Document:

<PAGE>
                                                                   Exhibit 10.42

           __________________________________________________________

                     COMMON SECURITIES GUARANTEE AGREEMENT

                                  ACE LIMITED,
                                  AS GUARANTOR

                         Dated as of December 20, 1999

           __________________________________________________________
<PAGE>

                               TABLE OF CONTENTS

                                                                            Page
                                                                            ----

                                   ARTICLE I

                        DEFINITIONS AND INTERPRETATIONS

<TABLE>
<S>            <C>                                                           <C>
SECTION 1.1    Definitions and Interpretations                                 2
</TABLE>

                                  ARTICLE II

                                   GUARANTEE
<TABLE>
<S>            <C>                                                           <C>
SECTION 2.1    Guarantee                                                       4
SECTION 2.2    Subordination in an Event of Default Under the Trust Agreement  5
SECTION 2.3    Waiver of Notice and Demand                                     5
SECTION 2.4    Obligations Not Affected                                        5
SECTION 2.5    Rights of Holders                                               6
SECTION 2.6    Guarantee of Payment                                            6
SECTION 2.7    Subrogation                                                     6
SECTION 2.8    Independent Obligations                                         6
</TABLE>

                                  ARTICLE III

                      LIMITATION OF TRANSACTIONS; RANKING
<TABLE>
<S>            <C>                                                           <C>
SECTION 3.1    Limitation of Transactions                                      7
SECTION 3.2    Ranking                                                         7
SECTION 3.3    Pari Passu Guarantees                                           8
</TABLE>

                                  ARTICLE IV

                                  TERMINATION
<TABLE>
<S>            <C>                                                           <C>
SECTION 4.1    Termination                                                     8
</TABLE>

                                   ARTICLE V

                                 MISCELLANEOUS
<TABLE>
<S>            <C>                                                           <C>
SECTION 5.1    Successors and Assigns                                          8
SECTION 5.2    Amendments                                                      9
SECTION 5.3    Notices                                                         9
SECTION 5.4    Benefit                                                         9
SECTION 5.5    Governing Law                                                  10
</TABLE>

                                       2
<PAGE>

                              GUARANTEE AGREEMENT

     This GUARANTEE AGREEMENT (the "Common Securities Guarantee"), dated as of
December 20, 1999, is executed and delivered by ACE Limited, a Cayman Islands
company (the "Guarantor"), having its principal executive offices at The ACE
Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda, for the benefit of the
Holders (as defined herein) from time to time of the Common Securities (as
defined herein) of ACE Capital Trust I, a Delaware statutory business trust (the
"Issuer").

     WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as of
December 20, 1999, among the Trustees named therein, ACE INA Holdings Inc., a
Delaware corporation and a wholly-owned subsidiary of the Guarantor ("ACE INA"),
as depositor (in such capacity, the "Depositor"), and the Holders from time to
time of undivided beneficial ownership interests in the assets of the Issuer
(the "Trust Agreement"), the Issuer is issuing on the date hereof $3,092,800
($3,556,725 if the Underwriters' over-allotment option pursuant to the
Underwriting Agreement is exercised in full), aggregate liquidation preference
of its 8.875% Common Securities (liquidation preference $25 per common security)
(the "Common Securities") representing undivided beneficial interests in the
assets of the Issuer and having the terms set forth in the Trust Agreement;

     WHEREAS, the Common Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the Issuer's
Preferred Securities (as defined herein), will be used to purchase the
Debentures (as defined herein) of ACE INA (in its capacity as issuer of the
Debentures, the "Debenture Issuer"), which will be deposited with Bank One Trust
Company, National Association, as Property Trustee under the Trust Agreement, as
trust assets; and

     WHEREAS, as incentive for the Holders to purchase the Common Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Common Securities Guarantee, to pay to the Holders of the
Common Securities the Guarantee Payments (as defined herein) and to make certain
other payments on the terms and conditions set forth herein;

     WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Preferred Securities Guarantee") having substantially identical
terms to this Common Securities Guarantee for the benefit of the holders of the
Preferred Securities (as defined in the Trust Agreement) it being understood
that if an Event of Default under the Trust Agreement has occurred and is
continuing, the rights of Holders to receive Guarantee Payments under this
Common Securities Guarantee are subordinated to the rights of holders of the
Preferred Securities to receive guarantee payments under the Preferred
Securities Guarantee ("Preferred Guarantee Payments").

     NOW, THEREFORE, in consideration of the purchase by each Holder of Common
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Common Securities Guarantee
for the benefit of the Holders from time to time of the Common Securities.

                                       3
<PAGE>

                                   ARTICLE I

                        DEFINITIONS AND INTERPRETATIONS

SECTION 1.1 Definitions and Interpretations

     In this Common Securities Guarantee, unless the context otherwise requires:

     (a)  capitalized terms used in this Common Securities Guarantee, but not
defined in the preamble hereto have the respective meanings assigned to them in
this Section 1.1 or in the Trust Agreement, as the case may be;

     (b)  a term defined anywhere in this Common Securities Guarantee has the
same meaning throughout;

     (c)  all references to "the Common Securities Guarantee" or "this Common
Securities Guarantee" are to this Common Securities Guarantee as modified,
supplemented or amended from time to time;

     (d)  all references in this Common Securities Guarantee to Articles and
Sections are to Articles and Sections of this Common Securities Guarantee,
unless otherwise specified;

     (e)  a reference to the singular includes the plural and vice versa; and

     (f)  the masculine, feminine, or neuter genders used herein shall include
the masculine, feminine and neuter genders.

     "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the Issuer. For the purpose of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

     "Capitalized Lease Obligations" means an obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
generally accepted accounting principles, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with such principles.

     "Debenture Guarantee" means the full and unconditional payment guarantee
and indemnity of the Debenture Guarantor provided for in the Indenture with
respect to the Debentures.

     "Debenture Guarantor" means ACE Limited, in its capacity as guarantor of
the Debentures under the Indenture.

                                       4
<PAGE>

     "Debentures" means the series of subordinated debt securities of the
Debenture Issuer designated the 8.875% Junior Subordinated Deferrable Interest
Debentures due 2029 held by the Property Trustee.

     "Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Common Securities Guarantee; provided, however,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.

     "Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Common Securities, to the extent not paid or
made by or on behalf of the Issuer: (i) any accrued and unpaid Distributions (as
defined in the Trust Agreement) that are required to be paid on such Common
Securities, to the extent the Issuer shall have funds on hand available therefor
at such time, (ii) the redemption price, including all accrued and unpaid
Distributions to the date of redemption (the "Redemption Price") with respect to
Common Securities called for redemption by the Issuer to the extent the Issuer
shall have funds on hand available therefor at such time and (iii) upon a
voluntary or involuntary dissolution, winding-up or liquidation of the Issuer,
unless Debentures are distributed to the Holders, the lesser of (a) the
aggregate of the liquidation preference of $25 per Common Security plus accrued
and unpaid Distributions on the Common Securities to the date of payment, to the
extent the Issuer shall have funds on hand available to make such payment at
such time and (b) the amount of assets of the Issuer remaining available for
distribution to Holders in liquidation of the Issuer (in either case, the
"Liquidation Distribution").

     "Holder" shall mean ACE INA Holdings Inc. or, if the Common Securities are
transferred in accordance with the provisions of the Trust Agreement, any other
holder, as registered on the books and records of the Issuer, of any Common
Securities.

     "Indebtedness" means, with respect to any Person, (i) the principal of and
any premium and interest on (a) indebtedness of such Person for money borrowed
and (b) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable; (ii)
all Capitalized Lease Obligations of such Person; (iii) all obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business); (iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (v) all obligations of the type referred to in clauses (i)
through (iv) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable as obligor,
guarantor or otherwise; and (vi) all obligations of the type referred to in
clauses (i) through (v) of other Persons secured by any Lien on any property or

                                       5
<PAGE>

asset of such Person (whether or not such obligation is assumed by such Person),
the amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured; and (vii) any
amendments, modifications, refundings, renewals or extensions of any
indebtedness or obligation described as Indebtedness in clauses (i) through (vi)
above.

     "Indenture" means the Subordinated Indenture dated as of December 1, 1999
among the Debenture Issuer, the Debenture Guarantor and Bank One Trust Company,
National Association, as trustee, and any indenture supplemental thereto
pursuant to which the Debentures and the Debenture Guarantee are to be issued to
the Property Trustee of the Issuer.

     "Majority in liquidation preference of the Common Securities" means a vote
by Holder(s), voting separately as a class, of more than 50% of the liquidation
preference of all then outstanding Common Securities issued by the Issuer.

     "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association or government or any agency
or political subdivision thereof, or any other entity of whatever nature.

     "Preferred Securities" means the securities representing preferred
undivided beneficial interests in the assets of the Issuer.

     "Senior Indebtedness" means all Indebtedness of the Guarantor (including
its Indebtedness, as Debenture Guarantor, under the Indenture) outstanding at
any time, except (a) the Indebtedness under this Common Securities Guarantee
and, subject to Sections 2.2 and 3.2 hereof, the Preferred Securities Guarantee,
(b) Indebtedness as to which, by the terms of the instrument creating or
evidencing the same, it is provided that such Indebtedness is subordinated to or
pari passu with this Common Securities Guarantee or to other Indebtedness of the
Guarantor which is subordinated to or pari passu with this Common Securities
Guarantee, (c) Indebtedness of the Guarantor to an Affiliate of the Guarantor,
(d) interest accruing after the filing of a petition initiating any proceeding
referred to in Section 5.1(7) and 5.1(8) of the Indenture unless such interest
is an allowed claim enforceable against the Guarantor in a proceeding under
federal or state bankruptcy laws, (e) trade accounts payable and (f) similar
guarantee agreements issued by the Guarantor on behalf of holders of common
securities of any other ACE Capital Trust or any trust, partnership or other
entity affiliated with the Guarantor which is a financing vehicle of the
Guarantor or any Affiliate of the Guarantor in connection with the issuance by
such entity of common securities or other securities which are similar to common
securities that are guaranteed by the Guarantor pursuant to an instrument that
ranks pari passu with or junior in right of payment to this Common Securities
Guarantee.

                                  ARTICLE II

                                   GUARANTEE

SECTION 2.1  Guarantee

                                       6
<PAGE>

     The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by or on behalf of the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer, through the Debenture Issuer, to pay such amounts to the Holders.

SECTION 2.2  Subordination in an Event of Default Under the Trust Agreement

     Notwithstanding anything to the contrary contained herein, if an event of
default under the Trust Agreement has occurred and is continuing, the rights of
the Holders of the Common Securities to receive the Guarantee Payments under
this Common Securities Guarantee shall be subordinated to the rights of the
holders of Preferred Securities to receive Preferred Guarantee Payments, and no
Guarantee Payments shall be made to the Holders of Common Securities hereunder
unless payment in full in cash of all accumulated and unpaid Preferred Guarantee
Payments on all outstanding Preferred Securities shall have been made or
provided for, and all funds immediately available to the Property Trustee shall
be first applied to the payment in full in cash of all such Preferred Guarantee
Payments then due and payable. The Guarantor's obligation to make Guarantee
Payments will not be discharged except by payment of the Guarantee Payments in
full.

SECTION 2.3  Waiver of Notice and Demand

     The Guarantor hereby waives notice of acceptance of this Common Securities
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Issuer
or any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.

SECTION 2.4  Obligations Not Affected

     The obligations, covenants, agreements and duties of the Guarantor under
this Common Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:

     (a)  the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Common Securities to be performed or
observed by the Issuer;

     (b)  the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Common Securities or the extension of
time for the performance of any other obligation under, arising out of, or in
connection with, the Common Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures or so provided by the Indenture);

                                       7
<PAGE>

     (c)  any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Common Securities, or any
action on the part of the Issuer granting indulgence or extension of any kind;

     (d)  the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;

     (e)  any invalidity of, or defect or deficiency in, the Common Securities;

     (f)  the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or

     (g)  any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 2.4 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.

     There shall be no obligation of the Holders to give notice to, or obtain
the consent of, the Guarantor with respect to the happening of any of the
foregoing.

SECTION 2.5  Rights of Holders

     Any Holder of the Common Securities may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Common
Securities Guarantee.  The Guarantor waives any right or remedy to require that
any such action be brought first against the Issuer or any other Person before
so proceeding directly against the Guarantor.

SECTION 2.6  Guarantee of Payment

     This Common Securities Guarantee creates a guarantee of payment and not of
collection. This Common Securities Guarantee will not be discharged except by
payment of the Guarantee Payments in full (without duplication of amounts
theretofore paid by the Issuer) or upon distribution of Debentures to Holders as
provided in the Trust Agreement.

SECTION 2.7  Subrogation

     The Guarantor shall be subrogated to all rights, if any, of the Holders
against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Common Securities Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Common Securities Guarantee, if, at the time of
any such payment, any amounts are due and unpaid under this Common Securities
Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.

                                       8
<PAGE>

SECTION 2.8  Independent Obligations

     The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Common Securities, and that
the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Common Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 2.4 hereof.

                                  ARTICLE III

                      LIMITATION OF TRANSACTIONS; RANKING

SECTION 3.1  Limitation of Transactions

     The Guarantor hereby covenants and agrees that, so long as any Common
Securities remain outstanding, it will not, and will not permit any of its
Subsidiaries (including the Debenture Issuer) to, (a) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the outstanding capital stock of the
Debenture Issuer or the Guarantor, as the case may be, or (b) make any payment
of principal of, interest or premium, if any, on or repay, repurchase or redeem
any debt security of the Debenture Issuer or the Guarantor, as the case may be,
that ranks junior in interest to the Debentures or the guarantee in respect
thereof, as the case may be, or make any guarantee payments with respect to any
guarantee by the Debenture Issuer or the Guarantor, as the case may be, of the
debt securities of any Subsidiary of the Debenture Issuer or the Guarantor, as
the case may be, if such guarantee ranks junior in interest to the Debentures or
the guarantee in respect thereof, as the case may be (other than (i) dividends
or distributions on the Capital Stock (as defined in the Indenture) of the
Debenture Issuer paid or made to the Guarantor and dividends or distributions in
Common Stock (as defined in the Indenture) of the Debenture Issuer or the
Guarantor, as the case may be, (ii) redemptions or purchases of any rights
outstanding under a shareholder rights plan of the Debenture Issuer or the
Guarantor, as the case may be, or any successor to such rights plan, or the
declaration of a dividend of such rights or the issuance of stock under such
plans in the future, (iii) payments under any preferred securities guarantee
issued by the Guarantor, and (iv) purchases of Common Stock related to the
issuance of Common Stock under any benefit plans of the Debenture Issuer, the
Guarantor or its Subsidiaries, as the case may be, for their respective
directors, officers or employees) if at such time (1) there shall have occurred
any event of which the Debenture Issuer or the Guarantor, as the case may be,
has actual knowledge that (A) with the giving of notice or the lapse of time or
both would constitute an Event of Default under the Indenture and (B) in respect
of which the Debenture Issuer or the Guarantor, as the case may be, shall not
have taken reasonable steps to cure, (2) the Guarantor shall be in default with
respect to its payment of any obligations under this Common Securities Guarantee
or (3) the Debenture Issuer shall have given notice of its election to begin an
Extension Period (as defined in the Indenture) with respect to the Debentures as
provided in the Indenture and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.

SECTION 3.2  Ranking

                                       9
<PAGE>

     This Common Securities Guarantee will constitute an unsecured obligation of
the Guarantor and will rank subordinate and junior in right of payment to all
Senior Indebtedness of the Guarantor.  Subject to Section 2.2 hereof and the
immediately follwing paragraph, the Common Securities Guarantee will rank pari
passu with the Guarantor's obligations under the Preferred Securities Guarantee.

     If an event of default under the Trust Agreement has occurred and is
continuing, the rights of holders of the Common Securities of the Issuer to
receive Guarantee Payments are subordinated to the rights of holders of the
Preferred Securities to receive Preferred Guarantee Payments, with the result
that no Guarantee Payments shall be made unless payment in full in cash of all
accumulated and unpaid Preferred Guarantee Payments on all outstanding Preferred
Securities shall have been made or provided for, and all funds immediately
available to the Property Trustee shall first be applied to the payment in full
in cash of all such Preferred Guarantee Payments then due and payable.

SECTION 3.3  Pari Passu Guarantees

     This Common Securities Guarantee shall rank pari passu with any similar
guarantee agreements issued by the Guarantor on behalf of holders of common
securities of any other ACE Capital Trust or any trust, partnership or other
entity affiliated with the Guarantor which is a financing vehicle of the
Guarantor or any Affiliate of the Guarantor in connection with the issuance by
such entity of common securities or other securities which are similar to common
securities that are guaranteed by the Guarantor pursuant to an instrument that
ranks pari passu with or junior in right of payment to this Common Securities
Guarantee.

                                  ARTICLE IV

                                  TERMINATION

SECTION 4.1  Termination

     This Common Securities Guarantee shall terminate and be of no further force
and effect upon (i) full payment of the Redemption Price of all Common
Securities, (ii) the distribution of the Debentures to all Holders in exchange
for the Preferred Securities or (iii) full payment of the amounts payable in
accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Common Securities Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
Holder must restore payment of any sums paid with respect to the Common
Securities or under this Common Securities Guarantee.

                                   ARTICLE V

                                 MISCELLANEOUS

SECTION 5.1  Successors and Assigns

                                       10
<PAGE>

     All guarantees and agreements contained in this Common Securities Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Common
Securities then outstanding. Except in connection with a consolidation, merger,
or sale involving the Guarantor that is permitted under Article 8 of the
Indenture and pursuant to which the assignee agrees in writing to perform the
Guarantor's obligations hereunder, the Guarantor shall not assign its
obligations hereunder.

SECTION 5.2  Amendments

     Except with respect to any changes that do not adversely affect the rights
of Holders in any material respect (in which case no consent of Holders will be
required), this Common Securities Guarantee may only be amended with the prior
approval of the Holders of at least a Majority in liquidation preference of the
Common Securities. The provisions of Article VI of the Trust Agreement
concerning meetings of Holders apply to the giving of such approval.

SECTION 5.3  Notices

     Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by first class mail, as
follows:

     (a)  If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders):

          ACE Limited
          The ACE Building
          30 Woodbourne Avenue
          Hamilton, HM 08, Bermuda
          Attn:  General Counsel and Secretary

     (b)  If given to the Issuer, at the Issuer's address set forth below or
such other address as the Issuer may give notice to the Holders:

          ACE Capital Trust I
          c/o ACE INA Holdings Inc.
          Two Liberty Place
          1601 Chestnut Street
          Philadelphia, Pennsylvania 19101
          Attn:  General Counsel and Secretary

     (c)  If given to any Holder, at the address set forth on the books and
records of the Issuer.

     All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which

                                       11
<PAGE>

no notice was given, such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.

SECTION 5.4  Benefit

     This Common Securities Guarantee is solely for the benefit of the Holders
and is not separately transferable from the Common Securities.

SECTION 5.5  Governing Law

     THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND PERFORMED IN THAT STATE

                                       12
<PAGE>

     THIS COMMON SECURITIES GUARANTEE is executed as of the day and year first
above written.

                         ACE LIMITED,
                         as Guarantor

                         By:
                              Name:
                              Title:

                                       13<PAGE>
                                                                   Exhibit 10.43

________________________________________________________________________________

                   PREFERRED SECURITIES GUARANTEE AGREEMENT

                                    BETWEEN

                                 ACE LIMITED,
                                 AS GUARANTOR

                                      AND

                 BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION,
                             AS GUARANTEE TRUSTEE

                         DATED AS OF DECEMBER 20, 1999

________________________________________________________________________________
<PAGE>

                               TABLE OF CONTENTS

                                                                         Page
                                                                         ----

                                   ARTICLE I

                        DEFINITIONS AND INTERPRETATIONS

<TABLE>
<S>            <C>                                                       <C>
SECTION 1.1    Definitions and Interpretations                            2
</TABLE>

                                  ARTICLE II

                              TRUST INDENTURE ACT
<TABLE>
<S>            <C>                                                       <C>
SECTION 2.1    Trust Indenture Act: Application                           6
SECTION 2.2    List of Holders                                            6
SECTION 2.3    Reports by the Guarantee Trustee                           6
SECTION 2.4    Periodic Reports to Guarantee Trustee                      6
SECTION 2.5    Evidence of Compliance with Conditions Precedent           7
SECTION 2.6    Events of Default; Waiver                                  7
SECTION 2.7    Event of Default; Notice                                   7
SECTION 2.8    Conflicting Interests                                      7
</TABLE>

                                  ARTICLE III

                POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE

<TABLE>
<S>            <C>                                                       <C>
SECTION 3.1    Powers and Duties of the Guarantee Trustee                 7
SECTION 3.2    Certain Rights of the Guarantee Trustee                    9
SECTION 3.3    Indemnity                                                 10
</TABLE>

                                  ARTICLE IV

                               GUARANTEE TRUSTEE

<TABLE>
<S>            <C>                                                       <C>
SECTION 4.1    Guarantee Trustee; Eligibility                            11
SECTION 4.2    Appointment, Removal and Resignation of Guarantee
                   Trustees                                              11
</TABLE>

                                   ARTICLE V

                                   GUARANTEE

<TABLE>
<S>            <C>                                                       <C>
SECTION 5.1    Guarantee                                                 12
SECTION 5.2    Waiver of Notice and Demand                               12
SECTION 5.3    Obligations Not Affected                                  12
SECTION 5.4    Rights of Holders                                         13
SECTION 5.5    Guarantee of Payment                                      13
SECTION 5.6    Subrogation                                               14
SECTION 5.7    Independent Obligations                                   14
SECTION 5.8    Net Payments                                              14
</TABLE>

                                       2
<PAGE>

                                  ARTICLE VI

                      LIMITATION OF TRANSACTIONS; RANKING
<TABLE>
<S>            <C>                                                       <C>
SECTION 6.1    Limitation of Transactions                                15
SECTION 6.2    Ranking                                                   16
SECTION 6.3    Pari Passu Guarantees                                     16
</TABLE>
                                  ARTICLE VII

                                  TERMINATION
<TABLE>
<S>            <C>                                                       <C>
SECTION 7.1    Termination                                               16
</TABLE>

                                 ARTICLE VIII

                                 MISCELLANEOUS

<TABLE>
<S>            <C>                                                       <C>
SECTION 8.1    Successors and Assigns                                    17
SECTION 8.2    Amendments                                                17
SECTION 8.3    Notices                                                   17
SECTION 8.4    Benefit                                                   18
SECTION 8.5    Governing Law                                             18
SECTION 8.6    Submission to Jurisdiction                                18
SECTION 8.7    Judgment Currency                                         19
</TABLE>

                                       3
<PAGE>

                   PREFERRED SECURITIES GUARANTEE AGREEMENT

     This GUARANTEE AGREEMENT, dated as of December 20, 1999, is executed and
delivered by ACE Limited, a Cayman Islands company (the "Guarantor"), having its
principal executive offices at The ACE Building, 30 Woodbourne Avenue, Hamilton
HM 08 Bermuda, and Bank One Trust Company, National Association, a national
banking association, having a corporate trust office at Bank One Plaza, Suite
IL1-0126, Chicago, Illinois 60670-0126, as trustee (the "Guarantee Trustee"),
for the benefit of the Holders (as defined herein) from time to time of the
Preferred Securities (as defined herein) of ACE Capital Trust I, a Delaware
statutory business trust (the "Issuer").

     WHEREAS, pursuant to an Amended and Restated Trust Agreement, dated as of
December 20, 1999, among the Trustees named therein, ACE INA Holdings Inc., a
Delaware corporation and a wholly-owned subsidiary of the Guarantor ("ACE INA"),
as depositor (in such capacity, the "Depositor"), and the Holders from time to
time of undivided beneficial interests in the assets of the Issuer (as amended
from time to time, the "Trust Agreement"), the Issuer is issuing on the date
hereof $100,000,000 ($115,000,000 if the Underwriters' over-allotment option
pursuant to the Underwriting Agreement is exercised in full), aggregate
liquidation preference of its 8.875% Trust Originated Preferred Securities
(liquidation preference $25 per preferred security) (the "Preferred Securities")
representing preferred undivided beneficial interests in the assets of the
Issuer and having the terms set forth in the Trust Agreement;

     WHEREAS, the Preferred Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the Issuer's
Common Securities (as defined herein), will be used to purchase the Debentures
(as defined herein) of ACE INA (in its capacity as issuer of the Debentures, the
"Debenture Issuer"), which will be deposited with Bank One Trust Company,
National Association, as Property Trustee under the Trust Agreement, as trust
assets;

     WHEREAS, as incentive for the Holders to purchase the Preferred Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Guarantee Agreement, to pay to the Holders of the Preferred
Securities the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein; and

     WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee Agreement") with substantially
identical terms to this Guarantee Agreement, for the benefit of the holders of
the Common Securities, except that if an Event of Default under the Trust
Agreement has occurred and is continuing, the rights of holders of the Common
Securities to receive guarantee payments under the Common Securities Guarantee
Agreement are subordinated, to the extent and in the manner set forth in the
Common Securities Guarantee Agreement, to the rights of Holders of Preferred
Securities to receive Guarantee Payments under this Guarantee Agreement.

     NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred

                                       4
<PAGE>

Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the
benefit of the Holders from time to time of the Preferred Securities.

                                   ARTICLE I

                        DEFINITIONS AND INTERPRETATIONS

SECTION 1.1 Definitions and Interpretations
     In this Guarantee Agreement, unless the context otherwise requires:

     (a) capitalized terms used in this Guarantee Agreement, but not defined in
the preamble hereto have the respective meanings assigned to them in this
Section 1.1 or in the Trust Agreement, as the case may be;

     (b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;

     (c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Preferred Securities Guarantee Agreement as modified,
supplemented or amended from time to time;

     (d) all references in this Guarantee Agreement to Articles and Sections are
to Articles and Sections of this Guarantee Agreement, unless otherwise
specified;

     (e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement, unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires;

     (f) a reference to the singular includes the plural and vice versa; and

     (g) the masculine, feminine, or neuter genders used herein shall include
the masculine, feminine and neuter genders.

     "Additional Amounts" means any additional amounts which are required hereby
or by the terms of the Preferred Securities, under circumstances specified
herein or therein, to be paid by the Guarantor in respect of certain taxes,
assessments or other governmental charges imposed on Holders specified therein
and which are owing to such Holders.

     "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the Issuer. For the purpose of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

                                       5
<PAGE>

     "Capitalized Lease Obligations" means an obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
generally accepted accounting principles, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with such principles.

     "Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.

     "Debenture Guarantee" means the full and unconditional payment guarantee
and indemnity of the Debenture Guarantor provided for in the Indenture with
respect to the Debentures.

     "Debenture Guarantor" means ACE Limited, in its capacity as guarantor of
the Debentures under the Indenture.

     "Debentures" means the series of subordinated debt securities of the
Debenture Issuer designated the 8.875% Junior Subordinated Deferrable Interest
Debentures due 2029 held by the Property Trustee.

     "Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Guarantee Agreement; provided, however, that,
except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.

     "Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by or on behalf of the Issuer: (i) any accrued and unpaid Distributions (as
defined in the Trust Agreement) that are required to be paid on such Preferred
Securities, to the extent the Issuer shall have funds on hand available therefor
at such time, (ii) the redemption price, including all accumulated and unpaid
Distributions to the date of redemption (the "Redemption Price") with respect to
Preferred Securities called for redemption by the Issuer, to the extent the
Issuer shall have funds on hand available therefor at such time and (iii) upon a
voluntary or involuntary dissolution, winding-up or liquidation of the Issuer,
unless Debentures are distributed to the Holders, the lesser of (a) the
aggregate of the liquidation preference of $25 per Preferred Security plus
accumulated and unpaid Distributions on the Preferred Securities to the date of
payment, to the extent the Issuer shall have funds on hand available to make
such payment at such time and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer (in either
case, the "Liquidation Distribution").

     "Guarantee Trustee" means Bank One Trust Company, National Association,
until a Successor Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Guarantee Agreement and thereafter
means each such Successor Guarantee Trustee.

     "Holder" shall mean any holder, as registered on the books and records of
the Issuer, of any Preferred Securities; provided, however, that, in determining
whether the holders of the

                                       6
<PAGE>

requisite percentage of Preferred Securities have given any request, notice,
consent or waiver hereunder, "Holder" shall not include the Guarantor, the
Depositor, the Guarantee Trustee or any Affiliate of the Guarantor, the
Depositor, or the Guarantee Trustee.

     "Indebtedness" means, with respect to any Person, (i) the principal of and
any premium and interest on (a) indebtedness of such Person for money borrowed
and (b) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible or liable; (ii)
all Capitalized Lease Obligations of such Person; (iii) all obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business); (iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (v) all obligations of the type referred to in clauses (i)
through (iv) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable as obligor,
guarantor or otherwise; (vi) all obligations of the type referred to in clauses
(i) through (v) of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured; and (vii) any
amendments, modifications, refundings, renewals or extensions of any
indebtedness or obligation described as Indebtedness in clauses (i) through (vi)
above.

     "Indenture" means the Subordinated Indenture dated as of December 1, 1999
among the Debenture Issuer, the Debenture Guarantor and Bank One Trust Company,
National Association, as trustee, and any indenture supplemental thereto
pursuant to which the Debentures and the Debenture Guarantee are to be issued to
the Property Trustee of the Issuer.

     "List of Holders" has the meaning specified in Section 2.2(a).

     "Majority in liquidation preference of the Preferred Securities" means,
except as provided by the Trust Indenture Act, a vote by Holder(s), voting
separately as a class, of more than 50% of the liquidation preference of all
then outstanding Preferred Securities issued by the Issuer.

     "Officer's Certificate" means, with respect to any Person, a certificate
signed by the Chairman of the Board of Directors, a Vice Chairman, the
President, any Vice President, the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of such Person, and delivered to the
Guarantee Trustee. Any Officer's Certificate delivered with respect to
compliance with a condition or covenant provided for in this Guarantee Agreement
shall include:

          (a) a statement that the officer signing the Officer's Certificate has
read the covenant or condition and the definitions relating thereto;

                                       7
<PAGE>

          (b) a brief statement of the nature and scope of the examination or
investigation undertaken by such officer in rendering the Officer's Certificate;

          (c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and

          (d) a statement as to whether, in the opinion of such officer, such
condition or covenant has been complied with.

     "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association or government or any agency
or political subdivision thereof, or any other entity of whatever nature.

     "Responsible Officer" means, with respect to the Guarantee Trustee, any
Senior Vice President, any Vice President, any Assistant Vice President, the
Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any
Trust Officer or Assistant Trust Officer or any other officer within the
Corporate Trust Department of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.

     "Senior Indebtedness" means all Indebtedness of the Guarantor (including
its Indebtedness, as Debenture Guarantor, under the Indenture) outstanding at
any time, except (a) the Indebtedness under this Guarantee Agreement, (b)
Indebtedness as to which, by the terms of the instrument creating or evidencing
the same, it is provided that such Indebtedness is subordinated to or pari passu
with this Guarantee Agreement or to other Indebtedness of the Guarantor which is
subordinated to or pari passu with this Guarantee Agreement, (c) Indebtedness of
the Guarantor to an Affiliate of the Guarantor, (d) interest accruing after the
filing of a petition initiating any proceeding referred to in Section 5.1(7) and
5.1(8) of the Indenture unless such interest is an allowed claim enforceable
against the Guarantor in a proceeding under federal or state bankruptcy laws,
(e) trade accounts payable and (f) similar guarantee agreements issued by the
Guarantor on behalf of holders of preferred securities of any other ACE Capital
Trust or any trust, partnership or other entity affiliated with the Guarantor
which is a financing vehicle of the Guarantor or any Affiliate of the Guarantor
in connection with the issuance by such entity of preferred securities or other
securities which are similar to preferred securities that are guaranteed by the
Guarantor pursuant to an instrument that ranks pari passu with or junior in
right of payment to this Guarantee Agreement.

     "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.

     "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.

                                  ARTICLE II

                                       8
<PAGE>

                              TRUST INDENTURE ACT

SECTION 2.1  Trust Indenture Act: Application

     (a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.

     (b) If any provision of this Guarantee Agreement limits, qualifies or
conflicts with any duties under any required provision of the Trust Indenture
Act imposed hereon by Section 318(c) thereof, such required provision shall
control.

SECTION 2.2  List of Holders

     (a) The Guarantor shall furnish or cause to be furnished to the Guarantee
Trustee (a) semiannually, not later than May 1 and November 1 of each year, a
list, in such form as the Guarantee Trustee may reasonably require, of the names
and addresses of the Holders ("List of Holders") as of the applicable date, and
(ii) at such other times as the Guarantee Trustee may request in writing, within
30 days after the receipt by the Guarantor of any such request, a List of
Holders as of a date not more than 15 days prior to the time such list is
furnished, in each case to the extent such information is in the possession or
control of the Guarantor and is not identical to a previously supplied list of
Holders or has not otherwise been received by the Guarantee Trustee in its
capacity as such or in its capacity as Security Registrar (as defined in the
Indenture). The Guarantee Trustee may destroy any List of Holders previously
given to it on receipt of a new List of Holders.

     (b) The Guarantee Trustee shall comply with its obligations under Section
311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.

SECTION 2.3  Reports by the Guarantee Trustee

     Within 60 days after September 15 of each year commencing with September
15, 2000, the Guarantee Trustee shall provide to the Holders such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act. The Guarantee
Trustee shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.

SECTION 2.4 Periodic Reports to the Guarantee Trustee

     The Guarantor shall provide to the Guarantee Trustee, the Securities and
Exchange Commission and the Holders, such documents, reports and information, if
any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.

                                       9
<PAGE>

SECTION 2.5 Evidence of Compliance with Conditions Precedent

     The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of an
Officer's Certificate.

SECTION 2.6 Events of Default; Waiver

     The Holders of a Majority in liquidation preference of the Preferred
Securities may, by vote, on behalf of all Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.

SECTION 2.7 Event of Default; Notice

     (a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default known to the Guarantee Trustee, transmit by mail, first class
postage prepaid, to the Holders, notices of all such Events of Default, unless
such defaults have been cured or waived before the giving of such notice,
provided, except in the case of a default in the payment of a Guarantee Payment,
the Guarantee Trustee shall be protected in withholding such notice if and so
long as a the board of directors, the executive committee or a trust committee
of directors and/or Responsible Officers of the Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.

     (b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer of the Guarantee Trustee charged with the
administration of the Trust Agreement shall have obtained written notice, of
such Event of Default.

SECTION 2.8  Conflicting Interests

     The Trust Agreement shall be deemed to be specifically described in this
Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.

                                  ARTICLE III

                POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE

SECTION 3.1 Powers and Duties of the Guarantee Trustee

     (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the
benefit of the
                                      10
<PAGE>

Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement
to any Person except a Holder exercising his or her rights pursuant to Section
5.4(iv) or to a Successor Guarantee Trustee on acceptance by such Successor
Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The
right, title and interest of the Guarantee Trustee shall automatically vest in
any Successor Guarantee Trustee, upon acceptance by such Successor Guarantee
Trustee of its appointment hereunder, and such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Guarantee Trustee.

     (b) If an Event of Default has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee Agreement for the benefit of the Holders.

     (c) The Guarantee Trustee, before the occurrence of any Event of Default
and after the curing or waiver of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

     (d) No provision of this Guarantee Agreement shall be construed to relieve
the Guarantee Trustee from liability for its own negligent action, its negligent
failure to act or its own bad faith or willful misconduct, except that:

          (i) prior to the occurrence of any Event of Default and after the
     curing or waiving of such Events of Default that may have occurred:

               (A) the duties and obligations of the Guarantee Trustee shall be
          determined solely by the express provisions of this Guarantee
          Agreement, and the Guarantee Trustee shall not be liable except for
          the performance of such duties and obligations as are specifically set
          forth in this Guarantee Agreement, and

               (B) in the absence of bad faith on the part of the Guarantee
          Trustee, the Guarantee Trustee may conclusively rely, as to the truth
          of the statements and the correctness of the opinions expressed
          therein, upon any certificates or opinions furnished to the Guarantee
          Trustee and conforming to the requirements of this Guarantee
          Agreement; but in the case of any such certificates or opinions that
          by any provision hereof are specifically required to be furnished to
          the Guarantee Trustee, the Guarantee Trustee shall be under a duty to
          examine the same to determine whether or not they conform to the
          requirements of this Guarantee Agreement;

          (ii) the Guarantee Trustee shall not be liable for any error of
     judgment made in good faith by a Responsible Officer of the Guarantee
     Trustee, unless it shall be proved that the Guarantee Trustee was negligent
     in ascertaining the pertinent facts upon which such

                                      11
<PAGE>

judgment was made;

          (iii) the Guarantee Trustee shall not be liable with respect to any
     action taken or omitted to be taken by it in good faith in accordance with
     the direction of the Holders of not less than a Majority in liquidation
     preference of the Preferred Securities relating to the time, method and
     place of conducting any proceeding for any remedy available to the
     Guarantee Trustee, or exercising any trust or power conferred upon the
     Guarantee Trustee under this Guarantee Agreement; and

          (iv) no provision of this Guarantee Agreement shall require the
     Guarantee Trustee to expend or risk its own funds or otherwise incur
     personal financial liability in the performance of any of its duties or in
     the exercise of any of its rights or powers, if the Guarantee Trustee shall
     have reasonable grounds for believing that the repayment of such funds or
     liability is not reasonably assured to it under the terms of this Guarantee
     Agreement or adequate indemnity against such risk or liability is not
     reasonably assured to it.

SECTION 3.2  Certain Rights of the Guarantee Trustee

     (a) Subject to the provisions of Section 3.1:

          (i) The Guarantee Trustee may rely upon, and shall be fully protected
     in acting or refraining from acting upon, any resolution, certificate,
     statement, instrument, opinion, report, notice, request, direction,
     consent, order, bond, debenture, note, other evidence of indebtedness or
     other paper or document believed by it to be genuine and to have been
     signed, sent or presented by the proper party or parties.

          (ii) Any direction or act of the Guarantor contemplated by this
     Guarantee Agreement shall be sufficiently evidenced by an Officer's
     Certificate unless otherwise prescribed herein.

          (iii) Whenever, in the administration of this Guarantee Agreement, the
     Guarantee Trustee shall deem it desirable that a matter be proved or
     established before taking, suffering or omitting any action hereunder, the
     Guarantee Trustee (unless other evidence is herein specifically prescribed)
     may, in the absence of bad faith on its part, request and rely upon an
     Officer's Certificate which, upon receipt of such request, shall be
     promptly delivered by the Guarantor.

          (iv) The Guarantee Trustee may consult with competent legal counsel,
     and the written advice or opinion of such counsel with respect to legal
     matters shall be full and complete authorization and protection in respect
     of any action taken, suffered or omitted to be taken by it hereunder in
     good faith and in accordance with such advice or opinion. Such counsel may
     be counsel to the Guarantor or any of its Affiliates and may include any of
     its employees. The Guarantee Trustee shall have the right at any time to
     seek instructions concerning the administration of this Guarantee Agreement
     from any court of competent jurisdiction.

                                      12
<PAGE>

          (v) The Guarantee Trustee shall be under no obligation to exercise any
     of the rights or powers vested in it by this Guarantee Agreement at the
     request or direction of any Holder, unless such Holder shall have provided
     to the Guarantee Trustee such security and indemnity as would satisfy a
     reasonable person in the position of the Guarantee Trustee, against the
     costs, expenses (including attorneys' fees and expenses) and liabilities
     that might be incurred by it in complying with such request or direction,
     including such reasonable advances as may be requested by the Guarantee
     Trustee; provided that, nothing contained in this Section 3.2(a)(v) shall
     be taken to relieve the Guarantee Trustee, upon the occurrence of an Event
     of Default, of its obligation to exercise the rights and powers vested in
     it by this Guarantee Agreement.

          (vi) The Guarantee Trustee shall not be bound to make any
     investigation into the facts or matters stated in any resolution,
     certificate, statement, instrument, opinion, report, notice, request,
     direction, consent, order, bond, debenture, note, other evidence of
     indebtedness or other paper or document, but the Guarantee Trustee, in its
     discretion, may make such further inquiry or investigation into such facts
     or matters as it may see fit.

          (vii) The Guarantee Trustee may execute any of the trusts or powers
     hereunder or perform any duties hereunder either directly or by or through
     agents or attorneys, and the Guarantee Trustee shall not be responsible for
     any misconduct or negligence on the part of any such agent or attorney
     appointed with due care by it hereunder.

          (viii) Any action taken by the Guarantee Trustee or its agents
     hereunder shall bind the Holders, and the signature of the Guarantee
     Trustee or its agents alone shall be sufficient and effective to perform
     any such action. No third party shall be required to inquire as to the
     authority of the Guarantee Trustee to so act or as to its compliance with
     any of the terms and provisions of this Guarantee Agreement, both of which
     shall be conclusively evidenced by the Guarantee Trustee's or its agent's
     taking such action.

          (ix) Whenever in the administration of this Guarantee Agreement the
     Guarantee Trustee shall deem it desirable to receive instructions with
     respect to enforcing any remedy or right or taking any other action
     hereunder, the Guarantee Trustee (A) may request instructions from the
     Holders of a Majority in liquidation preference of the Preferred
     Securities, (B) may refrain from enforcing such remedy or right or taking
     such other action until such instructions are received, and (C) shall be
     protected in acting in accordance with such instructions.

     (b) No provision of this Guarantee Agreement shall be deemed to impose any
duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.

SECTION 3.3  Indemnity

                                      13
<PAGE>

     The Guarantor agrees to indemnify the Guarantee Trustee for, and to hold it
harmless against, any loss, liability or expense incurred without negligence,
bad faith or willful misconduct on the part of the Guarantee Trustee, arising
out of or in connection with the acceptance or administration of this Guarantee
Agreement, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder. The Guarantee Trustee will not claim or exact any
lien or charge on any guarantee agreement as a result of any amount due to it
under this Guarantee Agreement.

     The provisions of this Section 3.3 shall survive the termination of this
Guarantee Agreement or the resignation or removal of the Guarantee Trustee.

                                  ARTICLE IV

                               GUARANTEE TRUSTEE

SECTION 4.1 Guarantee Trustee; Eligibility

     (a) There shall at all times be a Guarantee Trustee which shall:

          (i)  not be an Affiliate of the Guarantor or the Depositor; and

          (ii) be a Person that is eligible pursuant to the Trust Indenture Act
     to act as such and has a combined capital of at least 50 million U.S.
     dollars ($50,000,000), and shall be a corporation meeting the requirements
     of Section 310(c) of the Trust Indenture Act. If such corporation publishes
     reports of condition at least annually, pursuant to law or to the
     requirements of the supervising or examining authority, then, for the
     purposes of this Section 4.1(a)(ii), the combined capital and surplus of
     such corporation shall be deemed to be its combined capital and surplus as
     set forth in its most recent report of condition so published.

     (b) If at any time the Guarantee Trustee shall cease to be eligible to so
act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 4.2(c).

     (c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.

SECTION 4.2  Appointment, Removal and Resignation of  Guarantee Trustees

     (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or
removed with or without cause at any time by the Guarantor.

     (b) The Guarantee Trustee shall not be removed in accordance with Section
4.2(a) until a Successor Guarantee Trustee has been appointed and has accepted
such appointment by written

                                      14
<PAGE>

instrument executed by such Successor Guarantee Trustee and delivered to the
Guarantor.

     (c) The Guarantee Trustee appointed to office shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.

     (d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Guarantee Trustee.

                                   ARTICLE V

                                   GUARANTEE

SECTION 5.1  Guarantee

     The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by or on behalf of the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert, other then
the defense of payment. The Guarantor's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by the Guarantor to
the Holders or by causing the Issuer, through the Debenture Issuer, to pay such
amounts to the Holders.

SECTION 5.2 Waiver of Notice and Demand

     The Guarantor hereby waives notice of acceptance of this Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.

SECTION 5.3 Obligations Not Affected

     The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:

     (a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the

                                      15
<PAGE>

Preferred Securities to be performed or observed by the Issuer;

     (b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures or so provided by the Indenture);

     (c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Issuer granting indulgence or extension of any
kind;

     (d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;

     (e) any invalidity of, or defect or deficiency in, the Preferred
Securities;

     (f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or

     (g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.

     There shall be no obligation of the Holders to give notice to, or obtain
the consent of, the Guarantor with respect to the happening of any of the
foregoing.

SECTION 5.4  Rights of Holders

     The Guarantor expressly acknowledges that: (i) this Guarantee Agreement
will be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) the Holders of a Majority in
liquidation preference of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under this
Guarantee Agreement; and (iv) any Holder may, to the extent permitted by law,
institute a legal proceeding directly against the Guarantor to enforce its
rights under this Guarantee Agreement, without first instituting a legal
proceeding against the Guarantee Trustee, the Issuer, the Debenture Issuer or
any other Person. The Guarantor waives any right or remedy to require that any
such action on this Guarantee Agreement be brought first against the Issuer or
any other Person or entity before so proceeding directly against the Guarantor.

                                      16
<PAGE>

SECTION 5.5 Guarantee of Payment

     This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore paid
by the Issuer) or upon distribution of Debentures to Holders as provided in the
Trust Agreement.

SECTION 5.6 Subrogation

     The Guarantor shall be subrogated to all rights, if any, of the Holders
against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Guarantee Agreement; provided, however, that the Guarantor
shall not (except to the extent required by mandatory provisions of law) be
entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee Agreement, if, at the time of any such
payment, any amounts are due and unpaid under this Guarantee Agreement. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.

SECTION 5.7 Independent Obligations

     The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Preferred Securities, and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee Agreement
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.

SECTION 5.8 Net Payments

     All Guarantee Payments required to be made hereunder shall be made by the
Guarantor without withholding or deduction at source for, or on account of, any
present or future taxes, fees, duties, assessments or governmental charges of
whatever nature imposed or levied by or on behalf of the Cayman Islands or
Bermuda (each, a "taxing jurisdiction") or any political subdivision or taxing
authority thereof or therein, unless such taxes, fees, duties, assessments or
governmental charges are required to be withheld or deducted by (i) the laws (or
any regulations or rulings promulgated thereunder) of a taxing jurisdiction or
any political subdivision or taxing authority thereof or therein or (ii) an
official position regarding the application, administration, interpretation or
enforcement of any such laws, regulations or rulings (including, without
limitation, a holding by a court of competent jurisdiction or by a taxing
authority in a taxing jurisdiction or any political subdivision thereof).  If a
withholding or deduction at source is required, the Guarantor shall, subject to
certain limitations and exceptions set forth below, pay to the Holder of any
Preferred Security such Additional Amounts as may be necessary so that every
Guarantee Payment made to such Holder, after such withholding or deduction,
shall not be less than the amount provided for in this Guarantee Agreement to be
then due and payable; provided, however, that the Guarantor shall not be
required to make payment of such Additional Amounts for or on account of:

                                      17
<PAGE>

     (1) any tax, fee, duty, assessment or governmental charge of whatever
nature which would not have been imposed but for the fact that such Holder: (A)
was a resident, domiciliary or national of, or engaged in business or maintained
a permanent establishment or was physically present in, the relevant taxing
jurisdiction or any political subdivision thereof or otherwise had some
connection with the relevant taxing jurisdiction other than by reason of the
mere ownership of, or receipt of payment under, such Preferred Security; (B)
presented such Preferred Security for payment in the relevant taxing
jurisdiction or any political subdivision thereof, unless such Preferred
Security could not have been presented for payment elsewhere; or (C) presented
such Preferred Security more than thirty (30) days after the date on which the
payment in respect of such Preferred Security first became due and payable or
provided for, whichever is later, except to the extent that the Holder would
have been entitled to such Additional Amounts if it had presented such Preferred
Security for payment on any day within such period of  thirty (30) days;

     (2) any estate, inheritance, gift, sale, transfer, personal property or
similar tax, assessment or other governmental charge;

     (3) any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the Holder or the beneficial owner of such
Preferred Security to comply with any reasonable request by the Guarantor or the
Trust addressed to the Holder within 90 days of such request (A) to provide
information concerning the nationality, residence or identity of the Holder or
such beneficial owner or (B) to make any declaration or other similar claim or
satisfy any information or reporting requirement, which, in the case of (A) or
(B), is required or imposed by statute, treaty, regulation or administrative
practice of the relevant taxing jurisdiction or any political subdivision
thereof as a precondition to exemption from all or part of such tax, assessment
or other governmental charge; or

     (4) any combination of items (1), (2) and (3);

nor shall Additional Amounts be paid with respect to any Guarantee Payment to
any Holder who is a fiduciary or partnership or other than the sole beneficial
owner of the related Preferred Security to the extent such payment would be
required by the laws of the relevant taxing jurisdiction (or any political
subdivision or relevant taxing authority thereof or therein) to be included in
the income for tax purposes of a beneficiary or partner or settlor with respect
to such fiduciary or a member of such partnership or a beneficial owner who
would not have been entitled to such Additional Amounts had it been the Holder
of such Preferred Security.

                                  ARTICLE VI

                      LIMITATION OF TRANSACTIONS; RANKING

SECTION 6.1 Limitation of Transactions

     The Guarantor hereby covenants and agrees that, so long as any Preferred
Securities remain outstanding, it will not, and will not permit any of its
Subsidiaries (including the Debenture Issuer) to, (a) declare or pay any
dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the outstanding capital stock of the

                                      18
<PAGE>

Debenture Issuer or the Guarantor, as the case may be, or (b) make any payment
of principal of, interest or premium, if any, on or repay, repurchase or redeem
any debt security of the Debenture Issuer or the Guarantor, as the case may be,
that ranks junior in interest to the Debentures or the guarantee in respect
thereof, as the case may be, or make any guarantee payments with respect to any
guarantee by the Debenture Issuer or the Guarantor, as the case may be, of the
debt securities of any Subsidiary of the Debenture Issuer or the Guarantor, as
the case may be, if such guarantee ranks junior in interest to the Debentures or
the guarantee in respect thereof, as the case may be (other than (i) dividends
or distributions on the Capital Stock (as defined in the Indenture) of the
Debenture Issuer paid or made to the Guarantor and dividends or distributions in
Common Stock (as defined in the Indenture) of the Debenture Issuer or the
Guarantor, as the case may be, (ii) redemptions or purchases of any rights
outstanding under a shareholder rights plan of the Debenture Issuer or the
Guarantor, as the case may be, or any successor to such rights plan, or the
declaration of a dividend of such rights or the issuance of stock under such
plans in the future, (iii) payments under any preferred securities guarantee
issued by the Guarantor, and (iv) purchases of Common Stock related to the
issuance of Common Stock under any benefit plans of the Debenture Issuer, the
Guarantor or its Subsidiaries, as the case may be, for their respective
directors, officers or employees) if at such time (1) there shall have occurred
any event of which the Debenture Issuer or the Guarantor, as the case may be,
has actual knowledge that (A) with the giving of notice or the lapse of time or
both would constitute an Event of Default under the Indenture and (B) in respect
of which the Debenture Issuer or the Guarantor, as the case may be, shall not
have taken reasonable steps to cure, (2) the Guarantor shall be in default with
respect to its payment of any obligations under this Guarantee Agreement or (3)
the Debenture Issuer shall have given notice of its election to begin an
Extension Period (as defined in the Indenture) with respect to the Debentures as
provided in the Indenture and shall not have rescinded such notice, or such
Extension Period, or any extension thereof, shall be continuing.

SECTION 6.2 Ranking

     This Guarantee Agreement will constitute an unsecured obligation of the
Guarantor and will rank subordinate and junior in right of payment to all Senior
Indebtedness of the Guarantor.

SECTION 6.3 Pari Passu Guarantees

     This Guarantee Agreement shall rank pari passu with any similar guarantee
agreements issued by the Guarantor on behalf of holders of preferred securities
of any other ACE Capital Trust or any trust, partnership or other entity
affiliated with the Guarantor which is a financing vehicle of the Guarantor or
any Affiliate of the Guarantor in connection with the issuance by such entity of
preferred securities or other securities which are similar to preferred
securities that are guaranteed by the Guarantor pursuant to an instrument that
ranks pari passu with or junior in right of payment to this Guarantee Agreement.

                                  ARTICLE VII

                                  TERMINATION

SECTION 7.1 Termination

                                      19
<PAGE>

     This Guarantee Agreement shall terminate and be of no further force and
effect upon (i) full payment of the Redemption Price of all Preferred
Securities, (ii) the distribution of the Debentures to all Holders in exchange
for the Preferred Securities or (iii) full payment of the amounts payable in
accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid with respect to the Preferred Securities
or under this Guarantee Agreement.

                                 ARTICLE VIII

                                 MISCELLANEOUS

SECTION 8.1 Successors and Assigns

     All guarantees and agreements contained in this Guarantee Agreement shall
bind the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation,
amalgamation or merger or conveyance, transfer or lease involving the Guarantor
that is permitted under Article 8 of the Indenture and pursuant to which the
assignee agrees in writing to perform the Guarantor's obligations hereunder, the
Guarantor shall not assign its obligations hereunder.

SECTION 8.2  Amendments

     Except with respect to any changes that do not adversely affect the rights
of Holders in any material respect (in which case no consent of Holders will be
required), this Guarantee Agreement may only be amended with the prior approval
of the Holders of at least a Majority in liquidation preference of the Preferred
Securities. The provisions of Article VI of the Trust Agreement concerning
meetings of Holders apply to the giving of such approval.

SECTION 8.3 Notices

     Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by first class mail, as
follows:

     (a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing
address set forth below (or such other address as the Guarantee Trustee may give
notice of to the Guarantor and the Holders):

          Bank One Trust Company, National Association
          Bank One Plaza
          Suite IL1-0126
          Chicago, Illinois 60670-0126
          Attention:  Corporate Trust Services Division

                                      20
<PAGE>

     (b) If given to the Guarantor, at the Guarantor's mailing address set forth
below (or such other address as the Guarantor may give notice of to the
Holders):

          ACE Limited
          The ACE Building
          30 Woodbourne Avenue
          Hamilton, HM 08, Bermuda
          Attn:  General Counsel and Secretary

     (c) If given to the Issuer, in care of the Guarantee Trustee, at the
Issuer's (and the Guarantee Trustee's) address set forth below or such other
address as the Guarantee Trustee on behalf of the Issuer may give notice to the
Holders:

          ACE Capital Trust I
          c/o ACE INA Holdings Inc.
          Two Liberty Place
          1601 Chestnut Street
          Philadelphia, Pennsylvania 19101
          Attn:  General Counsel and Secretary

          with a copy to:

          Bank One Trust Company, National Association
          Bank One Plaza
          Suite IL1-0126
          Chicago, Illinois 60670-0126
          Attention:  Corporate Trust Services Division

     (d) If given to any Holder, at the address set forth on the books and
records of the Issuer.

     All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

SECTION 8.4  Benefit

      This Guarantee Agreement is solely for the benefit of the Holders and is
not separately transferable from the Preferred Securities.

SECTION 8.5 Governing Law

      THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY, AND

                                      21
<PAGE>

CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND PERFORMED IN THAT STATE.

SECTION 8.6 Submission to Jurisdiction

     The Guarantor agrees that any judicial proceedings instituted in relation
to any matter arising under this Guarantee Agreement may be brought in any
United States Federal or New York State court sitting in the Borough of
Manhattan, The City of New York, New York to the extent that such court has
subject matter jurisdiction over the controversy, and, by execution and delivery
of this Guarantee Agreement, the Guarantor hereby irrevocably accepts, generally
and unconditionally, the jurisdiction of the aforesaid courts, acknowledges
their competence and irrevocably agrees to be bound by any judgement rendered in
such proceeding. The Guarantor also irrevocably and unconditionally waives for
the benefit of the Guarantee Trustee and the Holders any immunity from
jurisdiction and any immunity from legal process (whether through service or
notice, attachment prior to judgement, attachment in the aid of execution,
execution or otherwise) in respect of this Guarantee Agreement. The Guarantor
hereby irrevocably designates and appoints for the benefit of the Guarantee
Trustee and the Holders for the term of this Guarantee Agreement ACE USA, Inc.
1133 Avenue of the Americas, 32nd Floor, New York, New York 10036, as its agent
to receive on its behalf service of all process (with a copy of all such service
of process to be delivered to Peter N. Mear, General Counsel and Secretary, ACE
Limited, The ACE Building, 30 Woodbourne Avenue, Hamilton, HM 08, Bermuda)
brought against it with respect to any such proceeding in any such court in The
City of New York, such service being hereby acknowledged by the Guarantor to be
effective and binding service on it in every respect whether or not the
Guarantor shall then be doing or shall have at any time done business in New
York. Such appointment shall be irrevocable so long as any of the Preferred
Securities or the obligations of the Guarantor hereunder remain outstanding, or
until the appointment of a successor by the Guarantor and such successor's
acceptance of such appointment. Upon such acceptance, the Guarantor shall notify
the Guarantee Trustee of the name and address of such successor. The Guarantor
further agrees for the benefit of the Guarantee Trustee and the Holders to take
any and all action, including the execution and filing of any and all such
documents and instruments, as may be necessary to continue such designation and
appointment of said ACE USA, Inc. in full force and effect so long as any of the
Preferred Securities or the obligations of the Guarantor hereunder shall be
outstanding. The Guarantee Trustee shall not be obligated and shall have no
responsibility with respect to any failure by the Guarantor to take any such
action. Nothing herein shall affect the right to serve process in any other
manner permitted by any law or limit the right of the Guarantee Trustee or any
Holder to institute proceedings against the Guarantor in the courts of any other
jurisdiction or jurisdictions.

SECTION 8.7 Judgment Currency

     The Guarantor agrees, to the fullest extent that it may effectively do so
under applicable law, that (a) if for the purpose of obtaining judgment in any
court it is necessary to convert the sum due in respect of any Guarantee Payment
(the "Required Currency") into a currency in which a judgment will be rendered
(the "Judgment Currency"), the rate of exchange used shall be

                                      22
<PAGE>

the rate at which in accordance with normal banking procedures the Guarantee
Trustee could purchase in The City of New York the requisite amount of the
Required Currency with the Judgment Currency on the New York Banking Day
preceding the day on which a final unappealable judgment is given and (b) its
obligations under this Guarantee Agreement to make payments in the Required
Currency (i) shall not be discharged or satisfied by any tender, or any recovery
pursuant to any judgment (whether or not entered in accordance with clause (a)),
in any currency other than the Required Currency, except to the extent that such
tender or recovery shall result in the actual receipt, by the payee, of the full
amount of the Required Currency expressed to be payable in respect of such
payments, (ii) shall be enforceable as an alternative or additional cause of
action for the purpose of recovering in the Required Currency the amount, if
any, by which such actual receipt shall fall short of the full amount of the
Required Currency so expressed to be payable and (iii) shall not be affected by
judgment being obtained for any other sum due under this Guarantee Agreement.
For purposes of the foregoing, "New York Banking Day" means any day except a
Saturday, Sunday or a legal holiday in The City of New York or a day on which
banking institutions in The City of New York are authorized or obligated by law,
regulation or executive order to be closed.

                                      23
<PAGE>

     THIS PREFERRED SECURITIES GUARANTEE AGREEMENT is executed as of the day and
year first above written.

                         ACE LIMITED,

                             as Guarantor

                         By:

                             Name:

                             Title:

                         BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION,

                             as Guarantee Trustee

                         By:

                             Name:

                             Title:

                                      24

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