Document:

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                                                                   EXHIBIT 10.11

                                PLEDGE AGREEMENT

MONTPELIER REINSURANCE LTD., a company organized under the laws of Bermuda,
located at 30 Woodbourne Avenue, Pembroke, Bermuda (hereinafter referred to
herein as the "PLEDGOR"), and FLEET NATIONAL BANK, a national banking
association duly organized and existing by and under the laws of the United
States of America, having an office located at 100 Federal Street, Boston
Massachusetts 02110 (hereinafter referred to herein as the "Bank"), hereby agree
as follows:

1. DEFINITIONS. The following definitions apply in this Pledge Agreement:

CASH COLLATERAL ACCOUNT: The interest bearing account no. 9429112620, entitled
"Fleet National Bank, as collateral pledgee for Montpelier Reinsurance Ltd. -
Cash Collateral Account", maintained with the Bank.

CONTROL AGREEMENT: That certain Control Agreement dated as of the date hereof by
and among the Pledgor, the Bank and State Street Bank and Trust Company, a
Massachusetts trust company (the "CUSTODIAN").

DEPOSIT ACCOUNT: The Pledgor's demand deposit account no. 4760-870-8 maintained
with the Custodian and subject to the terms of the Control Agreement.

LETTER OF CREDIT FACILITY: The letter of credit facility established by the Bank
in favor of the Pledgor pursuant to one or more applications and agreements for
standby letter of credit, each in the form attached hereto as EXHIBIT C (each an
"Application" and collectively, the "Applications"), from time to time executed
and delivered by the Pledgor to the Bank, pursuant to which the Bank may from
time to time issue, amend, extend or renew one or more standby letters of credit
on behalf of the Pledgor. The Letter of Credit Facility is a discretionary
facility. Nothing contained herein or in the Applications or in any other
Transaction Document shall impose any obligation on the part of the Bank to
issue letters of credit on behalf of the Pledgor or to renew, amend or otherwise
modify any existing letters of credit; and it is hereby expressly acknowledged
and agreed by the parties hereto that the issuance and amount of the letters of
credit issued under the Letter of Credit Facility shall at all times be in the
Bank's sole and absolute discretion.

LIABILITIES: All obligations, indebtedness and liabilities of any type of the
Pledgor to the Bank, which arise out of or in connection with or which in any
way relate to the Letter of Credit Facility or any letters of credit issued
thereunder, whether now existing or hereafter incurred, whether direct,
indirect, absolute or contingent, whether otherwise guaranteed or secured, and
howsoever evidenced or acquired, including, without limitation, reimbursement
obligations in respect of letters of credit, any interest where chargeable,
commissions, fees, and other customary Bank charges related to the Letter of
Credit Facility and any and all other out-of-pocket expenses or costs incurred
by the Bank and its legal counsel in connection with the administration of the
Letter of Credit Facility, this Pledge Agreement, the other Transaction
Documents, and the other matters contemplated hereby and thereby, and the
enforcement of any of its rights with respect thereto.

PLEDGED COLLATERAL: (i) The Securities Account (as defined below) and all
property held therein or any replacement or successor account and/or any and all
substitutions, additions and accessions thereto, which shall include, but not be
limited to, cash, investment property, securities, security entitlements,
securities accounts and any and all financial assets credited to and held in the
Securities Account or any replacement or successor account, including, without
limitation, the property described on EXHIBIT A attached hereto and made a part
hereof; (ii) the Deposit Account and all of the Cash Collateral (as defined
below) and other property held from time to time held therein; (iii) the Cash
Collateral Account and all of the Cash Collateral and other property from time
to time held therein, and (iv) to the extent not already included in clauses
(i), (ii) or (iii) above, dividends, distributions, income, interest and all
proceeds of the foregoing, including, without limitation, the roll-over or
reinvested proceeds of the foregoing, whether now existing or hereafter arising.
Any delivery or transfer of any of the Pledged Collateral to the Custodian and
credited to the Securities Account or the Deposit Account shall be deemed a
delivery or transfer to the Bank.

SECURITIES ACCOUNT: The Pledgor's custodial account fund no. HGL2 maintained
with the Custodian.

TRANSACTION DOCUMENTS. This Pledge Agreement, the Control Agreement and any
instrument or agreement executed in connection with the Letter of Credit
Facility and the Cash Collateral Account.

2. THE CASH COLLATERAL ACCOUNT. The Pledgor or any other person on behalf of the
Pledgor, including the Custodian, may from time to time deposit cash sums
denominated in U.S. dollars into the Cash Collateral Account. The Pledgor agrees
that some or all of the funds from time to time in the Cash Collateral Account
may be invested in certificates of deposit issued by the Bank (such certificates
of deposit hereinafter referred to, collectively, as "TIME DEPOSITS", and
together with the cash held in each of the Deposit Account and the Cash
Collateral Account, the "CASH COLLATERAL"). Interest earned on the Cash
Collateral held or credited to the Cash Collateral Account, and the principal of
the Time Deposits at maturity which is not invested in new Time Deposits, shall
be deposited in the Cash Collateral Account. The Pledgor may from time to time
request, and the Bank agrees to, effect transfers of cash from the Cash
Collateral Account to the Securities Account for the sole purpose of allowing
the Pledgor to purchase Qualified Securities to be held in or credited to the
Securities Account; provided that (a) any such transfer request shall involve a
minimum amount of $500,000 or integral multiples of $100,000 in excess thereof,
(b) after giving effect to such transfer request, the Pledgor remains in
compliance with the covenant contained in Section 13
<PAGE>
and (c) no Event of Default has occurred and is continuing hereunder.

3. SECURITY INTEREST. For and in consideration of the sum of TEN ($10.00)
DOLLARS, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and for and in consideration of the
Bank's issuance of letters of credit under the Letter of Credit Facility, the
Pledgor hereby pledges, hypothecates, and impresses the Pledged Collateral with
a lien in favor of the Bank, and grants to the Bank a security interest in the
Pledged Collateral, in each case to secure the punctual payment and performance
of all the Liabilities. The Pledgor covenants and agrees that (i) with respect
to the Pledged Collateral consisting of the Securities Account, the property
held therein and any and all proceeds thereof, from and after the issuance of a
Notice of Exclusive Control pursuant to the Control Agreement (which Notice
shall not be given unless an Event of Default (as defined below) has occurred
and is continuing hereunder), the Bank shall have sole and exclusive control
over such Pledged Collateral and that it shall take all such steps as may be
necessary to cause the Bank to have sole and exclusive control over such Pledged
Collateral; (ii) with respect to the Pledged Collateral Consisting of the
Deposit Account, the property held therein and any and all proceeds thereof, the
Bank has sole and exclusive control over such Pledged Collateral and the Pledgor
shall take all such steps as may be necessary to cause the Bank to have sole and
exclusive control over such Pledged Collateral; (iii) pursuant to Section 3 of
the Control Agreement, the available balance of funds standing to the credit of
the Deposit Account in excess of $100,000 shall be transferred by the Custodian
from the Deposit Account to the Cash Collateral Account by wire transfer or
automatic clearing house electronic transfer (or other means acceptable to the
Bank) on a daily basis or as may be directed by the Bank and the Pledgor shall
not take any action to terminate or modify such arrangements; (iv) with respect
to the Pledged Collateral consisting of the Cash Collateral Account, the Cash
Collateral and the other property held therein and any and all proceeds thereof,
the Bank shall have sole and exclusive control over such Pledged Collateral and
that it shall take all such steps as may be necessary to cause the Bank to have
sole and exclusive control over such Pledged Collateral; (v) except as expressly
permitted in Section 2 above, it shall have no rights to withdraw or direct the
transfer of any or all credit balances at any time in the Cash Collateral
Account for so long as any Liabilities remain outstanding under or in respect of
the Transaction Documents; (vi) it shall not sell, transfer, assign, or
otherwise dispose of any of the Pledged Collateral without the prior written
consent of the Bank except in connection with substitutions of Pledged
Collateral permitted pursuant to Section 14(b) and provided that, after giving
effect to such substitutions, the Pledgor is in compliance with the covenant
contained in Section 13; (vii) it shall do or cause to be done all things
necessary to preserve and keep in full force and effect the perfected first
priority security interest in the Pledged Collateral granted to the Bank
hereunder, (viii) it shall not create or permit the existence of liens or
security interests in the Pledged Collateral in favor of third parties; (ix) it
shall not take any action or omit to take any action that would result in the
termination of the Control Agreement without the prior consent of the Bank and
it shall otherwise comply in all respects with the provisions of the Control
Agreement; and (x) with respect to the Deposit Account and the Securities
Account, it shall not give instructions or entitlement orders to the Custodian
that would require the Custodian to advance any margin or other credit to or for
the benefit of the Pledgor.

The representations, warranties and covenants of the Pledgor set forth in
Section 12(b), (c) and (d) of the Application are incorporated herein by
reference and shall be deemed to be made by the Pledgor with respect to each of
the Transaction Documents.

4. PLEDGER'S ADDITIONAL OBLIGATIONS. The Pledgor agrees that: (1) any
distribution in kind received by the Pledgor from any party for or on account of
the Pledged Collateral, including distributions of stock as a dividend or split
of any of the Pledged Collateral, shall be promptly delivered to the Bank in the
form received with any required endorsement; (2) additional collateral in form
and kind satisfactory to the Bank will be deposited by the Pledgor with the Bank
in accordance with Section 13 of this Pledge Agreement; (3) any note or other
instrument executed and delivered to the Pledgor by any party to evidence any
obligation of such party with respect to the Pledged Collateral shall be
promptly delivered with any required endorsement to the Bank. All such items
shall be held by the Bank in accordance with the terms of this Pledge Agreement.

The Pledgor agrees to pay to the Bank on demand all reasonable out-of-pocket
fees, costs and expenses (including reasonable legal fees and expenses) incurred
by the Bank in connection with the preparation, execution, administration and
enforcement of this Pledge Agreement and the other documents and agreements
referred to herein, including, without limitation, overnight courier fees, lien
search fees, and filing and recording fees. The Pledgor agrees that the Bank
shall be entitled to debit the Securities Account, the Deposit Account, the Cash
Collateral Account and/or any other account maintained by the Pledgor with the
Bank for the payment of any such fees, costs or expenses.

The Pledgor agrees to execute and deliver to the Bank and/or third parties
designated by the Bank such additional documents, notices, requests and other
instruments as the Bank deems reasonably necessary or advisable to protect the
Banks rights under this Pledge Agreement.

5. CERTAIN RIGHTS AND DUTIES OF BANK. The Pledgor acknowledges that: the Bank
has no duty of any type with respect to the Pledged Collateral except for the
use of due care in safekeeping any of the Pledged Collateral actually in the
physical custody of the Bank; prior to the occurrence of any Event of Default
described in the succeeding paragraph the Bank's rights with respect to the
Pledged Collateral shall be limited to the Bank's rights as a secured party and
pledgee and the right to perfect its security interest, preserve, enforce and
protect the lien granted hereunder and its interest in the Pledged Collateral;
the Bank may, with the consent of the Pledgor, such consent not to be
unreasonably withheld and otherwise not required if an Event of Default shall
have occurred and be continuing hereunder, sell, assign or grant participations
in any of the Liabilities and may sell, assign or grant participations in any of
the Pledged Collateral to the extent of any such sales, assignments or
participations in the Liabilities; the Bank's purchaser, assignee or participant
shall have the same rights and privileges with respect to such Liabilities and
Pledged Collateral as the Pledgor grants to the Bank under this Pledge
Agreement. Prior to the occurrence and continuance of any Event of Default
described in the succeeding paragraph, the Pledgor shall be entitled to vote any
Pledged Collateral constituting

                                       -2-
<PAGE>

securities or capital stock and to give consents, waivers and ratifications in
respect thereof; provided, however, that no vote shall be cast or consent,
waiver or ratification given by the Pledgor if the effect thereof would impair
any of the Pledged Collateral or be inconsistent with or result in any violation
of any of the provisions of this Pledge Agreement. All such rights of the
Pledgor to vote and give consents, waivers and ratifications with respect to the
Pledged Collateral shall cease upon the occurrence and continuance of an Event
of Default.

6. EVENTS OF DEFAULT; REMEDIES. Upon the occurrence and continuance of any of
the following events of default (each an "Event of Default"): (1) default in the
payment of any of the Liabilities consisting of reimbursement obligations in
respect of letters of credit issued under the Letter of Credit Facility; (2)
default in the payment of any Liabilities (other than those specified in clause
(1)) under any of the Transaction Documents, including, without limitation,
default in the payment of fees and interest, which shall continue for more than
two (2) business days; (3) default in the performance of any of the agreements
or covenants of the Pledgor under the Letter of Credit Facility or the
Transaction Documents (other than those specified in clauses (1) and (2));
provided that, any applicable grace or cure periods which are expressly herein
provided shall have elapsed; (4) the Control Agreement is terminated by any
party thereto and the Pledgor and another securities intermediary satisfactory
to the Bank have not, as of the date that is three (3) business days prior to
the effective date of such termination, entered into a control agreement in form
and substance reasonably satisfactory to the Bank, such that the Bank's first
priority lien and security interest in the Pledged Collateral is preserved
unimpaired; (5) the Bank's security interest in the Pledged Collateral shall
cease to be a first priority perfected security interest, otherwise than in
accordance with the terms hereof or with the express prior written agreement,
consent or approval of the Bank; or any action at law, suit or in equity or
other legal proceeding to cancel, revoke or rescind the Letter of Credit
Facility or any Transaction Document shall be commenced by or on behalf of the
Pledgor or any of its shareholders, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the effect
that, the Letter of Credit Facility or any one or more of the Transaction
Documents is illegal, invalid or unenforceable in accordance with the terms
thereof; (6) the Pledgor shall be enjoined, restrained or in any way prevented
by the order of any court or any administrative or regulatory agency from
conducting any material part of its business and such order shall continue in
effect for more than thirty (30) days; (7) the Pledgor generally discontinues
its business operations or sells or otherwise disposes of all or substantially
all of its assets; (8) the Pledgor admits in writing that it is generally unable
to pay debts as they mature or become due; (9) the Pledgor makes a general
assignment for the benefit of creditors; (10) the commencement of a proceeding
by or against the Pledgor under the federal bankruptcy code or the equivalent
under Bermuda law, or any other federal, state or Bermuda laws seeking to
adjudicate the Pledgor a bankrupt or insolvent, or seeking the liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of the Pledgor or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator, debtor in possession, examiner or other
similar official for the Pledgor, the Pledged Collateral or any substantial part
of the Pledgor's property, with or without consent, for any purpose whatsoever
and, in the case of any such proceeding instituted against the Pledgor (but not
instituted by it), either such proceeding shall remain unstayed and undismissed
for a period of (i) sixty (60) days, if such proceeding is commenced with a
Bermuda court, or (ii) forty-five (45) days, if such proceeding is commenced in
any other court; or any of the following actions sought in such proceeding shall
occur: the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, the Pledgor, the
Pledged Collateral or for any substantial part of its property; (11) any of the
Pledged Collateral or a substantial part of the Pledgor's property is taken by
attachment, execution or any other form of legal process; (12) the assertion of
any levy, seizure or attachment on the Pledged Collateral, or the taking of any
action by a regulatory authority to obtain control of the Pledgor, a substantial
part of its assets, or any part of the Pledged Collateral; or (13) the
non-bankruptcy related dissolution, liquidation, winding-up or termination of
the legal existence of the Pledgor by passage of a resolution by the
shareholders of the Pledgor;

then the Bank, with or without prior notice to the Pledgor, and without demand
for additional collateral, may (a) transfer, or cause the Custodian to transfer
any or all of the Pledged Collateral and/or the Securities Account, the Deposit
Account and/or the Cash Collateral Account into the name of the Bank or its
nominee (including, without limitation, having the Pledged Collateral debited
from the Securities Account, the Deposit Account and/or the Cash Collateral
Account and credited to an account designated by the Bank) and vote any Pledged
Collateral constituting securities or closely held capital stock; (b) sell at
public or private sale any or all of the Pledged Collateral, which the Bank may
purchase free from any right of redemption; (c) apply to, or set off against,
the Liabilities of the Pledgor all or any portion of the Pledged Collateral,
securities or other property of the Pledgor in the possession of the Bank and,
to the extent that the amount of such Liabilities in default exceeds the balance
of cash held in the Cash Collateral Account, the Bank may redeem any Time
Deposits issued by the Bank for application to such Liabilities, with any
withdrawal penalties on any Time Deposits being considered a collection expense
to be added to such Liabilities; or (d) at its discretion in its own name or in
the name of the Pledgor take any action for the collection of the Pledged
Collateral, including the filing of a proof of claim in insolvency proceedings,
and may receive the proceeds thereof and execute releases therefor. After
deducting its expenses, including reasonable out-of-pocket attorney's fees,
incurred in the sale or collection of the Pledged Collateral, the Bank shall
apply the proceeds to the Liabilities and shall account to the Pledgor for any
surplus. The Pledgor agrees that the Bank has no obligation to sell or otherwise
liquidate the Pledged Collateral in any particular order or to apply the
proceeds thereof to any particular portion of the Liabilities. The Pledgor
further agrees that after the occurrence and during the continuance of an Event
of Default, the Bank shall have no obligation to vote any Pledged Collateral
constituting securities or closely held capital stock, but shall have the right
to do so in its sole discretion.

In connection with any secured party's sale, the Bank is authorized, if it deems
it advisable to do so, in order to comply with any applicable securities laws,
to restrict the prospective bidders or purchasers to persons who will represent
and agree that they are

                                       -3-
<PAGE>
purchasing the Pledged Collateral for their own account for investment, and not
with a view to the distribution or re-sale thereof. Sales made subject to such
restriction shall be deemed to have been made in a commercially reasonable
manner.

7. POWER OF ATTORNEY, ETC. The Pledgor hereby irrevocably constitutes and
appoints the Bank the true and lawful attorney-in-fact for and on behalf of the
Pledgor with full power of substitution and revocation in its own name or in the
name of the Pledgor to make, execute, deliver and record, as the case may be,
any and all financing statements, continuation statements, notices of exclusive
control, assignments, proofs of claim, powers of attorney, leases, discharges or
other instruments or agreements which the Bank in its sole discretion may deem
necessary or advisable to perfect, preserve, or protect (and, after the
occurrence and during the continuance of an Event of Default, to enforce) the
lien granted hereunder and the Bank's interest in the Pledged Collateral and to
carry out the purposes of this Pledge Agreement, including but without limiting
the generality of the foregoing, any and all proofs of claim in bankruptcy or
other insolvency proceedings of the Pledgor, with the right, upon the occurrence
and during the continuance of an Event of Default, to collect and apply to the
Liabilities all distributions and dividends made on account of the Pledged
Collateral. The rights and powers conferred on the Bank by the Pledgor are
expressly declared to be coupled with an interest and shall be irrevocable until
all the Liabilities are paid and performed in full. A carbon, photographic, or
other reproduction of a security agreement (including this Pledge Agreement) or
a financing statement is sufficient as a financing statement to the extent
permitted by applicable law.

8. MISCELLANEOUS. This Pledge Agreement and the Pledged Collateral shall not be
in any way affected by the extension of time or renewal of any of the
Liabilities, the modification in any manner or the taking or release in whole or
in part of any security therefor or the obligations of the Pledgor or any
endorsers, sureties, guarantors or other parties or the granting of any other
indulgences to the Pledgor. No termination of this Pledge Agreement shall be
effective until the Liabilities of the Pledgor secured by this Pledge Agreement
have been satisfied in full.

9. NOTICES. Except as otherwise specifically provided for herein, any notice,
demand or communication hereunder shall be given in writing (including facsimile
transmission or telex) and mailed or delivered by hand or overnight courier to
the parties at their respective addresses set forth below, or, as to each party,
at such other address as shall be designated by such party by a prior notice to
the other party in accordance with the terms of this provision.

Any notice to the Bank shall be sent as follows:

FLEET NATIONAL BANK
MAIL STOP: MA DE 10010H
100 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
ATTENTION: ESTEBAN KOOSAU
FAX: (617) 434-1096

with a copy to:

BINGHAM DANA LLP
150 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
ATTENTION: JONATHAN K. BERNSTEIN
FAX: (617) 951-8736

Any notice to the Pledgor shall be sent as follows:

MONTPELIER REINSURANCE LTD.
30 WOODBOURNE AVENUE
PEMBROKE, BERMUDA
ATTN: THE CHAIRMAN
FAX:

All notices hereunder shall be effective (i) five (5) business days after such
notice is mailed, by registered or certified mail, postage prepaid (return
receipt requested), (ii) upon delivery by hand, (iii) upon delivery if delivered
by overnight courier (such delivery to be evidenced by the courier's records),
and (iv) in the case of any notice or communication by facsimile transmission,
on the date when sent.

10. CONSTRUCTION. The term "Pledgor" and all pronouns referring thereto as
used herein shall be construed in the masculine, feminine, neuter or singular
or plural as the context may require.

11. SUCCESSORS AND ASSIGNS. This Pledge Agreement shall inure to the benefit
of the Bank and its successors and assigns and shall bind the Pledgor and the
successors, representatives, legal representatives and/or heirs and assigns
of the Pledgor.

12. CHOICE OF LAW/BINDING EFFECT. This Pledge Agreement and the rights and
obligations of the parties hereunder shall be construed and interpreted in
accordance with the laws of the State of New York, excluding the laws applicable
to conflicts or choice of law (other than Section 5-1401 of the New York General
Obligations Law). Regardless of any provision in any other agreement, for
purposes of Article 9 of the uniform commercial code as in effect in the State
of New York, New York shall be deemed to be the Bank's jurisdiction.

13. COLLATERAL COVERAGE COVENANT. The Pledgor hereby covenants and agrees that
the Collateral Coverage Amount (as hereinafter defined) must at all times be
equal to or greater than the aggregate undrawn face amount of all issued and
outstanding letters of credit under the Letter of Credit Facility. As used
herein, the "COLLATERAL COVERAGE AMOUNT" means the sum of (a) the fair market
value (as calculated by the Bank in its reasonable discretion) of the Pledged
Collateral consisting of Cash Collateral divided by 1.02 plus (b) the fair
market value (as calculated by the Bank by reference to Bloomberg or, if
Bloomberg is not available, another quotation service reasonably acceptable to
the Bank) of the Pledged Collateral consisting of Qualified Securities (as
defined in Section 14) divided by 1.10. If at any time the Collateral Coverage
Amount is less than the aggregate undrawn face amount of all issued and
outstanding letters of credit under the Letter of Credit Facility, then the
Pledgor shall promptly provide to the Bank and pledge hereunder such additional
Cash Collateral or Qualified Securities as may be necessary to satisfy the
foregoing collateral coverage requirement. Failure to do so within two (2)
business days shall constitute an immediate and automatic Event of Default under
the terms and conditions of this Pledge Agreement. The

                                        4
<PAGE>
Pledgor shall, no later than the tenth business day of each month, provide the
Bank with a certificate substantially in the form of EXHIBIT B attached hereto,
signed by an officer of the Pledgor certifying compliance with the foregoing
collateral coverage requirement and demonstrating, in detail satisfactory to the
Bank, the fair market value (as valued by Bloomberg or, if Bloomberg is not
available, another quotation service reasonably acceptable to the Bank) of the
Qualified Securities (as defined in Section 14) and the fair market value of
Cash Collateral as of the last business day of the immediately preceding month.

14. RELEASE OF COLLATERAL. (a) In the event that the Collateral Coverage Amount
exceeds the aggregate face amount of all issued and outstanding letters of
credit under the Letter of Credit Facility, (such excess being referred to
herein as the "RELEASE AMOUNT") then, so long as no Event of Default has
occurred and is continuing, the Bank shall, at the request and expense of the
Pledgor, release such portions of the Pledged Collateral designated by the
Pledgor with a fair market value equal to the Release Amount (or such smaller
amount as may be requested by the Pledgor); provided that in no event shall the
Bank be required to release any Pledged Collateral after the occurrence and
during the continuance of an Event of Default or in an aggregate amount that is
less than five hundred thousand dollars ($500,000). In connection with any such
partial release of the Pledged Collateral, the Bank shall give such consents as
may be necessary to permit the Custodian to allow the Pledgor to withdraw the
Release Amount from the Securities Account and/or the Deposit Account, as the
case may be. The Pledgor agrees to reimburse the Bank on demand for any and all
out-of-pocket costs and expenses incurred by the Bank in connection with any
such partial release of the Pledged Collateral.

(b) So long as the Collateral Coverage Amount exceeds the aggregate undrawn face
amount of all issued and outstanding letters of credit under the Letter of
Credit Facility and so long as no Event of Default has occurred and is
continuing, the Pledgor may make substitutions of equal or greater value for the
Pledged Collateral; provided that such Pledged Collateral shall at all times
consist of cash or obligations of the United States Treasury and issues of
United States agencies guaranteed by the United States that mature within five
(5) years of the date of purchase and are quoted daily by Bloomberg or, if
Bloomberg is not available, another quotation service reasonably acceptable to
the Bank ("QUALIFIED SECURITIES"). In the event that any amounts are paid or due
to be paid in respect of the Pledged Collateral (whether at scheduled maturity
or otherwise), the Pledgor may give instructions to roll-over or reinvest such
amounts in Qualified Securities, all of which shall remain Pledged Collateral
hereunder.

(c) In the event that (i) any and all letters of credit issued under the Letter
of Credit Facility are fully drawn or expire or are returned to the Bank for
cancellation, and (ii) all reimbursement obligations with respect to any
drawings under the Letter of Credit Facility have been fully satisfied pursuant
to the provisions of the Initial Application, and (iii) no other Liabilities,
whether contingent or otherwise, are then outstanding, the Bank agrees that (A)
it shall, after request by Pledger and at Pledger's sole cost and expense,
release the Pledged Collateral from the security interest and lien created by
this Pledge Agreement and shall execute such instruments of release and
discharge as may be reasonably requested by the Pledgor and (B) the Pledgor may
thereafter withdraw from the Cash Collateral Account any amounts constituting
the balance in the Cash Collateral Account and the Pledger shall be entitled to
the return of any Time Deposits.

15. AUTHORIZATION TO FILE FINANCING STATEMENT. The Bank is hereby authorized to
file in any Uniform Commercial Code filing office a financing statement naming
the Pledgor as the debtor and indicating the collateral as the Pledged
Collateral, including, the Securities Account and the Deposit Account and all
property held therein, the Cash Collateral Account and all sums from time to
time maintained therein, together with the Time Deposits, if any, and any and
all proceeds of any thereof, whether now or hereafter existing or arising. The
Bank may indicate some or all of the collateral on the financing statement,
whether generally or specifically.

This Pledge Agreement has been executed by the Pledgor and the Bank as of the 26
day of February, 2002.

PLEDGOR:                                     BANK:

MONTPELIER REINSURANCE LTD.                  FLEET NATIONAL BANK

BY: /s/ ANTHONY TAYLOR                       BY: /s/ DAVID A. BOSSELAIT
   --------------------------------          -------------------------------
NAME:  ANTHONY TAYLOR                        NAME: DAVID A. BOSSELAIT
TITLE: PRESIDENT & CHIEF                     TITLE: DIRECTOR
       EXECUTIVE OFFICER

                                        5

<PAGE>

                                   EXHIBIT A

                  (Partial Description of Pledged Collateral)

            Securities (U.S. Government & Federal Agency Securities)
<Table>
<Caption>

DESCRIPTION                   PAR                           ISSUE          INTEREST       MATURITY
                              VALUE       CUSIP NO.         DATE           RATE           DATE
<S>                          <C>         <C>               <C>            <C>            <C>

                                          None
</Table>

THE COLLATERAL PLEDGED HEREIN SHALL BE HELD IN AND SHALL INCLUDE THE SECURITIES
ACCOUNT.

THE FOREGOING IS NOT A COMPLETE LIST OF ALL OF THE PLEDGED COLLATERAL.

PLEDGOR'S INITIALS:

A.T.
--------------------
(Pledgor's Initials)

DATE: Feb 26, 2002
     ---------------
<PAGE>

                                   EXHIBIT B

                         Form of Compliance Certificate

                               ____________, 200_

Fleet National Bank
MA DE 10010H
100 Federal Street
Boston, Massachusetts 02110

Attention: Esteban Koosau

     RE: MONTPELIER REINSURANCE LTD.

Dear Mr. Koosau:

     Reference is made to the Pledge Agreement, dated as of February __, 2002
(the "PLEDGE AGREEMENT"), by and among Montpelier Reinsurance Ltd., a company
organized under the laws of Bermuda (the "PLEDGOR"), and Fleet National Bank, a
national banking association duly organized and existing by and under the laws
of the United States of America, having an office located at 100 Federal
Street, Boston Massachusetts 02110 (the "BANK"). Capitalized terms used herein
without definition shall have the respective meanings assigned to such terms in
the Pledge Agreement.

     Pursuant to Section 13 of the Pledge Agreement, the undersigned officer of
the Pledgor hereby certifies to you as follows: (a) the information furnished
in the calculations attached hereto was true and correct as of the last day of
the month ended immediately preceding the date of this certificate and (b) as
of the date of this certificate, there exists no Event of Default under any of
the Transaction Documents.

     IN WITNESS WHEREOF, the undersigned officer has executed this Compliance
Certificate as of the date first written above.

                               MONTPELIER REINSURANCE LTD.

                               By: -----------------------
                               Name:
                               Title:

<PAGE>
                        COMPLIANCE CERTIFICATE WORKSHEET

                                      for

                          MONTPELIER REINSURANCE LTD.

                            ______________ __, 200_

<Table>
<Caption>
<S> <C>                                                        <C>
A.  Fair market value of Qualified Securities held in the
    Securities Account (as valued by Bloomberg):               $_______________

B.  Result from Item A divided by 1.10 equals:                 $_______________

C.  Cash balance in State Street Deposit Account               $_______________

D.  Cash balance in Fleet Cash Collateral Account              $_______________

E.  Fair market value of Time Deposits (as calculated by
    Fleet)                                                     $_______________

F.  Sum of Item C plus Item D plus Item E equals:              $_______________

G.  Result from Item F divided by 1.02 equals:                 $_______________

H.  Sum of Item B plus Item G equals Collateral Coverage
    Amount:                                                    $_______________

I.  Aggregate undrawn face amount of all issued and
    outstanding letters of credit:                             $_______________
</Table>

                 ITEM H MUST BE EQUAL TO OR GREATER THAN ITEM I

                             Compliance     yes/no

________________
Values and balances are to be determined as at the last business day of the
month ended immediately prior to the date of this worksheet.
<PAGE>
                                   EXHIBIT C

         Form of Application and Agreement for Standby Letter of Credit
<PAGE>
                     AGREEMENT FOR STANDBY LETTER OF CREDIT

         For good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged, the Bank and the Customer agree as follows:

         1. Each reference hereinafter contained to: (a) "Bank", "Bank's
Address", "Customer", "Customer's Address", and "Expiry Date" shall be deemed to
refer to the defined terms on Page 1 of this Agreement; (b) "Agreement" shall be
deemed to refer to this Application and Agreement for Standby Letter of Credit,
including without limitation the application portion on Page 1 hereof; (c)
"Business Day" shall be deemed to refer to any day on which commercial banks
located in the state of the Bank's Address are not required or authorized to
remain closed and which is not a Saturday. Sunday or legal holiday; (d) "Credit"
shall be deemed to refer to the letter of credit to be issued by the Bank
substantially in the form set forth in the application portion of this
Agreement, all amendments thereto, and any substitutions or replacements
thereof;(e) "Events of Default" shall be deemed to refer to one or more of the
events of default or defaults specified in Paragraph 6 of this Agreement; (f)
"Prime Rate" shall be deemed to refer to the rate of interest designated by the
Bank from time to time as being its prime rate of interest.

      2. As to instruments payable in U.S. Dollars, the Customer will: (a) pay
the Bank in U. S. Dollars the amount paid on any sight draft on demand or, at
the Bank's option, pay the Bank in advance the amount required to pay such
draft; and (b) pay the Bank in U. S. Dollars the amount of each acceptance on
demand, but in any event not later than one Business Day prior to maturity.

      3. As to instruments payable in a foreign currency, the Customer will: (a)
pay the Bank in U.S. Dollars, the equivalent of the amount paid on any sight
draft, immediately upon such payment being made, at the Bank's then selling rate
for cable transfers to the place of payment in the currency in which the draft
is drawn; and (b) in the case of each acceptance pay the Bank in U.S. Dollars,
on demand, but in any event in time to reach the place of payment by mail not
later than one Business Day prior to maturity, the equivalent thereof at the
Bank's then selling rate for the currency in which the acceptance is payable, or
at the Bank's option pay the Bank on demand the equivalent of the acceptance in
U.S. Dollars at the Bank's then selling rate for cable transfers to the place of
payment in such currency. If for any reason there should exist at the time in
question no rate of exchange generally current in the state of the Bank's
Address for effective cable transfers of the sort provided for, the Customer
will pay the Bank on demand an amount in U.S. Dollars equivalent to the actual
cost to the Bank of settlement of the Bank's obligations to the payor of the
draft or acceptance or any holder thereof, as the case may be, however and
whenever such settlement is made by the Bank.

      4. The Customer will pay the Bank on demand a commission at such rate as
the Bank may determine, plus interest where chargeable, and all fees, charges
and expenses, including reasonable counsel fees, incurred or paid by the Bank in
protecting or enforcing its rights under this Agreement, or in connection with
the Credit issued pursuant hereto and any confirmation thereof, or arising or
caused in any manner whatsoever in connection therewith, including without
limitation reasonable counsel fees and expenses incurred in connection with the
defense of all actions seeking to restrain or enjoin payment of the Credit or
any draft accepted under the Credit or attachment or garnishment proceedings
involving any of the proceeds of the Credit or any such draft. In addition to
commissions, fees, charges, expenses and amounts otherwise payable with respect
to the issuance of the Credit, the Customer shall pay to the Bank on demand such
amounts as the Bank in its sole discretion determines are necessary to
compensate the Bank for any costs attributable to the Bank's issuing or having
outstanding or making payment under the Credit resulting from the application of
any domestic or foreign law or regulation or the interpretation or
administration thereof applicable to the Bank regarding any reserve, assessment,
capitalization (including the cost of maintaining capital sufficient to permit
issuance of the Credit, provided the cost attributed to the Credit is determined
in good faith by any reasonable method) or similar requirement whether existing
at the time of issuance of the Credit or adopted thereafter. All amounts not
paid when due in accordance with this Agreement (including without limitation
those set forth in paragraph 2.3 and 4 hereof) shall bear interest until paid in
full at a rate per annum equal to six percent (6%) above the Prime Rate, not to
exceed the maximum rate of interest permitted by applicable law. Each change in
such interest rate shall take effect simultaneously with the corresponding
change in the Prime Rate. The Bank is hereby irrevocably authorized to charge
any one or more of the Customer's accounts with the Bank for payment in full or
in part of any of the Customer's obligations to the Bank under this Agreement.
At the option of the Bank, if there is a separate revolving line of credit, line
of credit, or other credit facility existing between the Bank and the Customer,
the Bank is irrevocably authorized to satisfy the Customer's reimbursement
obligation to the Bank, in whole or in part, by making an advance under such
facility.

      5. The users of the Credit shall be deemed the Customer's agents, and the
Customer assumes all risks of their acts or omissions. The Customer's obligation
to pay the Bank for all amounts due under this Agreement is absolute and
unconditional. Such obligation of the Customer shall not be affected by, and the
Bank shall not be responsible for, the validity, sufficiency, correctness or
genuineness of documents, even if such documents should in fact prove to be in
any or all respects incorrect, defective, invalid, insufficient, fraudulent or
forged, any breach of contract or disputes between any beneficiary of the Credit
and the Customer; the existence of any claim, setoff, defense or other right
which the Customer may have at any time against the beneficiary or any other
person or entity, whether in connection with this Agreement, the transaction
contemplated herein or any unrelated transaction; the failure of any draft or
certificate to bear reference or adequate reference to the Credit; errors,
omissions, interruptions or delays in transmission or delivery of any messages
by mail, telex, telecopy, or otherwise; the exchange, release or non-perfection
of any collateral or the release of any guarantor; or any consequences arising
from causes beyond the Bank's control; and none of the above shall affect,
impair or prevent the fixing of any of the Bank's rights or powers hereunder.
Any provision with respect to any of the foregoing matters which is contained in
the Credit itself may be waived by the Bank. The Customer will hold the Bank
harmless from all loss or damage in respect of any of the foregoing matters, and
from any and all damage and loss whatsoever suffered by the Bank by reason of
any and all action taken by the Bank in good faith.

         6. The Customer will deliver to the Bank on demand such additional
security (including cash) as the Bank may from time to time require, to be held
as general collateral for all the Customer's liabilities to the Bank hereunder
and for all other liabilities, absolute or contingent due or to become due,
which may be at any time owing to Bank by the Customer. All property belonging
to the Customer, including any collection items, now or hereafter handed to the
Bank or for any purpose left in the Bank's possession by the Customer or for the
Customer's account, or in transit to or from the Bank, by mail or carriers, and
all balances of any deposit accounts the Customer may have with the Bank, are
hereby made security, and the Bank is hereby granted a security interest
therein, for all such liabilities and may be held or disposed of as the Bank may
see fit, and applied toward any payment of any and all such liabilities, all of
which shall become immediately due and payable upon an Event of Default. Each of
the following events or actions by or affecting the Customer shall constitute an
Event of Default; default in the performance of any undertaking to the Bank
under this Agreement, any trust receipt, or under any other obligation to the
Bank or agreement with the Bank; insolvency, or the filing by or against the
Customer of any petition under the Bankruptcy Code or any similar Federal or
state statute; the filing by or against the Customer of a petition for the
appointment of a receiver; the making of an assignment for the benefit of
creditors; the Customer's death, failure in business, dissolution, suspension or
termination of existence; any seizure, vesting or intervention by or under
authority of a government, by which the Customer's management is displaced or
its authority in the conduct of its business is curtailed; or the attachment or
distraint of any of the Customer's funds or other property which may be in, or
come into, the Bank's possession or under the Bank's control, or that of any
third party acting for the Bank, or of the same becoming subject at any time to
any mandatory order of court or other legal process. The Bank may at any time
transfer into the Bank's or its nominee's name all or any part of such security,
before or after maturity of any of the Customer's obligations and without any
notice to the Customer or any other person. Whenever the Bank deems it necessary
for the Bank's or the customer's protection, or after an Event of Default
specified herein, or other default, the Bank shall have the right to accelerate
and make immediately due and payable all of the Customer's obligations to the
Bank under the Credit and this Agreement and under any other document or
agreement (including without limitation the obligations evidenced by the
outstanding (but undrawn upon Credit and/or by, acceptances which have not
matured). The Bank shall have, in addition to all other rights and remedies
under applicable law, the rights and remedies of a secured party under the
Uniform Commercial Code, and the Bank may, without regard to such maturity,
realize upon (by sale, assignment, setoff, application or otherwise) all or any
part of such security, in each case without advertisement, notice to, tender,
demand or call of any kind up on the Customer or any other person, except that,
unless such security is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, the Bank shall give the
Customer three Business Days' prior written notice of the time and place of any
public sale thereof or of the time after which any private sale or other
intended disposition thereof is to be made. Any such sale or assignment may be
public, private or upon any broker's board or exchange, for cash, on credit or
for future delivery, and at such price and upon such terms and conditions, as
the Bank deems appropriate. For this purpose, the Bank may, so far as the
Customer can give authority therefor, enter upon any premises on which such
security or any proceeds thereof may be situated and remove the same therefrom,
or require that such security or proceeds be made available to the Bank at a
place or places reasonably convenient to both the Bank and the Customer. The
Bank may acquire all or any part of such security and any purchaser shall hold
same free from any equity of redemption or other claim or right on the
Customer's part, which are hereby specifically waived and released. The Bank may
discount, settle, compromise, or extend any obligations constituting such
security, and sue thereon in the Bank's or the Customer's name. However, the
Bank shall not be liable for failure to collect or demand payment of, or protest
or give notice of non-payment of, any obligation included in such security or
part thereof, or for any delay in so doing, nor shall the Bank be under any
obligation to take any action whatever in respect to such security or any part
thereof. No advertising, notice, tender, demand, or call at any time given or
made shall be a waiver of the Bank's right to proceed in the same or other
instances without any further action.

         7. The receipt by the Bank at any time of other collateral shall not be
deemed a waiver of any of the Bank's rights or powers relating to any collateral
which the Bank may hold at the time of such receipt.

         8. No failure on the part of the Bank 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 right hereunder preclude any other further
exercise thereof or the exercise of any right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. No amendment or
waiver of any provision of this Agreement nor consent to any departure by the
parties hereto shall in any event be effective unless the same shall be in
writing and signed by such party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

         9. This Agreement shall continue in force not withstanding any change
in the composition of firm or Firms parties hereto, or drawers of drafts
hereunder, or in the incorporation of any such firm.

         1O. The Customer authorizes the Bank, without reference to or approval
by the Customer, to set forth the terms of this Agreement in the Credit in such
language as the Bank may deem appropriate with such variations from such terms
as the Bank may in its discretion determine (which determination shall be
conclusive and binding upon the Customer) are necessary and are not materially
inconsistent with this Agreement.

         11. All rights under the Credit and this Agreement (whether or not the
Credit is documentary or non-documentary in nature) shall be determined by the
Uniform Customs and Practice for Documentary Credits of the International
Chamber of Commerce in effect (International Chamber of Commerce Publication No.
500 or the most recent revision or successor thereto which shall be in effect
from time to time), the terms of which are known to the Customer and which are
incorporated by reference herein, and all rights under the Credit and this
Agreement, to the extent not inconsistent with said Uniform Customs and
Practices, shall be construed in accordance with the local laws of the State of
the Bank's Address.

         12. The Customer represents, warrants and covenants to the Bank that
(a) if a partnership or a corporation, it is duly organized, validly existing
and in good standing; (b) it has the power to execute, deliver and perform this
Agreement; (c) the execution, delivery and performance of this Agreement have
been duly authorized by all requisite action; (d) the execution, delivery and
performance of this Agreement and the issuance of the Credit will not violate
any provision of law, any order of any court or other agency of government, the
Articles of Incorporation or By-Laws of a corporate Customer or the Partnership
Agreement of a partnership Customer, or any indenture, agreement or other
instrument to which it is a party, or by which it is bound, or be in conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge or encumbrance of any
nature what so ever upon any of the property or assets of the Customer (other
than in favor of the Bank) or the acceleration of any of the Customer's
outstanding indebtedness; (e) the Customer has heretofore furnished to the Bank
accurate and complete financial data and other information based on its
operations in previous years, and said financial data furnished to the Bank is
accurate and complete and fairly presents the financial position and the results
of operations for the periods indicated therein; (f) there has been no material
adverse change in the condition, financial or otherwise, of the Customer since
the date of the most recent financial statement; and (g) the Customer shall
furnish to the Bank periodically such financial statements, balance sheets and
profit and loss statements, together with supporting schedules, tax returns. and
such other information regarding the operations, assets, business, affairs and
financial condition of the Customer, as the Bank shall from time to time
request.

         13. If this Agreement is signed by two or more Customers, it shall be
the joint and several agreement and obligation of such Customers.

         14. The Customer agrees that in the event of any extension of the
maturity or time for presentation of drafts, acceptances or documents, or any
other amendments or modification of the terms of the Credit, at the request of
any single Customer, with or without notification to the others, or in the event
of any increase in the amount of the Credit at any single Customer's request,
with or without notification to the others, this amount shall be binding upon
the Customer with regard to the Credit so increased or otherwise amended or
modified, to drafts, documents and property covered thereby, and to any action
taken by the Bank or any of its correspondents in accordance with such
extension, increase or other modification.

         15. The Bank is authorized to interpret the Credit in accordance with
rules, regulations, and customs prevailing at the place and time during which
the credit is available or the drafts are drawn or negotiated.

         16. The Bank is authorized to pay conforming drawings submitted by an
administrator, trustee in bankruptcy, debtor-in-possession, assignee for the
benefit of creditors, liquidator, receiver or other legal representative of the
party who is authorized to draw.

         17. The available amount of the Credit shall be reduced by the amount
of any conforming drawing made thereunder.

         18. All notices and other communications provided for hereunder shall
be in writing and shall be personally delivered or sent by certified first class
mail, return receipt requested, or by telex or telecopy. Unless otherwise
specified in this Agreement, all such notices and other communications to the
Bank shall be mailed, telexed, telecopied or delivered to it, addressed to the
Bank, c/o Fleet/Norstar Trade Services Operations, Dept. MA ML SFTINT, P.0. Box
2197, Boston, Massachusetts 02106-2197 (Telex No. 210721; Telecopy No. (617)
241-1993), and all such notices and other communications to the Customer shall
be mailed, telexed, telecopied or delivered to the Customer, at the Customer's
Address. The Bank and the Customer reserve the right to change such address,
telex number and/or telecopy number in a written notice to the other party. All
such notices and other communications shall, when mailed certified or registered
mail, be effective three days after the date of deposit in the mails, addressed
as aforesaid; when personally delivered, when received at the address as
aforesaid; and, when sent by telex or telecopy, when received at the then
current telex or telecopy number.

         19. Any provision of this Agreement which is prohibited, unenforceable
or not authorized in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.

         20. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but both or all of which, when taken
together, shall constitute but one instrument, and shall become effective when
copies hereof which, when taken together, bear the signatures of each of the
parties, hereto shall be delivered to the Bank.

         21. The Customer hereby expressly submits to the non-exclusive
jurisdiction of all federal and state courts sitting in the state of the Bank's
Address, and agrees that any process or notice of motion or other application to
any of said courts or a judge thereof may be served upon the Customer within or
without such court's jurisdiction by registered or certified mail, return
receipt requested, or by personal service, at the Customer's Address (or at such
other address as the Customer shall specify by a prior notice in writing to the
Bank), provided reasonable time for appearance is allowed. The Customer hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue to any suit, action or proceeding arising out of or relating to
this Agreement brought in any federal or state courts sitting in the Bank's
location and hereby further irrevocably waives any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum. Notwithstanding the foregoing, the Bank may sue the Customer
in any jurisdiction where the Customer or any of its assets may be found and may
serve legal process upon the Customer in any other manner permitted by law.

         22. The Customer hereby waives any rights it may have to a trial by
jury of any dispute arising under or relating to this Agreement or the Credit,
and agrees that any such dispute shall be tried before a judge sitting without a
jury.

         23. The Bank reserves the right to sell or assign all or any portion of
the Bank's right, title and interest in and to the Agreement and all related
documents, and to participate all or any portion of the aforesaid. In connection
therewith, the Customer authorizes the Bank to deliver to any such purchaser or
participant and any prospective purchaser or participant the originals and/or
copies of the Agreement, financial statements relative to the Customer and any
guarantors, and any and all other credit or other information from time to time
in the Bank's possession.

         24. The issuance of the Credit by the Bank constitutes the Bank's
adoption, authentication, signature, and agreement to be bound by the terms and
provisions of this Agreement.

         25. This Agreement shall be binding upon the Customer's respective
executors, administrators, successors and assigns and shall inure to the benefit
of the Bank and its successors and assigns.
<PAGE>

                                      Rider

                                       to

                               Fleet National Bank

             Application and Agreement for Standby Letter of Credit

                            Dated: _________ __, 2002

                    Executed By: Montpelier Reinsurance Ltd.

         Reference is made to that certain Application and Agreement for Standby
Letter of Credit, dated as of _________ __, 2002, between Fleet National Bank
and Montpelier Reinsurance Ltd. (the "Agreement"). All references in the
Agreement to the "Rider" are references to this Rider. The provisions contained
in the Agreement are incorporated herein by reference as if fully set out
herein; and all references to the Agreement shall be deemed to include this
Rider. To the extent that any provision of this Rider is inconsistent with any
provision of the Agreement, the terms of this Rider shall, to the extent of any
such inconsistency, govern. The Agreement and this Rider shall be read together
and construed as one instrument. Capitalized terms used herein without
definition shall have the respective meanings ascribed thereto in the Agreement.

         1. No Commitment. The Credit issued pursuant to this Agreement is
discretionary. Nothing contained in this Agreement or in any other document or
instrument executed in connection herewith shall impose any obligation on the
part of the Bank to issue the Credit or to renew, amend or otherwise modify any
existing Credit; and it is hereby expressly acknowledged and agreed by the
Customer that the issuance and amount of the Credit issued pursuant to this
Agreement shall at all times be in the Bank's sole and absolute discretion.

         2. Provisions Supplemental; Relation to Other Documents. The Customer
has entered into (i) a Pledge Agreement, dated as of February 26, 2002 (the
"Pledge Agreement") between the Customer and the Bank, pursuant to which the
Customer has granted a security interest to the Bank in the Pledged Collateral
(as such term is defined in the Pledge Agreement), and (ii) a Control Agreement,
dated as of February 26, 2002 (the "Control Agreement") by and among the
Customer, the Bank and State Street Bank and Trust Company (the "Custodian"),
pursuant to which the Bank has obtained control over the Securities Account (as
such term is defined in the Pledge Agreement) maintained with the Custodian. The
provisions of the Pledge Agreement and the Control Agreement are supplemental to
the provisions of this Agreement. In the event that any provision of the Pledge
Agreement or the Control Agreement is inconsistent with any provision of this
Agreement, then the provision of the Pledge Agreement or the Control Agreement,
as the case may be, shall, to the extent of any such inconsistency, govern.

         3. Fees. The Customer shall pay to the Bank a fee ("Letter of Credit
Fees") equal to 0.28% per annum of the undrawn face amount of each outstanding
letter of credit issued pursuant to this Agreement. Letter of Credit Fees shall
be payable quarterly in arrears on the first Business Day of each fiscal quarter
of the Customer for the immediately preceding fiscal quarter, commencing on the
first such date following the date of this Agreement. Letter of Credit Fees
shall be calculated by the Bank and shall, absent manifest error, be conclusive.
The Bank reserves the right in its sole discretion from time to time to change
the per annum rate at which Letter of Credit Fees are calculated; provided that
the Bank shall notify the Customer of any such rate change, which shall take
effect with respect to letters of credit issued, renewed or otherwise extended
on or after the date such notice is given and which shall not otherwise apply to
any
<PAGE>
                                      -2-

outstanding Letters of Credit. For greater certainty, the commission referred to
in Paragraph 4 of the Agreement shall be deemed to refer to Letter of Credit
Fees, which the Customer acknowledges and agrees are obligations in addition to
its obligation to pay the customary fees and other charges and expenses referred
to in such Paragraph 4.

         4. Events of Default. Paragraph 6 of the Agreement is hereby deleted in
its entirety and replaced with Section 6 of the Pledge Agreement, which is
incorporated herein by reference.

         5. Reimbursement Obligations.

         (a) In addition to the obligations of the Customer set forth in
Paragraphs 2 and 3 of the Agreement, the Customer hereby agrees to reimburse or
pay to the Bank with respect to the Credit issued, extended or renewed by the
Bank hereunder, on each date that any draft presented under such Credit is
honored by the Bank, or the Bank otherwise makes a payment with respect thereto,
the amount of any taxes, fees, charges or other costs and expenses whatsoever
incurred by the Bank in connection with any payment made by the Bank under, or
with respect to, such Credit.

         (b) Each such payment shall be made to the Bank at the Bank's Address
in immediately available funds. Interest on any and all amounts remaining unpaid
by the Customer under this Paragraph 5 at any time from the date such amounts
become due and payable (whether as stated in this Paragraph 5, by acceleration
or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Bank on demand at the rate specified in this Agreement for
overdue amounts.

         (c) The Customer's obligations under this Paragraph 5 shall be absolute
and unconditional under any and all circumstances and irrespective of the
occurrence of any default or Event of Default or any condition precedent
whatsoever or any setoff, counterclaim or defense to payment which the Customer
may have or have had against the Bank or any beneficiary of the Credit. The
Customer further agrees with the Bank that the Bank shall not be responsible
for, and the Customer's reimbursement obligations under this Agreement 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 Customer, the beneficiary of the Credit or any financing institution
or other party to which the Credit may be transferred or any claims or defenses
whatsoever of the Customer against the beneficiary of the Credit or any such
transferee. The Bank shall not be liable for any error, omission, interruption
or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with the Credit. The Customer agrees that any action
taken or omitted by the Bank under or in connection with the Credit and the
related drafts and documents, if done in good faith, shall be binding upon the
Customer and shall not result in any liability on the part of the Bank to the
Customer.

         6. Reliance by Bank. The Bank shall be entitled to rely, and shall be
fully protected in relying upon, the Credit, draft, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper person
or persons and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Bank. The Bank shall be fully
justified in failing or refusing to take any action under this Agreement unless
it shall first have received such advice or concurrence of such persons as it
reasonably deems appropriate or it shall first be indemnified to its reasonable
<PAGE>
                                      -3-

satisfaction by the Customer and/or any assignee(s) of, or participant(s) in,
the Credit against any and all liability and expense which may be incurred by
the Bank by reason of taking or continuing to take any such action. The Bank
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement in accordance with a request of an assignee(s) of, or
participant(s) in, the Credit, and such request and any action taken or failure
to act pursuant thereto shall be binding upon such assignee or such participant
and all future holders of the Credit or of a participation therein.

         7. No Offset; etc. All payments by the Customer hereunder and under any
of the other Transaction Documents (as such term is defined in the Pledge
Agreement) shall be made without recoupment, setoff or counterclaim and free and
clear of and without deduction for any taxes, levies, imposts, duties, charges,
fees, deductions, withholdings, compulsory loans, restrictions or conditions of
any nature now or hereafter imposed or levied by any jurisdiction or any
political subdivision thereof or taxing or other authority therein unless the
Customer is compelled by law to make such deduction or withholding. If any such
obligation is imposed upon the Customer with respect to any amount payable by it
hereunder or under any of the other Transaction Documents, the Customer will pay
to the Bank, on the date on which such amount is due and payable hereunder or
under such other Transaction Document, such additional amount in dollars as
shall be necessary to enable the Bank to receive the same net amount which it
would have received on such due date had no such obligation been imposed upon
the Customer. The Customer will deliver promptly to the Bank certificates or
other valid vouchers for all taxes or other charges deducted from or paid with
respect to payments made by the Customer hereunder or under such other
Transaction Document.

         8. Transfer of Collateral; Notice of Exclusive Control. Notwithstanding
anything contained in the Agreement, the Bank agrees that, unless an Event of
Default shall have occurred and be continuing, it shall not (i) transfer all or
any part of the Pledged Collateral into the Bank's or its nominee's name and/or
(ii) issue a Notice of Exclusive Control (as such term is defined in the Control
Agreement).

         9. Representations and Warranties. The Customer hereby represents and
warrants to the Bank that it is not an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.

         10. Governing Law; Submission to Jurisdiction. This Agreement and the
rights and obligations of the parties hereunder shall be construed and
interpreted in accordance with the laws of the State of New York, excluding the
laws applicable to conflicts or choice of law (other than Section 5-1401 of the
New York General Obligations Law). THE CUSTOMER AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS (AS SUCH
TERM IS DEFINED IN THE PLEDGE AGREEMENT) MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE CUSTOMER BY MAIL AT THE ADDRESS SPECIFIED IN THE PLEDGE
AGREEMENT. THE CUSTOMER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS
BROUGHT IN AN INCONVENIENT COURT.
<PAGE>
                                      -4-

         The undersigned hereby acknowledges and agrees with the provisions
contained in this Rider as evidenced by its execution of this Rider as of the
date first above written.

                                       MONTPELIER REINSURANCE LTD.

                                       By:
                                          --------------------------------------
                                          Name:
                                          Title:<PAGE>

To:      Montpelier Reinsurance Ltd.,
         Mintflower Place
         6th Floor
         8 Par-La-Ville Road
         PO Box HM 2079
         Pembroke HM HX
         Bermuda

                                                                   December 2002

Dear Sirs

We are pleased to advise you that we, Barclays Bank PLC, (the BANK) are willing
to make available a letter of credit facility to you as follows:

1           DEFINITIONS AND INTERPRETATION

1.1         DEFINITIONS

            In this Letter the following definitions apply:

            ACT means the Companies Act 1985.

            ADDITIONAL RESTRICTED PAYMENT means any Restricted Payment in excess
            of a Permitted Restricted Payment.

            AFFILIATE of any Person means any other Person which, directly or
            indirectly, controls or is controlled by or is under common control
            with such Person (excluding any trustee under, or any committee with
            responsibility for administering, any Plan). A Person shall be
            deemed to be:

            (a)   "controlled by" any other Person if such other Person
                  possesses, directly or indirectly, power:

                  (i)   to vote 20% or more of the securities having at the time
                        of any determination hereunder voting power for the
                        election of directors of such Person; or

                  (ii)  to direct or cause the direction of the management and
                        policies of such Person whether by contract or
                        otherwise; or

            (b)   "controlled by" or "under common control with" such other
                  Person if such other Person is the executor, administrator, or
                  other personal representative of such Person.

            ANNUAL STATEMENT means the annual financial statement of the
            Applicant as required to be filed with the Department of the
            Applicant's domicile, together with all exhibits or schedules filed
            therewith, prepared in conformity with SAP. References to amounts on
            particular exhibits, schedules, lines, pages and columns of the
            Annual Statement are based on the format promulgated by the
            Department for the 2000 Annual Statements. If such format is changed
            in future years so that different information is contained in such
            items or they no longer exist, it

                                                                          Page 1
<PAGE>

            is understood that the reference is to information consistent with
            that reported in the referenced item in the 2000 Annual Statement of
            the Applicant.

            APPLICANT means Montpelier Reinsurance Ltd., a company incorporated
            in Bermuda and having its registered office at Clarendon House, 2
            Church Street, Hamilton, Bermuda.

            AVAILABILITY PERIOD means the inclusive period commencing on the
            date hereof and ending on December 2003 being the date falling 364
            days after the date of this Letter, as extended from time to time in
            accordance with Paragraph 2.3.

            BARCLAYS LETTER OF CREDIT FACILITY means the letter of credit
            facility established by Barclays Bank PLC in favour of the Applicant
            under an application and agreement for standby letter of credit
            dated 21 June 2002.

            BENEFICIARY means a person in whose favour a Letter of Credit is
            issued.

            BORROWER REINSURANCE AGREEMENT means any arrangement whereby any
            Insurance Subsidiary, as reinsurer, agrees to indemnify any other
            insurance or reinsurance company against all or a portion of the
            insurance or reinsurance risks underwritten by such insurance or
            reinsurance company under any insurance or reinsurance policy.

            BUSINESS DAY means any day other than a Saturday, Sunday or other
            day on which commercial banks in London, Chicago, New York or
            Bermuda are authorized or required by law to close.

            CAPITAL LEASE OBLIGATION means, as to any Person, the obligations of
            such Person to pay rent or other amounts under any lease which is
            required to be classified and accounted for as a capital lease on a
            balance sheet of such Person in accordance with GAAP. For purposes
            of this Letter, the amount of such Capital Lease Obligation shall be
            the capitalized amount thereof determined in accordance with GAAP.

            CASH COLLATERAL means Dollar credit balances on the Cash Collateral
            Account and the Deposit Account and pledged in each case to the Bank
            pursuant to the Pledge Agreement.

            CASH COLLATERAL ACCOUNT means the interest bearing account number
            050798413 entitled "Barclays Bank, as collateral Pledgee for
            Montpelier Reinsurance Ltd. - Cash Collateral Account", maintained
            with the Bank at its branch office in New York.

            CERTIFIED COPY means, in relation to a document, a copy of that
            document bearing the endorsement "Certified a true, complete and
            accurate copy of the original, which has not been amended otherwise
            than by a document, a Certified Copy of which is attached hereto",
            which has been signed and dated by a duly authorised officer of the
            relevant company and which complies with that endorsement.

            CHANGE OF CONTROL has the meaning given to that term in Paragraph
            8.1.

            CODE means the U.S Internal Revenue Code of 1986, as amended from
            time to time, and regulations promulgated thereunder.

            COLLATERAL COVERAGE AMOUNT has the meaning given to that term in the
            Pledge Agreement.

            COMPLIANCE CERTIFICATE means a certificate of the Parent in a form
            agreed acceptable to the Bank and executed under the authority of
            the board of directors of the Applicant.

            CONSOLIDATED DEBT means the consolidated Debt (excluding Hedging
            Obligations) of the Parent and its Subsidiaries, including the
            Loans.

                                                                          Page 2
<PAGE>

            CONSOLIDATED INSURANCE SUBSIDIARY NET WORTH means the Net Worth of
            all Insurance Subsidiaries on a consolidated basis.

            CONSOLIDATED NET INCOME means, with respect to any Person, the
            consolidated net income for such period as determined by GAAP,
            adjusted by excluding, without duplication, to the extent included
            in calculating such Consolidated Net Income, all extraordinary gains
            and losses.

            CONSOLIDATED NET WORTH means the Net Worth of the Parent and its
            Subsidiaries on a consolidated basis.

            CONTINGENT LIABILITY means any agreement, undertaking or arrangement
            by which any Person (outside the ordinary course of business)
            guarantees, endorses, acts as surety for or otherwise becomes or is
            contingently liable for (by direct or indirect agreement, contingent
            or otherwise, to provide funds for payment by, to supply funds to,
            or otherwise to invest in, a debtor, or otherwise to assure a
            creditor against loss) the Debt, obligation or other liability of
            any other Person (other than by endorsements of instruments in the
            course of collection), or for the payment of dividends or other
            distributions upon the shares of any other Person or undertakes or
            agrees (contingently or otherwise) to purchase, repurchase, or
            otherwise acquire or become responsible for any Debt, obligation or
            liability or any security therefor, or to provide funds for the
            payment or discharge thereof (whether in the form of loans,
            advances, stock purchases, capital contributions or otherwise), or
            to maintain solvency, assets, level of income, or other financial
            condition of any other Person, or to make payment or transfer
            property to any other Person other than for fair value received;
            provided, however, that obligations of each of the Insurance
            Subsidiaries under Primary Policies or Borrower Reinsurance
            Agreements which are entered into in the ordinary course of business
            (including security posted by each of the Insurance Subsidiaries in
            the ordinary course of its business to secure obligations
            thereunder) shall not be deemed to be Contingent Liabilities of such
            Insurance Subsidiary or the Parent for the purposes of this Letter.
            The amount of any Person's obligation under any Contingent Liability
            shall (subject to any limitation set forth therein) be deemed to be
            the lesser of (i) the outstanding principal amount (or maximum
            permitted principal amount, if larger) of the Debt, obligation or
            other liability guaranteed or supported thereby or (ii) the maximum
            stated amount so guaranteed or supported.

            CONTRACTUAL OBLIGATION means, relative to any Person, any
            obligation, commitment or undertaking under any agreement or other
            instrument to which such Person is a party or by which it or any of
            its property is bound or subject.

            CONTROL AGREEMENT means the agreement dated on or about the date of
            this Letter between the Custodian, the Applicant and the Bank.

            CREDIT AGREEMENT means the agreement dated 12 December 2001 among
            the Parent and the Lenders and Bank of America, N.A., in its
            capacity as administrative agent for the Lenders as amended by an
            amendment agreement of 26 December 2001, a second amendment
            agreement of 17 June 2002 and a third amendment agreement of 1
            August 2002 pursuant to which the Lenders made available to the
            Parent a revolving loan facility and term loan facility.

            CUSTODIAN means State Street Bank and Trust Company, a
            Massachusetts's trust company with its principal place of business
            at 225 Franklin Street, Boston, Massachusetts 02110, United States
            of America.

            CUSTODIAN AGREEMENT means the agreement dated 18 December 2001
            between the Applicant and the Custodian.

            DEBT means, with respect to any Person, at any date, without
            duplication, (a) all obligations of such Person for borrowed money
            or in respect of loans or advances; (b) all obligations of such

                                                                          Page 3
<PAGE>

            Person evidenced by bonds, debentures, notes or other similar
            instruments; (c) all obligations in respect of letters of credit
            which have been drawn but not reimbursed by the Person for whose
            account such letter of credit was issued within the later of (x)
            three Business Days and (y) the applicable cure period and bankers'
            acceptances issued for the account of such Person; (d) all Capital
            Lease Obligations of such Person; (e) all Hedging Obligations of
            such Person; (f) to the extent required to be included as
            liabilities in accordance with GAAP, all obligations of such Person
            to pay the deferred purchase price of property or services; (g) Debt
            of such Person secured by a Lien on property owned or being
            purchased by such Person (including Debt arising under conditional
            sales or other title retention agreements) whether or not such Debt
            is limited in recourse; (h) any Debt of another Person secured by a
            Lien on any assets of such first Person, whether or not such Debt is
            assumed by such first Person (it being understood that if such
            Person has not assumed or otherwise become personally liable for any
            such Debt, the amount of the Debt of such Person in connection
            therewith shall be limited to the lesser of the face amount of such
            Debt and the fair market value of all property of such Person
            securing such Debt); (i) any Debt of a partnership in which such
            Person is a general partner unless such debt is nonrecourse to such
            Person; and (j) all Contingent Liabilities of such Person whether or
            not in connection with the foregoing; provided that, notwithstanding
            anything to contrary contained herein, Debt shall not include (x)
            unsecured current liabilities incurred in the ordinary course of
            business and paid within 90 days after the due date (unless
            contested diligently in good faith by appropriate proceedings and,
            if requested by the Bank, reserved against in conformity with GAAP)
            other than liabilities that are for money borrowed or are evidenced
            by bonds, debentures, notes or other similar instruments or (y) any
            obligations of such Person under any Borrower Reinsurance Agreement
            or any Primary Policy.

            DEPARTMENT means the Minister of Finance of Bermuda.

            DEPOSIT ACCOUNT means the Applicant's demand deposit account number
            47608716 maintained with the Custodian and subject to the terms of
            the Control Agreement.

            DISPOSAL means a sale, transfer or other disposal (including by way
            of lease or loan) by a Person of all or part of its assets, whether
            by one transaction or a series of transactions and whether at the
            same time or over a period of time.

            $ and DOLLAR means the lawful currency of the United States of
            America.

            ERISA means the U.S Employee Retirement Income Security Act of 1974
            and any regulations issued pursuant thereto.

            ERISA AFFILIATE means any trade or business (whether or not
            incorporated) under common control with the Parent within the
            meaning of Section 414(b) or (c) of the Code (and Sections 414(m)
            and (o) of the Code for purposes of provisions relating to Section
            412 of the Code).

            ERISA EVENT means (a) a Reportable Event (as defined in Section 4043
            of ERISA and the regulations issued thereunder) with respect to a
            Pension Plan (other than a Reportable Event for which the PBGC has
            waived the 30-day notice requirement); (b) a withdrawal by the
            Parent or any ERISA Affiliate from a Pension Plan subject to Section
            4063 of ERISA during a plan year in which it was a substantial
            employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
            of operations that is treated as such a withdrawal under Section
            4062(e) of ERISA; (c) a complete or partial withdrawal by the Parent
            or any ERISA Affiliate from a Multiemployer Plan or notification
            that a Multiemployer Plan is in reorganization; (d) the filing of a
            notice of intent to terminate, the treatment of a Plan amendment as
            a termination under Sections 4041 or 4041A of ERISA, or the
            commencement of proceedings by the PBGC to terminate a Pension Plan
            or Multiemployer Plan; (e) an event or condition which might
            reasonably be expected to constitute grounds under Section 4042 of
            ERISA for the termination

                                                                          Page 4
<PAGE>

            of, or the appointment of a trustee to administer, any Pension Plan
            or Multiemployer Plan; or (f) the imposition of any liability under
            Title IV of ERISA, other than PBGC premiums due but not delinquent
            under Section 4007 of ERISA, upon the Parent or any ERISA Affiliate.

            EVENT OF DEFAULT means any of the events defined in Paragraph 11.

            EXECUTIVE OFFICER means, as to any Person, the president, the chief
            financial officer, the chief executive officer, the general counsel,
            the treasurer or the secretary.

            FACILITY has the meaning given to that term in Paragraph 6.3.4.

            FAIR MARKET VALUE means (a) with respect to Cash and Permitted
            Investments of the type described in limbs (a), (b), (c), (d) (e) or
            (f) of the definition of "Permitted Investments", the amounts
            thereof, and (b) with respect to any publicly-traded security in the
            U.S. (other than those set forth in clause (a) of this definition),
            the closing price for such security on the Business Day prior to the
            date for determination on the largest exchange on which security is
            traded (or if not traded on an exchange, the average of the closing
            bid and ask prices quoted over-the-counter on the date of the
            determination) as such prices are reported in the Wall Street
            Journal (Northeast Edition) or if not so reported, in any nationally
            recognized financial journal or newspaper in the U.S. and (c) with
            respect to any Investment (other than those set forth in clauses (a)
            and (b) of this definition), the price for such Investment on the
            date of calculation obtained from a generally recognized source
            approved by the Bank or the most recent bid quotation from such
            approved source (or, if no generally recognized source exists as to
            a particular Investment, any other source specified by the Parent to
            which the Bank does not reasonably object).

            FEDERAL AGENCY means any of the following agencies of the federal
            government of the United States: (a) Government National Mortgage
            Association; (b) the Export-Import Bank of the United States; (c)
            the Farmers Home Administration, an agency of the United States
            Department of Agriculture; (d) the United States General Services
            Administration; (e) the United States Maritime Administration; (f)
            the United States Small Business Administration; (g) the Commodity
            Credit Corporation; (h) the Rural Electrification Administration (i)
            the Rural Telephone Bank; (j) Washington Metropolitan Area Transit
            Authority; and (k) such other federal agencies as are acceptable to
            the Bank.

            FINAL MATURITY DATE means, subject to the provisions of Paragraph
            2.3, the date falling 364 days after the date of this Letter.

            FINANCING DOCUMENTS means this Letter, each Letter of Credit and the
            Security Documents.

            FISCAL QUARTER means any quarter of a Fiscal Year.

            FISCAL YEAR means any period of twelve consecutive calendar months
            ending on the last day of December.

            FLEET LETTER OF CREDIT FACILITY means the letter of credit facility
            established by Fleet National Bank in favour of the Applicant under
            an application and agreement for standby letter of credit dated 22
            February 2002.

            FRB means the Board of Governors of the Federal Reserve System, and
            any Governmental Authority succeeding to any of its principal
            functions.

            GAAP means (a) for purposes of the financial statements delivered
            pursuant to Paragraph 10.1(a), the maintenance of books and records
            under Paragraph 10.2(e)(i) and the reserves referred to in
            Paragraphs 9.1(o) and 10.2(a), generally accepted accounting
            principles set forth

                                                                          Page 5
<PAGE>

            from time to time in the opinions and pronouncements of the US
            Accounting Principles Board and the American Institute of Certified
            Public Accountants and statements and pronouncements of the US
            Financial Accounting Standards Board (or agencies with similar
            functions of comparable stature and authority within the U.S.
            accounting profession), which are applicable to the circumstances as
            of the date of determination and (b) for all other purposes
            including calculation of financial covenants, generally accepted
            accounting principles set forth from time to time in the opinions
            and pronouncements of the US Accounting Principles Board and the
            American Institute of Certified Public Accountants and statements
            and pronouncements of the US Financial Accounting Standards Board
            (or agencies with similar functions of comparable stature and
            authority within the U.S. accounting profession) which are
            applicable to Persons reporting on a "consolidated" rather than a
            "combined" basis.

            GOVERNMENTAL AUTHORITY means any nation or government, any state or
            other political subdivision thereof, and any entity exercising
            executive, legislative, judicial, regulatory or administrative
            functions of or pertaining to government.

            GROUP means the Applicant, the Parent and each of its Subsidiaries;
            and GROUP COMPANY means any one of them.

            HEDGING OBLIGATIONS means, with respect to any Person, the liability
            of such Person under any futures contract or options contract,
            interest rate swap agreements and interest rate collar agreements
            and all other agreements or arrangements (other than Retrocession
            Agreements), designed to protect such Person against fluctuations in
            interest rates or currency exchange rates (HEDGING AGREEMENTS). Debt
            under a Hedging Obligation shall be the amount of such Person's net
            obligation, if any, under each Hedging Agreement (determined on the
            mark-to-market value for such agreement based upon a readily
            available quotation provided by a recognized dealer in such type of
            Hedging Agreement)

            INSURANCE CODE means, with respect to any Insurance Subsidiary, the
            Insurance Code of such Insurance Subsidiary's domicile and any
            successor statute of similar import, together with the regulations
            thereunder, as amended or otherwise modified and in effect from time
            to time. References to sections of the Insurance Code shall be
            construed to also refer to successor sections.

            INSURANCE POLICIES means policies purchased from insurance companies
            by the Applicant or any of its Subsidiaries, for its own account to
            insure against its own liability and property loss (including,
            without limitation, casualty, liability and workers' compensation
            insurance).

            INSURANCE SUBSIDIARY means the Applicant and any other Subsidiary of
            the Parent which is licensed by any Governmental Authority to engage
            in the insurance business.

            INVESTED ASSETS means cash, cash equivalents, short term
            investments, investments held for sale and any other assets which
            are treated as investments under GAAP. Investments in Subsidiaries
            are not Invested Assets.

            INVESTMENT means, as to any Person, any investment of any Person,
            whether by means of security purchase, capital contribution, loan,
            time deposit or otherwise, and shall include without limitation
            Permitted Investments.

            IRS means the U.S. Internal Revenue Service, and any Governmental
            Authority succeeding to any of its principal functions under the
            Code.

            ISSUE DATE means the date specified in a Request upon which a Letter
            of Credit is to be opened by the Bank under this Letter.

                                                                          Page 6
<PAGE>

            LENDERS has the meaning given to that term in the Credit Agreement.

            LETTER OF CREDIT means a letter of credit opened or to be opened by
            the Bank at the request of the Applicant, subject to the terms and
            conditions hereof.

            LEVERAGE RATIO means the ratio of (a) Consolidated Debt to (b) the
            sum of Tangible Net Worth plus Consolidated Debt expressed as a
            percentage.

            LICENSE(S) means, as to any Insurance Subsidiary, all permits or
            authorisations to transact the insurance business (including,
            without limitation), licenses or certificates of authority from the
            applicable Department.

            LIEN means, when used with respect to any Person, any interest in
            any real or personal property, asset or other right held, owned or
            being purchased or acquired by such Person for its own use,
            consumption or enjoyment which secures payment or performance of any
            obligation and shall include any mortgage, charge, assignment by way
            of security, hypothecation, right of set off, lien, pledge,
            encumbrance, charge, retained title of a conditional vendor or
            lessor, or other security agreement, mortgage, deed of trust,
            chattel mortgage, assignment, pledge, retention of title, financing
            or similar statement or notice, trust or flawed asset arrangement
            (for the purpose of, or which has the effect of, granting security)
            or any other security interest of any kind whatsoever, or any
            agreement, whether conditional or otherwise to create any of the
            same, or any agreement to sell or otherwise dispose of any asset on
            terms whereby such asset is or may be leased to or reacquired by any
            Person or other encumbrance arising as a matter of law, judicial
            process or otherwise.

            LOAN means an extension of credit to the Parent under the Credit
            Agreement.

            LOAN DOCUMENTS means the Credit Agreement, any Note and all other
            agreements, instruments, certificates, documents, schedules or other
            written indicia delivered by the Parent or any of its Subsidiaries
            in connection with any of the foregoing.

            MATERIAL ADVERSE EFFECT means, the occurrence of an event, which has
            a materially adverse effect on:

            (a)   the business, assets, liabilities, operations, financial
                  condition or prospects of the Parent and its Subsidiaries
                  (including, for the avoidance of doubt, the Applicant) taken
                  as a whole; or

            (b)   the ability of the Applicant to perform any of its payment or
                  other material obligations under any of the Financing
                  Documents; or

            (c)   the legality, validity, binding effect or enforceability
                  against the Applicant of any Financing Document that by its
                  terms purports to bind the Applicant;

            MATURITY DATE means the last day of the Term of a Letter of Credit.

            MULTIEMPLOYER PLAN means any employee benefit plan of the type
            described in Section 4001(a)(3) of ERISA, to which the Parent or any
            ERISA Affiliate makes or is obligated to make contributions, or
            during the preceding three calendar years, has made or been
            obligated to make contributions.

            NET EQUITY PROCEEDS means, relative to the sale by the Parent of any
            stock, warrants or other equity securities which qualify as equity
            under GAAP (other than Cure Contributions, as such term is defined
            in the Credit Agreement), the excess of

            (a)   the gross cash proceeds received by the Parent from such sale
                  or contribution;

                                                                          Page 7
<PAGE>

            (b)   all reasonable underwriting commissions, private placement
                  fees, legal, investment banking, and accounting fees and
                  disbursements, printing expenses, and any governmental or
                  exchange fees incurred (or reasonably expected to be incurred)
                  in connection with such sale which are not payable to
                  Affiliates of the Parent.

            NET WORTH means, with respect to any Person, the consolidated net
            worth of such Person, calculated in accordance with GAAP.

            NON-INSURANCE SUBSIDIARY means any Subsidiary of the Parent which is
            not an Insurance Subsidiary.

            NOTE means a promissory note executed by the Parent in favour of a
            Lender pursuant to the Credit Agreement.

            OBLIGATIONS means all obligations and liabilities of the Applicant
            to the Bank howsoever created, arising or evidenced, whether direct
            or indirect, absolute or contingent, primary or secondary, joint or
            several, recourse or nonrecourse or now or hereafter existing or due
            or to become due, whether for principal, interest, fees, expenses,
            lease obligations, claims, indemnities or otherwise, under or in
            connection with this Letter or any other Financing Document.

            OUTSTANDINGS means, at any given time from and including the date of
            this Letter to and including the date upon which all obligations of
            the Applicant (whether present or future, actual or contingent)
            under this Letter have been satisfied in full, the maximum amount
            for which each Letter of Credit was opened less the aggregate amount
            of any permanent reductions or prepayments made in accordance with
            Paragraph 4.1 or claims reimbursed in full in accordance with
            Paragraph 4.2 plus the aggregate amount of any increases made to any
            Letters of Credit.

            PARENT means Montpelier Re Holdings Ltd., a Bermuda company.

            PBGC means the Pension Benefit Guaranty Corporation and any entity
            succeeding to any or all of its functions under ERISA.

            PENSION PLAN means any "employee pension benefit plan" (as such term
            is defined in Section 3(2) of ERISA), other than a Multiemployer
            Plan, that is subject to Title IV of ERISA and is sponsored or
            maintained by the Parent or any ERISA Affiliate or to which the
            Parent or any ERISA Affiliate contributes or has an obligation to
            contribute, or in the case of a multiple employer (as described in
            Section 4064(a) of ERISA) has made contributions at any time during
            the immediately preceding five plan years.

            PERMITTED INVESTMENT means, at any time:

            (a)   any evidence of Debt issued or guaranteed by the United States
                  Government;

            (b)   commercial paper which is issued by:

                  (i)   a corporation (except an Affiliate of the Parent) rated
                        at least A-2 by S&P or P-2 by Moody's, or

                  (ii)  any Lender (or its holding company);

            (c)   any certificate of deposit or bankers' acceptance or
                  eurodollar time deposit,

                  (i)   which is issued by either:

                                                                          Page 8
<PAGE>

                        (aa)  a financial institution which is rated at least
                              BBB- by S&P or Baa3 by Moody's, or

                        (bb)  any Lender, and

                  (ii)  such Investment is fully insured by the Federal Deposit
                        Insurance Corporation;

            (d)   any repurchase agreement with a term of one year or less
                  which:

                  (i)   is entered into with:

                        (aa)  any Lender, or

                        (bb)  any other commercial banking institution of the
                              stature referred to in clause (c)(i), and

                  (ii)  is secured by a fully perfected Lien in any obligation
                        of the type described in any of clauses (a) to (c) that
                        has a market value at the time such repurchase agreement
                        is entered into of not less than 100% of the repurchase
                        obligation of such Lender (or other commercial banking
                        institution) thereunder;

            (e)   investments in money market funds that invest solely in
                  Permitted Investments described in clauses (a) through (d);

            (f)   investments in short-term asset management accounts offered by
                  any Lender for the purpose of investing in loans to any
                  corporation (other than an Affiliate of the Parent ) organized
                  under the laws of any state of the United States or of the
                  District of Columbia and rated at least A-1 by S&P or P-1 by
                  Moody's; (g) investments in non-equity securities which are
                  rated at least BBB- by S&P or Baa3 by Moody's or 2; and

            (h)   investments in equity securities which are traded on a
                  national stock exchange.

            PERMITTED LIEN means:

            (a)   any Lien created under the Financing Documents;

            (b)   any Lien existing at the date of this Letter and created under
                  the Loan Documents;

            (c)   any Lien created under the Fleet Letter of Credit Facility and
                  the Barclays Letter of Credit Facility;

            (d)   any right of set-off or lien, in each case arising by
                  operation of law;

            (e)   any retention of title to goods supplied to a Group Company in
                  the ordinary course of its trading activities;

            (f)   any right of set-off over credit balances on bank accounts of
                  Group Companies arising in the ordinary course of the banking
                  arrangements of the Group;

            (g)   any agreement entered into by a Group Company in the ordinary
                  course of its trading activities to sell or otherwise dispose
                  of any asset on terms whereby that asset is or may be leased
                  to or re-acquired or acquired by a Group Company; and

            (h)   any Lien permitted under Section 6.8 of the Credit Agreement.

                                                                          Page 9
<PAGE>

            PERMITTED RESTRICTED PAYMENTS means ,in any quarter, Restricted
            Payments not exceeding 50% of the Consolidated Net Income for that
            quarter.

            PERSON means any natural person, corporation, limited liability
            company, partnership, firm, trust, joint venture, joint stock
            company, unincorporated association, government, governmental agency
            or other entity, whether acting in an individual, fiduciary or other
            capacity.

            PLAN means any "employee benefit plan" (as such term is defined in
            Section 3(3) of ERISA) established by the Parent or any ERISA
            Affiliate.

            PLEDGE AGREEMENT means the agreement dated on or about the date of
            this Letter between the Applicant (1), and the Bank (2) regarding,
            among other things, the Cash Collateral Account and the Deposit
            Account.

            PLEDGED COLLATERAL has the meaning given to that term in the Pledge
            Agreement.

            POTENTIAL DEFAULT means an event which with the giving of notice or
            lapse of time and/or the satisfaction of any other condition would
            constitute an Event of Default.

            (POUND) and STERLING mean the lawful currency of the United Kingdom.

            PRIMARY POLICIES means any insurance policies issued by an Insurance
            Subsidiary.

            QUALIFIED SECURITIES means marketable securities that are (i) issued
            by the United States Treasury or any Federal Agency and backed by
            the full faith and credit of the United States, or (ii) directly and
            fully guaranteed or insured by the United States Treasury or backed
            by the full faith and credit of the United States and (a) that
            mature within five (5) years of the date of purchase, (b) which are
            rated 'AAA' or higher by Moody's Investors Services, Inc., (c) are
            quoted daily by a generally recognised quotation service approved by
            the Bank, provided that there shall be excluded from Qualified
            Securities those securities described in Clause (ii) above that are
            issued in any one calendar year having an aggregate Market Value in
            excess of twenty five per cent. (25%) of the Collateral Coverage
            Amount.

            QUARTER DATE means each 31 March, 30 June, 30 September and 31
            December.

            QUARTERLY STATEMENT means the quarterly financial statement of the
            Applicant as required to be filed with the Department (or similar
            Governmental Authority) of the Applicant's domicile, together with
            all exhibits or schedules filed therewith, prepared in conformity
            with SAP.

            REINSTATEMENT PREMIUMS means premiums charged to insureds to
            reinstate or continue coverage under a reinsurance policy after a
            loss.

            REINSURED means a Person in whose favour the Applicant has issued a
            policy of reinsurance.

            REQUEST means a request, substantially in the form set out in
            Schedule 1 hereto, signed on behalf of the Applicant and issued in
            accordance with Paragraph 3.3.

            RESERVATIONS means the principle that equitable remedies are
            remedies which may be granted or refused at the discretion of the
            court, the limitation of enforcement by laws relating to bankruptcy,
            insolvency, liquidation, reorganisation, court schemes, moratoria,
            administration and other laws generally affecting the rights of
            creditors, the time barring of claims under the Limitation Act 1980,
            the possibility that an undertaking to assume liability for or to
            indemnify against non-payment of United Kingdom stamp duty may be
            void, defences of set-off or counterclaim and similar principles.

                                                                         Page 10
<PAGE>

            RESTRICTED PAYMENT means any dividend or other distribution (whether
            in cash, securities or other property) with respect to any capital
            stock of the Parent or any payment (whether in cash, securities or
            other property), including any sinking fund or similar deposit on
            account of the purchase, redemption, retirement, acquisition,
            cancellation or termination of any such capital stock or of any
            option, warrant or other right to acquire any such capital stock.

            RETROCESSION AGREEMENTS means any agreement, treaty, certificate or
            other arrangement whereby any Insurance Subsidiary cedes to another
            insurer all a part of such Insurance Subsidiary's liability under a
            policy or policies of insurance reinsured by such Insurance
            Subsidiary.

            SAP means, as to the Applicant, the statutory accounting practices
            prescribed or permitted by the Department (or other similar
            authority) in such the Applicant's domicile for the preparation of
            Annual Statements and other financial reports by insurance
            corporations of the same type as the Applicant.

            SECURITIES ACCOUNT means the Applicant's custodial account number
            HGL3 maintained with the Custodian and subject to the terms of the
            Control Agreement.

            SECURITY DOCUMENTS means:

            (a)   the Pledge Agreement;

            (b)   the Control Agreement; and

            (c)   any guarantee and any document creating security executed and
                  delivered after the date of this Letter as security for any of
                  the obligations and liabilities of the Applicant under any
                  Financing Document.

            SECURITY PERIOD means the period starting on the date of this Letter
            and ending on the date on which all of the obligations and
            liabilities of the Applicant under each Financing Document are
            discharged in full and the Bank has no continuing obligation in
            relation to the letter of credit facility made available pursuant to
            this Letter.

            STATUTORY NET WRITTEN PREMIUMS means as at any date, with respect to
            any Insurance Subsidiary, the amount shown on Form 2, Line 3 of its
            most recently filed Annual Statement minus Reinstatement Premiums
            or, with respect to any Fiscal Quarter occurring after the then most
            recent annual statement, an amount calculated in the same manner.

            SUBSIDIARY means, with respect to any Person at any time, any Person
            of which the indicated Person and/or its other Subsidiaries,
            individually or in the aggregate, own, directly or indirectly, such
            number of outstanding shares as have at that time more than 50% of
            the ordinary voting power. Unless otherwise specified, "Subsidiary"
            shall mean a Subsidiary of the Parent.

            TANGIBLE NET WORTH means as to the Parent, Consolidated Net Worth
            minus intangible assets minus capitalized expenses determined in
            accordance with GAAP.

            TAX includes all present and future taxes, charges, imposts, duties,
            levies, deductions, withholdings or fees of any kind whatsoever, or
            any amount payable on account of or as security for any of the
            foregoing, payable at the instance of or imposed by any statutory,
            governmental, international, state, federal, provincial, local or
            municipal authority, agency, body or department whatsoever or any
            central bank or monetary agency or European Union institution, in
            each case whether in the United Kingdom or elsewhere, together with
            any

                                                                         Page 11
<PAGE>

            penalties, additions, fines, surcharges or interest relating thereto
            and TAXES and TAXATION shall be construed accordingly.

            TAX LIABILITY means in respect of the Bank:

            (a)   any liability or any increase in the liability of the Bank to
                  make any payment or payments of or in respect of Tax;

            (b)   the loss of any relief, allowance, deduction or credit in
                  respect of Tax which would otherwise have been available to
                  the Bank;

            (c)   the setting off against income, profits or gains or against
                  any Tax liability of any relief, allowance deduction or credit
                  in respect of Tax which would otherwise have been available to
                  the Bank; and

            (d)   the loss or setting off against any Tax Liability of a right
                  to repayment of Tax which would otherwise have been available
                  to the Bank.

            For the purposes of this definition any question of whether or not
            any relief, allowance, deduction, credit or right to repayment of
            Tax has been lost or set off, and if so, the date on which that loss
            or set-off took place, shall be conclusively determined by the
            Bank's auditors.

            TAX ON OVERALL NET INCOME means in relation to the Bank, Tax (other
            than Tax deducted or withheld from any payment) imposed on the Bank
            on its net profits by the jurisdiction in which either its
            participating branch or its head office is situated.

            TERM means each period specified in a Letter of Credit for which the
            Bank may be under a liability under such Letter of Credit which must
            not, in any event, extend beyond the Final Maturity Date.

1.2         INTERPRETATION

            (a)   headings are for ease of reference only and shall not affect
                  the construction of this Letter;

            (b)   unless the context otherwise requires, the singular includes
                  the plural and vice versa and references to the masculine,
                  feminine or neuter include all genders;

            (c)   references herein to Paragraphs are references to the
                  Paragraphs of this Letter; and

            (d)   unless otherwise defined or the context otherwise requires,
                  all financial and accounting terms used herein or in any of
                  the Financing Documents or any certificate or other document
                  made or delivered pursuant hereto shall be defined in
                  accordance with GAAP or SAP, as the context may require. When
                  used in this Letter , the term "financial statements" shall
                  include the notes and schedules thereto. In addition, when
                  used herein, the terms "best knowledge of" or "to the best
                  knowledge of" any Person shall mean matters within the actual
                  knowledge of such Person (or an Executive Officer or general
                  partner of such Person) or which should have been known by
                  such Person after reasonable inquiry.

1.3         CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

            The parties to this Letter do not intend that any term of this
            Letter shall be enforceable solely by virtue of the Contracts
            (Rights of Third Parties) Act 1999 by any person who is not a party
            to this Letter. The consent of any third party is not required for
            any termination or amendment to this Letter.

                                                                         Page 12
<PAGE>

2           CONDITIONS PRECEDENT

2.1         CONDITIONS PRECEDENT

            Notwithstanding any other provision of this Letter, the Bank shall
            be under no obligation to issue any Letters of Credit under or in
            connection with this Letter unless, within the period specified in
            Paragraph 19, the Bank has received each of the following in form
            and substance satisfactory to it:

            (a)   the enclosed copy of this Letter with the endorsed acceptance
                  duly signed on the Applicant's behalf;

            (b)   Certified Copies of the Applicant's certificate of
                  incorporation and memorandum and articles of association or
                  equivalent constitutional documents under the laws of its
                  jurisdiction of incorporation;

            (c)   a Certified Copy of the minutes of a meeting of the board of
                  directors of the Applicant (including the resolutions passed
                  at such meeting):

                  (i)   approving and authorising the execution, delivery and
                        performance of each Financing Document to which it is to
                        be a party on the terms and conditions of those
                        documents;

                  (ii)  showing that the relevant board meeting was quorate,
                        that due consideration was given by all the relevant
                        directors present of the relevant company's obligations
                        and liabilities arising under those documents and that
                        all declarations of interests required in connection
                        with any Financing Document to which it is to be a party
                        were made; and

                  (iii) authorising any director whose name and specimen
                        signature is set out in those minutes to sign or
                        otherwise attest the execution of those documents and
                        any other documents to be executed or delivered pursuant
                        to those documents;

            (d)   a letter from Montpelier Marketing Services (UK) Ltd, New
                  Baltic House, 65 Fenchurch Street, London EC3N 4BET accepting
                  its appointment as agent for service of process for the
                  Applicant;

            (e)   a legal opinion from Appleby, Spurling and Kempe, Bermudian
                  counsel to the Bank;

            (f)   a legal opinion from Bingham McCutchen L.L.P., US counsel to
                  the Bank;

            (g)   legal opinions from LeBoeuf, Lamb, Greene & MacRae L.L.P., US
                  Counsel to the Applicant confirming, inter alia, that there
                  are no breaches under the Credit Agreement or the Fleet Letter
                  of Credit Facility and from Conyers, Dill & Pearman, Bermuda
                  Counsel to the Applicant;

            (h)   evidence that there are no Liens over any assets which are the
                  subject of a Security Document;

            (i)   the fees payable on the date of this Letter pursuant to this
                  Letter; and

            (j)   payment up to $15,000 in aggregate of the fees of Messrs
                  Denton Wilde Sapte, Bingham McCutchen L.L.P. and Appleby,
                  Spurling and Kempe, English, US and Bermudian counsel to the
                  Bank respectively;

            (k)   evidence that the Qualified Securities satisfy the following
                  conditions:

                                                                         Page 13
<PAGE>

                  (i)   they have a long term debt rating of 'AAA' or higher by
                        Moody's Investor Services, Inc.;

                  (ii)  they have been issued or directly and fully guaranteed
                        or insured by the United States Treasury or issued by
                        any agency thereof, the obligations of which are backed
                        by the full faith and credit of the United States of
                        America;

                  (iii) no more than 25 per cent. (25%) of the Qualified
                        Securities (by fair market value) shall be from the same
                        year of issue;

                  (iv)  they mature within five (5) years of the date of
                        purchase; and

                  (v)   they are quoted daily by a generally recognised
                        quotation service approved by the Bank;

            (l)   the Bank shall have received a copy of the Custodian Agreement
                  certified by an officer of the Applicant;

            (m)   the following documents duly executed by the Applicant:

                  (i)   the Pledge Agreement; and

                  (ii)  the Control Agreement,

                  in each case together with all documents deliverable with
                  them;

2.2         AVAILABILITY

            Notwithstanding any other provision of this Letter, the Bank shall
            have no obligation under this Letter until:

            (a)   all the conditions precedent in Paragraph 2.1 have been
                  satisfied;

            (b)   the matters represented by the Applicant in Paragraph 9.1 are
                  true and correct at that time as if made at that time;

            (c)   no Event of Default or Potential Default has occurred and is
                  continuing.

2.3         EXTENSIONS TO AVAILABILITY PERIOD

2.3.1       The Applicant may at any time by notice to the Bank request an
            extension to the Availability Period, subject to the provisions of
            this Paragraph 2.3.

2.3.2       Upon receipt of any such request, the Bank shall undertake a full
            credit assessment of the Applicant. The Bank shall be under no legal
            or moral obligation to extend the Availability Period. No extension
            shall be effective unless agreed in writing by the Bank.

2.3.3       If the Applicant requests an extension during the final thirty days
            of the Availability Period, the Bank shall, at its absolute
            discretion, have the option:

            (a)   (subject to Paragraph 2.3.2) to extend the Availability Period
                  for a further period of 364 days from the date on which the
                  Availability Period is then due to expire; or

            (b)   to decline such request.

                                                                         Page 14
<PAGE>

2.3.4       If the Applicant requests an extension otherwise than in accordance
            with Paragraph 2.3, the Bank shall, at its absolute discretion, have
            the option:

            (a)   (subject to Paragraph 2.3.2) to extend the Availability Period
                  for a further period of 364 days from the date on which the
                  Bank gives written notice to the Applicant of the Bank's
                  agreement to extend the Availability Period; or

            (b)   to decline such request.

3           FACILITY, PURPOSE AND UTILISATION

3.1         FACILITY

            Upon and subject to the terms and conditions of this Letter, the
            Bank, in full reliance upon each of the representations and
            warranties made by the Applicant under Paragraph 9, hereby agrees to
            make available to the Applicant a letter of credit facility in the
            maximum principal amount of $100,000,000.

3.2         PURPOSE

            This letter of credit facility is to be used in respect of normal
            reinsurance business requirements. The Bank shall not be bound to
            monitor or verify the utilisation of the letter of credit facility.

3.3         ISSUE DATE

            A Letter of Credit shall be opened by the Bank on a Business Day
            during the Availability Period following receipt from the Applicant,
            no later than 11.00 a.m. (London time) on the date falling two
            Business Days prior to the requested Issue Date, of a duly completed
            Request for that Letter of Credit.

3.4         REQUEST

            The Request shall specify the proposed Issue Date, which shall be a
            Business Day during the Availability Period. No Request may be
            issued until the conditions precedent in Paragraph 2.1 have been
            satisfied. Once served, a Request shall be irrevocable.

3.5         COMPLETION OF REQUESTS

            A Request for a Letter of Credit will not be regarded as being duly
            completed unless:

            (a)   it specifies that it is for a Letter of Credit;

            (b)   the amount of the Letter of Credit requested is:

                  (i)   a minimum of $1,000,000;

                  (ii)  no more than the maximum undrawn amount available under
                        this Letter on the proposed Issue Date; or

                  (iii) such other amount as the Bank may agree;

                                                                         Page 15
<PAGE>

            (c)   it gives the identity of the proposed beneficiary and
                  confirmation that such beneficiary is a Reinsured;

            (d)   the form of Letter of Credit is attached;

            (e)   the expiry date of the Letter of Credit falls on or before the
                  Final Maturity Date; and

            (f)   the delivery instructions for the Letter of Credit are
                  specified.

            Only one Letter of Credit may be requested in each Request.

4           REPAYMENT, PREPAYMENT, CLAIMS AND INDEMNITY

4.1         GENERAL

            (a)   A Letter of Credit is repaid or prepaid if:

                  (i)   the Applicant provides Pledged Collateral for that
                        Letter of Credit which has a Collateral Coverage Amount
                        which is equal to or greater than the outstanding or
                        principal amount of that Letter of Credit;

                  (ii)  the undrawn face amount of the Letter of Credit is
                        reduced in accordance with its terms; or

                  (iii) the Bank is satisfied that it has no further liability
                        under that Letter of Credit.

                  The amount by which a Letter of Credit is repaid or prepaid
                  under sub-paragraphs (i) and (ii) above is the amount of the
                  relevant Collateral Coverage Amount or reduction.

            (b)   If a Letter of Credit or any amount outstanding under a Letter
                  of Credit is expressed to be immediately payable, the
                  Applicant must repay or prepay that amount immediately.

            (c)   The outstanding or principal amount of the Letter of Credit at
                  any time is the undrawn face amount of that Letter of Credit
                  at that time.

4.2         CLAIMS UNDER A LETTER OF CREDIT

            (a)   The Applicant irrevocably and unconditionally authorises the
                  Bank to pay any claim made or purported to be made under a
                  Letter of Credit requested by it and which appears on its face
                  to be in order (a CLAIM).

            (b)   The Applicant must immediately on demand pay to the Bank an
                  amount equal to the amount of any claim.

            (c)   The Applicant acknowledges that the Bank:

                  (i)   is not obliged to carry out any investigation or seek
                        any confirmation from any other person before paying a
                        claim; and

                  (ii)  deals in documents only and will not be concerned with
                        the legality of a claim or any underlying transaction or
                        any available set-off, counterclaim or other defence of
                        any other person.

            (d)   The obligations of the Applicant under this Paragraph will not
                  be affected by:

                                                                         Page 16
<PAGE>

                  (i)   the sufficiency, accuracy or genuineness of any claim or
                        any other document; or

                  (ii)  any incapacity of, or limitation in the powers of, any
                        person signing a claim or other document.

4.3         INDEMNITY

            The Applicant hereby unconditionally and irrevocably agrees and
            undertakes to the Bank as follows:

            (a)   promptly following the Bank's demand, it shall reimburse the
                  Bank for each payment made by the Bank under or in connection
                  with the Letter of Credit and not otherwise paid by the
                  Applicant under this Letter;

            (b)   it will at all times indemnify the Bank and keep the Bank
                  indemnified from and against all actions, proceedings, claims
                  and demands which may be brought or made against the Bank and
                  all losses, costs, charges, damages and expenses which the
                  Bank may incur or sustain or for which the Bank may become
                  liable by reason either directly or indirectly of the Bank
                  having opened or issued the Letter of Credit; and

            (c)   the indemnity contained in this Paragraph 4.3 shall constitute
                  and be a continuing security to the Bank and shall extend to
                  the Letter of Credit as it may, from time to time, be varied,
                  modified, amended or extended.

4.4         REPAYMENT

            Subject to a prior repayment or prepayment made by the Applicant in
            accordance with this Paragraph 4, the Applicant shall repay each
            Letter of Credit drawn upon in full on its Maturity Date.

5           COMMISSION

            The Applicant shall pay to the Bank a commission in Dollars on the
            Outstandings at the rate per annum of:

            (a)   0.225 per cent, if the Collateral Coverage Amount is less than
                  all Outstandings; and

            (b)   0.20 per cent if the Collateral Coverage Amount is equal to or
                  greater than all Outstandings.

            Such commission shall accrue from day to day on the basis of a
            360-day year and the actual number of days elapsed and shall be
            calculated by the Bank in advance on each Quarter Date. The Bank
            shall give notice to the Applicant of the amount so calculated
            (showing in reasonable detail the basis for such calculation)
            whereupon the same shall, save for a manifest error in calculation,
            become immediately due and payable.

6           CHANGES IN CIRCUMSTANCES

6.1         ILLEGALITY

            If, as a result of a change of law, it becomes unlawful for the Bank
            either to open a Letter of Credit, or to maintain its contingent
            liability or fund any sum required to be paid by it thereunder then:

                                                                         Page 17
<PAGE>

            (a)   the Bank shall notify the Applicant and shall consult with the
                  Applicant with a view to making the facility constituted by
                  this Letter and each Letter of Credit available through
                  another office or an associated company of the Bank which
                  would not be affected by the illegality; and

            (b)   if it is not possible to make such facility available in that
                  way then the Bank's obligations to make such facility will
                  terminate and the Applicant will use all reasonable endeavours
                  to procure the cancellation of each Letter of Credit.

6.2         INDEMNITIES

            The Applicant shall repay or prepay all Outstandings under each
            Letter of Credit subject to the illegality on either:

            (a)   the Business Day following receipt by the Applicant of notice
                  from the Bank under Paragraph 6.1(a) above; or

            (b)   if later, the latest date allowed by the relevant law.

6.3         INCREASED COSTS

6.3.1       If, after the date of this Letter, the introduction, implementation,
            repeal, withdrawal or change in, or in the interpretation or
            application of, (a) any law, regulation, practice or concession, or
            (b) any directive, requirement, request or guidance (whether or not
            having the force of law but if not having the force of law, one
            which applies generally to a class or category of financial
            institutions of which the Bank forms part and compliance with which
            is in accordance with the general practice of those financial
            institutions) of any central bank or other fiscal, monetary or other
            authority (each of such occurrences being referred to in this
            Paragraph 6.3 as a CHANGE) causes an Increased Cost (as defined in
            Paragraph 6.3.4 to the Bank (or any company of which the Bank is a
            subsidiary) then the Applicant shall pay (as additional interest)
            from time to time to the Bank on demand all amounts which the Bank
            certifies to be necessary to compensate the Bank for the Increased
            Cost.

6.3.2       Any demand made under Paragraph 6.3.1 shall set out in reasonable
            detail so far as is practicable the basis of computation of the
            Increased Cost.

6.3.3       Without prejudice to Paragraph 6.3.1 the Bank agrees that it will,
            after consultation with the Applicant, take such reasonable steps as
            may be available to the Bank including changing the office through
            which it is performing its obligations hereunder (but only so long
            as such steps do not, in the opinion of the Bank, produce any other
            adverse effects for the Bank) to avoid or reduce any Increased Cost.

6.3.4       In this Paragraph 6.3 INCREASED COST means any cost to, or reduction
            in the amount payable to, or reduction in the return on capital
            achieved by, the Bank (or any company of which the Bank is a
            subsidiary) to the extent that they arise, directly or indirectly,
            as a result of the Change and are attributable to any of the
            following:

            (a)   the opening of a Letter of Credit;

            (b)   the contingent liability of the Bank under this Letter or
                  under a Letter of Credit;

            (c)   the contingent liability of the Applicant under this Letter;
                  or

            (d)   the funding of any sum required to be paid by the Bank under
                  this Letter or a Letter of Credit

                                                                         Page 18
<PAGE>

            ((a) - (d) above being referred to below collectively and severally
            as the FACILITY) including without limitation:

                  (i)   any Tax Liability (other than Tax on Overall Net Income)
                        incurred by the Bank;

                  (ii)  the cost of any changes in the basis or timing of
                        Taxation of the Bank in relation to the Facility;

                  (iii) the cost to the Bank (or any company of which the Bank
                        is a subsidiary) of complying with any capital adequacy
                        or similar requirements howsoever arising including,
                        without limitation, as a result of an increase in the
                        amount of capital to be allocated to the Facility or of
                        a change to the weighting of the Facility;

                  (iv)  the cost to that Bank of complying with any reserve,
                        cash ratio, special deposit or liquidity requirements
                        (or any other similar requirements).

7           PAYMENTS

7.1         PLACE

            All payments to be made by the Applicant pursuant to this Letter or
            any other Financing Document shall be made to the Bank at its branch
            in New York (222 Broadway, New York, New York 10038) (or at such
            other office as the Bank may notify to the Applicant from time to
            time) in cleared Dollar funds for value on the due date.

7.2         DIFFERENT CURRENCY

            No payment to the Bank (whether under any judgment or court order or
            otherwise) shall discharge the obligation or liability in respect of
            which it was made unless and until the Bank shall have received
            payment in full in the currency in which such obligation or
            liability was incurred. To the extent that the amount of any such
            payment shall, on actual conversion, fall short of such obligation
            or liability expressed in that currency, the Bank shall have a
            further separate cause of action against the Applicant to recover
            the amount of the shortfall.

7.3         NO WITHHOLDINGS

            All payments by the Applicant under this Letter are to be made in
            immediately available funds free and clear and, save as required by
            law, without any withholding or deduction for any and all present or
            future Taxes and without any set-off or counter-claim whatsoever.

7.4         GROSSING-UP

            If the Applicant is required by law to make any deduction or
            withholding for any present or future Tax from any sum payable under
            this Letter, then:

            (a)   the Applicant shall make such deduction or withholding;

            (b)   the Applicant shall pay the full amount deducted to the
                  relevant authority in accordance with applicable law and
                  deliver a copy of the original receipt to the Bank; and

            (c)   the Applicant shall increase the sum so that the net amount
                  received by the Bank after the deduction or withholding (and
                  after the payment of any Tax or additional Tax

                                                                         Page 19
<PAGE>

                  which is due as a consequence of the increase) shall be equal
                  to the amount which the Bank would have been entitled to
                  receive in the absence of any requirement to make a deduction
                  or withholding.

7.5         NON-BUSINESS DAYS

            Any amounts which but for this Paragraph 7.5 would fall due for
            payment hereunder on a day other than a Business Day shall be
            payable on the immediately succeeding Business Day in the same
            calendar month (if there is one) or the immediately preceding
            Business Day (if there is not).

7.6         DEFAULT INTEREST

            If the Applicant fails to pay any sum payable under this Letter on
            the due date, the Applicant shall pay default interest on such sum
            (or, as the case may be, the amount thereof for the time being due
            and unpaid) to the Bank from the due date to the date of actual
            payment in full calculated (on the basis of a 360-day year and the
            actual number of days elapsed) by reference to successive periods
            (each of such duration as the Bank may from time to time select and
            the first beginning on the relative due date) at the rate per annum
            being the aggregate of:

            (a)   1.225 per cent per annum; and

            (b)   LIBOR, being the rate per annum at which the Bank offered
                  Dollar deposits in an amount comparable with such unpaid sum,
                  to leading banks in the London Inter-Bank Market at or about
                  11.00 a.m. (London time) on the first day of such period, for
                  a period of equal duration.

            So long as the default continues, such rate shall be recalculated in
            accordance with the provisions of this Paragraph 7.6 on the last day
            of each such period and unpaid interest then payable but unpaid
            under this Paragraph shall be compounded at the end of each such
            period.

7.7         CERTIFICATES

            The statement of the Bank as to the rate or amount of commission or
            interest payable pursuant to any provision of this Letter or as to
            the amount of the Outstandings shall, in the absence of manifest
            error, be conclusive.

8           PREPAYMENT AND CANCELLATION

8.1         MANDATORY PREPAYMENT - CHANGE OF CONTROL

            (a)   The Applicant must promptly notify the Bank if it becomes
                  aware of any Person or Persons other than the Parent acquiring
                  control of the Applicant or if the legal and beneficial
                  interest of the Parent in the voting stock of the Applicant is
                  less than 100% of such voting stock.

            (b)   After notification under paragraph (a) above, the Bank may by
                  notice to the Applicant:

                  (i)   cancel the portion of the facility made available under
                        this Letter which has not been used for the opening of
                        Letters of Credit; and

                  (ii)  declare all outstanding Letters of Credit, together with
                        accrued interest and all other amounts accrued under
                        this Letter, each Letter of Credit and each Security
                        Document to be immediately due and payable.

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                        Any such notice will take effect in accordance with its
                        terms.

            In paragraph (a) above control of the Applicant means the power to
            appoint or remove a majority of the board of directors of the
            Applicant or to direct the management and policies of the Applicant
            whether through the ownership of voting stock, by contract or
            otherwise.

8.2         VOLUNTARY PREPAYMENT

            (a)   The Applicant may by giving not less than 14 days' prior
                  notice to the Bank, prepay any Letter of Credit at any time in
                  whole or in part.

            (b)   A prepayment of part of a Letter of Credit must be in a
                  minimum amount of $1,000,000 and an integral multiple of
                  $1,000,000.

8.3         AUTOMATIC CANCELLATION

            The facility made available under this Letter shall be automatically
            cancelled at the close of business on the last day of the
            Availability Period.

8.4         VOLUNTARY CANCELLATION

            (a)   The Applicant may, by giving not less than 14 days' prior
                  notice to the Bank, cancel the unutilised amount of the
                  facility made available under this Letter in whole or in part.

            (b)   Partial cancellation of the facility provided under this
                  Letter must be in the minimum amount of $1,000,000 and an
                  integral multiple of $1,000,000.

8.5         MISCELLANEOUS PROVISIONS

            (a)   Any notice of prepayment and/or cancellation under this Letter
                  is irrevocable and must specify the relevant date(s) and the
                  effected Letters of Credit.

            (b)   No premium or penalty is payable in respect of any prepayment.

            (c)   The Bank may agree to a shorter notice period for a voluntary
                  prepayment or a voluntary cancellation.

            (d)   No prepayment or cancellation is allowed except in accordance
                  with the express terms of this Letter.

            (e)   No amount of the facility cancelled under this Letter may
                  subsequently be reinstated.

            (f)   Commission paid by the Applicant pursuant to Paragraph 5 will
                  be refunded to the Applicant pro-rata as a result of any
                  prepayment and/or cancellation under this Letter.

9           REPRESENTATIONS AND WARRANTIES

9.1         REPRESENTATIONS AND WARRANTIES

            The Applicant hereby represents and warrants that:

            (a)   STATUS: the Applicant is a limited liability company duly
                  incorporated as an exempted company under the laws of Bermuda,
                  and it possesses the capacity to sue and be sued

                                                                         Page 21
<PAGE>

                  in its own name and has the power to carry on its business and
                  to own its property and other assets;

            (b)   POWERS AND AUTHORITY: the Applicant has power to execute,
                  deliver and perform its obligations under the Financing
                  Documents and to carry out the transactions contemplated by
                  those documents and all necessary corporate, shareholder and
                  other action has been or will be taken to authorise the
                  execution, delivery and performance of the same;

            (c)   BINDING OBLIGATIONS: subject to the Reservations, the
                  obligations of the Applicant under the Financing Documents
                  constitute its legal, valid, binding and enforceable
                  obligations;

            (d)   CONTRAVENTIONS: the execution, delivery and performance by the
                  Applicant of the Financing Documents does not:

                  (i)   contravene any applicable law or regulation or any order
                        of any governmental or other official authority, body or
                        agency or any judgment, order or decree of any court
                        having jurisdiction over it;

                  (ii)  conflict with, or result in any breach of any of the
                        terms of, or constitute a default under, any agreement
                        or other instrument to which it is a party or any
                        licence or other authorisation to which it is subject or
                        by which it or any of its property is bound which might
                        be reasonably expected to have a Material Adverse
                        Effect; or

                  (iii) contravene or conflict with the provisions of its
                        constitutional documents;

            (e)   INSOLVENCY: no Group Company has taken any action nor have any
                  steps been taken or legal proceedings been started or
                  threatened against it for winding-up (other than in the case
                  of a winding up petition which proved to the reasonable
                  satisfaction of the Bank to be frivolous or vexatious and
                  which is, in any event, discharged within 14 days of its
                  presentation and before it is advertised) dissolution or
                  re-organisation, the enforcement of any Lien over its assets
                  or for the appointment of a receiver, administrative receiver,
                  or administrator, trustee or similar officer of it or of any
                  of its assets;

            (f)   NO DEFAULT: no Group Company is (nor would be with any of the
                  giving of notice, the lapse of time, the determination of
                  materiality, or the satisfaction of any other condition) in
                  breach of or in default under any agreement to which it is a
                  party or which is binding on it or any of its assets which, to
                  its knowledge, would reasonably be expected to have a Material
                  Adverse Effect;

            (g)   LITIGATION: except for claims which are covered by Insurance
                  Policies, coverage for which has not been denied in writing or
                  which relate to Primary Policies or Borrower Reinsurance
                  Agreements issued by the Applicant or to which it is a party
                  entered into by the Applicant in the ordinary course of
                  business, no action, litigation, arbitration or administrative
                  proceeding has been commenced, or is pending or to its
                  knowledge threatened, against the Applicant (i) which would,
                  if adversely determined, have a Material Adverse Effect or
                  (ii) which seeks to prevent, enjoin or delay any of the
                  transactions contemplated hereby, and there is no basis known
                  to the Applicant for any of the foregoing; nor is there
                  subsisting any unsatisfied judgment or award given against the
                  Applicant by any court, arbitrator or other body;

                                                                         Page 22
<PAGE>

            (h)   ACCOUNTS: each of the latest audited and unaudited
                  consolidated or combined financial statements required to be
                  delivered under Paragraph 10.1(a) is prepared in accordance
                  with GAAP consistently applied (except as disclosed therein
                  and, in the case of interim financial statements, for the
                  absence of footnote disclosures) and shall present fairly the
                  consolidated position (or, in the event that GAAP requires the
                  financial statements to be presented on a combined basis,
                  presents fairly the combined position) of the corporations
                  covered thereby at the dates thereof for the period then
                  ended, subject, in the case of quarterly financial statements,
                  to normal year end audit adjustments.

            (i)   LIEN: no Lien other than a Permitted Lien exists over all or
                  any part of the assets of the Applicant;

            (j)   NO LIEN CREATED: the execution of the Financing Documents by
                  the Applicant and the exercise of each of its rights and the
                  performance of each of its obligations under the Financing
                  Documents will not result in the creation of, or any
                  obligation to create, any Lien (other than a Permitted Lien)
                  over or in respect of any of its assets;

            (k)   AUTHORISATIONS: all authorisations, approvals, licences,
                  consents, filings, registrations, payment of duties or taxes
                  and notarisations required:

                  (i)   for the conduct of the business, trade and ordinary
                        activities of the Applicant to the extent that failure
                        to make, pay or obtain the same would not have a
                        Material Adverse Effect;

                  (ii)  for the performance and discharge of the obligations of
                        the Applicant under the Financing Documents to which it
                        is a party; and

                  (iii) in connection with the execution, delivery, validity,
                        enforceability or admissibility in evidence of the
                        Financing Documents,

                  are in full force and effect except where failure to obtain
                  the consent of a Governmental Authority would not have a
                  Material Adverse Effect;

            (l)   FINANCIAL STATEMENTS: there has been no material adverse
                  change in the business, assets, condition, operations or
                  prospects of the Applicant and the Group since the date of the
                  latest audited financial statements of the Applicant and the
                  Group;

            (m)   DISCLOSURE: it has disclosed to the Bank all information which
                  to its knowledge might be material to the Bank in connection
                  with this Letter and the transactions and arrangements
                  contemplated hereby and all written information, exhibits and
                  reports furnished to the Bank by the Applicant in connection
                  herewith, as supplemented to the date hereof, are accurate in
                  all material respects on the date as of which such information
                  is dated or certified and is true and accurate in all material
                  respects as at the date of this Agreement;

            (n)   INSURANCE LICENCES: to the best of the Applicant's knowledge,
                  no Licence is the subject of a proceeding for suspension or
                  revocation or any similar proceedings, there is no sustainable
                  basis for such a suspension or revocation, and no such
                  suspension or revocation is threatened by the Department which
                  would have a Material Adverse Effect;

            (o)   TAXES: the Applicant has filed all Tax returns that are
                  required to be filed by it, and has paid or provided adequate
                  reserves for the payment of all material Taxes that are due
                  and payable including, without limitation, all payroll Taxes
                  and federal and state

                                                                         Page 23
<PAGE>

                  withholding Taxes, and all assessments payable by it that have
                  become due, other than (i) those that are not yet payable or
                  that are being contested in good faith by appropriate
                  proceedings and with respect to which reserves have been
                  established and have been maintained in accordance with GAAP
                  or (ii) those which the failure to file or pay would not have
                  a Material Adverse Effect. On the date of this Letter there is
                  no ongoing audit or, to the Applicant's knowledge, other
                  governmental investigation of the Tax liability of the
                  Applicant or any of its subsidiaries and there is no
                  unresolved claim by a Taxing authority concerning the
                  Applicant's Tax liability for any period for which returns
                  have been filed or were due.

            (p)   ERISA COMPLIANCE:

                  (i)   each Plan is in compliance in all material respects with
                        the applicable provisions of ERISA, the Code and other
                        Federal or state Laws. Each Plan that is intended to
                        qualify under Section 401(a) of the Code has received a
                        favourable determination letter from the IRS or an
                        application for such a letter has been filed with the
                        IRS with respect thereto and, to the best knowledge of
                        the Applicant, nothing has occurred which would prevent,
                        or cause the loss of, such qualification. The Applicant
                        and each ERISA Affiliate have made all required
                        contributions to each Plan subject to Section 412 of the
                        Code, and no application for a funding waiver or an
                        extension of any amortization period pursuant to Section
                        412 of the Code has been made with respect to any Plan.

                  (ii)  there are no pending or, to the best knowledge of the
                        Applicant, threatened claims, actions or lawsuits, or
                        action by any Governmental Authority, with respect to
                        any Plan that would have a Material Adverse Effect.
                        There has been no prohibited transaction or violation of
                        the fiduciary responsibility rules with respect to any
                        Plan that would result in a Material Adverse Effect.

                  (iii) no ERISA Event has occurred or is reasonably expected to
                        occur; (ii) no Pension Plan has any Unfunded Pension
                        Liability; (iii) neither the Applicant nor any ERISA
                        Affiliate has incurred, or reasonably expects to incur,
                        any liability under Title IV of ERISA with respect to
                        any Pension Plan (other than premiums due and not
                        delinquent under Section 4007 of ERISA); (iv) neither
                        the Applicant nor any ERISA Affiliate has incurred, or
                        reasonably expects to incur, any liability (and no event
                        has occurred which, with the giving of notice under
                        Section 4219 of ERISA, would result in such liability)
                        under Sections 4201 or 4243 of ERISA with respect to a
                        Multiemployer Plan; and (v) neither the Applicant nor
                        any ERISA Affiliate has engaged in a transaction that
                        could be subject to Sections 4069 or 4212(c) of ERISA.

            (q)   INVESTMENT COMPANY ACT: the Applicant is not an "investment
                  company" or a company "controlled by an investment company,"
                  within the meaning of the Investment Company Act of 1940, as
                  amended. The Applicant is not carrying on "investment
                  business" as defined in The Investment Business Act 1998 of
                  Bermuda.

            (r)   REGULATIONS U AND X: the Applicant is not engaged principally,
                  or as one of its important activities, in the business of
                  extending credit for the purpose of purchasing or carrying
                  margin stock. None of the Applicant, any Affiliate of the
                  Applicant or any Person acting on their behalf has taken or
                  will take action to cause the execution, delivery or
                  performance of this Letter, the making or existence of the
                  Letters of Credit or the use of the Letters of Credit to
                  violate Regulations U or X of the FRB.

                                                                         Page 24
<PAGE>

9.2         DEEMED REPETITION

            The representations and warranties set out in this Paragraph 9
            (other than that set out in (m)) shall survive both the acceptance
            of this Letter and each Issue Date, and shall be deemed to be
            repeated on the date on which the Applicant serves a Request and
            each Issue Date, with reference to the facts and circumstances
            subsisting at the time of such repetition.

10          UNDERTAKINGS AND COVENANTS

10.1        INFORMATION UNDERTAKINGS

            (a)   GAAP FINANCIAL STATEMENTS:

                  (i)   As soon as the same become available (and in any event
                        within 45 days after the close of each of the first
                        three Fiscal Quarters of each Fiscal Year of the
                        Parent), a copy of the unaudited consolidated and
                        consolidating balance sheets of the Parent and its
                        Subsidiaries, as of the close of such quarter and the
                        related consolidated and consolidating statements of
                        income and cash flows for that portion of the Fiscal
                        Year ending as of the close of such Fiscal Quarter, all
                        prepared in accordance with GAAP (subject to normal
                        year-end adjustments and except that footnote and
                        schedule disclosure may be abbreviated) and accompanied
                        by the certification of the chief executive officer,
                        chief financial officer ,treasurer or controller of the
                        Parent that all such financial statements are complete
                        and correct and present fairly in all material respects
                        in accordance with GAAP (subject to normal year-end
                        adjustments and except that footnote and schedule
                        disclosure may be abbreviated) the consolidated results
                        of operations and cash flows of the Parent and its
                        consolidated Subsidiaries as at the end of such Fiscal
                        Quarter and for the period then ended.

                  (ii)  As soon as the same become available (and in any event
                        within 90 days after the close of each Fiscal Year of
                        the Parent), (a) a copy of the annual audited
                        consolidated financial statements of the Parent and its
                        Subsidiaries, consisting of consolidated balance sheets
                        and consolidated statements of income and retained
                        earnings and cash flows, setting forth in comparative
                        form in each case the consolidated figures for the
                        previous Fiscal Year, which financial statements shall
                        be prepared in accordance with GAAP, certified without
                        material qualification by the independent certified
                        public accountants regularly retained by the Parent, or
                        any other firm of independent certified public
                        accountants of recognized national standing in the U.S.
                        selected by the Parent and reasonably acceptable to the
                        Bank that all such financial statements are complete and
                        correct and present fairly in all material respects in
                        accordance with GAAP the consolidated financial position
                        and the consolidated results of operations and cash
                        flows of the Parent and its Subsidiaries as at the end
                        of such Fiscal Year and for the period then ended and
                        (b) a copy of the consolidating balance sheets and
                        consolidating statements of income and retained earnings
                        and cash flows for the Parent and its Subsidiaries as of
                        the end of such Fiscal Year, accompanied by the
                        certificate of the chief executive officer, chief
                        financial officer, treasurer or controller of the Parent
                        that all such consolidating financial statements are
                        complete and correct and present fairly in all material
                        respects the results of operations and cash flows of the
                        Parent as at the end of such Fiscal Year and for the
                        period then ended.

                                                                         Page 25
<PAGE>

                  (iii) In the event that GAAP requires the financial statements
                        required under sub-paragraphs (i) and (ii) above to be
                        presented on a combined basis, the Applicant shall
                        deliver such combined and combining statements in lieu
                        of the required consolidated and consolidating financial
                        statements.

            (b)   SAP FINANCIAL STATEMENTS: Within (i) 5 days after the date
                  filed with the Department for each of its Fiscal Years, but in
                  any event within 125 days after the end of each Fiscal Year of
                  the Applicant a copy of the Annual Statement of the Applicant
                  for such Fiscal Year and (ii) 5 days after the date filed with
                  any Department for each of its Fiscal Quarters, but in any
                  event within 60 days after the end of each Fiscal Quarter of
                  the Applicant a copy of the Quarterly Statement of the
                  Applicant for such Fiscal Quarter, if any, required by such
                  Department to be filed, each of which statements delivered
                  pursuant to clause (i) or (ii) to be prepared in accordance
                  with SAP and accompanied by the certification of the chief
                  financial officer or chief executive officer of the Applicant
                  that such financial statement is complete and correct and
                  presents fairly in accordance with SAP the financial position
                  of the Applicant for the period then ended.

            (c)   OTHER INFORMATION: The following certificates and other
                  information related to the Parent and the Applicant:

                  (i)   Promptly after completion of each such item but in no
                        event later than the 90th day after the close of each
                        Fiscal Year of the Parent, a copy of the Parent's
                        projections for the next Fiscal Year.

                  (ii)  Within five (5) Business Days of receipt, a copy of any
                        final financial examination reports by a Governmental
                        Authority with respect to the Applicant relating to the
                        insurance business of the Applicant (when, and if,
                        prepared), PROVIDED the Applicant shall only be required
                        to deliver any interim report hereunder at such time as
                        the Parent receives notice from the Governmental
                        Authority that no final report will be forthcoming or a
                        final report has not been delivered within 180 days of
                        issuance of such interim report.

                  (iii) Copies of all filings (other than nonmaterial tax and
                        insurance rate and other ministerial regulatory filings)
                        with Governmental Authorities by the Applicant not later
                        than five (5) Business Days after such filings are made,
                        including, without limitation, filings which seek
                        approval of Governmental Authorities with respect to
                        transactions between the Applicant and its Affiliates.

                  (iv)  Within five (5) Business Days of such notice, notice of
                        proposed or actual suspension, termination or revocation
                        of any material License of the Applicant by any
                        Governmental Authority or of receipt of notice from any
                        Governmental Authority notifying the Applicant of a
                        hearing relating to such a suspension, termination or
                        revocation, including any request by a Governmental
                        Authority which commits the Applicant to take, or
                        refrain from taking, any action or which otherwise
                        materially and adversely affects the authority of the
                        Applicant to conduct its business.

                  (v)   Within five (5) Business Days of such notice, notice of
                        any pending or threatened investigation or regulatory
                        proceeding (other than routine periodic investigations
                        or reviews) by any Governmental Authority concerning the
                        business, practices or operations of the Applicant.

                                                                         Page 26
<PAGE>

                  (vi)  Simultaneously with delivery of the financial statements
                        provided pursuant to Paragraph 10.1(a), a list of all
                        investments (including, without limitation, Permitted
                        Investments) of the Parent and the Applicant as of the
                        end of such Fiscal Quarter.

                  (vii) Promptly, after an Executive Officer of the Parent or
                        the Applicant has knowledge of actual material changes
                        in the Insurance Code governing the investment or
                        dividend practices of the Applicant.

                  (viii) Promptly, such additional financial and other
                        information as the Bank may from time to time reasonably
                        request concerning the Parent or the Applicant.

            (d)   COMPLIANCE CERTIFICATES: Concurrently with the delivery to the
                  Bank of the GAAP financial statements under Paragraphs
                  10.1(a)(i) and 10.1(a)(ii), for each Fiscal Quarter and Fiscal
                  Year of the Parent, a duly completed Compliance Certificate,
                  signed by the chief executive officer, chief financial
                  officer, treasurer or controller of the Parent, containing,
                  among other things, a computation of, and showing compliance
                  with, each of the applicable financial ratios and restrictions
                  contained in Paragraphs 10.4 (a), 10.4 (b) and 10.4 (c), and
                  to the effect that, to the best of such officer's knowledge,
                  as of such date no Potential Default has occurred and is
                  continuing.

            (e)   INSURANCE REPORTS: Within five (5) Business Days of receipt of
                  such notice by the Applicant written notice of any
                  cancellation of any material Insurance Policy carried by the
                  Applicant.

            (f)   DEFAULT, LITIGATION, ETC: promptly, upon becoming aware of the
                  same, notify the Bank of:

                  (i)   any Event of Default or Potential Default;

                  (ii)  any occurrence relating to the Applicant (including any
                        third party claim or liability) which could reasonably
                        be expected to have a Material Adverse Effect.

10.2        POSITIVE UNDERTAKINGS

            The Applicant undertakes that during the Security Period it shall,
            unless the Bank otherwise agrees:

            (a)   PAY TAXES: pay and discharge all Taxes and governmental
                  charges payable by or assessed upon it prior to the date on
                  which the same become overdue unless, and only to the extent
                  that, such Taxes and charges shall be contested in good faith
                  by appropriate proceedings, pending determination of which
                  payment may lawfully be withheld, and there shall be set aside
                  adequate reserves with respect to any such Taxes or charges so
                  contested in accordance with GAAP;

            (b)   INSURANCE: maintain Insurance Policies to such extent and
                  against such hazards and liabilities as is required by law or
                  customarily maintained by prudent companies similarly
                  situated;

            (c)   AUTHORISATIONS: obtain, maintain and comply with the terms of
                  any authorisation, approval, licence, consent, exemption,
                  clearance, filing or registration required:

                  (i)   for the conduct of its business, trade and ordinary
                        activities, save to the extent that failure to obtain,
                        maintain or comply with the same could reasonably be
                        expected not to have a Material Adverse Effect; and

                                                                         Page 27
<PAGE>

            (ii)  to enable it to perform its obligations under, or for the
                  validity, enforceability or admissibility in evidence of, any
                  Financing Document;

            (d)   COMPLIANCE WITH LAWS: comply in all respects with (a) all laws
                  to which it may be subject, (including, without limitation,
                  the establishment of all insurance reserves required to be
                  established under SAP) and (b) all Contractual Obligations
                  binding upon it except where, in each case, failure so to
                  comply would not in the aggregate have a Material Adverse
                  Effect.

            (e)   ACCESS:

                  (i)   maintain materially complete and accurate books and
                        records in accordance with GAAP and SAP,

                  (ii)  upon reasonable notice being given to the Applicant by
                        the Bank, permit the Bank and any person (being an
                        accountant, auditor, solicitor, valuer or other
                        professional adviser of the Bank) authorised by the Bank
                        to have, at all reasonable times during normal business
                        hours, access to the property, premises and accounting
                        books and records of the Applicant and to the Executive
                        Officers of the Applicant; and

                  (iii) permit the Bank to discuss, at reasonable times, its
                        business, operations and financial condition with its
                        Executive Officers and its independent accountants.

            (f)   RANKING OF OBLIGATIONS: ensure that its obligations under the
                  Financing Documents to which it is a party shall at all times
                  rank at least pari passu with all its other present and future
                  unsecured and unsubordinated Debt except for any obligations
                  which are mandatorily preferred by law and not by contract;

            (g)   FURTHER DOCUMENTS: at the request of the Bank, do or procure
                  the doing of all such things and execute or procure the
                  execution of all such documents as are, in the opinion of the
                  Bank, necessary or desirable to ensure that the Bank obtains
                  all its rights and benefits under the Financing Documents;

            (h)   CORPORATE EXISTENCE: do and cause to be done at all times all
                  things necessary to (a) maintain and preserve its existence
                  and (b) be, and ensure that it is, duly qualified to do
                  business and be in good standing in each jurisdiction where
                  the nature of its business makes such qualification necessary
                  unless the failure to be so qualified would not have a
                  Material Adverse Effect;

            (i)   MAINTENANCE OF PERMITS: once received, maintain all permits,
                  licences and consents as may be required for the conduct of
                  its business by any Governmental Authority except where
                  failure to maintain the same would not reasonably be expected
                  to have a Material Adverse Effect;

            (j)   COMPLIANCE WITH ERISA: do, and cause each of its ERISA
                  Affiliates to do, each of the following:

                  (i)   maintain each Plan in compliance in all material
                        respects with the applicable provisions of ERISA, the
                        Code and other Federal or state law;

                  (ii)  cause each Plan which is qualified under Section 401(a)
                        of the Code to maintain such qualification; and

                                                                         Page 28
<PAGE>

                  (iii) make all required contributions to any Plan subject to
                        Section 412 of the Code;

            (k)   COLLATERAL COVERAGE AMOUNT: ensure that at all times the
                  Collateral Coverage Amount is equal to or greater than the
                  aggregate undrawn face amount of all issued and outstanding
                  Letters of Credit PROVIDED THAT if at any time the Collateral
                  Coverage Amount is less than the aggregate undrawn face amount
                  of all issued and outstanding Letters of Credit, then the
                  Applicant shall within two (2) Business Days provide to the
                  Bank and/or the Custodian (as the case may be) and pledge to
                  the Bank (pursuant to the Pledge Agreement) such additional
                  Cash Collateral or Qualified Securities as may be necessary to
                  satisfy the foregoing collateral coverage requirement. Failure
                  to do so within two (2) Business Days shall constitute an
                  immediate and automatic Event of Default under the terms and
                  conditions of this Letter.

10.3        NEGATIVE UNDERTAKINGS

            The Applicant undertakes that during the Security Period it shall
            not, unless the Bank otherwise agrees:

            (a)   DISPOSAL OF ASSETS: make a Disposal other than:

                  (i)   in the ordinary course of its business; or

                  (ii)  to another Subsidiary; or

                  (iii) provided no Potential Default or Event of Default has
                        occurred and is continuing or would result therefrom,
                        any Disposal of a wholly-owned Subsidiary to the Parent
                        or to another wholly owned Subsidiary of the Parent.

            (b)   CHANGE OF BUSINESS: make any substantial change to the general
                  nature or scope of the business of the Applicant as a whole
                  from that carried on at the date of this Letter;

            (c)   MERGERS: enter into merger or consolidation save, provided no
                  Potential Default or Event of Default has occurred and is
                  continuing or would result therefrom, for a merger or
                  consolidation of a wholly owned Subsidiary with the Parent or
                  with another wholly owned Subsidiary of the Parent.;

            (d)   OTHER AGREEMENTS: enter into any agreement containing any
                  provision which would be violated or breached by the
                  performance of obligations hereunder or under any instrument
                  or document delivered or to be delivered by it hereunder or in
                  connection herewith;

            (e)   TRANSACTIONS WITH AFFILIATES: enter into, or cause, suffer or
                  permit to exist, directly or indirectly, any arrangement,
                  transaction or contract with any of its Affiliates unless such
                  arrangement, transaction or contract is on an arm's length
                  basis; PROVIDED that transactions between the Applicant and
                  the Parent or any wholly-owned Subsidiary of the Parent shall
                  be excluded from the restrictions set forth in this Paragraph
                  10.3(e);

10.4        FINANCIAL COVENANTS

            Until all Obligations are paid in full and until the end of the
            Security Period, the Applicant undertakes, unless otherwise agreed
            in writing by the Bank, that:

            (a)   LEVERAGE RATIO: the Leverage Ratio shall not at any time be
                  more than 30%.

                                                                         Page 29
<PAGE>

            (b)   TANGIBLE NET WORTH: the Tangible Net Worth of the Parent shall
                  not at any time be less than the sum of (a) $525,000,000 plus
                  (b) 50% of positive quarterly Consolidated Net Income (with no
                  deduction for net losses) plus (c) 50% of Net Equity Proceeds
                  received after 11 January 2002 minus (d) Additional Restricted
                  Payments.

            (c)   STATUTORY NET WRITTEN PREMIUMS TO CONSOLIDATED INSURANCE
                  SUBSIDIARY NET WORTH: commencing 31 March 2002, the ratio of
                  (a) the aggregate Statutory Net Written Premiums for all
                  Insurance Subsidiaries for the four Fiscal Quarters then ended
                  to (b) the Consolidated Insurance Subsidiary Net Worth of all
                  Insurance Subsidiaries on the last day of the four Fiscal
                  Quarters then ended shall not be greater than 1.5:1.0 as at
                  the end of any Fiscal Quarter; provided that for purposes of
                  calculating such ratio in Fiscal Year 2002, the ratio shall be
                  based on the number of Fiscal Quarters then ended in Fiscal
                  Year 2002. For example, for the Fiscal Quarter ending 30 June,
                  2002, the ratio shall be based on the two Fiscal Quarters then
                  ended.

11          EVENTS OF DEFAULT

11.1        EVENTS OF DEFAULT

            There shall be an Event of Default if:

            (a)   the Applicant defaults in the payment of Obligations
                  consisting of reimbursement obligations in respect of the
                  Letters of Credit;

            (b)   the Applicant defaults in the payment of commission or any
                  other sums payable under this Letter (other than payments
                  referred to in (a)) and such default continues unremedied for
                  a period of three (3) Business Days;

            (c)   the Applicant fails to comply with any of the covenants set
                  out in Paragraphs 10.2(h), 10.2(i), 10.3(b), 10.3(c), 10.3(d)
                  or 10.4(c);

            (d)   the Applicant does not comply with or perform its obligations
                  under Paragraph 10.2(k) of this Letter within any originally
                  applicable grace period;

            (e)   the Applicant does not comply with or perform any provision of
                  the Pledge Agreement or the Control Agreement (and not
                  constituting an Event of Default under Paragraph 11.1(d) and
                  continuance of such failure for five (5) Business Days;

            (f)   the Applicant does not comply with or perform any provision of
                  this Letter or the other Financing Documents (and not
                  constituting an Event of Default under any of the other
                  provisions of this Paragraph 11.1) and continuance of such
                  failure for thirty (30) days after notice thereof from the
                  Bank to the Applicant;

            (g)   any representation, warranty or statement made or deemed to be
                  repeated by the Applicant under any Financing Document or in
                  any document delivered by or on behalf of the Applicant under
                  or in connection with any Financing Document is incorrect when
                  made or deemed to have been repeated;

            (h)   the Applicant or the Parent admits in writing its inability to
                  pay or becomes unable to pay its debts, or becomes bankrupt or
                  insolvent or files any petition or action for relief under any
                  bankruptcy, reorganisation, insolvency or moratorium law
                  (existing or future) of any jurisdiction;

                                                                         Page 30
<PAGE>

            (i)   a petition is presented for an administration order to be made
                  in relation to the Applicant or the Parent;

            (j)   any proceedings are started or any steps are taken for the
                  winding-up (other than a winding-up petition which is proved
                  to the reasonable satisfaction of the Bank to be frivolous or
                  vexatious and which is, in any event, discharged within 14
                  days of its presentation and before it is advertised),
                  dissolution, or reorganisation (otherwise than while solvent
                  and on terms previously approved in writing by the Bank) of
                  the Applicant or the Parent or for the appointment of a
                  receiver, administrative receiver, trustee, supervisor or
                  similar officer of the Applicant or the Parent or all or any
                  substantial part of the Applicant's or the Parent's revenues
                  and assets or the Applicant or the Parent is unable to pay its
                  debts as they fall due;

            (k)   an encumbrancer takes possession of all or any substantial
                  part of the revenues or assets of the Applicant or the Parent
                  or any security created by the Applicant or the Parent becomes
                  enforceable and the mortgagee or chargee takes steps to
                  enforce the same (including without limitation by appointing a
                  receiver or administrative receiver to all or any substantial
                  part of the assets of the Applicant or the Parent);

            (l)   the Applicant or the Parent convenes a meeting or takes any
                  steps for the purpose of making or proposes to enter into or
                  make, any arrangement or composition for the benefit of its
                  creditors generally or any class of them;

            (m)   a distress or other execution is levied or enforced or sued
                  out upon or against all or any substantial part of the
                  property of the Applicant or the Parent;

            (n)   any event occurs or proceeding is taken with respect to the
                  Applicant or the Parent in any jurisdiction to which it is a
                  subject which has an effect equivalent or similar to any of
                  the events mentioned in any of Paragraphs 11.1(h) to (m)
                  inclusive;

            (o)   the Parent or the Applicant suspends or ceases or threatens to
                  suspend or cease to carry on its business or all or any
                  substantial part of its assets are seized or appropriated by
                  or on behalf of any governmental or other authority or are
                  compulsorily acquired;

            (p)   any Debt of the Parent or the Applicant in excess of, in
                  aggregate, $5,000,000:

                  (i)   is not paid when due or within any originally applicable
                        grace period; or

                  (ii)  is declared to be or otherwise becomes due and payable
                        prior to its specified maturity; or

                  (iii) any creditor of the Parent or the Applicant becomes
                        entitled to declare any such Debt due and payable prior
                        to its specified maturity;

            (q)   any governmental or other consent or exemption required to
                  enable the Applicant to perform its obligations hereunder is
                  withdrawn or modified in a manner which could reasonably be
                  expected to have a Material Adverse Effect or it becomes for
                  any reason unlawful for the Applicant to perform any of its
                  obligations hereunder;

            (r)   any event or series of events occur which in the reasonable
                  opinion of the Bank has or will have a Material Adverse
                  Effect;

            (s)   any security, guarantee or indemnity created in favour of the
                  Bank in respect of any of the Applicant's obligations
                  hereunder is not or ceases to be fully valid, binding and
                  enforceable; or

                                                                         Page 31
<PAGE>

            (t)   all or any part of the revolving loan facility and term loan
                  facility made available by the Lenders to the Parent pursuant
                  to the Credit Agreement is not renewed, on or before 31
                  December 2002, for at least a further 12 months.

11.2         ACCELERATION

            If an Event of Default is outstanding, the Bank may by notice to the
            Applicant:

            (a)   cancel that portion of the facility made available under this
                  Letter which has not been utilised for the opening of Letters
                  of Credit; and/or

            (b)   declare that all or part of any amounts outstanding under the
                  Financing Documents are:

                  (i)   immediately due and payable; and/or

                  (ii)  payable on demand by the Bank; and/or

            (c)   declare that the Obligations in respect of each Letter of
                  Credit is immediately due and payable.

            (d)   Any notice given under this Paragraph 11.2 will take effect in
                  accordance with its terms.

12          SET-OFF, ETC

            In addition to any general lien, right of set-off or similar right
            to which the Bank, as bankers, may be entitled by law, the Bank may
            at any time and without notice to the Applicant, debit any of the
            Applicant's accounts with the Bank with all or any amounts due and
            payable by the Applicant to the Bank hereunder, notwithstanding that
            such debit may cause any such account to become overdrawn or cause
            an existing overdraft to be increased, and/or set off or transfer
            any sum or sums standing to the credit of any of the Applicant's
            accounts with the Bank, whether or not the same may result in the
            breaking of any fixture or notice period in relation to a credit or
            deposit balance, in or towards satisfaction of any amounts due and
            payable by the Applicant to the Bank hereunder. If such amount or
            any part thereof is in a different currency from any credit balance
            against which the Bank seeks to set it off, the Bank shall be
            entitled to use the currency of such credit balance for the purchase
            of an amount in the currency of the liability not exceeding the
            amount of such liability and also to pay out of such credit balance
            any additional sum which the United Kingdom Government may require
            the Bank to pay for such currency and any costs in connection with
            such purchase.

13          SEVERANCE

            If at any time any provision of this Letter is or becomes invalid,
            illegal or unenforceable in any respect under any law of any
            jurisdiction, the validity, legality and enforceability of the
            remaining provisions hereof and the validity, legality and
            enforceability of such provisions under the law of other
            jurisdictions shall not in any way be affected or impaired thereby.

                                                                         Page 32
<PAGE>

14          COSTS, FEES AND INDEMNITY

14.1        ARRANGEMENT FEE

            The Applicant shall pay to the Bank an arrangement fee of $50,000 on
            the date of its counter-signature of this Letter.

14.2        COMMITMENT FEE

            (a)   The Applicant shall pay a commitment fee at the rate of 0.075
                  per cent. per annum on the undrawn, uncancelled amount of the
                  facility made available pursuant to this Letter.

            (b)   Accrued commitment fee is payable quarterly in arrears and on
                  the date on which the Facility made available pursuant to this
                  Letter is cancelled in full.

14.3        COSTS AND EXPENSES

            The Applicant shall pay on demand on a full indemnity basis all
            costs, charges and expenses, including legal costs including VAT
            thereon, arising at any time (provided that the Applicant's
            indemnity in respect of costs incurred in connection with (a) shall
            be limited in aggregate to $15,000):

            (a)   in connection with the negotiation of this Letter or any of
                  the documents referred to in Paragraph 2.1 or any other
                  Financing Document or the consummation of the transactions
                  contemplated hereby; or

            (b)   in connection with the preservation or enforcement of the
                  Bank's rights and remedies under this Letter or any of the
                  Applicant's obligations in connection with this Letter; or

            (c)   in respect of any waiver or variation to, or consent under,
                  any of this Letter, any Letter of Credit or any other
                  Financing Document or any document relating hereto or thereto;

            are payable by the Applicant on demand on a full indemnity basis.

14.4        DOCUMENTARY TAXES INDEMNITY

            All stamp, documentary, registration or other like Taxes, including
            any penalties, fines, surcharges or interest relating thereto, which
            are imposed or chargeable on or in connection with any of this
            Letter, any Letter of Credit, any other Financing Document and any
            document relating hereto or thereto shall be paid by the Applicant
            PROVIDED THAT the Bank shall be entitled but not obliged to pay any
            such Taxes (whether or not they are its primary responsibility),
            whereupon the Applicant shall on demand indemnify the Bank for such
            costs and expenses so incurred.

14.5        CURRENCY INDEMNITY

14.5.1      Any payment made to or for the account of or received by the Bank in
            respect of any moneys or liabilities due, arising or incurred by the
            Applicant to the Bank in a currency (the CURRENCY OF PAYMENT) other
            than the currency in which the payment should have been made under
            this Letter (the CURRENCY OF OBLIGATION) in whatever circumstances
            (including as a result of a judgment against the Applicant) and for
            whatever reason shall constitute a discharge to the Applicant only
            to the extent of the Currency of Obligation amount which the Bank is
            able on the date of receipt of such payment (or if such date of
            receipt is not a Business Day, on the next succeeding Business Day)
            to purchase with the Currency of Payment amount at its spot

                                                                         Page 33
<PAGE>

            rate of exchange (as conclusively determined the Bank) in the London
            foreign exchange market.

14.5.2      If the amount of the Currency of Obligation which the Bank is so
            able to purchase falls short of the amount originally due to the
            Bank under this Letter, then the Applicant shall immediately on
            demand indemnify the Bank against any loss or damage arising as a
            result of that shortfall by paying to the Bank that amount in the
            Currency of Obligation certified by that Bank as necessary so to
            indemnify it.

14.6        GENERAL

14.6.1      Each indemnity in this Paragraph 14 shall constitute a separate and
            independent obligation from the other obligations contained in this
            Letter, shall give rise to a separate and independent cause of
            action, shall apply irrespective of any indulgence granted from time
            to time and shall continue in full force and effect notwithstanding
            any judgment or order for a liquidated sum or sums in respect of
            amounts due under this Letter or under any such judgment or order.

14.6.2      The certificate of the Bank as to the amount of any loss or damage
            sustained or incurred by it shall be conclusive and binding on the
            Applicant except for any manifest error.

15          NON-WAIVER; RIGHTS CUMULATIVE

            No failure by the Bank to exercise and no delay by the Bank in
            exercising any right, power or privilege hereunder shall operate as
            a waiver thereof nor shall any single or partial exercise of any
            right, power or privilege preclude any other or further exercise
            thereof or the exercise of any other right, power or privilege. The
            rights and remedies herein provided are cumulative and not exclusive
            of any rights or remedies provided by law.

16          SUCCESSORS AND ASSIGNS

16.1        SUCCESSORS

            This Letter shall enure to the benefit of the Bank and its
            successors from time to time including without limitation any entity
            with which the Bank may merge or amalgamate or by which it may be
            absorbed, and any change in the Bank's constitution or any such
            merger, amalgamation, absorption will not prejudice or affect its
            rights hereunder in any respect.

16.2        PARTICIPATING OFFICE

            The Bank shall perform its obligations under this Letter through the
            office of the Bank at the address specified at the head of this
            Letter or through any other office of the Bank selected from time to
            time by the Bank. If the office through which the Bank is performing
            is obligations is changed pursuant to this Paragraph 16.2, the Bank
            shall notify the Applicant promptly of such change. The Applicant
            shall enter into such documents as the Bank may reasonably require
            for the purpose of perfecting any such change of the Bank's
            participating office, provided that the express terms of such
            documents are no more onerous than those of this Letter.

16.3        ASSIGNMENT AND TRANSFERS

16.3.1      Without prejudice to Paragraphs 16.1 and 16.2, the Applicant may not
            assign or transfer any of its rights, benefits or obligations under
            this Letter.

                                                                         Page 34
<PAGE>

16.3.2      The Bank may at any time assign or transfer (including by way of
            novation) any of its rights and obligations under this Letter to any
            other person.

17          NOTICES

17.1        METHOD

            Each notice or other communication to be given under this Letter
            shall be given in writing in English and, unless otherwise provided,
            shall be made by fax or letter.

17.2        DELIVERY

            Any notice or other communication to be given by one party to
            another under this Letter shall (unless one party has by 15 days'
            notice to the other party specified another address) be given to
            that other party, at the respective addresses given in Paragraph
            17.3.

17.3        ADDRESSES

            The address and fax number of the Bank and the Applicant are:

            (a)   the Bank:

                  54 Lombard Street
                  London EC3P 3AH
                  Attention: Richard Askey
                  Fax: 020 7699 2407

            (b)   the Applicant:

                  Montpelier Reinsurance Ltd
                  Mintflower Place
                  6th Floor
                  8 Par-La-Ville Road
                  PO Box HM 2079
                  Pembroke HM HX
                  Bermuda

                  Attention: Thomas Busher, Chief Operating Officer
                  Fax: (441) 226-5551

17.4        DEEMED RECEIPT

17.4.1      Any notice or other communication given by the Bank shall be deemed
            to have been received:

            (a)   if sent by fax, with a confirmed receipt of transmission from
                  the receiving machine, on the day on which transmitted;

            (b)   in the case of a notice given by hand, on the day of actual
                  delivery; and

            (c)   if posted, on the second Business Day or, in the case of
                  airmail, the fifth Business Day following the day on which it
                  was despatched by first class mail postage prepaid or, as the
                  case may be, airmail postage prepaid,

                                                                         Page 35
<PAGE>

            provided that a notice given in accordance with the above but
            received on a day which is not a Business Day or after normal
            business hours in the place of receipt shall be deemed to have been
            received on the next Business Day.

17.4.2      Any notice or other communication given to the Bank shall be deemed
            to have been given only on actual receipt.

18          LAW AND JURISDICTION

18.1        GOVERNING LAW

            This Letter is governed by and shall be construed in accordance with
            English law.

18.2        JURISDICTION

            The Applicant agrees that the English courts shall have
            non-exclusive jurisdiction in relation to any dispute or controversy
            arising out of or in respect of this Letter and that any judgment or
            order of an English court made in this respect is conclusive and
            binding on the Applicant and may be enforced against the Applicant
            in the courts of any other jurisdiction. Nothing in this Paragraph
            18.2 limits the right of the Bank to bring proceedings in any other
            court of competent jurisdiction or concurrently in more than one
            jurisdiction.

18.3        WAIVER

            For the purposes of this Letter the Applicant hereby:

            (a)   waives any objections on the grounds of venue or forum non
                  conveniens or any similar grounds; and

            (b)   consents to service of process by mail or in any other manner
                  permitted by relevant law.

18.4        AGENT FOR SERVICE

            The Applicant hereby undertakes that it will at all times maintain
            an agent for service of process in England. Such agent shall be
            Montpelier Marketing Services (UK) Limited, New Baltic House, 65
            Fenchurch Street, London EC3N 4BET any writ, summons, judgment or
            other notice of legal process shall be sufficiently served on the
            Applicant if delivered to such agent at its address for the time
            being, and the Applicant hereby undertakes that it will not revoke
            the authority of the above agent, and if for any reason any such
            agent no longer serves as agent of the Applicant to receive service
            of process, the Applicant shall promptly appoint another such agent
            and advise the Bank thereof.

19          PERIOD OF OFFER

            Please confirm your acceptance of the terms and conditions of this
            Letter by signing the acceptance on the enclosed duplicate and
            returning it to the Bank, together with the documents referred to in
            Paragraph 2.1, by no later than the date falling 21 days after the
            date of this Letter. If this offer is not so accepted within that
            period, it will lapse.

Yours faithfully

                                                                         Page 36
<PAGE>

/s/ Barclays Bank PLC
----------------------------
For and on behalf of
BARCLAYS BANK PLC

                                                                         Page 37
<PAGE>
In accordance with a Resolution of the Board of Directors of the Applicant dated
27th November 2002 we hereby accept the terms and conditions set out in the
Letter dated 27th November 2002 of which this is a true copy.

/s/ T.G.S. Busher
-----------------------------
Signed by
duly authorised
for and on behalf of
MONTPELIER REINSURANCE LTD.,

Dated this 27th day of November 2002

                                                                         Page 38
<PAGE>

SCHEDULE 1 - FORM OF REQUEST

      On Applicant's Letterhead

To:   Bank

Attention: **
                                                                 **       [Date]

Dear Sirs

LETTER OF CREDIT FACILITY OF $100,000,000 DATED (THE AGREEMENT)

1     We refer to the Agreement. This is a Request.

2     Terms defined in the Agreement bear the same meanings in this Request.

3     We wish to arrange for a Letter of Credit to be issued on the following
      terms:

      (a)   Issue Date:  **        ;

      (b)   Amount:      $**       ;

      (c)   Term and Maturity Date:               **    .

4     Our delivery instructions are:**          .

5     This Request is irrevocable.

6     We attach a copy of the proposed Letter of Credit.

We confirm that no Event of Default or Potential Event of Default has occurred
and is continuing and the representations and warranties deemed to be repeated
under Paragraph 9.2 of the Agreement are now and will on the Issue Date be true
and accurate, with reference to the facts and circumstances subsisting at the
time of each such repetition.

Yours faithfully

-----------------------------
duly authorised
for and on behalf of
MONTPELIER REINSURANCE LTD.,

                                                                         Page 39

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