeds held
            by the Pledgee and remaining after payment in full of all the
            Secured Obligations shall be paid over to the Pledgor or to
            whomsoever may be lawfully entitled to receive such surplus.

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            (c)   The Pledgee may, without notice to the Pledgor except as
            required by law and at any time or from time to time, charge,
            set-off and otherwise apply all or any part of the Secured
            Obligations against the Collateral or any part thereof.

      Section 15. Indemnity and Expenses.

            (a)   The Pledgor agrees to indemnify the Pledgee and their
            affiliates and their officers, directors, employees, agents,
            attorneys and advisors from and against any and all claims, damages,
            losses and liabilities growing out of or resulting from this
            Agreement (including, without limitation, enforcement of this
            Agreement), except claims, damages, losses or liabilities resulting
            from the Pledgee's gross negligence or willful misconduct.

            (b)   The Pledgor will upon demand pay to the Pledgee the amount of
            any and all reasonable expenses, including the reasonable fees and
            expenses of its counsel and of any experts and agents, that the
            Pledgee may incur in connection with (i) the administration of this
            Agreement, (ii) the custody, preservation, use or operation of, or
            the sale of, collection from or other realization upon, any of the
            Collateral, (iii) the exercise or enforcement (whether through
            negotiations, legal proceedings or otherwise) of any of the rights
            of the Pledgee hereunder or (iv) the failure by the Pledgor to
            perform or observe any of the provisions hereof.

      Section 16. Amendments; Waivers; Etc. No amendment or waiver of any
      provision of this Agreement, and no consent to any departure by the
      Pledgor herefor, shall in any event be effective unless the same shall be
      in writing and signed by the Pledgee, and then such waiver or consent
      shall be effective only in the specific instance and for the specific
      purpose for which given. No failure on the part of the Pledgee to
      exercise, and no delay in exercising any right hereunder, shall operate as
      a waiver thereof; nor shall any single or partial exercise of any such
      right preclude any other or further exercise thereof or the exercise of
      any other right.

      Section 17. Addresses for Notices. All notices and other communications
      provided for hereunder shall be in writing (including telecopier,
      telegraphic, telex or cable communication) and, mailed telegraphed,
      telecopied, telexed, cabled or delivered if to the Pledgor at 29 Richmond
      Road, HM 08, Hamilton HMAX, Bermuda or, as to either party, at such other
      address as shall be designated by such party in a written notice to each
      other party complying as to delivery with the terms of this Section 17.
      All such notices and communications shall, when mailed, telecopied,
      telegraphed or telexed, be effective five Business Days after deposit in
      the mail, or when telecopied, delivered to the telegraph company or
      confirmed by telex answerback, respectively, except that notices and
      communications to the Pledgee shall not be effective until received by the
      Pledgee. Delivery by telecopier of an executed counterpart of any
      amendment or waiver of any provision of this Agreement or of any Exhibit
      hereto to be executed and delivered hereunder shall be effective as
      delivery of a manually executed counterpart thereof.

      Section 18. Continuing Security Interest; Assignments. This Agreement
      shall create a continuing security interest in the Collateral and shall
      (a) remain in full force and effect until the payment in full in cash of
      the Secured Obligations, (b) be binding upon the Pledgor and the Pledgee
      and their respective successors and assigns and (c) inure, together with
      the rights and remedies of the Pledgee and its respective successors,
      transferees and assigns. Without limiting the generality of the foregoing
      clause (c), the Pledgee may assign or otherwise transfer to any other
      Person all or any portion of its rights and obligations under this
      Agreement to any other Person, and such other Person shall thereupon
      become vested with all the benefits in respect thereof granted to the
      Pledgee herein or otherwise. The Pledgor will, at its own expense, make,
      execute, endorse, acknowledge, file

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      and/or deliver to the Pledgee such confirmatory assignments, conveyances,
      financing statements, transfer endorsements, powers of attorney,
      certificates, reports and other assurances or instruments and take such
      further steps related to the Collateral and other property or rights
      covered by the security interest hereby granted, which the Pledgee deems
      reasonably advisable to perfect, preserve or protect its security interest
      in the Collateral, including any actions which may be required or
      advisable as a result of any amendment or supplement to applicable laws,
      including the NYUCC.

      Section 19. Release and Termination. Upon the later of the payment in full
      in cash of the Secured Obligations or any termination as provided in
      Master Agreement, the pledge, assignment and security interest granted
      hereby shall terminate and all rights to be Collateral shall revert to the
      Pledgor. Upon any such termination, the Pledgee will, at the Pledgor's
      expense execute and deliver to the Pledgor such documents as the Pledgor
      shall reasonably request to evidence such termination.

      SECTION 20. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY AND
      CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO
      THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
      HEREUNDER IN RESPECT OF ANY PARTICULAR COLLATERAL IS MANDATORILY GOVERNED
      BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK, IN WHICH
      CASE THE LAWS OF SUCH OTHER JURISDICTION SHALL GOVERN SUCH MATTERS.

      Section 21. Jurisdiction, Venue.

            (a)   The Pledgor hereby irrevocably and unconditionally submits,
            for itself and its property, to the nonexclusive jurisdiction of any
            New York State or Federal court (to the extent such court has
            subject matter jurisdiction) sitting in New York City and any
            appellate court from any thereof in any action or proceeding arising
            out of or relating to this Agreement or for the recognition and
            enforcement of any judgment, and the Pledgor hereby irrevocably and
            unconditionally agrees that all claims in respect of such action or
            proceeding may be heard and determined in such New York State court
            or in such Federal court. The Pledgor hereto agrees that a final
            judgment in any such action or proceeding shall be conclusive and
            may be enforced in other jurisdictions by suit on the judgment or in
            any other manner provided by law. The Pledgor hereto irrevocably and
            unconditionally waives, to the fullest extent it may legally and
            effectively do so, any objection that it may now or hereafter have
            to the laying of venue of any suit, action or proceeding arising out
            of or relating to this Agreement in any New York State or federal
            court. The Pledgor hereby irrevocably waives, to the fullest extent
            it may effectively do so, the defense of an inconvenient forum to
            the maintenance of such action or proceeding in any such court. The
            Pledgor irrevocably consents to the service of any and all process
            in any such action or proceeding by the mailing of copies of such
            process to such Pledgor at its address specified in Section 17. The
            Pledgor agrees that a final judgment in any such action or
            proceeding shall be conclusive and may be enforced in other
            jurisdictions by suit on the judgment or in any other manner
            provided by applicable law.

            (b)   Nothing in this Section 21 shall affect the right of the
            Pledgee to serve legal process in any other manner permitted by
            applicable law or affect any right which the Pledge would otherwise
            have to bring any action or proceeding against the Pledgor or its
            property in the courts of any other jurisdiction.

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            (c)   To the extent that the Pledgor has or hereafter may acquire
            any immunity from jurisdiction of any court or from any legal
            process (whether through service or notice, attachment prior to
            judgment, attachment in aid of execution, execution or otherwise)
            with respect to itself or its property, the Pledgor to the extent
            permitted by law hereby irrevocably waives such immunity in respect
            of its obligations under this Agreement and, without limiting the
            generality of the foregoing, agrees that the waives set forth in
            this subsection (c) shall have the fullest scope permitted under the
            United States Foreign Sovereign Immunities Act of 1976, as amended,
            and are intended to be irrevocable for purposes of such Act.

      SECTION 22. WAIVER OF JURY TRAIL. EACH OF THE PLEDGOR AND THE PLEDGEE
      HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
      PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
      ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS
      CONTEMPLATED HEREBY OR THE ACTIONS OF THE PLEDGEE IN THE NEGOTIATION,
      ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

      Section 23. Execution in Counterparts. This Agreement may be executed in
      any number of counterparts and by different parties hereto in separate
      counterparts, each of which when so executed shall be deemed to be an
      original and all of which taken together shall constitute one and the same
      agreement. Delivery of an executed counterpart of a signature page to this
      Agreement by telecopier shall be effective as delivery of a manually
      executed counterpart of this Agreement.

      Section 24. Severability. If any term or provision of this Agreement is or
      shall become illegal, invalid or unenforceable in any jurisdiction, all
      other terms and provisions of this Agreement shall remain legal, valid and
      enforceable in such jurisdiction and such illegal, invalid or

<PAGE>

                                                                 [CITIBANK LOGO]

      unenforceable provision shall be legal, valid and enforceable in any other
      jurisdiction.

      Section 26. Termination of Prior Agreement. The parties agree that any
      prior pledge agreement with respect to the Collateral is terminated as of
      the effective date of this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.

Allied World Assurance Ltd                          CITIBANK, N.A.

BY: /S/ S.G. Cubbon                                 BY: /s/ R. Arch
    ----------------------------                        -----------------------
Name: S.G. Cubbon                                   Name:  R. Arch
Title: Vice President/Treasurer                     Title: Vice President

BY: /s/ M. Simmons
    ----------------------------
Name: M. Simmons
Title: Assistant Treasurer

<PAGE>

                                    ANNEX A

                             CERTAIN DEFINED TERMS

Capitalized terms used herein shall have the respective meanings ascribed to
them below:

"Collateral" has the meaning specified therefore in Section 2 hereof.

"Entitlement Holder" means a Person that (i) is an "entitlement holder" as
defined in Section 8-102(a)(7) of the NYUCC (except in respect of a Book-entry
Security); and (ii) in respect of any book-entry Security, is an "entitlement
holder" as defined in 31 C.F.R. 357.2 (or, as applicable to such book-entry
Security, the corresponding Federal Book-Entry Regulations governing such
book-entry Security) which, to the extent required or permitted by the Federal
Book-Entry Regulations, is also an "entitlement holder" as defined in Section
8-102(a)(7) of the NYUCC.

"Entitlement Order" shall have the meaning set forth in Section 8-102(a)(8) of
the NYUCC and shall include, without limitation, any notice or related
instructions from the Pledgee directing the transfer or redemption of the
Collateral or any part thereof.

"Federal Book-Entry Regulations" means the federal regulations contained in
Subpart B ("Treasury/Reserve Automated Debt Entry System (TRADES)" governing
book-entry securities consisting of United States Treasury securities, U.S.
Treasury bonds, notes and bills) and Subpart D ("Additional Provisions") of 31
C.F.R. Part 357, 31 C.F.R.  357.10 through 357.14 and 357.41 through 357.44
(including related defined terms in 31 C.F.R. 357.2), as amended by regulations
published at 61 Fed. Reg. 43626 (August 23, 1996) and as amended by an
subsequent regulations.

"Lien" means any mortgage, pledge, attachment, lien, charge, claim, encumbrance,
lease or security interest, easement, right of first or last refusal, right of
first offer or other option or contingent purchase right.

"NYUCC" means the Uniform Commercial Code from time to time in effect in the
State of New York.

"Person" means any individual, corporation, partnership, joint venture,
foundation, association, joint-stock company, trust, unincorporated
organization, government or any political subdivision thereof or any agency or
instrumentality of any thereof.

"Secured Obligations" has the meaning specified therefore in Section 3 hereof.

"Secured Intermediary" means a person that (i) is a "securities intermediary" as
defined in Section 8-102(a)(14) of the NYUCC and (ii) in respect of any U.S.
Government Obligations, is also a "securities intermediary" as defined in 31
C.F.R. 357.2.

"Security Control" means "control" as defined in Section 9-115(1)(e) of the
NYUCC.

"Security Entitlement" means (i) security entitlement" as defined in Section
8-102(a)(17) of the NYUCC (except in respect of a U.S. Government Obligation);
and (ii) in respect of any U.S. Government Obligation, a "security entitlement"
as defined in 31 C.F.R. 357.2 which, to the extent required or permitted by the
Federal Book-Entry Regulations, is also a "security entitlement" as defined in
Section 8-102(a)(17) of the NYUCC.

"STRIPS" shall have the meaning thereof set forth in Section 357.2 of the
Federal Book-Entry Regulations.

"U.S. Government Obligations" means all of the United States Treasury securities
(including STRIPS) maintained in the commercial book-entry system entitled
Treasury/Reserve Automated Debt Entry System ("TRADES") pursuant to the Federal
Book-Entry Regulations or pursuant to a successor system.

(b)     NYUCC Terms. Terms defined or referenced in the NYUCC and not otherwise
defined or referenced herein are used herein as therein defined or referenced.
In particular, the following terms are used herein as defined or referenced in
the respective NYUCC sections indicated below: "Account": Section 9-106;
"Entitlement Order": Section 8-102(a)(8); "Financial Asset": Section
8-102(a)(9); "Instrument": Section 9-105(l)(i): "Investment Property": Section
9-115(1)(f); "Person": Section 1-201(30); "Securities Account": Section
8-501(a); "Security": Section 8-102(a)(15).<PAGE>
                             [CLIFFFORD CHANCE LOGO]
                                                                   EXHIBIT 10.33

                                                                  EXECUTION COPY

                                31 DECEMBER 2003

                      ALLIED WORLD ASSURANCE COMPANY, LTD.
                                   AS BORROWER

                                BARCLAYS BANK PLC
                                    AS ISSUER

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

                                  $125,000,000

                                CREDIT AGREEMENT

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

<PAGE>

                                    CONTENTS

<TABLE>
<CAPTION>
CLAUSE                                                                                                 PAGE
<S>                                                                                                    <C>
1.  Definitions....................................................................................      1

2.  The Letter Of Credit Facility..................................................................     10

3.  Change In Circumstances........................................................................     14

4.  Conditions Precedent...........................................................................     17

5.  Representations And Warranties.................................................................     19

6.  Covenants......................................................................................     23

7.  Defaults.......................................................................................     28

8.  Acceleration, Waivers, Amendments And Remedies.................................................     30

9.  General Provisions.............................................................................     31

10. Set-Off........................................................................................     35

11. Benefit Of Agreement...........................................................................     35

12. Notices........................................................................................     35

SCHEDULE 1  Authorized Officers....................................................................     37

EXHIBIT A  FORM OF LETTER OF CREDIT................................................................     38

EXHIBIT B  FORM OF LC APPLICATION..................................................................     40

EXHIBIT C  FORM OF COMPLIANCE CERTIFICATE..........................................................     42

</TABLE>

<PAGE>

THIS CREDIT AGREEMENT dated as of 31 December 2003

BETWEEN:

(1)   ALLIED WORLD ASSURANCE COMPANY, LTD., a corporation organized under the
      laws of Bermuda, as Borrower; and

(2)   BARCLAYS BANK PLC, as Issuer.

RECITALS:

(A)   The Borrower has requested the Issuer to make available to the Borrower a
      standby letter of credit issuance facility in the aggregate principal
      amount of up to $125,000,000 to support the reinsurance of business of the
      Borrower in the United States.

(B)   The Issuer is willing to extend such standby letter of credit issuance
      facility on the terms and conditions set forth below.

NOW, THEREFORE, in consideration of the mutual covenants and undertakings herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Issuer hereby
agree as follows:

1.    DEFINITIONS

      As used in this Agreement:

      "ACCOUNT CONTROL AGREEMENT" means the Account Control Agreement dated on
      or about the date hereof among the Borrower, the Issuer and the Custodian,
      or any other account control agreement among the Borrower, the Issuer and
      the Custodian approved by the Issuer, as it may be amended, modified or
      restated and in effect from time to time.

      "ADJUSTED COLLATERAL VALUE" means the amount calculated as follows:

      (i)   US Government Securities and OECD Government Bonds: 95% of market
            value;

      (ii)  Corporate Bonds: 90% of market value; and

      (iii) Cash: 100%

      Notwithstanding the above, no more than 50% of the Adjusted Collateral
      Value may be comprised of Corporate Bonds and no more than 10% of Adjusted
      Collateral Value may be from any one corporate issuer or any Affiliate of
      such corporate issuer.

<PAGE>

      "AFFILIATE" of any Person means any other Person directly or indirectly
      controlling, controlled by or under common control with such Person.

      "AGGREGATE FACILITY LC COMMITMENT" means the commitment of the Issuer to
      issue Facility LCs from time to time issued or outstanding under Clause 2
      (The Letter of Credit Facility), in an aggregate amount not to exceed
      $125,000,000 at any time outstanding, as such amount may be decreased from
      time to time pursuant to the terms hereof.

      "AGREEMENT" means this credit agreement, as it may be amended, modified or
      restated and in effect from time to time.

      "AGREEMENT ACCOUNTING PRINCIPLES" means the U.S. generally accepted
      accounting principles as in effect from time to time, applied in a manner
      consistent with those used in preparing the financial statements referred
      to in Clause 5.5 (Financial Statements).

      "AUTHORIZED OFFICER" means, with respect to the Borrower, any two of the
      individuals, acting jointly, listed on Schedule 1 (Authorized Officers) as
      such Schedule may be supplemented or modified from time to time by the
      Borrower with the approval of the Issuer.

      "BORROWER" means Allied World Assurance Company, Ltd., a corporation
      organized under the laws of Bermuda, and its successors and assigns.

      "BUSINESS DAY" means a day (other than a Saturday or Sunday) on which
      banks are open in London for the conduct of substantially all of their
      commercial lending activities, interbank wire transfers can be made on the
      Fedwire system and dealings in Dollars are carried on in the London
      interbank market.

      "CASH" means immediately available funds denominated in Dollars and
      credited to an account in the name of the Borrower at the New York branch
      of the Issuer and to which the Borrower is alone beneficially entitled and
      for so long as the Issuer has a perfected security interest thereon under
      security documents satisfactory to the Issuer.

      "CEDING COMPANY" means an insurance or reinsurance company (including,
      without limitation, any reinsurance or insurance company that is a
      Wholly-Owned Subsidiary of the Borrower) that has, pursuant to an
      Insurance Contract or a Reinsurance Contract with the Borrower, agreed
      with the Borrower that the Borrower, as reinsurer, shall assume certain
      liabilities of such insurance or reinsurance company under an Insurance
      Contract.

      "CHANGE" is defined in Clause 3.2 (Changes in Capital Adequacy
      Regulations).

      "CHANGE IN CONTROL" means the acquisition by any Person, or two or more
      Persons acting in concert, of beneficial ownership (within the meaning of
      Rule 13d-3 of the Securities and Exchange Commission under the Securities
      Exchange Act of 1934) of 30% or more of the outstanding shares of voting
      stock of the Borrower.

      "CHANGE IN LAW" is defined in Clause 3.1 (Yield Protection).

<PAGE>

      "CLAUSE" means a numbered Clause of this Agreement, unless another
      document is specifically referenced.

      "CODE" means the Internal Revenue Code of 1986, as amended, reformed or
      otherwise modified from time to time.

      "COLLATERAL" means at any time Cash, OECD Government Bonds, US Government
      Bonds and Corporate Bonds.

      "COLLATERAL DOCUMENTS" means all agreements, instruments and other
      documents now or hereafter executed and delivered by the Borrower pursuant
      to which liens and security interests in collateral are granted to secure
      the Obligations, including, without limitation, the Security Agreement,
      the Account Control Agreement, the Custody Agreement, UCC-1 Financing
      Statements, security documents securing a pledge over Cash in favor of the
      Issuer and any documentation delivered pursuant to Clause 2.9 (Facility LC
      Collateral Account) with respect to the Facility LC Collateral Account.

      "COLLATERAL SHORTFALL AMOUNT" is defined in Clause 8.1 (Acceleration;
      Facility LC Collateral Account).

      "COMMITMENT" means the Facility LC Commitment.

      "CONTINGENT OBLIGATION" of a Person means any agreement, undertaking or
      arrangement by which such Person assumes, guarantees, endorses,
      contingently agrees to purchase or provide funds for the payment of, or
      otherwise becomes or is contingently liable upon, the obligation or
      liability of any other Person, or agrees to maintain the net worth or
      working capital or other financial condition of any other Person, or
      otherwise assures any creditor of any other Person against loss,
      including, without limitation, any comfort letter, operating agreement,
      take or pay contract or application for a Facility LC or other Letter of
      Credit, but excluding the Reimbursement Obligations, obligations in
      respect of the endorsement of instruments for deposit or collection in the
      ordinary course of business, obligations in respect of Insurance Contracts
      and Reinsurance Contracts issued in the ordinary course of business and
      obligations in respect of the extension of guaranties in the ordinary
      course of business to insureds of the obligations of insurers under
      Insurance Contracts and Reinsurance Contracts.

      "CONTROLLED GROUP" means all members of a controlled group of corporations
      or other business entities and all trades or businesses (whether or not
      incorporated) under common control which, together with the Borrower or
      any of its Subsidiaries, are treated as a single employer under Section
      414 of the Code.

      "CORPORATE BONDS" means debt securities issued by any corporate and which
      are rated at least AAA by S&P and which have a remaining modified duration
      of less than eight years.

      "CREDIT DOCUMENTS" means this Agreement, the Facility LC Applications, the
      Facility LCs, the Collateral Documents and the other documents and
      agreements contemplated

<PAGE>

      hereby and executed by the Borrower pursuant hereto in favor of the
      Issuer, as amended, modified or supplemented from time to time.

      "CUSTODIAL ACCOUNT" means the investment securities account of the
      Borrower maintained with the Custodian pursuant to the Custody Agreement
      into which the Collateral (other than Cash) shall be deposited from time
      to time and over which the Issuer has a perfected security interest
      (except for any failure of the Issuer to cause the filing of any relevant
      financing statement to perfect the security interest) under the Account
      Control Agreement.

      "CUSTODIAN" shall mean, initially, Mellon Bank N.A. and any successor
      thereto approved by the Issuer.

      "CUSTODY AGREEMENT" means the Custody Agreement dated as of November 19,
      2001 between the Borrower and Mellon Bank N.A. or any other custody
      agreement between the Borrower and a Custodian approved by the Issuer, as
      it may be amended, modified or restated and in effect from time to time.

      "DEFAULT" means an event described in Clause 7 (Defaults).

      "DOLLARS," "DOLLARS" and "$" each mean lawful money of the United States.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
      amended from time to time, and any rule or regulation issued thereunder.

      "EUROCURRENCY BASE RATE" means, with respect to any unpaid Reimbursement
      Obligation for the relevant Interest Period, the rate per annum determined
      by the Issuer by reference to the applicable British Bankers' Association
      LIBOR rate for deposits in the applicable agreed currency (as reported by
      Reuters, or if Reuters quotations are not available, as reported by
      Bloomberg L.P., or if neither is available, as reported by another
      generally recognized financial information service selected by the
      Facility Agent in its reasonable discretion) as of 11:00 a.m. (London
      time) two Business Days prior to the first day of such Interest Period,
      and having a maturity equal to such Interest Period; PROVIDED THAT, if no
      such British Bankers' Association LIBOR rate is available to the Issuer,
      the applicable Eurocurrency Base Rate for the relevant Interest Period
      shall instead be the arithmetic mean (rounded in accordance with normal
      market practice) of the rates as the rate at which the Issuer offers to
      place deposits in Dollars with first-class banks in the London interbank
      market at approximately 11:00 a.m. (London time) two Business Days prior
      to the first day of such Interest Period, in the approximate amount of the
      Issuer's unpaid Reimbursement Obligations and having a maturity equal to
      such Interest Period.

      "EXCLUDED TAXES" means in the case of the Issuer, taxes imposed on its
      overall net income, and franchise taxes imposed on it, in each case by:

      (a)   England and Wales;

      (b)   the jurisdiction in which the Issuer's principal executive office is
            located; or

<PAGE>

      (c)   any jurisdiction in which the Issuer is otherwise doing business.

      "FACILITY LC" is defined in sub-clause 2.1.1 of Clause 2.1 (Issuance of
      Facility LCs).

      "FACILITY LC APPLICATION" is defined in Clause 2.2 (Notice).

      "FACILITY LC COLLATERAL ACCOUNT" is defined in Clause 2.9 (Facility LC
      Collateral Account).

      "FACILITY LC COMMITMENT" means for the Issuer, the obligation to issue
      Facility LCs in accordance with the terms hereof.

      "FACILITY LC OBLIGATIONS" means, at any time, the sum, without
      duplication, of:

      (a)   the aggregate undrawn stated amount under all Facility LCs
            outstanding at such time; plus

      (b)   the aggregate unpaid amount at such time of all Reimbursement
            Obligations.

      "FINANCIAL STATEMENTS" is defined in Clause 5.5 (Financial Statements).

      "GOVERNMENTAL AUTHORITY" means any government (foreign or domestic) or any
      state or other political subdivision thereof or any governmental body,
      agency, authority, department or commission (including without limitation
      any board of insurance, insurance department, insurance commission, taxing
      authority or political subdivision) or any instrumentality or officer
      thereof (including without limitation any court or tribunal) exercising
      executive, legislative, judicial, regulatory or administrative functions
      of or pertaining to government and any corporation, partnership or other
      entity directly or indirectly owned or controlled by or subject to the
      control of any of the foregoing.

      "INSURANCE CONTRACT" means an insurance contract or Reinsurance Contract
      entered into by a Ceding Company.

      "INTEREST PERIOD" means a period of one month, or such other period as the
      Issuer may agree, commencing on a Business Day on which a Reimbursement
      Obligation commenced but was not immediately paid. Such Interest Period
      shall end on the day which corresponds numerically to such date one month
      or such other applicable period, thereafter; PROVIDED, HOWEVER, THAT if
      there is no such numerically corresponding day in such next succeeding
      month, or such other applicable period, such Interest Period shall end on
      the last Business Day of such next succeeding month, or such other
      applicable period. If an Interest Period would otherwise end on a day
      which is not a Business Day, such Interest Period shall end on the next
      succeeding Business Day; PROVIDED, HOWEVER, THAT if said next succeeding
      Business Day falls in a new calendar month, such Interest Period shall end
      on the immediately preceding Business Day.

      "ISSUANCE DATE" means a date on which a Facility LC is issued, renewed or
      amended hereunder.

<PAGE>

      "ISSUANCE REQUEST" is defined in Clause 2.2 (Notice).

      "ISSUER" means Barclays Bank PLC.

      "LC FACILITY TERMINATION DATE" means the date falling 364 days after the
      date of issuance of a Facility LC (as such date may be extended by
      amendment hereto) or any earlier date on which the Aggregate Facility LC
      Commitment is reduced to zero or otherwise terminated and/or the Facility
      LC Obligations shall become due and payable in accordance with the
      provisions of this Agreement.

      "LC PAYMENT DATE" is defined in Clause 2.5 (Reimbursement by Borrower).

      "LETTER OF CREDIT" of a Person means a letter of credit or similar
      instrument which is issued upon the application of such Person or upon
      which such Person is an account party or for which such Person is in any
      way liable.

      "LICENSE" means any license, certificate of authority, permit or other
      authorization which is required to be obtained from any Governmental
      Authority in connection with the operation, ownership or transaction of
      insurance or reinsurance business.

      "LIEN" means any lien (statutory or other) mortgage, pledge,
      hypothecation, assignment, deposit arrangement, encumbrance or preference,
      priority or other security agreement or preferential arrangement of any
      kind or nature whatsoever having a similar effect (including, without
      limitation, the interest of a vendor or lessor under any conditional sale,
      capitalized lease or other title retention agreement).

      "MATERIAL ADVERSE EFFECT" means a material adverse effect on:

      (a)   the business, Property, condition (financial or otherwise),
            prospects or results of operations of the Borrower and its
            Subsidiaries taken as a whole,

      (b)   the ability of the Borrower to perform its obligations under the
            Credit Documents, or

      (c)   the validity or enforceability of any of the Credit Documents or the
            rights or remedies of the Issuer thereunder.

      "MATERIAL INDEBTEDNESS" means indebtedness in an outstanding principal
      amount of $25,000,000 or more in the aggregate (or the equivalent thereof
      in any currency other than Dollars).

      "MATERIAL INDEBTEDNESS AGREEMENT" means any agreement or instrument under
      which any Material Indebtedness was created, is evidenced or is governed.

      "MODIFY" and "MODIFICATION" are defined in sub-clause 2.1.1 of Clause 2.1
      (Issuance of Facility LCs).

      "MULTIEMPLOYER PLAN" means a "multiemployer plan" (as defined in Section
      (3)(37) of ERISA) contributed to for any employees of the Borrower or any
      Affiliate of the Borrower.

<PAGE>

      "OBLIGATIONS" means all unpaid principal and accrued and unpaid interest
      on the Facility LC Obligations and all other liabilities, if any, whether
      actual or contingent, of the Borrower with respect to Facility LCs, all
      accrued and unpaid fees and all expenses, reimbursements, indemnities and
      other obligations of the Borrower to the Issuer or any indemnified party
      hereunder, in each case arising under any of the Credit Documents.

      "OECD COUNTRY" means a country that (a) either (i) is a full member of the
      Organization for Economic Cooperation and Development or (ii) has
      concluded special lending arrangements with the International Monetary
      Fund's General Arrangements to Borrow, and (b) has not rescheduled its
      external sovereign debt within the previous five (5) years.

      "OECD GOVERNMENT BONDS" means bonds issued by any OECD Country and which
      are rated at least AAA by S&P and which have a remaining modified duration
      of less than eight years.

      "OTHER TAXES" is defined in sub-clause 3.3.2 of Clause 3.3 (Taxes).

      "PBGC" means the Pension Benefit Guaranty Corporation, or any successor
      thereto.

      "PAYMENT DATE" means the last Business Day of each March, June, September
      and December.

      "PBGC" means the Pension Benefit Guaranty Corporation, or any successor
      thereto.

      "PERSON" means any natural person, corporation, limited liability company,
      firm, joint venture, partnership, association, enterprise, trust or other
      entity or organization, or any government or political subdivision or any
      agency, department or instrumentality thereof.

      "PLAN" means an employee pension benefit plan which is covered by Title IV
      of ERISA or subject to the minimum funding standards under Section 412 of
      the Code as to which any Credit Party or any member of the Controlled
      Group may have any liability.

      "PROPERTY" of a Person means any and all property, whether real, personal,
      tangible, intangible, or mixed, of such Person, or other assets owned,
      leased or operated by such Person.

      "REGULATION U" means Regulation U of the Board of Governors of the U.S.
      Federal Reserve System as from time to time in effect and any successor
      thereto or other regulation or official interpretation of said Board of
      Governors relating to the extension of credit by banks for the purpose of
      purchasing or carrying margin stocks applicable to member banks of the
      Federal Reserve System.

      "REIMBURSEMENT OBLIGATIONS" means, at any time, the aggregate of all
      obligations of the Borrower then outstanding under Clause 2 (The Letter of
      Credit Facility) to

<PAGE>

      reimburse the Issuer for amounts paid by the Issuer in respect of any one
      or more drawings under Facility LCs.

      "REINSURANCE CONTRACT" means a reinsurance contract between the Borrower
      (or one of its Wholly-Owned Subsidiaries), as reinsurer, and a Ceding
      Company pursuant to which the Borrower (or one of its Wholly-Owned
      Subsidiaries), as reinsurer, assumes certain liabilities of the Ceding
      Company with respect to one or more Insurance Contracts.

      "REPORTABLE EVENT" means a reportable event as defined in Section 4043 of
      ERISA and the regulations issued under such Section, with respect to a
      Single Employer Plan, excluding, however, such events as to which the PBGC
      has by regulation waived the requirement of Section 4043(a) of ERISA that
      it be notified within thirty (30) days of the occurrence of such event;
      PROVIDED, HOWEVER, THAT a failure to meet the minimum funding standard of
      Section 412 of the Code and of Section 302 of ERISA shall be a Reportable
      Event regardless of the issuance of any such waiver of the notice
      requirement in accordance with either Section 4043(a) of ERISA or Section
      412(d) of the Code.

      "RISK-BASED CAPITAL GUIDELINES" is defined in Clause 3.2 (Changes in
      Capital Adequacy Regulations).

      "S & P" means Standard & Poor's Rating Services, a division of the
      McGraw-Hill Companies or any successor rating agency thereto acceptable to
      the Issuer.

      "SCHEDULE" refers to a specific schedule to this Agreement, unless another
      document is specifically referenced.

      "SECURITY AGREEMENT" means the Security Agreement dated as of 31 December
      2003 between the Borrower and the Issuer, as it may be amended, modified
      or restated and in effect from time to time.

      "SENIOR FINANCIAL OFFICER" means any of the following officers of the
      Borrower: Chief Accounting Officer, Treasurer and Group Comptroller.

      "SINGLE EMPLOYER PLAN" means a Plan maintained by the Borrower or any
      member of the Controlled Group for employees of the Borrower or any member
      of the Controlled Group.

      "SUBSIDIARY" of a Person means:

      (a)   any corporation more than 50% of the outstanding securities having
            ordinary voting power of which shall at the time be owned or
            controlled, directly or indirectly, by such Person or by one or more
            of its Subsidiaries or by such Person and one or more of its
            Subsidiaries; or

      (b)   any partnership, association, joint venture, limited liability
            company or similar business organization more than 50% of the
            ownership interests having ordinary voting power of which shall at
            the time be so owned or controlled.

<PAGE>

            Unless otherwise expressly provided, all references herein to a
            "Subsidiary" shall mean a Subsidiary of the Borrower.

      "TAXES" means any and all present or future taxes, duties, levies,
      imposts, deductions, charges or withholdings, and any and all liabilities
      with respect to the foregoing, but excluding Excluded Taxes and Other
      Taxes.

      "TRANSFEREE" is defined in Clause 11.2 (Dissemination of Information).

      "UNFUNDED LIABILITIES" means the amount (if any) by which the present
      value of all vested and unvested accrued benefits under all Single
      Employer Plans exceeds the fair market value of all such Plan assets
      allocable to such benefits, all determined as of the then most recent
      valuation date for such Plans using PBGC actuarial assumptions for single
      employer plan terminations.

      "UNFUNDED LIABILITIES" means the amount (if any) by which the present
      value of all vested and unvested accrued benefits under all Single
      Employer Plans exceeds the fair market value of all such Single Employer
      Plan assets allocable to such benefits, all determined as of the then most
      recent valuation date for such Single Employer Plans using PBGC actuarial
      assumptions for single employer plan terminations.

      "UNMATURED DEFAULT" means an event which but for the lapse of time or the
      giving of notice, or both, would constitute a Default.

      "US GOVERNMENT SECURITIES" means bonds issued by any agency of the US
      Government and which are rated at least AAA by S&P and which have a
      remaining modified duration of less than eight years.

      "WHOLLY OWNED SUBSIDIARY" of a Person means:

      (a)   any Subsidiary, all of the outstanding voting securities (other than
            directors' qualifying shares) of which shall at the time be owned or
            controlled, directly or indirectly, by such Person or one or more
            Wholly Owned Subsidiaries of such Person, or by such Person and one
            or more Wholly Owned Subsidiaries of such Person, or

      (b)   any partnership, association, joint venture, limited liability
            company or similar business organization, 100% of the ownership
            interests having ordinary voting power of which shall at the time be
            so owned or controlled by such Person. Unless otherwise expressly
            provided, all references herein to a "Wholly Owned Subsidiary" shall
            mean a Wholly Owned Subsidiary of the Borrower.

      The foregoing definitions shall be equally applicable to both the singular
      and plural forms of the defined terms.

<PAGE>

2.    THE LETTER OF CREDIT FACILITY

2.1   ISSUANCE OF FACILITY LCS

      2.1.1 The Issuer hereby agrees, on the terms and conditions set forth in
            this Agreement, at any time subsequent to 31 December 2003 to issue
            standby letters of credit denominated in Dollars and substantially
            in the form of Exhibit A (or in such other form as may be acceptable
            to the Issuer and the Borrower) (each, a "FACILITY LC") and to
            renew, extend, increase, decrease or otherwise modify each Facility
            LC ("MODIFY," and each such action a "MODIFICATION"), from time to
            time from and including the date of this Agreement and prior to the
            LC Facility Termination Date upon the request of and for the account
            of the Borrower; PROVIDED THAT:

            (a)   immediately after each such Facility LC is issued or Modified,
                  the aggregate amount of the outstanding Facility LC
                  Obligations shall not exceed the Aggregate Facility LC
                  Commitment; and

            (b)   the initial face amount of any Facility LC shall not be less
                  than $250,000. No Facility LC shall have an expiry date later
                  than the earlier of:

                  (i)   the one (1) year anniversary of the date of the Facility
                        LC or, as applicable, a Modification; and

                  (ii)  the LC Facility Termination Date.

            (c)   The Issuer acknowledges that, subject to the terms of this
                  Agreement, each issued Facility LC shall continue in force
                  unless the Issuer receives a notice from the Borrower no more
                  than ninety (90) days and at least seventy (70) days (or such
                  shorter time as the Issuer may agree in a particular instance)
                  prior to the anniversary of the issuance of such Facility LC
                  or Modification, as the case may be, that such Facility LC is
                  to be cancelled, effective upon the ensuing anniversary of the
                  issuance of such Facility LC or Modification. Notwithstanding
                  the foregoing, all outstanding Facility LCs shall
                  automatically expire on the LC Facility Termination Date.

      2.1.2 The Issuer shall not be under any obligation to issue or extend any
            Facility LC if any order, judgment or decree of any Governmental
            Authority or other regulatory body with jurisdiction over the Issuer
            shall purport by its terms to enjoin or restrain the Issuer from
            issuing or extending such Facility LC, or any law or governmental
            rule, regulation, policy, guideline or directive (whether or not
            having the force of law) from any Governmental Authority or other
            regulatory body with jurisdiction over the Issuer shall prohibit, or
            request that the Issuer refrain from, the issuance or extension of
            Facility LCs in particular or shall impose upon the Issuer with
            respect to any Facility LC any restriction or reserve or capital
            requirement (for which the Issuer is not otherwise compensated) or
            any unreimbursed loss, cost or expense which was

<PAGE>

            not applicable and in effect with respect to the Issuer as of the
            date of this Agreement and which the Issuer in good faith deems
            material to it.

      2.1.3 Notwithstanding anything herein, the Borrower and the Issuer may
            agree between themselves as to administrative procedures for the
            issuance of Facility LCs by the Issuer which are different than
            those set forth herein, and such procedures shall govern as between
            the Issuer and the Borrowers.

2.2   NOTICE

      Subject to Clause 2.1 (Issuance of Facility LCs), the Borrower shall,
      through an Authorized Officer or authorized attorney in fact, give the
      Issuer notice (an "ISSUANCE REQUEST") prior to 11:00 a.m. (the Issuer
      time) at least two (2) Business Days prior to the proposed date of
      issuance or Modification of each Facility LC, specifying the account
      party, the beneficiary, the proposed date of issuance (or Modification)
      and the expiry date of such Facility LC. If the Issuance Request requests
      the issuance of a Facility LC, it shall be accompanied by a completed
      standby letter of credit application substantially in the form of Exhibit
      B (or such other form as from time to time is customarily utilized by the
      Issuer) executed by the Borrower and related documentation reasonably
      required by the Issuer (collectively, a "FACILITY LC APPLICATION"). The
      issuance or Modification by the Issuer of any Facility LC shall be subject
      to the conditions precedent set forth in Clause 4.2 (Continuation
      Conditions Precedent). In the event of any conflict between the terms of
      this Agreement and the terms of any Facility LC Application, the terms of
      this Agreement shall control.

2.3   FACILITY LC FEES

      The Borrower shall pay to the Issuer a letter of credit fee with respect
      to each Facility LC for each day from and including the date of issuance
      thereof until the date such Facility LC is fully drawn, cancelled or
      expired (the "EXPIRY DATE") equal to 0.24% per annum multiplied by the
      aggregate outstanding face amount thereof at the close of business on such
      day, payable (in arrears) until the applicable Expiry Date of such
      Facility LC on each Payment Date and, if any such fees are accrued and
      unpaid on the LC Facility Termination Date, on such date. Notwithstanding
      anything contained in this Clause 2.3 to the contrary, during the
      continuance of a Default, the letter of credit fee rate shall be increased
      to 2.00% per annum. The Borrower shall also pay to the Issuer (i) a
      facility fee on the average daily amount equal to the difference between
      the Aggregate Facility LC Commitment and the aggregate undrawn stated
      amount under all Facility LCs outstanding from time to time, in an amount
      equal to 0.09% per annum, such fee to be payable (in arrears) on each
      Payment Date and, if any such fees are accrued and unpaid on the LC
      Facility Termination Date, on such date; (ii) an upfront fee equal to
      0.03% per annum of the Aggregate Facility LC Commitment, such fee to be
      payable (in advance) on or before the date of execution of this Agreement;
      and (iii) documentary and processing charges in connection with the
      issuance or Modification of and draws under Facility LCs, in an amount
      separately agreed upon between the Issuer and the Borrower, payable at the
      time of issuance of each Facility LC. Interest and fees under this
      Agreement shall be calculated for actual days elapsed on the basis of a
      360-day year. If any payment shall become due on a day which is not a
      Business Day,

<PAGE>

      such payment shall be made on the next succeeding Business Day and, in the
      case of a payment of a Reimbursement Obligation, such extension of time
      shall be included in computing interest in connection with such payment.

2.4   ADMINISTRATION; REIMBURSEMENT BY LC PARTICIPANTS.

      Upon receipt from the beneficiary of any Facility LC of any demand for
      payment under such Facility LC, the Issuer shall promptly notify the
      Borrower as to the amount to be paid by the Issuer as a result of such
      demand and the proposed payment date thereof. The responsibility of the
      Issuer to the Borrower shall be only to determine that the documents
      (including each demand for payment) delivered under each Facility LC in
      connection with such presentment shall be in conformity in all material
      respects with such Facility LC.

2.5   REIMBURSEMENT BY BORROWER

      (a)   The Borrower shall be irrevocably and unconditionally obligated to
            reimburse the Issuer for any amounts paid by the Issuer upon any
            drawing under any Facility LC, without presentment, demand, protest
            or other formalities of any kind, not later than 3:00 p.m. (London
            time) on the second Business Day after the date notice of such
            payment is transmitted to the Borrower in accordance with Clause
            12.1 (Giving Notice) and confirmation of receipt is received or such
            notice is otherwise received by the Borrower (such second Business
            Day being the "LC PAYMENT DATE"); PROVIDED THAT any such notice that
            is transmitted to the Borrower after 12:00 noon (London time) on any
            Business Day shall be deemed to have been transmitted on the
            immediately following Business Day.

      (b)   All such amounts paid by the Issuer and remaining unpaid by the
            Borrower shall bear interest, payable on demand, for each day until
            paid at a rate per annum equal to the sum of the Eurocurrency Base
            Rate for such day plus 2.00% per annum.

      Such interest shall accrue from and including the date of the applicable
      drawing (unless the drawing is reimbursed in full prior to 3:00 p.m.
      (London time) on such date) to and including the date of payment (unless
      such payment in full is made prior to 3:00 p.m. (London time) on such
      payment date).

2.6   OBLIGATIONS ABSOLUTE

      The Borrower's obligations under this Clause 2 shall be absolute and
      unconditional under any and all circumstances and irrespective of any
      setoff, counterclaim or defence to payment which the Borrower may have or
      have had against the Issuer or any beneficiary of a Facility LC. The
      Borrower further agrees with the Issuer that the Borrower shall not be
      responsible for, and the Borrower's Reimbursement Obligation in respect of
      any Facility LC shall not be affected by, among other things, the validity
      or genuineness of documents or of any endorsements thereon, even if such
      documents should in fact prove to be in any or all respects invalid,
      fraudulent or forged, or any dispute between or among the Borrower, the
      beneficiary of any Facility LC or any financing institution or other party
      to whom any Facility LC may be transferred or any

<PAGE>

      claims or defences whatsoever of the Borrower against the beneficiary of
      any Facility LC or any such transferee. The Issuer shall not be liable for
      any error, omission, interruption or delay in transmission, dispatch or
      delivery of any message or advice, however transmitted (except for the
      Issuer's bad faith, gross negligence or wilful misconduct) in connection
      with any Facility LC; PROVIDED FURTHER, that the Borrower agrees that any
      action taken or omitted by the Issuer under or in connection with each
      Facility LC and the related drafts and documents, if done without bad
      faith, gross negligence or wilful misconduct, shall be binding upon the
      Borrower and shall not put the Issuer under any liability to the Borrower.

2.7   ACTIONS OF ISSUER

      The Issuer shall be entitled to rely, and shall be fully protected in
      relying, upon any Facility LC, draft, writing, resolution, notice,
      consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
      telex or teletype message, statement, order or other document believed by
      the Issuer in good faith to be genuine and correct and to have been
      signed, sent or made by the proper Person or Persons set forth on Schedule
      1 (Authorized Officers) attached hereto, and upon advice and statements of
      legal counsel, independent accountants and other experts selected by the
      Issuer.

2.8   INDEMNIFICATION

      The Borrower hereby agrees to indemnify and hold harmless the Issuer and
      its directors, officers, agents and employees from and against any and all
      claims and damages, losses, liabilities, costs or expenses which the
      Issuer may incur (or which may be claimed against the Issuer by any Person
      whatsoever) by reason of or in connection with the issuance, execution and
      delivery or transfer of or payment or failure to pay under any Facility LC
      or any actual or proposed use of any Facility LC, including, without
      limitation, any claims, damages, losses, liabilities, costs or expenses
      which the Issuer may incur by reason of or on account of the Issuer
      issuing any Facility LC which specifies that the term "BENEFICIARY"
      included therein includes any successor by operation of law of the named
      Beneficiary, but which Facility LC does not require that any drawing by
      any such successor Beneficiary be accompanied by a copy of a legal
      document, satisfactory to the Issuer, evidencing the appointment of such
      successor Beneficiary; PROVIDED THAT the Borrower shall not be required to
      indemnify any such indemnitee for any claims, damages, losses,
      liabilities, costs or expenses to the extent, but only to the extent,
      caused by (a) the bad faith, wilful misconduct or gross negligence of such
      indemnitee or (b) the Issuer's failure to pay under any Facility LC after
      the presentation to it of a request strictly complying with the terms and
      conditions of such Facility LC.

2.9   FACILITY LC COLLATERAL ACCOUNT

      The Borrower agrees that it will (to the extent required by Clause 8.1
      (Acceleration; Facility LC Collateral Account), upon the request of the
      Issuer and until the final expiration date of any Facility LC and
      thereafter as long as any amount is payable to the Issuer in respect of
      any Facility LC, maintain a special collateral account pursuant to
      documentation (including, without limitation, legal opinions) reasonably
      satisfactory to the Issuer (the "FACILITY LC COLLATERAL ACCOUNT") at the
      Issuer's office at the

<PAGE>

      address specified pursuant to Clause 12, in the name of the Borrower but
      under the sole dominion and control of the Issuer and in which the
      Borrower shall have no interest other than as set forth in Clause 8.1
      (Acceleration; Facility LC Collateral Account). The Borrower hereby
      pledges, assigns and grants to the Issuer a security interest in all of
      the Borrower's right, title and interest in and to all funds which may
      from time to time be on deposit in the Facility LC Collateral Account to
      secure the prompt and complete payment and performance of the Obligations.

2.10  REDUCTIONS IN AGGREGATE FACILITY LC COMMITMENT

      2.10.1  The Borrower may permanently reduce the Aggregate Facility LC
              Commitment in whole or in part in a minimum aggregate amount of
              the lesser of (i) $25,000,000 (or any integral multiple of
              $5,000,000 in excess thereof) and (ii) the total amount of the
              unused Aggregate Facility LC Commitment, upon at least three (3)
              Business Days' written notice to the Issuer, which notice shall
              specify the amount of any such reduction; PROVIDED, HOWEVER, THAT
              the amount of the Aggregate Facility LC Commitment may not be
              reduced below the aggregate amount of the outstanding Facility LC
              Obligations (and if, at any time, the aggregate outstanding amount
              of the Facility LC Obligations exceeds the Aggregate Facility LC
              Commitment, then the Issuer shall immediately deposit an amount
              equal to such excess in the Facility LC Collateral Account in
              accordance with Clause 8.1 (Acceleration; Facility LC Collateral
              Account)).

3.    CHANGE IN CIRCUMSTANCES

3.1   YIELD PROTECTION

      If, on or after the date of this Agreement, the adoption of or any change
      in any law or any governmental or quasi governmental rule, regulation,
      policy, guideline or directive (whether or not having the force of law),
      or any change in the interpretation or administration thereof by any
      governmental or quasi-governmental authority, central bank or comparable
      agency charged with the interpretation or administration thereof, or
      compliance by the Issuer with any request or directive (whether or not
      having the force of law) of any such authority, central bank or comparable
      agency (each of the foregoing being a "CHANGE IN LAW"):

      3.1.1 subjects the Issuer to any Taxes, or changes the basis of taxation
            of payments (except for Taxes covered by Clause 3.3 (Taxes) and
            changes in the rate of tax on the overall net income of the Issuer)
            to the Issuer in respect of its interest in the Facility LCs or
            other amounts due it hereunder; or

      3.1.2 imposes or increases or deems applicable any reserve, assessment,
            insurance charge, special deposit or similar requirement against
            assets of, deposits with or for the account of, or credit extended
            by the Issuer; or

      3.1.3 imposes any other condition the result of which is to increase the
            cost to the Issuer of issuing in Facility LCs or reduces any amount
            receivable by the Issuer in connection with any Facility LC, or
            requires the Issuer to make any

<PAGE>

            payment calculated by reference to the amount of the Issuer Facility
            LCs issued or interest received by it, in each case, by an amount
            reasonably deemed material by the Issuer,

      and the result of any of the foregoing is to increase the cost to the
      Issuer of funding or maintaining its interest in the Facility LCs and its
      Commitment or to reduce the return received by it in connection with its
      interest in the Facility LCs and its Commitment, then, within fifteen (15)
      days of demand by the Issuer, the Borrower shall pay the Issuer such
      additional amount or amounts as will compensate the Issuer for such
      increased cost or reduction in amount received.

3.2   CHANGES IN CAPITAL ADEQUACY REGULATIONS

      If the Issuer reasonably determines the amount of capital required or
      expected to be maintained by the Issuer or any corporation controlling the
      Issuer is increased as a result of a Change, then, within fifteen (15)
      Business Days of demand by the Issuer, the Borrower shall pay the Issuer
      the amount necessary to compensate for any shortfall in the rate of return
      on the portion of such increased capital which the Issuer reasonably
      determines is attributable to this Agreement, its interest in the Facility
      LCs or its obligation to issue Facility LCs hereunder (after taking into
      account the Issuer's policies as to capital adequacy). "CHANGE" means (a)
      any change after the date of this Agreement in the Risk Based Capital
      Guidelines, or (b) any adoption of or change in any other law,
      governmental or quasi-governmental rule, regulation, policy, guideline,
      interpretation, or directive (whether or not having the force of law)
      after the date of this Agreement which affects the amount of capital
      required or expected to be maintained by the Issuer or corporation
      controlling the Issuer. "RISK BASED CAPITAL GUIDELINES" means (a) the risk
      based capital guidelines in effect in the United States on the date of
      this Agreement, including transition rules, and (b) the corresponding
      capital regulations promulgated by regulatory authorities outside the
      United States implementing the July 1988 report of the Basel Committee on
      Banking Regulation and Supervisory Practices entitled "International
      Convergence of Capital Measurements and Capital Standards", including
      transition rules, and any amendments to such regulations adopted prior to
      the date of this Agreement.

3.3   TAXES

      3.3.1 All payments by or on behalf of the Borrower to or for the account
            of the Issuer hereunder shall be made free and clear of and without
            deduction for any and all Taxes. If the Borrower shall be required
            by law to deduct any Taxes from or in respect of any sum payable
            hereunder to the Issuer, (a) the sum payable by the Issuer shall be
            increased as necessary so that after making all required deductions
            (including deductions applicable to additional sums payable under
            this Clause 3.3) the Issuer receives an amount equal to the sum it
            would have received had no such deductions been made, (b) the
            Borrower shall make such deductions, (c) the Borrower shall pay the
            full amount deducted to the relevant authority in accordance with
            applicable law and (d) the Borrower shall furnish to the Issuer the
            original copy of a receipt evidencing payment thereof or other
            evidence of such payment reasonably

<PAGE>

            satisfactory to the Issuer within thirty (30) days after such
            payment is made. The Borrower shall not be required to increase any
            amounts payable to the Issuer's hereunder with respect to any United
            States withholding Taxes to the extent that such Taxes are imposed
            on the Issuer on the date of this Agreement.

      3.3.2 In addition, the Borrower hereby agrees to pay any present or future
            stamp or documentary taxes and any other excise or property taxes,
            charges or similar levies which arise from any payment made
            hereunder or from the execution or delivery of, or otherwise with
            respect to, any Credit Document ("OTHER TAXES").

      3.3.3 The Borrower hereby agrees to indemnify the Issuer for the full
            amount of Taxes or Other Taxes (including, without limitation, any
            Taxes or Other Taxes imposed on amounts payable under this Clause
            3.3) paid by the Issuer as a result of its Commitment, its interest
            in Facility LCs, or otherwise in connection with its participation
            in this Agreement and any liability (including penalties, interest
            and expenses) arising therefrom or with respect thereto. Payments
            due under this indemnification shall be made within thirty (30) days
            of the date the Issuer makes demand therefor pursuant to Clause 3.4
            (Issuer Statements); PROVIDED THAT the Issuer shall contest such
            Taxes or Other Taxes and liabilities, at the Borrower's expense, if
            (a) the Borrower furnishes to it an opinion of reputable tax counsel
            acceptable to the Issuer to the effect that such Taxes or Other
            Taxes and liabilities were wrongfully or illegally imposed and (b)
            the Issuer determines in its sole good faith discretion that it
            would not be disadvantaged or prejudiced in any manner as a result
            of such contest.

      3.3.4 If the Issuer receives a refund in respect of any Taxes or Other
            Taxes as to which it has been indemnified by the Borrower or with
            respect to which the Borrower has paid additional amounts pursuant
            to sub-clause 3.3.1, it shall, within thirty (30) days from the date
            of such receipt, pay over the amount of such refund to the Borrower,
            net of all reasonable out-of-pocket expenses of the Issuer and
            without interest (other than interest paid by the relevant
            Governmental Authority with respect to such refund); PROVIDED THAT
            the Borrower, upon the request of the Issuer, agrees to repay the
            amount paid over to the Borrower (plus penalties, interest or other
            reasonable charges) to the Issuer in the event the Issuer is
            required to repay such refund to such Governmental Authority.

3.4   ISSUER STATEMENTS

      To the extent reasonably possible, the Issuer shall designate an alternate
      issuing office to reduce any liability of the Borrower to the Issuer under
      Clause 3.1 (Yield Protection), Clause 3.2 (Changes in Capital Adequacy
      Regulations) and Clause 3.3 (Taxes) so long as such designation is not, in
      the reasonable judgment of the Issuer, disadvantageous to the Issuer. The
      Issuer shall deliver a written statement to the Borrower as to the amount
      due, if any, under Clause 3.1 (Yield Protection), Clause 3.2

<PAGE>

      (Changes in Capital Adequacy Regulations) and Clause 3.3 (Taxes). Such
      written statement shall set forth in reasonable detail the calculations
      upon which the Issuer determined such amount and shall be final,
      conclusive and binding on the Borrower in the absence of manifest error.
      Unless otherwise provided herein, the amount specified in the written
      statement of the Issuer shall be payable within 30 days after receipt by
      the Borrower of such written statement. The obligations of the Issuer
      under Clause 3.1 (Yield Protection), Clause 3.2 (Changes in Capital
      Adequacy Regulations) and Clause 3.3 (Taxes) shall survive payment of the
      Obligations and termination of this Agreement.

3.5   FUNDING INDEMNIFICATION

      If any payment of any default interest occurs on a date which is not the
      last day of the applicable Interest Period the Borrower will indemnify the
      Issuer for any loss or cost incurred by it resulting therefrom, including,
      without limitation, any loss or cost in liquidating or employing deposits
      acquired.

3.6   SURVIVAL

      The agreements and obligations of the Issuer in this Clause 3 shall
      survive the payment of the Obligations and termination of this Agreement.

4.    CONDITIONS PRECEDENT

4.1   INITIAL EXTENSION OF CREDIT

      The Issuer shall not be required to issue any Facility LC hereunder unless
      the Borrower has furnished the following to the Issuer and the other
      conditions set forth below have been satisfied:

      4.1.1 Charter Documents; Good Standing Certificates. Copies of the Clauses
            or certificate of incorporation or other similar organizational
            document of the Borrower, together with all amendments thereto, and
            a good standing certificate (to the extent issued in the ordinary
            course in the applicable jurisdiction) as of a recent date, each
            certified by the appropriate governmental officer in its
            jurisdiction of organization.

      4.1.2 By-Laws and Resolutions. Copies, certified by the Secretary or
            Assistant Secretary of the Borrower, of its by laws or other similar
            document and of resolutions of its Board of Directors or other
            similar governing body (and resolutions of other bodies, if any are
            deemed necessary by counsel for the Issuer) authorizing the
            execution, delivery and performance of the Credit Documents to which
            the Borrower is a party.

      4.1.3 Incumbency Certificate. An incumbency certificate, executed by the
            Secretary or Assistant Secretary of the Borrower, which shall
            identify by name and title and bear the signature of the officers or
            attorneys in fact of the Borrower authorized to sign the Credit
            Documents to which it is a party and to request the issuance of
            Facility LCs hereunder, upon which certificate the Issuer shall be
            entitled to rely until informed of any change in writing by the
            Borrower.

<PAGE>

      4.1.4 Officer's Certificate. A certificate, dated the date of this
            Agreement, signed by an Authorized Officer of the Borrower, in form
            and substance satisfactory to the Issuer, to the effect that: (a) on
            the date of this Agreement (after giving effect to the issuance of
            any Facility LCs hereunder) no Default or Unmatured Default has
            occurred and is continuing; (b) each of the representations and
            warranties set forth in Clause 5 (Representations and Warranties) of
            this Agreement is true and correct in all material respects on and
            as of the date of the Agreement; (c) on the date of this Agreement
            (both before and after giving effect to this Agreement and the
            issuance of any Facility LCs hereunder) the Borrower is not in
            breach of any borrowing limit applicable to the Borrower; and (d)
            since December 31, 2002, no event or change has occurred that has
            caused or evidences a Material Adverse Effect with regard to the
            Borrower or its parent.

      4.1.5 Legal Opinions. Written opinions of (a) inside counsel to the
            Borrower, (b) Clifford Chance LLP, special New York counsel to the
            Issuer and, (c) external Bermuda counsel to the Borrower, both
            addressed to the Issuer in form and substance acceptable to the
            Issuer and its counsel.

      4.1.6 Credit Documents. Executed originals of this Agreement and each of
            the other Credit Documents, which shall be in full force and effect,
            together with all schedules, exhibits, certificates, instruments,
            documents and financial statements required to be delivered pursuant
            hereto and thereto.

      4.1.7 Regulatory Matters. Receipt of any required regulatory approvals
            from any Governmental Authority with respect to the transactions
            contemplated by the Credit Documents, including all hearing orders,
            if any, issued by insurance regulatory authorities.

      4.1.8 Other. Such other documents as the Issuer or its counsel may have
            reasonably requested.

4.2   CONTINUATION CONDITIONS PRECEDENT

      The following conditions will be deemed to have been confirmed by the
      Borrower on 31 December of each year and on each date of issuance of a
      Facility LC (each such date, a "REPETITION DATE"):

      4.2.1 there exists no Default or Unmatured Default and none would result
            from such issuance of such Facility LC; and

      4.2.2 the representations and warranties (deemed to be made by reference
            to the facts and circumstances existing on each Repetition Date)
            contained in Clause 5 (Representations and Warranties) (other than
            Clause 5.6 (Material Adverse Change), paragraph (a) of Clause 5.8
            (Litigation and Contingent Obligations) and sub-clause 5.14.1 of
            Clause 5.14 (Material Agreements)) are true and correct in all
            material respects as of such Issuance Date except to the extent any
            such representation or warranty is stated to relate solely to an
            earlier date,

<PAGE>

            in which case such representation or warranty shall be true and
            correct on and as of such earlier date.

4.3   ISSUANCE REQUEST

      Each properly submitted Issuance Request (with respect to each such
      Facility LC) shall constitute a representation and warranty by the
      Borrower that the conditions contained in Clause 4.2 (Continuation
      Conditions Precedent) have been satisfied.

5.    REPRESENTATIONS AND WARRANTIES

      The Borrower represents and warrants to the Issuer that on the date
      hereof:

5.1   CORPORATE EXISTENCE AND STANDING

      The Borrower is a corporation duly incorporated, validly existing and in
      good standing under the laws of its jurisdiction of incorporation and has
      all requisite authority to conduct its business in each jurisdiction in
      which its business is conducted.

5.2   AUTHORIZATION AND VALIDITY

      The Borrower has all requisite power and authority and legal right to
      execute and deliver each of the Credit Documents to which it is a party
      and to perform its obligations thereunder. The execution and delivery by
      the Borrower of the Credit Documents to which it is a party and the
      performance of its respective obligations thereunder have been duly
      authorized by proper corporate proceedings and the Credit Documents
      constitute legal, valid and binding obligations of the Borrower,
      enforceable against the Borrower in accordance with their terms, except as
      enforceability may be limited by bankruptcy, insolvency or similar laws
      affecting the enforcement of creditors' rights generally.

5.3   NO CONFLICT

      Neither the execution and delivery by the Borrower of the Credit
      Documents, nor the consummation of the transactions therein contemplated,
      nor compliance with the provisions of the Credit Documents, including the
      application of the proceeds of the Facility LCs, will violate any law,
      rule, regulation, order, writ, judgment, injunction, decree or award
      binding on the Borrower or any of its Subsidiaries or the Borrower's or
      any of its Subsidiaries' Clauses or certificate of incorporation or
      by-laws or the provisions of any indenture, instrument or agreement to
      which the Borrower or any of its Subsidiaries is a party or is subject, or
      by which it or its Property is bound, or conflict with or constitute a
      default thereunder, or result in the creation or imposition of any Lien
      in, of or on the Property of the Borrower or any of its Subsidiaries
      pursuant to the terms of any such indenture, instrument or agreement.

5.4   GOVERNMENTAL CONSENTS

      No order, consent, approval, license, authorization, or validation of, or
      filing, recording or registration with, or exemption by, any Governmental
      Authority is required to authorize, or is required in connection with the
      execution, delivery and performance of, or the legality, validity, binding
      effect or enforceability of, any of the Credit Documents, the application
      of the proceeds of the Facility LCs or the

<PAGE>

      consummation of any other transaction contemplated by the Credit Documents
      except for those which have been obtained and are in full force and
      effect.

5.5   FINANCIAL STATEMENTS

      The 31 December 2002 audited consolidated financial statements of the
      Borrower's parent holding company and its consolidated Subsidiaries and
      the September 30, 2003 unaudited consolidated financial statements of the
      Borrower's parent holding company and its consolidated Subsidiaries
      heretofore delivered to the Issuer (the "FINANCIAL STATEMENTS") were
      prepared in accordance with U.S. generally accepted accounting principles
      in effect on the date such statements were prepared, consistently applied,
      and fairly present the consolidated financial condition and operations of
      the Borrower's parent holding company and its consolidated Subsidiaries at
      such dates and the consolidated results of their operations for the
      periods then ended.

5.6   MATERIAL ADVERSE CHANGE

      Since 31 December 2002, there has been no change in the business,
      Property, condition (financial or otherwise), prospects or results of
      operations of the Borrower and its Subsidiaries taken as a whole which
      could reasonably be expected to have a Material Adverse Effect.

5.7   TAXES

      The Borrower and its Subsidiaries have filed all material tax returns
      (domestic or foreign) which are required to be filed and have paid all
      taxes due pursuant to said returns or pursuant to any assessment received
      by the Borrower or any of its Subsidiaries, except (a) such taxes, if any,
      as are being contested in good faith and as to which, in the good faith
      judgment of the Borrower, adequate reserves have been provided and (b)
      taxes the failure of which to pay could not reasonably be expected to have
      a Material Adverse Effect. Except for liens and claims of which the
      executive officers of the Borrower are unaware or which are immaterial, no
      tax liens have been filed and no claims against the Borrower or its
      Subsidiaries are being asserted with respect to any such taxes except
      claims being contested in good faith and as to which, in the good faith
      judgment of the Borrower, adequate reserves have been provided. The
      charges, accruals and reserves on the books of the Borrower and its
      Subsidiaries in respect of any taxes or other governmental charges are
      adequate in the good faith judgment of the Borrower.

5.8   LITIGATION AND CONTINGENT OBLIGATIONS

      There is no litigation, arbitration, governmental investigation,
      proceeding or inquiry pending or, to the knowledge of any of their
      officers, threatened against or affecting the Borrower or any of its
      Subsidiaries which could reasonably be expected to (a) have a Material
      Adverse Effect or (b) prevent, enjoin or unduly delay the issuance of
      Facility LCs under this Agreement. As of the date hereof, the Borrower has
      no material Contingent Obligations not provided for or disclosed in the
      Financial Statements.

5.9   SUBSIDIARIES

      The Borrower does not have any Subsidiaries.

<PAGE>

5.10  ERISA

      5.10.1  The Unfunded Liabilities of all Single Employer Plans do not in
              the aggregate exceed $100,000,000. Each Single Employer Plan
              complies in all material respects with all applicable requirements
              of law and regulations except where such non-compliance could not
              reasonably be expected to have a Material Adverse Effect.

      5.10.2  No Reportable Event has occurred with respect to any Single
              Employer Plan.

      5.10.3  Neither the Borrower nor any Affiliate of the Borrower contributes
              to a Multiemployer Plan.

5.11  DEFAULTS

      No Default or Unmatured Default has occurred and is continuing.

5.12  ACCURACY OF INFORMATION

      No information, exhibit or report furnished by the Borrower or any of its
      Subsidiaries to the Issuer in connection with the negotiation of, or
      compliance with, the Credit Documents (as modified or supplemented by
      other information so furnished) contained any material misstatement of
      fact, omitted to state a material fact or omitted to state any fact
      necessary to make the statements contained therein, in light of the
      circumstances under which they were made, not misleading in any material
      respect; provided, that with respect to projected financial information,
      the Borrower represents only that such information was prepared in good
      faith upon assumptions believed to be reasonable at the time prepared.

5.13  REGULATION U

      Margin stock (as defined in Regulation U) constitutes less than 25% of
      those assets of the Borrower and its Subsidiaries which are subject to any
      limitation on sale, pledge or other restriction hereunder. Neither the
      Borrower nor any Subsidiary is engaged, directly or indirectly,
      principally, or as one of its important activities, in the business of
      extending, or arranging for the extension of, credit for the purpose of
      purchasing or carrying margin stock. No part of any Facility LC will be
      used in a manner which would violate, or result in a violation of,
      Regulation U. Neither the issuance of any Facility LC hereunder nor the
      use of the proceeds thereof will violate or be inconsistent with the
      provisions of Regulation U.

5.14  MATERIAL AGREEMENTS

      5.14.1  Neither the Borrower nor any Subsidiary is a party to any
              agreement or instrument which could reasonably be expected to have
              a Material Adverse Effect;

      5.14.2  Neither the Borrower nor any Subsidiary is subject to any charter
              or other corporate restriction which could reasonably be expected
              to have a Material Adverse Effect; and

      5.14.3  Neither the Borrower nor any Subsidiary is in default in the
              performance, observance or fulfilment of any of the obligations,
              covenants or conditions

<PAGE>

              contained in any agreement to which it is a party, which default
              could reasonably be expected to have a Material Adverse Effect.

5.15  INSURANCE

      The Borrower and each of its Subsidiaries maintain, with financially sound
      and reputable insurance companies, insurance on their Property in such
      amounts and covering such risks as is consistent with sound business
      practice.

5.16  INSURANCE LICENSES

      No material license, permit or authorization of the Borrower or any
      material Subsidiary to engage in the business of insurance, reinsurance or
      insurance-related activities is the subject of a proceeding for suspension
      or revocation, except where such suspension or revocation would not
      individually or in the aggregate have a Material Adverse Effect.

5.17  COMPLIANCE WITH LAWS

      To the best of its knowledge, the Borrower and each of its Subsidiaries
      have complied with all applicable statutes, rules, regulations, orders and
      restrictions of any domestic or foreign government or any instrumentality
      or agency thereof, having jurisdiction over the conduct of their
      respective businesses or the ownership of their respective Property,
      except where the failure to so comply could not reasonably be expected to
      have a Material Adverse Effect. There shall have occurred no material
      changes in governmental regulation or policy adversely affecting the
      Issuer or the Borrower in this transaction.

5.18  OWNERSHIP OF PROPERTIES

      Except for Liens permitted by Clause 6.10 (Liens), on the date of this
      Agreement the Borrower and each of its Subsidiaries have good title to all
      of the Property and assets reflected in the Financial Statements as owned
      by it, free of all Liens other than those permitted by this Agreement,
      except for assets sold, transferred or otherwise disposed of in the
      ordinary course of business since the date of such Financial Statements.

5.19  INVESTMENT COMPANY ACT

      Neither the Borrower (nor, to the extent such status would have a Material
      Adverse Effect, any of its Subsidiaries) is an "investment company" which
      is registered or required to be registered under the Investment Company
      Act of 1940, as amended, or is "controlled" by an "investment company"
      which is registered or required to be registered under such Act (all
      quoted terms in this Clause 5.19 having the meaning ascribed to them by
      such Act).

5.20  PUBLIC UTILITY HOLDING COMPANY ACT

      Neither the Borrower nor any of its Subsidiaries is a "holding company" or
      a "subsidiary company" of a "holding company", or an "affiliate" of a
      "holding company" or of a "subsidiary company" of a "holding company",
      within the meaning of the Public Utility Holding Company Act of 1935, as
      amended.

<PAGE>

5.21  PARI PASSU RANKING

      The Borrower's payment obligations under the Credit Agreement rank at
      least pari passu with the claims of all its other unsecured and
      unsubordinated creditors, except obligations mandatorily preferred by law
      applying to companies generally.

6.    COVENANTS

      While the Aggregate Facility LC Commitment remains outstanding and until
      the payment in full of any outstanding Obligations (other than contingent
      Obligations in respect of claims for indemnification) unless the Issuer
      shall otherwise consent in writing:

6.1   FINANCIAL REPORTING

      The Borrower will maintain, for itself and each of its Subsidiaries, a
      system of accounting established and administered in accordance with
      generally accepted accounting principles, and the Borrower will furnish to
      the Issuer:

      6.1.1 As soon as available, but, in any event, no later than within 120
            days after the close of each of its fiscal years, an unqualified
            audit report certified by independent certified public accountants,
            reasonably acceptable to the Issuer, prepared in accordance with
            Agreement Accounting Principles on a consolidated basis for the
            Borrower's parent and its consolidated Subsidiaries, including
            balance sheets as of the end of such period, related profit and loss
            and reconciliation of surplus statements, and a statement of cash
            flows.

      6.1.2 As soon as available, but, in any event, no later than within 60
            days after the end of each semi-annual reporting period of each of
            its fiscal years, for the Borrower and its consolidated
            Subsidiaries, consolidated unaudited balance sheets as at the close
            of each such period and consolidated profit and loss statements and
            a statement of cash flows for the period from the beginning of such
            fiscal year to the end of such period, all certified by the senior
            financial officer or senior accounting officer of the Borrower.

      6.1.3 Together with the financial statements required under sub-clause
            6.1.1 and 6.1.2, a compliance certificate in substantially the form
            of Exhibit C hereto signed by a Senior Financial Officer showing the
            calculations necessary to determine compliance with this Agreement
            and stating that no Default or Unmatured Default exists, or if any
            Default or Unmatured Default exists, stating the nature and status
            thereof.

      6.1.4 Within ten (10) Business Days after the end of each month (or at any
            time while any Default (or breach of Clause 6.3 (Adjusted Collateral
            Value)) is continuing), a certificate of a Senior Financial Officer
            as to (a) the aggregate fair market value of all amounts deposited
            in the Facility LC Collateral Account and the Custodial Account and
            (b) the Collateral Shortfall Amount, if any, each as of the end of
            such month. In addition, the Issuer shall receive all the
            information (or rights to access such information) as set out in the
            Account

<PAGE>

            Control Agreement, including, in particular, Section 5 (Statements,
            Confirmations and Notices of Adverse Claims) of the Account Control
            Agreement.

      6.1.5 Such other information (including, without limitation, non financial
            information) as the Issuer may from time to time reasonably request;
            PROVIDED, HOWEVER, THAT the Borrower shall not be obligated to
            provide information pursuant to this sub-clause 6.1.5 to the extent
            that disclosure thereof is prohibited by any existing customary
            confidentiality agreement restricting the dissemination of such
            information.

6.2   USE OF FACILITY LCS

      The Borrower will use the Facility LCs only to secure its
      reinsurance-related obligations to Ceding Companies. The Borrower will not
      request the issuance of any Facility LC, the proceeds of which are to be
      used to purchase or carry any "margin stock" (as defined in Regulation U).

6.3   CERTAIN NOTICES

      The Borrower will give prompt notice in writing to the Facility Agent, the
      Issuer of the occurrence of any Default or Unmatured Default. Any such
      notice shall state that it is given pursuant to this Clause 6.3.

6.4   CONDUCT OF BUSINESS

      The Borrower will (a) carry on and conduct its business in the fields of
      enterprise of insurance, reinsurance and financial services and similar
      and ancillary activities, (b) do all things necessary to remain duly
      incorporated, validly existing and in good standing in its jurisdiction of
      formation, and (c) do all things necessary to renew, extend and continue
      in effect all Licenses which may at any time and from time to time be
      necessary to operate its insurance business in compliance with all
      applicable laws and regulations (except where the failure to so comply
      could not reasonably be expected to have a Material Adverse Effect). The
      Borrower will not change its jurisdiction of domicile without the prior
      written consent of the Issuer, which shall not be unreasonably withheld or
      delayed.

6.5   TAXES

      The Borrower will, and will cause each of its Subsidiaries to, pay when
      due all taxes, assessments and governmental charges and levies upon it or
      its income, profits or Property, except those which are being contested in
      good faith by appropriate proceedings and with respect to which adequate
      reserves have been set aside and those the failure of which to pay could
      not reasonably be expected to have a Material Adverse Effect.

6.6   INSURANCE

      The Borrower will, and will cause each of its Subsidiaries to, maintain
      with financially sound and reputable insurance companies insurance on all
      or substantially all of its Property, or shall maintain self-insurance, in
      such amounts and covering such risks as is consistent with sound business
      practice for Persons in substantially the same industry

<PAGE>

      as such the Borrower or such Subsidiary, and the Borrower will furnish to
      the Issuer upon request full information as to the insurance carried.

6.7   COMPLIANCE WITH LAWS

      The Borrower will, and will cause each of its Subsidiaries to, comply with
      all laws, rules, regulations, orders, writs, judgments, injunctions,
      decrees or awards to which it may be subject (including, without
      limitation, environmental laws), except where the failure to so comply
      could not reasonably be expected to have a Material Adverse Effect.

6.8   MERGER

      The Borrower will not, nor will it permit any Subsidiary to, merge or
      consolidate with or into any other Person, except that (a) a Subsidiary
      may merge with the Borrower or a Wholly Owned Subsidiary, (b) the Borrower
      and any Subsidiary may merge or consolidate with or into any other Person
      PROVIDED THAT the Borrower or such Subsidiary shall be the continuing or
      surviving corporation and, after giving effect to such merger or
      consolidation, no Default or Unmatured Default shall exist and (c) a
      Material Subsidiary may merge or consolidate with or into another Person
      as a means of effecting a disposition otherwise permitted by this
      Agreement.

6.9   SALE OF ASSETS

      Neither the Borrower will, nor will it permit any of its Subsidiaries to,
      lease, sell, transfer or otherwise dispose of, by one or more transactions
      or series of transactions (whether related or not), all or a material
      portion of its Property to any other Person(s) except for:

      6.9.1   sales, transfers and other dispositions of securities and other
              financial instruments sold, transferred or disposed of in the
              ordinary course of business (excluding sales, transfers or other
              dispositions of interests in operating companies of the Borrower
              or holding companies for such operating companies);

      6.9.2   sales or other dispositions of obsolete Property in the ordinary
              course of business;

      6.9.3   transfers of assets and liabilities under Reinsurance Contracts in
              the ordinary course of business;

      6.9.4   sales, transfers or other dispositions made to the Borrower or
              between the Wholly-Owned Subsidiaries of the Borrower;

      6.9.5   sales of assets (excluding any sales of all or substantially all
              the assets of such Person) upon fair and reasonable terms in an
              arms-length transaction; and

      6.9.6   leases, sales or other dispositions of its Property that, together
              with all other Property of the Borrower and its Subsidiaries
              previously leased, sold or disposed of pursuant to this sub-clause
              6.9.6 during the twelve (12) month

<PAGE>

              period ending with the month in which any such lease, sale or
              other disposition occurs, do not constitute exceed $50,000,000;

      provided, in the case of sub-clauses 6.9.1 through 6.9.6, any lease, sale,
      transfer or other disposition of cash deposited in the Facility LC
      Collateral Account may only be made in accordance with the terms of this
      Agreement and any related Collateral Document.

6.10  LIENS

      Neither the Borrower will create, incur, or suffer to exist any Lien in,
      of or on the Property of the Borrower, except:

      6.10.1  Liens for taxes, assessments or governmental charges or levies on
              its Property if the same shall not at the time be delinquent or
              thereafter can be paid without penalty, or are being contested in
              good faith and by appropriate proceedings and for which adequate
              reserves in accordance with Agreement Accounting Principles shall
              have been set aside on its books.

      6.10.2  Liens imposed by law, such as carriers', warehousemen's and
              mechanics' Liens and other similar liens arising in the ordinary
              course of business which secure payment of obligations not more
              than ninety (90) days past due or which are being contested in
              good faith by appropriate proceedings and for which adequate
              reserves shall have been set aside on its books.

      6.10.3  Liens arising out of pledges or deposits under worker's
              compensation, unemployment insurance, old age pensions, or other
              social security or retirement benefits laws or regulations, or
              similar legislation or regulations.

      6.10.4  Utility easements, building restrictions and such other
              encumbrances or charges against real property as are of a nature
              generally existing with respect to properties of a similar
              character and which do not in any material way affect the
              marketability of the same or interfere with the use thereof in the
              business of the Borrower or its Subsidiaries.

      6.10.5  Liens arising under or pursuant to the Credit Documents.

      6.10.6  Liens incurred in the ordinary course of the Borrower's business,
              including:

              (a)   stock loans, repurchase agreements and reverse repurchase
                    agreements; buy/sell agreements, prime brokerage agreements,
                    credit support annexes and pledge and security agreements
                    entered into as part of, or incidental to, in each case
                    granted in the ordinary course of the Borrower's business;

              (b)   collateralization or margin obligations arising as part of,
                    or incidental to, transactions in the ordinary course of the
                    Borrower's business, whether to third parties or to
                    exchanges;

<PAGE>

              (c)   Liens in respect of assets or rights where such assets or
                    rights are inherent in, and arise or are created as part of
                    a structured finance, funding, financing or liquidity
                    transaction, payment undertaking arrangement, credit
                    enhancement or derivatives transaction, in each case granted
                    in the ordinary course of the Borrower's business; and

              (d)   deposits with Ceding Companies and with insurance regulators
                    in the ordinary course of the Borrower's business;

              PROVIDED, HOWEVER, THAT neither this sub-clause 6.10.6 nor the
              following sub-clause 6.10.7 shall permit Liens securing
              indebtedness for borrowed money incurred to finance either
              ordinary course operations or extraordinary activities.

      6.10.7  Set-off and netting arrangements entered into by the Borrower in
              the normal course of its banking arrangements.

      6.10.8  Title transfer and retention of title arrangements entered into by
              the Borrower in the ordinary course of business.

      6.10.9  Liens on assets acquired after the date of this Agreement;
              PROVIDED THAT (i) such Lien was not created in connection with or
              in contemplation of the acquisition of such assets and (ii) the
              amount thereby secured has not been increased in contemplation of,
              or since the date of, acquisition of such assets.

      6.10.10 Liens in favor of the Borrower.

      6.10.11 Other Liens securing an aggregate principal amount of obligations
              at no time exceeding an amount equal to $50,000,000 at such time.

6.11  ADJUSTED COLLATERAL VALUE

      The Borrower shall at all times maintain Collateral in the Custodial
      Account (or, in the case of Cash, in an account with the Issuer) in an
      amount such that the Adjusted Collateral Value of such Collateral is not
      less than the Obligations outstanding from time to time.

6.12  INCONSISTENT AGREEMENTS

      Neither the Borrower nor any of its Subsidiaries shall enter into any
      indenture, agreement, instrument (or amendment thereto) or other
      arrangement which, (a) directly or indirectly prohibits or restrains, or
      has the effect of prohibiting or restraining, or imposes materially
      adverse conditions upon, the incurrence or repayment of the Obligations,
      the amendment of the Credit Documents, or the ability of any Subsidiary to
      pay dividends or make other distributions on its capital stock (other than
      restrictions on the payment of dividends or other distributions imposed
      under subordinated debt obligations entered into for purposes of having
      such Indebtedness treated as capital for rating agency or regulatory
      purposes) or (b) contains any provision which would be violated or
      breached by the issuance of Facility LCs or by the performance by the
      Borrower of any of its obligations under any Credit Document.

<PAGE>

6.13  CUSTODY AGREEMENT

      The Borrower shall not agree to any waiver or amendment of the Custody
      Agreement without first obtaining the written consent of the Issuer, which
      shall not be unreasonably withheld or delayed.

7.    DEFAULTS

      The occurrence of any one or more of the following events shall constitute
      a Default:

7.1   Any representation or warranty made or deemed made (when required to be
      repeated under the terms of this Agreement) by or on behalf of the
      Borrower to the Issuer under or in connection with this Agreement, any
      other Credit Document, any Facility LC or any certificate or information
      delivered in connection with this Agreement or any other Credit Document
      shall be materially false or misleading on the date as of which made or
      deemed made.

7.2   Non-payment of any principal of any Reimbursement Obligation when due or
      non-payment of any interest or any fee or other obligation owing by the
      Borrower under any of the Credit Documents within five (5) Business Days
      after the same becomes due.

7.3   The breach by the Borrower of any of the terms or provisions of Clause 6.2
      (Use of Facility LCs), Clause 6.3 (Certain Notices), Clause 6.8 (Merger),
      Clause 6.9 (Sale of Assets), Clause 6.10 (Liens), Clause 6.12
      (Inconsistent Agreements) or Clause 5.21 (Pari Passu Ranking) or a breach
      by the Borrower of any of the terms or provisions of Clause 6.11 (Adjusted
      Collateral Value) which is not remedied within two (2) Business Days, or
      within a period otherwise agreed to by the Issuer.

7.4   The breach by the Borrower (other than a breach which constitutes a
      Default under Clause 7.1, 7.2 or 7.3 of this Clause 7) of any of the terms
      or provisions of this Agreement which is not remedied within thirty (30)
      days after written notice from the Issuer.

7.5   Failure of the Borrower or any of its Subsidiaries to pay when due (beyond
      the applicable grace period with respect thereto, if any) any indebtedness
      constituting in the aggregate Material Indebtedness; or the default by the
      Borrower or any of its Subsidiaries in the performance (beyond the
      applicable grace period with respect thereto, if any) of any material
      term, provision or condition contained in any Material Indebtedness
      Agreement, or any other event shall occur or condition exist, the effect
      of which default, event or condition is to cause, or to permit the
      lender(s) under any Material Indebtedness Agreement to cause, Material
      Indebtedness thereunder to become due prior to its stated maturity; or any
      Material Indebtedness of the Borrower or any of its Subsidiaries shall be
      declared to be due and payable or required to be prepaid or repurchased
      (other than by a regularly scheduled payment or prepayment not associated
      with a contractual breach) prior to the stated maturity thereof; PROVIDED
      THAT it shall not constitute a Default if the relevant Indebtedness arises
      under a derivative or structured finance transaction entered into in the
      ordinary course of

<PAGE>

      business and (a) the failure to pay is caused by a technical or
      administrative failure and is remedied within three (3) Business Days or
      (b) such Indebtedness becomes due prior to its stated maturity or is
      prepaid pursuant to unwind or termination provisions not associated with
      performance defaults.

7.6   The Borrower or any of its Subsidiaries shall:

      7.6.1 have an order for relief entered with respect to it under any state,
            federal or foreign bankruptcy or similar laws as now or hereafter in
            effect;

      7.6.2 make an assignment for the benefit of creditors;

      7.6.3 apply for, seek, consent to, or acquiesce in, the appointment of a
            receiver, custodian, trustee, examiner, liquidator or similar
            official for it or any of its assets;

      7.6.4 institute any proceeding seeking an order for relief under any
            state, federal or foreign bankruptcy or similar laws as now or
            hereafter in effect or seeking to adjudicate it a bankrupt or
            insolvent, or seeking dissolution, winding up, liquidation,
            reorganization, arrangement, adjustment or composition of it or its
            debts under any law relating to bankruptcy, insolvency or
            reorganization or relief of debtors or fail to file an answer or
            other pleading denying the material allegations of any such
            proceeding filed against it;

      7.6.5 take any corporate action to authorize or effect any of the
            foregoing actions set forth in this Clause 7.6;

      7.6.6 fail to contest in good faith within thirty (30) days any
            appointment or proceeding described in Clause 7.7; or

      7.6.7 not pay, or admit in writing its inability to pay, its debts
            generally as they become due.

7.7   Without the application, approval or consent of the Borrower or any of its
      Subsidiaries, a receiver, trustee, examiner, liquidator or similar
      official shall be appointed for the Borrower or any of its Subsidiaries,
      or a proceeding described in sub-clause 7.6.4 of Clause 7.6 shall be
      instituted against the Borrower or any of its Subsidiaries and such
      appointment continues undischarged or such proceeding continues
      undismissed or unstayed for a period of forty-five (45) consecutive days.

7.8   The Borrower or any of its Subsidiaries shall fail within 45 days to pay,
      bond or otherwise discharge any judgment or order for the payment of
      money, either singly or in the aggregate, in excess of $100,000,000, which
      is not stayed on appeal or otherwise being appropriately contested in good
      faith.

7.9   Any Change in Control shall occur or the Borrower's Parent shall cease to
      own, directly or indirectly, 100% of the outstanding shares of capital
      stock of the Borrower.

<PAGE>

7.10  The occurrence of any default or breach of its material obligations under,
      or any "event of default" as defined in, any Credit Document (other than
      this Agreement) on the part of or relating to the Borrower, which default,
      breach or "event of default" continues beyond any period of grace therein
      provided.

7.11  Any Collateral Document delivered by the Borrower pursuant to this
      Agreement shall for any reason fail to create a valid and perfected first
      priority security interest in any collateral purported to be covered
      thereby, except as permitted by the terms of any such Collateral Document
      (and save for any failure of the Issuer to cause the filing of any
      relevant financing statement to perfect the security interest), or any
      Collateral Document shall fail to remain in full force or effect or any
      action shall be taken by the Borrower or any Governmental Authority to
      discontinue or to assert the invalidity or unenforceability of any
      Collateral Document.

8.    ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

8.1   ACCELERATION; FACILITY LC COLLATERAL ACCOUNT

      8.1.1 If any Default described in Clause 7.6 or Clause 7.7 of Clause 7
            (Defaults) occurs with respect to the Borrower, the obligation of
            the Issuer to issue Facility LCs shall automatically terminate and
            the Obligations shall immediately become due and payable without any
            election or action on the part of the Issuer and the Borrower will
            be and become thereby unconditionally obligated, without any further
            notice, act or demand, to pay or transfer to the Issuer an amount in
            immediately available funds, which funds shall be held in the
            Facility LC Collateral Account, or at the Borrower's choosing, the
            Custodian Account, equal to the difference of (i) the amount of
            Facility LC Obligations at such time, less (ii) the amount on
            deposit in the Facility LC Collateral Account or under any
            Collateral Document at such time which is free and clear of all
            rights and claims of third parties and has not been applied against
            the Obligations (such difference, the "COLLATERAL SHORTFALL
            AMOUNT"). If any other Default occurs and is continuing, the Issuer
            may (i) terminate or suspend the obligation of the Issuer to issue
            Facility LCs, or declare the Obligations to be due and payable, or
            both, whereupon the Obligations shall become immediately due and
            payable, without presentment, demand, protest or notice of any kind,
            all of which the Borrower hereby expressly waives, and (ii) upon
            notice to the Borrower and in addition to the continuing right to
            demand payment of all amounts payable under this Agreement, make
            demand on the Borrower, and the Borrower will, forthwith upon such
            demand and without any further notice or act, to pay or transfer to
            the Issuer an amount in immediately available funds, the Collateral
            Shortfall Amount, which funds shall be deposited in the Facility LC
            Collateral Account or, at the Borrower's choosing, the Custodian
            Account.

      8.1.2 If at any time while any Default is continuing, the Issuer
            determines that the Collateral Shortfall Amount at such time is
            greater than zero, the Issuer may, make demand on the Borrower to,
            and the Borrower will, forthwith upon such

<PAGE>

            demand and without any further notice or act, pay or transfer to the
            Issuer an amount in immediately available funds the Collateral
            Shortfall Amount, which funds shall be deposited in the Facility LC
            Collateral Account or, at the Borrower's choosing, the Custodian
            Account.

      8.1.3 The Issuer may at any time or from time to time after funds are
            deposited in the Facility LC Collateral Account, apply such funds to
            the payment of the Facility LC Obligations and any other amounts as
            shall from time to time have become due and payable by the Borrower
            to the Issuer under the Credit Documents.

      8.1.4 At any time while any Default (or breach of Clause 6.11 (Adjusted
            Collateral Value)) is continuing neither the Borrower nor any Person
            claiming on behalf of or through the Borrower shall have any right
            to withdraw any of the funds held in the Facility LC Collateral
            Account. After all of the Obligations have been indefeasibly paid in
            full (other than contingent Obligations in respect of claims for
            indemnification hereunder) and the Aggregate Facility LC Commitment
            has been terminated, any funds remaining in the Facility LC
            Collateral Account shall be returned by the Issuer to the Borrower
            or paid to whomever may be legally entitled thereto at such time.

8.2   AMENDMENTS

      Subject to the provisions of this Clause 8.2, the Issuer and the Borrower
      may enter into agreements supplemental hereto for the purpose of adding or
      modifying any provisions to the Credit Documents or changing in any manner
      the rights of the Issuer or the Borrower hereunder or waiving any Default
      or Unmatured Default hereunder.

8.3   PRESERVATION OF RIGHTS

      No delay or omission of the Issuer to exercise any right under the Credit
      Documents shall impair such right or be construed to be a waiver of any
      Default or an acquiescence therein, and the issuance or Modification of a
      Facility LC notwithstanding the existence of a Default or the inability of
      the Borrower to satisfy the conditions precedent to such issuance or
      Modification shall not constitute any waiver or acquiescence. Any single
      or partial exercise of any such right shall not preclude other or further
      exercise thereof or the exercise of any other right, and no waiver,
      amendment or other variation of the terms, conditions or provisions of the
      Credit Documents whatsoever shall be valid unless in writing signed by the
      Issuer and then only to the extent in such writing specifically set forth.
      All remedies contained in the Credit Documents or by law afforded shall be
      cumulative and all shall be available to the Issuer until the Obligations
      have been paid in full.

9.    GENERAL PROVISIONS

9.1   SURVIVAL OF REPRESENTATIONS

      All representations and warranties of the Borrower contained in this
      Agreement or in any other Credit Document shall survive the issuance of
      the Facility LCs herein contemplated.

<PAGE>

9.2   INTEREST LIMITATION

      Anything in this Agreement or any other Credit Document to the contrary
      notwithstanding, the Borrower shall not be required to pay interest at a
      rate in excess of the highest lawful rate, and if the effective rate of
      interest that would otherwise be payable under this Agreement or any other
      Credit Document would exceed the highest lawful rate, or if any Issuer
      shall receive monies that are deemed to constitute interest which would
      increase the effective rate of interest payable under this Agreement or
      any other Credit Document to a rate in excess of the highest lawful rate,
      then (a) the amount of interest that would otherwise be payable under this
      Agreement and the other Credit Documents shall be reduced to the amount
      allowed under applicable law, and (b) any interest paid in excess of the
      highest lawful rate shall, at the option of the Issuer, be either refunded
      to the payor or credited to the payment of the Obligations.

9.3   HEADINGS

      Clause headings in the Credit Documents are for convenience of reference
      only and shall not govern the interpretation of any of the provisions of
      the Credit Documents.

9.4   ENTIRE AGREEMENT

      The Credit Documents embody the entire agreement and understanding between
      the Issuer and the Borrower and supersede all prior agreements and
      understandings between the Issuer and the Borrower relating to the subject
      matter thereof.

9.5   EXPENSES; INDEMNIFICATION

      The Borrower shall reimburse the Issuer for any reasonable and documented
      costs and out-of-pocket expenses (including reasonable attorneys' fees)
      paid or incurred by the Issuer in connection with the preparation,
      negotiation, execution, delivery, review, amendment, modification, and
      administration of the Credit Documents. The Borrower also agrees to
      reimburse the Issuer, for any reasonable costs and out-of-pocket expenses
      (including attorneys' fees paid or incurred by the Issuer in connection
      with the collection of the Obligations or the enforcement of the Credit
      Documents. The Borrower further agrees to indemnify the Issuer its
      affiliates, and each of its directors, officers and employees against all
      losses, claims, damages, penalties, judgments, liabilities and expenses
      (including, without limitation, all reasonable expenses of litigation or
      preparation therefor whether or not the Issuer, or any affiliate is a
      party thereto) which any of them may pay or incur arising out of or
      relating to this Agreement or the other Credit Documents, the transactions
      contemplated hereby or thereby or the use or intended use of any Facility
      LC, except to the extent that they are determined in a final
      non-appealable judgment by a court of competent jurisdiction to have
      resulted from the bad faith, gross negligence or wilful misconduct of the
      party seeking indemnification. The obligations of the Borrower under this
      Clause 9.5 incurred prior to the termination of this Agreement shall
      survive the termination of this Agreement.

<PAGE>

9.6   ACCOUNTING

      Except as provided to the contrary or otherwise defined herein, all
      accounting terms used herein shall be interpreted and all accounting
      determinations hereunder shall be made in accordance with Agreement
      Accounting Principles.

9.7   SEVERABILITY OF PROVISIONS

      Any provision in any Credit Document that is held to be inoperative,
      unenforceable, or invalid in any jurisdiction shall, as to that
      jurisdiction, be inoperative, unenforceable, or invalid without affecting
      the remaining provisions in that jurisdiction or the operation,
      enforceability, or validity of that provision in any other jurisdiction,
      and to this end the provisions of all Credit Documents are declared to be
      severable.

9.8   NON-LIABILITY OF ISSUER

      The relationship between the Borrower on the one hand and the Issuer on
      the other shall be solely that of debtor/account party and creditor. The
      Issuer shall not have any fiduciary responsibilities to the Borrower. The
      Issuer undertakes no responsibility to the Borrower to review or inform
      the Borrower of any matter in connection with any phase of the Borrower's
      business or operations. The Borrower agrees that the Issuer shall have no
      liability to the Borrower (whether sounding in tort, contract or
      otherwise) for losses suffered by the Borrower in connection with, arising
      out of, or in any way related to, the transactions contemplated and the
      relationship established by the Credit Documents, or any act, omission or
      event occurring in connection therewith, unless it is determined in a
      final non-appealable judgment by a court of competent jurisdiction that
      such losses resulted from the gross negligence or wilful misconduct of the
      party from which recovery is sought. The Issuer shall not have any
      liability with respect to, and the Borrower hereby waives, releases and
      agrees not to sue for, any special, indirect, consequential or punitive
      damages suffered by the Borrower in connection with, arising out of, or in
      any way related to the Credit Documents or the transactions contemplated
      thereby.

9.9   CHOICE OF LAW

      THE CREDIT DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS
      CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE
      INTERNAL LAWS (WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE
      STATE OF NEW YORK.

9.10  CONSENT TO JURISDICTION

      THE BORROWER AND THE ISSUER AND EACH FACILITY PROVIDER HEREBY IRREVOCABLY
      SUBMITS TO THE NON EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
      NEW YORK STATE COURT SITTING IN NEW YORK CITY IN ANY ACTION OR PROCEEDING
      ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT AND EACH SUCH PARTY
      HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
      PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND

<PAGE>

      IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE
      VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR
      THAT SUCH COURT IS AN INCONVENIENT FORUM. ANY JUDICIAL PROCEEDING BY THE
      ISSUER AGAINST THE BORROWER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
      IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY CREDIT
      DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK OR WITH
      RESPECT TO JUDGMENT ENFORCEMENT PROCEEDINGS ONLY, IN ANY OTHER
      JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE ISSUER
      INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
      RELATED TO, OR CONNECTED WITH ANY CREDIT DOCUMENT SHALL BE BROUGHT ONLY IN
      A COURT IN NEW YORK, NEW YORK.

9.11  WAIVER OF JURY TRIAL

      THE BORROWER AND THE ISSUER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
      PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING
      IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
      CONNECTED WITH ANY CREDIT DOCUMENT OR THE RELATIONSHIP ESTABLISHED
      THEREUNDER.

9.12  COUNTERPARTS

      This Agreement may be executed in any number of counterparts, all of which
      taken together shall constitute one agreement, and any of the parties
      hereto may execute this Agreement by signing any such counterpart. This
      Agreement shall be effective when it has been executed by the Borrower and
      the Issuer.

9.13  CONFIDENTIALITY

      The Issuer and each Transferee agrees to hold any confidential information
      which it may receive from the Borrower pursuant to this Agreement in
      confidence, except for disclosure (a) to its Affiliates in connection with
      the transactions contemplated by the Credit Documents, (b) to legal
      counsel, accountants, and other professional advisors to the Issuer or to
      a Transferee, (c) to regulatory officials, (d) as requested by a
      governmental agency or as required by law, regulation, or legal process,
      (e) to any Person in connection with any legal proceeding arising in
      connection with this Agreement to which the Issuer is a party, (f)
      permitted by Clause 11.2 (Benefit of Certain Provisions) and (g) which is
      otherwise made publicly available through no fault of the Issuer.
      Notwithstanding anything herein to the contrary, the Issuer, the Borrower
      and any Transferee (and each employee, representative, or other agent of
      any of the foregoing) may disclose to any and all Persons, without
      limitation of any kind, the tax treatment and tax structure of the
      transactions contemplated hereby, and all materials of any kind (including
      opinions or other tax analyses) that are provided to such Person related
      to such tax treatment and tax structure.

<PAGE>

10.   SET-OFF

10.1  SETOFF

      In addition to, and without limitation of, any rights of the Issuer under
      applicable law, if any Default occurs and is continuing, any and all
      deposits (including all account balances, whether provisional or final and
      whether or not collected or available), in any currency, and any other
      Indebtedness at any time held or owing by the Issuer to or for the credit
      or account of the Borrower may be offset and applied toward the payment of
      the Obligations owing to the Issuer, whether or not the Obligations, or
      any part hereof, shall then be due. Such right of setoff shall be without
      notice or demand to the Borrower and be without liability to the Issuer.
      Any party exercising setoff rights hereunder shall promptly provide the
      Borrower with written notice thereof after such setoff; PROVIDED THAT the
      failure to provide such notice shall not give rise to liability hereunder.

11.   BENEFIT OF AGREEMENT

11.1  SUCCESSORS AND ASSIGNS

      The terms and provisions of the Credit Documents shall be binding upon and
      inure to the benefit of the Borrower, the Issuer and their respective
      successors and assigns, except that the Borrower shall not have the right
      to assign its rights or obligations under the Credit Documents. Any
      attempted assignment or transfer by any party not made in compliance with
      this Clause 11.1 shall be null and void.

11.2  DISSEMINATION OF INFORMATION

      The Borrower authorizes the Issuer to disclose to any subparticipant or
      purchaser or any other Person acquiring an interest in the Credit
      Documents by operation of law or any counterparty to any swap,
      securitisation or derivative transaction referencing or involving any
      rights or obligations of the Issuer hereunder (each a "TRANSFEREE") and
      any prospective Transferee any and all information in the Issuer's
      possession concerning the creditworthiness of the Borrower; PROVIDED THAT
      each Transferee and prospective Transferee agrees to be bound by Clause
      9.13 (Confidentiality) of this Agreement.

12.   NOTICES

12.1  GIVING NOTICE

      All notices, requests and other communications to any party hereunder
      shall be in writing (including electronic transmission, facsimile
      transmission or similar writing) and shall be given to such party: (a) in
      the case of the Borrower and the Issuer at its respective address or
      facsimile number set forth on the signature pages hereof or (b) in the
      case of any party, at such other address or facsimile number as such party
      may hereafter specify for the purpose by notice to the Issuer and the
      Borrower in accordance with the provisions of this Clause 12.1. Each such
      notice, request or other communication shall be effective (i) if given by
      facsimile transmission, when transmitted to the facsimile number specified
      in this Clause and confirmation of receipt is received, (ii) if given by
      recognized courier service, 72 hours after such communication is deposited
      with such courier service with delivery prepaid, addressed

<PAGE>

      as aforesaid, or (iii) if given by any other means, when delivered (or, in
      the case of electronic transmission, received) at the address specified in
      this Clause; PROVIDED THAT notices to the Issuer under Clause 2 (The
      Letter of Credit Facility) shall not be effective until received.

12.2  CHANGE OF ADDRESS

      The Borrower and the Issuer may each change the address for service of
      notice upon it by a notice in writing to the other parties hereto.

IN WITNESS WHEREOF, the Borrower and the Issuer have executed this Agreement as
of the date first above written.
<PAGE>

                                   SIGNATURES

ALLIED WORLD ASSURANCE COMPANY, LTD., as Borrower

By: /s/ S.G. Cubbon

Name: George Cubbon

Title: Vice President and Treasures

Address: 43 Victoria Street
         Hamilton HM 12
         Besmuda

Attention:

Telecopy: (441) 278-2769

Telephone: (441) 278-5400

BARCLAYS BANK PLC, as Issuer

By: /s/ C.M.J. Lee

Name:  C.M.J. Lee

Title: Manager

Address: 54 Lambard Street
         London EC 3V 9EX

Attention: Richard Askey

Telecopy:

Telephone: +44 207 699 3124

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