Document:

Exhibit 10.5

EMPLOYMENT AGREEMENT

          AGREEMENT,
made and entered into as of this 21st day of December, 2006, by and
between, Security Capital Assurance Ltd, a Bermuda corporation (the “Company”),
and Edward B. Hubbard (the “Executive”).

          WHEREAS,
the Executive has been employed by XL Capital Assurance, Inc (“XLCA”) as
President & Chief Operating Officer, which has included the business of the
Company;

          WHEREAS,
the Executive and the Company desire that the Executive continue to be the
President & Chief Operating Officer of XLCA on the terms and subject to the
conditions set forth herein, effective upon the consummation of the initial
public offering of the common stock of the Company (the “IPO”); 

          NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein and for other good and valuable consideration, the Company, and the
Executive (the “Parties”) agree as follows:

          1. EMPLOYMENT.

          The
Company hereby employs the Executive, and the Executive hereby accepts
employment with the Company, for the term of this Agreement as set forth in
Section 2, below, in the position and with duties and responsibilities set
forth in Section 3, below, and upon such other terms and conditions as are
hereinafter stated.

          2. TERM
OF EMPLOYMENT.

          The
stated term of employment under this Agreement shall commence at the time of
consummation of the IPO (the “Date of the Agreement”) and shall continue
through the close of business on the third anniversary of the Date of the
Agreement, subject to earlier termination as provided in Section 8, below, and
extension as provided in the next succeeding sentence. On the second
anniversary of the Date of the Agreement and on each anniversary thereafter,
the stated term of employment shall be automatically extended for an additional
one year unless the Company gives notice in writing to the Executive or the
Executive gives notice in writing to the Company at least three months prior to
such anniversary that the term is not to be so extended.

          3. POSITIONS,
DUTIES AND RESPONSIBILITIES.

          (a) General.  The Executive shall be employed
as President
and  Chief Operating Officer of
XLCA.  In such positions, the Executive
shall have the duties, responsibilities and authority normally associated with
the office, position and titles of such an officer of a financial guaranty
company. In carrying out his duties and responsibilities, the Executive shall
report to the Chief Executive Officer of XLCA or the Company.  During the term of this Agreement, the
Executive shall devote his full business time to the business and affairs of
the Company and its subsidiaries, and shall use his best efforts, skills and
abilities to promote the interests of the Company and its subsidiaries.

          (b) Performance
of Services.  The Executive’s
services under this Agreement, which are global in nature, shall be performed
in the greater New York City metropolitan area, as reasonably requested by the
Company, in accordance with the guidelines established by the Company from time
to time for the location of the performance of services on behalf of the
Company and its subsidiaries. The Executive acknowledges that the Company may
require the Executive to travel to the extent such travel is reasonably
necessary to perform the services hereunder and that such travel may be
extensive. To the extent reasonably requested by the Company, and acceptable to
Executive, the Executive shall allocate greater business time to a location
other than his principal business location, if necessary.

          4. BASE
SALARY.

          The
Executive shall be paid a Base Salary by the Company of not less than
US$375,000.00, payable in accordance with the Company’s regular pay
practices.  Such Base Salary shall be
subject to annual review in accordance with the Company’s practices for
executives as in effect from time to time and may be increased, but not
decreased, at the discretion of the Compensation Committee of the Board of
Directors of the Company (the “Compensation Committee”).

          5. BONUSES.

          In
addition to the Base Salary provided for in Section 4, above, the Executive
shall be eligible for an annual cash bonus under the Company’s Annual Incentive
Compensation Plan as in effect from time to time, with an annual target bonus
equal to 150% of the Executive’s Base Salary. The Executive may be awarded such
annual bonuses thereunder as may be approved by the Compensation Committee
based on corporate, individual and business unit performance measures, as
appropriate, established or approved from time to time, by the Compensation
Committee.  Any annual bonus shall be
paid in cash in a lump sum no later than March 15 following the year for which
the annual bonus is paid, unless deferred at the Executive’s option in
accordance with the provisions of any applicable deferred compensation plan of
the Company or it subsidiaries in effect from time to time and in compliance
with Section 409A of the United States Internal Revenue Code of 1986, as amended
(the “Code”).  Nothing in this Section 5
shall confer upon the Executive any right to a minimum annual bonus.

          6. EMPLOYEE
BENEFIT PROGRAMS.

          During
the term of the Executive’s employment under this Agreement, the Executive
shall be entitled to participate in all employee retirement, pension, welfare
and benefit programs of the Company as are in effect from time to time and in
which similarly situated senior executives of the Company are eligible to
participate on the same terms as such other similarly situation senior
executives of the Company.

          7. BUSINESS
EXPENSE REIMBURSEMENT AND FRINGE BENEFITS.

          During
the term of the Executive’s employment under this Agreement, the Executive
shall be entitled to participate in the Company’s travel and entertainment
expense reimbursement programs and its executive fringe benefit plans and
arrangements, all in accordance with the terms and conditions of such programs,
plans and arrangements as in effect from time to 

time as
applied to the Company’s similarly situated executives on the same terms as
such other similarly situation senior executives of the Company.

          8. TERMINATION
OF EMPLOYMENT.

          (a) Termination
due to Death.  In the event the
Executive dies during the term of employment hereunder, the Executive’s spouse,
if the spouse survives the Executive, (or, if the Executive’s spouse does not
survive him, the estate or other legal representative of the Executive) shall
be entitled to receive the Base Salary as provided in Section 4, above, at the
rate in effect at the time of Executive’s death, to be paid in accordance with
the Company’s regular payroll practices, through the end of the sixth month
after the month in which the Executive dies. In addition to the above, the
estate or other legal representative of the Executive shall be entitled to:

	
 

	
 

	
 

	
          (i) any
  annual bonus awarded in accordance with the Company’s bonus program but not
  yet paid under Section 5, above, to be paid at the time such bonus would otherwise
  be due under the applicable program, and reimbursement of business expenses
  incurred prior to death in accordance with Section 7(a) above,

	
 

	
 

	
 

	
          (ii) within
  45 days after the date of death, a pro rata bonus for the year of death in an
  amount determined by the Compensation Committee, but in no event less than a
  pro rata portion of the Executive’s average annual bonus for the immediately
  preceding three years (or the period of the Executive’s employment with the
  Company, if less),

	
 

	
 

	
 

	
          (iii) the
  rights under any options to purchase equity securities of the Company or
  other rights with respect to equity securities of the Company, including any
  restricted stock or other securities, held by the Executive determined in accordance
  with the terms thereof,

	
 

	
 

	
 

	
          (iv) for
  a period of six months following the Executive’s death, continued medical
  benefit plan coverage (including dental and vision benefits if provided under
  the applicable plans) for the Executive’s immediate family members, if any,
  under the Company’s medical benefit plans upon substantially the same terms
  and conditions (including cost of coverage to the immediate family members)
  as is then in existence for other senior executives during the coverage
  period; provided, that, if the Executive’s immediate family
  members cannot continue to participate in the Company plans providing such
  benefits, the Company shall otherwise provide such benefits on substantially
  the same after-tax basis as if continued participation had been permitted,
  and

	
 

	
 

	
 

	
          (v) the
  vested accrued benefits, if any, under the employee benefit programs of the
  Company, as provided in Section 6, above, determined in accordance with
  the applicable terms and provisions of such programs.

          (b) Termination
due to Disability. In the event the Executive’s employment hereunder is
terminated due to his disability, as determined under the Company’s long-term
disability plan, the Executive shall be entitled to:

	
 

	
 

	
 

	
          (i) the
  Base Salary as provided in Section 4, above, through the end of the sixth
  month after the month in which the Executive’s employment terminates due to
  disability, to be paid in accordance with the Company’s regular payroll
  practices,

	
 

	
 

	
 

	
          (ii) any
  annual bonus awarded in accordance with the Company’s bonus program but not
  yet paid under Section 5, to be paid at the time such bonus would otherwise
  be due under the applicable program, and reimbursement of business expenses
  incurred prior to termination of employment in accordance with Section 7(a)
  above,

	
 

	
 

	
 

	
          (iii) within
  45 days after the date of termination, a pro rata bonus for the year of
  termination in an amount determined by the Compensation Committee, but in no
  event less than a pro rata portion of the Executive’s average annual bonus
  for the immediately preceding three years (or the period of the Executive’s
  employment with the Company, if less),

	
 

	
 

	
 

	
          (iv) the
  rights under any options to purchase equity securities of the Company or
  other rights with respect to equity securities of the Company, including any
  restricted stock or other securities, held by the Executive, determined in accordance
  with the terms thereof,

	
 

	
 

	
 

	
          (v) for
  a period of six months following the termination of the Executive’s
  employment, continued medical benefit plan coverage (including dental and
  vision benefits if provided under the applicable plans) for the Executive
  (and the Executive’s immediate family members, if any) under the Company’s
  medical benefit plans upon substantially the same terms and conditions
  (including cost of coverage to the Executive) as is then in existence for
  other executives during the coverage period; provided, that, if
  the Executive cannot continue to participate in the Company plans providing
  such benefits, the Company shall otherwise provide such benefits on
  substantially the same after-tax basis as if continued participation had been
  permitted; provided further, however, that, in the event the
  Executive becomes reemployed with another employer and becomes eligible to
  receive medical benefits from such employer, the medical benefits described
  herein shall immediately cease, and

	
 

	
 

	
 

	
          (vi) the
  vested accrued benefits, if any, under the employee benefit programs of the
  Company, as provided in Section 6 above, determined in accordance with the
  applicable terms and provisions of such programs.

          (c) TERMINATION
FOR CAUSE.

	
 

	
 

	
 

	
          (i) The
  employment of the Executive under this Agreement may be terminated by the
  Company for Cause, such termination to be effective upon the 

	
 

	
 

	
 

	
 

	
Company
  giving the Executive written notice of termination in accordance with the provisions
  of this Agreement.  For this purpose,
  “Cause” shall mean:

	
 

	
 

	
 

	
 

	
(A)

	
conviction
  of the Executive of a felony involving moral turpitude, dishonesty or laws to
  which the Company or its Affiliates are subject in connection with the
  conduct of its or their business;

	
 

	
 

	
 

	
 

	
(B)

	
the
  Executive, in carrying out his duties for the Company under this Agreement,
  has been guilty of (1) willful misconduct or (2) substantial and continual
  refusal by the Executive to perform the duties assigned to the Executive
  pursuant to the terms hereof; provided, however, that any act
  or failure to act by the Executive shall not constitute Cause for purposes of
  this Section 8(c)(i)(B) if such act or failure to act was committed, or
  omitted, by the Executive in good faith and in a manner he reasonably
  believed to be in the overall best interests of the Company, as the case may
  be. The determination of whether the Executive acted in good faith and that
  he reasonably believed his action to be in the Company’s overall best
  interest, as the case may be, will be in the reasonable and good faith
  judgment of the Compensation Committee and/or the Audit Committee; or

	
 

	
 

	
 

	
 

	
(C)

	
the
  Executive’s continued willful refusal to obey any lawful policy or
  requirement duly adopted by the Company Board and the continuance of such
  refusal after receipt of written notice.

	
 

	
 

	
 

	
 

	
          (ii) In
  the event of a termination for Cause under Section 8(c)(i), above, the
  Executive shall be entitled only to:

	
 

	
 

	
 

	
 

	
(A)

	
Base Salary
  as provided in Section 4, above, at the rate in effect at the time of his
  termination of employment for Cause, through the date on which termination for
  Cause occurs, to be paid in accordance with the Company’s regular payroll
  practices,

	
 

	
 

	
 

	
 

	
(B)

	
the rights
  under any options to purchase equity securities of the Company or other
  rights with respect to equity securities of the Company, including any restricted
  stock or other securities, held by the Executive, determined in accordance
  with the terms thereof, and

	
 

	
 

	
 

	
 

	
(C)

	
the vested
  accrued benefits, if any, under employee benefit programs of the Company, as
  provided in Section 6, above, and re-imbursement of properly incurred
  unreimbursed business expenses under the business expense reimbursement
  program as described in Section 7, above, determined in accordance with the
  applicable terms and provisions of such employee benefit and expense
  reimbursement programs; provided that the Executive shall not be
  entitled to any such benefits unless the terms and provisions of such
  programs expressly state that the Executive shall be entitled thereto in the
  event his employment is terminated for Cause (as defined in this Agreement or
  otherwise).

	
 

	
 

	
 

	
 

	
(d)

	
TERMINATION
  WITHOUT CAUSE.

	
 

	
 

	
 

	
 

	
          (i) Anything
  in this Agreement to the contrary notwithstanding, the Executive’s employment
  may be terminated by the Company without Cause as provided in this Section
  8(d). A termination due to death or disability, as described in Section 8(a)
  or (b), above, or a termination for Cause, as described in Section 8(c),
  above, shall not be deemed a termination without Cause under this Section
  8(d).  For the avoidance of doubt, if
  a notice of non-renewal of this Agreement pursuant to Section 2 is issued by
  the Company and, within six (6) months thereafter, a written notice is issued
  (x) by the Company to the Executive of its intention to terminate the
  employment relationship with Executive at the end of the Term or (y) by the
  Executive to the Company of Executive’s intention to terminate the employment
  relationship with the Company at the end of the Term, the termination of the
  Executive’s employment at the end of the Term shall be considered a
  termination by the Company without Cause hereunder.

	
 

	
 

	
 

	
 

	
          (ii) In
  the event the Executive’s employment is terminated by the Company without
  Cause (x) prior to a Change in Control (other than as provided in the last
  paragraph of Section 8(d)(iii), in which case the provisions of Section
  8(d)(iii) shall apply in lieu of this Section 8(d)(ii)) or (y) following the
  Post-Change Period (as hereinafter defined), the Executive shall be entitled
  to:

	
 

	
 

	
 

	
 

	
(A)

	
Base Salary
  as provided in Section 4, above, at the rate in effect at the time of his
  termination of employment without Cause, through the date on which
  termination without Cause occurs, to be paid in accordance with the Company’s
  regular payroll practices,

	
 

	
 

	
 

	
 

	
(B)

	
provided the
  Executive executes and does not revoke a reasonable general release of
  employment liability claims against the Company and its affiliates in form
  and substance satisfactory to the Company, a cash lump sum payment made
  within 30 days after termination of employment equal to (x) two times the
  Executive’s annual Base Salary, at the annual rate in effect in accordance
  with Section 4, above, immediately prior to such termination and (y) one
  times the higher of the targeted annual bonus for the year of such
  termination, if any, or the average of the Executive’s annual bonus payable
  by the Company or its subsidiaries for the three years immediately preceding
  the year of termination (or such shorter period during which the Executive
  has been employed by any of such entities),

	
 

	
 

	
 

	
 

	
(C)

	
any annual
  bonus awarded in accordance with the Company’s bonus program but not yet paid
  under Section 5, above, to be paid at the time such bonus would otherwise be
  due under the applicable program, and reimbursement of business expenses
  incurred prior to termination of employment in accordance with Section 7(a)
  above,

	
 

	
 

	
 

	
 

	
(D)

	
the rights
  under any options to purchase equity securities of the Company or other
  rights with respect to equity securities of the Company, including 

	
 

	
 

	
 

	
 

	
 

	
any
  restricted stock or other securities, held by the Executive, or rights to any
  cash-based long term incentives, determined in accordance with the terms
  thereof or the applicable plan,

	
 

	
 

	
 

	
 

	
(E)

	
for a period
  of twenty-four months following the termination of the Executive’s employment,
  continued medical benefit plan coverage (including dental and vision benefits
  if provided under the applicable plans) for the Executive (and the
  Executive’s immediate family members, if any) under the Company’s medical
  benefit plans upon substantially the same terms and conditions (including
  cost of coverage to the Executive) as is then in existence for other senior
  executives during the coverage period; provided, that, if the
  Executive cannot continue to participate in the Company plans providing such
  benefits, the Company shall otherwise provide such benefits on substantially
  the same after-tax basis as if continued participation had been permitted; provided,
  however, that, in the event the Executive becomes reemployed with
  another employer and becomes eligible to receive medical benefits from such
  employer, the medical benefits described herein shall immediately cease, and

	
 

	
 

	
 

	
 

	
(F)

	
the vested
  accrued benefits, if any, under the employee benefit programs of the Company,
  as provided in Section 6 above, determined in accordance with the applicable
  terms and provisions of such programs.

	
 

	
 

	
 

	
 

	
          (iii) In
  the event the Executive’s employment is terminated by (x) the Company without
  Cause within the twenty-four month period following a Change in Control (as
  defined in Exhibit A hereto) (the “Post-Change Period”) or (y)
  the Executive terminates his employment for “Good Reason” (as defined
  in Exhibit B hereto) during the Post-Change Period, the Executive
  shall be entitled to the following, paid in the case of amounts set forth in
  (A), (B), (C) and (D) below within 30 days after termination of employment:

	
 

	
 

	
 

	
 

	
(A)

	
Base Salary
  as provided in Section 4, above, at the rate in effect at the time of his
  termination of employment, through the date on which termination occurs,

	
 

	
 

	
 

	
 

	
(B)

	
a cash lump
  sum payment equal to two times the Executive’s annual Base Salary, at the
  rate in effect in accordance with Section 4, above, or immediately prior to
  such termination or Change in Control, whichever is greater,

	
 

	
 

	
 

	
 

	
(C)

	
a cash lump
  sum payment equal to two times the higher of (i) the average annual
  bonus awarded to the Executive by the Company or its subsidiaries in the
  three years prior to the year in which the Change in Control occurs (or
  shorter period during which the Executive had been employed by any of such
  entities), or (ii) the Executive’s target annual bonus, if any, for the
  year of such termination,

	
 

	
 

	
 

	
 

	
(D)

	
an amount
  equal to (i) the higher of (x) the bonus actually awarded to the Executive by
  the Company for the year immediately preceding the year in which the Change
  in Control occurs or (y) the targeted amount of bonus, if any, that would
  have been awarded to the Executive in respect of the year in which the
  termination of employment occurs, multiplied by (ii) a fraction, the
  numerator of which is the number of months or fraction thereof in which the
  Executive was employed by the Company in the year of termination of
  employment, and the denominator of which is 12,

	
 

	
 

	
 

	
 

	
(E)

	
options to
  purchase equity securities of the Company or other rights with respect to
  equity securities of the Company held by the Executive shall immediately vest
  in full and shall continue to be exercisable for three years from the date of
  termination of employment, notwithstanding the Executive’s termination of
  employment, or the original full term of the option or other right, if
  shorter, and cash-based long term incentives in accordance with the terms of
  the applicable plan,

	
 

	
 

	
 

	
 

	
(F)

	
for a period
  of twenty-four months following the termination of the Executive’s
  employment, continued medical benefit plan coverage (including dental and
  vision benefits if provided under the applicable plans) for the Executive
  (and the Executive’s immediate family members, if any) under the Company’s
  medical benefit plans upon substantially the same terms and conditions
  (including cost of coverage to the Executive) as is then in existence for
  other senior executives during the coverage period; provided, that,
  if the Executive cannot continue to participate in the Company plans
  providing such benefits, the Company shall otherwise provide such benefits on
  substantially the same after-tax basis as if continued participation had been
  permitted; provided, however, that, in the event the Executive
  becomes reemployed with another employer and becomes eligible to receive
  medical benefits from such employer, the medical benefits described herein
  shall immediately cease, and

	
 

	
 

	
 

	
 

	
(G)

	
full and
  immediate vesting under the Company’s retirement plans as of the date of
  termination, to the extent permitted by applicable law; provided, however,
  that if such full and immediate vesting cannot be provided under a retirement
  plan under applicable law, then economically equivalent benefits shall be
  provided through arrangements outside the applicable retirement plan.

          Anything
in this Agreement to the contrary notwithstanding, the Executive shall be
entitled to the benefits described in (A)-(G) above, if the Executive’s
employment with the Company is terminated by the Company (other than for Cause)
within one year prior to the date on which a Change in Control occurs, and it
is reasonably demonstrated that such termination (i) was at the request of a
third party who has taken steps reasonably calculated or intended to effect the
Change in Control or (ii) otherwise arose in connection with or anticipation of
the Change in Control; provided, however, that in such event,
amounts will be payable hereunder only following the Change in Control (and
within 10 days thereafter).

	
 

	
 

	
 

	
(iv) If,
  in situations where Section 8(d)(iii) does not apply, at any time during the
  term of the Executive’s employment hereunder, duties are assigned to the
  Executive that are materially inconsistent with his position, or the Company
  does not cure any other material breach by it of any provision of Sections 3
  through 7, 14 and 17 of this Agreement within 30 calendar days following written
  notice of same by the Executive (which written notice must be given within 30
  calendar days after such breach), the Executive shall have the right to
  terminate his employment within 30 calendar days of the Company’s failure to
  rescind such assignment in accordance with the proviso below or of such
  failure to cure a breach, as the case may be, and such termination shall be
  deemed a termination by the Company without Cause under Section 8(d)(ii),
  above, provided, in the case of assignment of inconsistent duties, the
  Executive shall have given the Company written notice of his decision within
  30 calendar days of such assignment and shall not, within 30 calendar days
  thereafter, have had the assignment of inconsistent duties rescinded.

          (e) VOLUNTARY
TERMINATION BY THE EXECUTIVE.  The
Executive may voluntarily terminate his employment prior to the expiration of
the term of this Agreement upon at least three months’ prior written notice to
the Company, provided such termination shall constitute a voluntary termination
and, except as provided in Section 8(d)(iii) or Section 8(d)(iv), above, in
such event the Executive shall be limited to the same rights and benefits as
applicable to a termination by the Company for Cause as provided in Section
8(c), above. A voluntary termination in accordance with this Section 8(e) shall
not be deemed a breach of this Agreement. A termination of the Executive’s
employment due to disability or death as described in Section 8(b) or 8(a),
above, a termination by the Executive which the Executive is entitled to treat
as a termination by the Company pursuant to Section 8(d), above, or a
termination by the Executive under Section 8(d)(iv), above, shall not be deemed
a voluntary termination within the meaning of this Section 8(e).  For the avoidance of doubt, a notice of
non-renewal of the Agreement pursuant to Section 2 above issued by the
Executive shall not be considered a voluntary termination within the meaning of
this Section 8(e).

          9. EXCISE
TAX PAYMENTS.

          (a) Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that (i) any payment or distribution made, or benefit provided
(including, without limitation, the acceleration of any payment, distribution
or benefit or accelerated vesting or exercisability of any award) by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 9) (a “Payment”) would be subject to the excise tax
imposed by Section 4999 of the Code (or any successor provision or similar
excise tax), or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the “Excise Tax”),
(ii) the aggregate amount of the Executive’s Parachute Payments (as defined in
Section 280G(b)(2)(A) of the Code) is less 

than 3.25
times the Executive’s Base Amount (as defined in Section 280G(b)(3)(A) of the
Code), and (iii) no such Payment would be subject to the Excise Tax if the
payments set forth in Section 8(d)(iii)(B) and (C) hereof were each reduced by
up to 20 percent, then the payments set forth in Section 8(d)(iii)(B) and (C)
will each be reduced to the smallest extent possible (and in no event by more
than 20 percent in the aggregate) such that no Payment is subject to the Excise
Tax.

          (b) Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that (i) the aggregate amount of the Executive’s Parachute Payments
equals or exceeds 3.25 times the Executive’s Base Amount, (ii) the aggregate
amount of the Executive’s Parachute Payments is less than 3.25 times the Base
Amount but one or more Payments would be subject to the Excise Tax even if the
payments set forth in Section 8(d)(iii)(B) and (C) hereof were each reduced by
20 percent, or (iii) notwithstanding a reduction in payments pursuant to
Section 9(a) above, an Excise Tax is payable by the Executive on one or more
Payments, then, in any such case, Payments shall not be reduced and the
Executive shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by the Executive of all
taxes (including any income or Excise Tax) imposed upon the Gross-Up Payment
and any interest or penalties imposed with respect to such taxes, the Executive
retains from the Gross-Up Payment an amount equal to the Excise Tax imposed
upon the Payments.

          (c) Subject
to the provisions of Section 9(d), all determinations required to be made under
this Section 9, including determination of whether a Gross-Up Payment is
required and of the amount of any such Gross-Up Payment, shall be made by a
nationally recognized independent public accounting firm selected by the
Company (the “Accounting Firm”) which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the date of termination of the Executive’s employment, if applicable, or such
earlier time as is reasonably requested. The initial Gross-Up Payment, if any,
as determined pursuant to this Section 9(c), shall be paid to the Executive
within five business days of the receipt of the Accounting Firm’s
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that he
has substantial authority not to report any Excise Tax on his Federal income
tax return. Any determination by the Accounting Firm meeting the requirements
of this Section 9(c) shall be binding upon the Company and the Executive,
subject only to payments pursuant to the following sentence based on a
determination that additional Gross-Up Payments should have been made,
consistent with the calculations required to be made hereunder (the amount of
such additional payments are referred to herein as the “Gross-Up
Underpayment”). In the event that the Company exhausts its remedies
pursuant to Section 9(d) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Gross-Up Underpayment that has occurred and any such Gross-Up Underpayment
shall be promptly paid by the Company to or for the benefit of the Executive.
The fees and disbursements of the Accounting Firm shall be paid by the Company.

          (d) The
Executive shall notify the Company in writing of any claim by the United States
Internal Revenue Service that, if successful, would require the payment by the
Executive of any Excise Tax and, therefore, the payment by the Company of a
Gross-Up Payment. Such notification shall be given as soon as practicable but
not later than 30 business days after the Executive receives written notice of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive

shall not pay
such claim prior to the expiration of the 30-day period following the date on
which he gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such
period that it desires, in good faith, to contest such claim (which notice shall
set forth the bases for such contest) and that it will bear the costs and
provide the indemnification as required by this sentence, the Executive shall,
in good faith:

	
 

	
 

	
 

	
          (i) give
  the Company any information reasonably requested by the Company relating to
  such claim,

	
 

	
 

	
 

	
          (ii) take
  such action in connection with contesting such claim as the Company shall, in
  good faith, reasonably request in writing from time to time, including,
  without limitation, accepting legal representation with respect to such claim
  by an attorney selected by the Company and reasonably acceptable to the
  Executive,

	
 

	
 

	
 

	
          (iii) cooperate
  with the Company in good faith in order effectively to contest such claim,
  and

	
 

	
 

	
 

	
          (iv) permit
  the Company to participate, in good faith, in any proceedings relating to
  such claim;

provided, however, that the Company
shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis to the
Executive, for any Excise Tax or income tax, including interest and penalties
with respect thereto, imposed as a result of such representation and payment of
all costs and expenses.

          Without
limitation on the foregoing provisions of this Section 9(d), the Company shall,
exercising good faith, control all proceedings taken in connection with such
contest and, at its sole option (but in good faith), may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option (but in
good faith), either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and sue for a refund,
the Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis to the Executive, from any Excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to such advance; and
further provided that any extension of the statute of limitations relating
to the payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company’s control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority. If, after the receipt by the Execu-

tive of an
amount advanced by the Company pursuant to Section 9(d), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company’s complying with the requirements of Section 9(d))
promptly pay to the Company, as the case may be, the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 9(d), a determination is made that the Executive shall not
be entitled to any refund with respect to such claim and the Company does not notify
the Executive in writing of its intent to contest such denial of refund prior
to the expiration of 30 days after such determination, then any obligation of
the Executive to repay such advance shall be forgiven and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.

          Notwithstanding
any provision herein to the contrary, the Executive’s failure to strictly
comply with the notice provisions set forth in this Section 9, so long as such
failure does not prevent the Company from contesting an excise tax claim, shall
not adversely affect the Executive’s rights under this Section 9.

          10. NO
MITIGATION; NO OFFSET.

          In
the event of any termination of employment under Section 8, above, the
Executive shall be under no obligation to mitigate damages or seek other employment,
and, except as expressly set forth herein, there shall be no offset against
amounts due the Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that he may obtain.

          11. NONCOMPETITION
AND NONSOLICITATION.

          The
Executive represents and warrants that, to the best of his knowledge, he is not
using the confidential or proprietary information of any other person in
violation of any agreement or rights of others known to him. The Executive
agrees that the products of the Company and its Affiliates shall constitute the
exclusive property of the Company and its Affiliates.

          For
the avoidance of doubt, all trademarks, policy language or forms, products or
services (including products and services under development), trade names,
trade secrets, service marks, designs, computer programs and software, utility
models, copyrights, know-how and confidential information, applications for
registration of any of the foregoing and the right to apply for them in any
part of the world (whether any of the foregoing shall be registered or
unregistered) created or discovered or participated in by the Executive during
the course of his employment (whether or not pursuant to the terms of this Agreement)
or under the instructions of the Company or its Affiliates are and shall be the
absolute property of the Company and its Affiliates, as appropriate. Without
limiting the foregoing, the Executive hereby assigns to the Company any and all
of the Executive’s right, title and interest, if any, pertaining to the
financial products insurance and reinsurance (including, without limitation,
finite insurance and reinsurance), risk assumption, risk management, brokerage,
financial and other products or services developed or improved upon by the
Executive (including, without limitation, any related “know-how”) while
employed by the Company or its Affiliates, including any patent, trademark,
trade name, copyright, ownership or other right that may pertain thereto.

          Since
Executive has obtained and is likely to obtain in the course of Executive’s
employment with the Company and its Affiliates knowledge of trade names, trade
secrets, know-how, products and services (including products and services under
development), techniques, methods, lists, computer programs and software and
other confidential information relating to the Company and its Affiliates, and
their employees, clients, business or business opportunities, Executive hereby
undertakes that:

	
 

	
 

	
 

	
          (i) Executive
  will not (either alone or jointly with or on behalf of others and whether
  directly or indirectly) encourage, entice, solicit or endeavor to encourage,
  entice or solicit away from employment with the Company or its Affiliates, or
  hire or cause to be hired, any officer or employee of the Company or its
  Affiliates (or any individual who was within the prior twelve months an
  officer or employee of the Company or its Affiliates), or encourage, entice,
  solicit or endeavor to encourage, entice or solicit any individual to violate
  the terms of any employment agreement or arrangement between such individual
  and the Company or any of its Affiliates;

	
 

	
 

	
 

	
          (ii) Executive
  will not (either alone or jointly with or on behalf of others and whether
  directly or indirectly) interfere with or disrupt or seek to interfere with
  or disrupt (A) the relationships between the Company and its Affiliates, on
  the one hand, and any customer or client of the Company and its Affiliates,
  on the other hand, (including any reinsured party) who during the period of
  twenty-four months immediately preceding such termination shall have been
  such a customer or client, or (B) the supply to the Company and its
  Affiliates of any services by any supplier or agent or broker who during the
  period of twenty-four months immediately preceding such termination shall
  have supplied services to any such person, nor will Executive interfere or
  seek to interfere with the terms on which such supply or agency or brokering
  services during such period as aforesaid have been made or provided; and

	
 

	
 

	
 

	
          (iii) Executive
  will not (either alone or jointly with or on behalf of others and whether
  directly or indirectly) whether as an employee, consultant, partner,
  principal, agent, distributor, representative or stockholder (except solely
  as a less than one percent stockholder of a publicly traded company), engage
  in any activities in Bermuda, the United Kingdom or the United States if such
  activities are competitive with the businesses that (i) are then being
  conducted by the Company or its Affiliates and (ii) during the period of the
  Executive’s employment were either being conducted by the Company or its
  Affiliates or actively being developed by the Company or its Affiliates.

          The
provisions of the immediately preceding sentence shall continue as long as the
Executive is employed by the Company or its Affiliates and such provisions
shall continue in effect after such employment is terminated for any reason
under Section 8 until the first anniversary of such termination, provided that
if such employment is terminated by the Company under Section 8(d)(iii) or by
the Executive under Section 8(d)(iii), the provisions of clauses (ii) and (iii)
shall automatically terminate upon such termination of employment, unless the
Company elects, in writing, upon such termination to continue the provisions of
clauses (ii) and (iii) in effect 

through the
six-month anniversary of such termination of employment, in which case the
Company shall be obligated to pay the Executive, in addition to any of the
Executive’s rights under Section 8(d)(iii), a lump sum payment equal to the sum
of (x) six months of his Base Salary and (y) one half of the
Executive’s average annual bonus payable by the Company or its subsidiaries for
the three years (or shorter period of employment by any of such entities)
immediately preceding the year of termination, and such lump sum payment shall
be made within 30 days following termination of employment.

          For
purposes of this Agreement, an “Affiliate” of the Company means any person,
directly or indirectly, through one or more intermediaries, controlled by the
Company, and such term shall specifically include, without limitation, the Company’s
majority-owned subsidiaries.

          The
limitations on the Executive set forth in this Section shall also apply to any
agent or other representative acting on behalf of Executive.

          While
the restrictions aforesaid are stated to be reasonable in all the circumstances
it is also recognized that restrictions of the nature in question may fail for
reasons unforeseen and accordingly it is hereby declared and agreed that if any
of such restrictions or the geographic or other scope thereof shall be adjudged
to be void as going beyond what is reasonable in the circumstances for the
protection of the interests of the Company and its Affiliates but would be
valid if part of the wording thereof were deleted and/or the periods (if any)
thereof reduced and/or geographic or other area dealt with thereby reduced in
scope then said restrictions shall apply with such modifications as may be
necessary to make them valid and effective.

          Nothing
contained in this Section 11 shall limit in any manner any additional
obligations to which Executive may be bound pursuant to any other agreement or
any applicable law, rule or regulation and Section 11 shall apply, subject to
its terms, after employment has terminated for any reason.

          12. CONFIDENTIAL
INFORMATION.

          The
Executive covenants that he shall not, without the prior written consent of the
Company, use for the Executive’s own benefit or the benefit of any other person
or entity other than the Company and its Affiliates or disclose to any person,
other than an employee of the Company or other person to whom disclosure is
necessary to the performance by the Executive of his duties in the employ of
the Company, any confidential, proprietary, secret, or privileged information
about the Company or its Affiliates or their business or operations, including,
but not limited to, information concerning trade secrets, know-how, software,
data processing systems, policy language and forms, inventions, designs,
processes, formulae, notations, improvements, financial information, business
plans, prospects, referral sources, lists of suppliers and customers, legal
advice and other information with respect to the affairs, business, clients,
customers, agents or other business relationships of the Company or its
Affiliates. Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret, confidential proprietary or privileged information or data
relating to the Company or any of its Affiliates or predecessor companies, and
their respective businesses, which shall have been obtained by Executive during
his employment, unless and until such information has become known to the
public generally (other than as a result of unauthorized disclosure by the
Executive) or unless he is required to disclose such infor-

mation by a
court or by a governmental body with apparent authority to require such
disclosure. The foregoing covenant by the Executive shall be without limitation
as to time and geographic application for so long as the information remains
Confidential and proprietary to the Company and is not readily available to the
public and this Section 12 shall apply in accordance with its terms after
employment has terminated for any reason. The Executive acknowledges and agrees
that he shall have no authority to waive any attorney-client or other privilege
without the express prior written consent of the Compensation Committee as
evidenced by the signature of the Company’s General Counsel.

          13. WITHHOLDING.

          Anything
in this Agreement to the contrary notwithstanding, all payments required to be
made by the Company hereunder to the Executive shall be subject to withholding
of such amounts relating to taxes as the Company may reasonably determine
should be withheld pursuant to any applicable law or regulation. In lieu of
withholding such amounts, in whole or in part, the Company may, in its sole
discretion, accept other provision for payment of taxes as required by law,
provided it is satisfied that all requirements of law affecting its
responsibilities to withhold such taxes have been satisfied.

          14. SUBSIDIARY
SERVICES AND GUARANTEE.

          (a) Each
of SCA Holdings US Inc and XL Financial Assurance Ltd (together, the
“Guarantors”) hereby agrees to be jointly and severally liable, together with
the Company, for the performance of all obligations and duties, and the payment
of all amounts, due to the Executive under this Agreement.

          (b) All
of the terms and provisions of this Agreement relating to the Executive’s
employment by the Company shall likewise apply mutatis mutandis to the
Executive’s employment by any of its subsidiaries, it being understood that if
the Executive’s employment with the Company is terminated, his employment with
its subsidiaries shall also be terminated and the Executive shall be required
to resign immediately from all directorships and other positions held by the
Executive in the Company and its subsidiaries or in any other entities in
respect of which the Executive was acting as a representative or designee of
the Company or its subsidiaries in connection with his employment.

          15. ENTIRE
AGREEMENT.

          This
Agreement, together with the Exhibits, contains the entire agreement between
the Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, between the Company and the Executive with respect thereto.

          16. ASSIGNABILITY;
BINDING NATURE.

          This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors, heirs and assigns. No rights or obligations of the
Executive under this Agreement may be assigned or transferred by the Executive
other than his right to compensation and benefits hereunder, which may be
transferred by will or operation of law subject to the limi-

tations of
this Agreement. No rights or obligations of the Company under this Agreement
may be assigned or transferred by the Company except that such rights or
obligations may be assigned or transferred pursuant to a merger or
consolidation or amalgamation or scheme of arrangement in which the Company is
not the continuing entity, or the sale or liquidation of all or substantially
all of the assets of the Company, provided that the assignee or transferee is
the successor to all or substantially all of the assets of the Company and such
assignee or transferee assumes by operation of law or in writing duly executed
by the assignee or transferee all of the liabilities, obligations and duties of
the Company, as contained in this Agreement, either contractually or as a
matter of law.

          17. INDEMNIFICATION.

          The
Executive shall be provided indemnification by the Company to the maximum
extent permitted by applicable law and its charter documents. In addition, he
shall be covered by a directors’ and officers’ liability policy with coverage
for all directors and officers of the Company in an amount equal to at least
US$25,000,000. Such directors’ and officers’ liability insurance shall be
maintained in effect for a period of six years following termination of the
Executive’s employment for any reason other than pursuant to Section 8(c) or
Section 8(e) hereof.

          18. SETTLEMENT
OF DISPUTES.

          (a) Any
dispute between the Parties arising from or relating to the terms of this
Agreement or the Executive’s employment with the Company or its Affiliates
shall, except as provided in Section 18(b) or Section 18(c), be resolved by
binding arbitration held in New York City in accordance with the rules of the
American Arbitration Association.

          (b) Executive
acknowledges that the Company and its Affiliates will suffer irreparable
injury, not readily susceptible of valuation in monetary damages, if Executive
breaches his obligations under Section 11 or 12. Accordingly, Executive agrees
that the Company and its Affiliates will be entitled, in addition to any other
available remedies, to obtain injunctive relief against any breach or
prospective breach by Executive of his obligations under Section 11 or 12 in
any Federal or state court sitting in the City and State of New York or court
sitting in Bermuda or the United Kingdom, or, at the Company’s or any
Affiliate’s election, in any other jurisdiction in which Executive maintains
his residence or his principal place of business. Executive hereby submits to
the non-exclusive jurisdiction of all those courts for the purposes of any
actions or proceedings instituted by the Company or its Affiliates to obtain
such injunctive relief, and Executive agrees that process in any or all of
those actions or proceedings may be served by registered mail or delivery,
addressed to the last address of Executive known to the Company or its
Affiliates, or in any other manner authorized by law. Executive further agrees
that, in addition to any other remedies available to the Company or its
Affiliates by operation of law or otherwise, because of any breach by Executive
of his obligations under Section 11 or 12 he will forfeit any and all bonus and
rights to any payments to which he might otherwise then be entitled by virtue
hereof and such payments may be suspended so long as any good faith dispute
with respect thereto is continuing; provided, however, that
payments, benefits and other rights and privileges of the Executive under this
Agreement following termination of the Executive’s employment during a Post
Change Period shall not be forfeited, suspended, 

offset,
diminished or otherwise altered in any way on account of any breach or
prospective breach of Section 11, Section 12 or any other provision of this
Agreement alleged by the Company.

          (c) Notwithstanding
any other provision of this Agreement, the Executive may elect to resolve any
dispute involving a breach or alleged breach of this Agreement following
termination of the Executive’s employment during a Post-Change Period in any
Federal or State court sitting in the City and State of New York or court
sitting in Bermuda or the United Kingdom. The Company hereby submits to the
non-exclusive jurisdiction of all those courts for the purposes of any such
actions or proceedings instituted by the Executive, and the Company agrees that
process in any or all of such actions or proceedings may be served by
registered mail or delivery, addressed to the Company as set forth in Section
20, or in any other manner authorized by law. The Company shall pay all costs
associated with any court proceeding under this Section 18(c) without regard to
the outcome of such proceeding, including all legal fees and expenses of the
Executive, who shall be reimbursed for all such costs promptly upon written
demand therefor by the Executive.

          (d) Each
Party shall bear its own costs incurred in connection with any proceeding under
Sections 18(a) or 18(b) hereof, including all legal fees and expenses; provided,
however, that the Company shall bear all such costs of the Executive (to
the extent such costs are reasonable) if the Executive substantially prevails
in the proceeding. The Executive shall be reimbursed by the Company for all
such reasonable costs promptly upon written demand therefore by the Executive
which is and is supported by documentation of such costs.

          19. AMENDMENT
OR WAIVER.

          No
provision in this Agreement may be amended unless such amendment is agreed to
in writing, signed by the Executive and by a duly authorized officer of the
Company. No waiver by any Party of any breach by the other Party of any condition
or provision of this Agreement to be performed by such other Party shall be
deemed a waiver of a similar or dissimilar condition or provision at the same
or any prior or subsequent time.  Except
as set forth in Exhibit B, any waiver must be in writing and signed by the
Executive or a duly authorized officer of the Company, as the case may be.

          20. NOTICES.

          Any
notice required or permitted to be given under this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
sent by courier, or by certified or registered mail, postage prepaid, return
receipt requested, duly addressed to the Party concerned at the address
indicated below or to such changed address as such Party may subsequently by
similar process give notice of:

If to the
Company:

Security
Capital Assurance Ltd

One Bermudiana Road

Hamilton HM11, Bermuda

Att’n:  Chief Executive Officer

If to the
Executive:

To the last
address delivered to

the Company by the Executive in

the manner set forth herein.

Copy to:  Cole, Schotz, Meisel, Forman & Leonard,
P.A.

25 Main Street

Hackensack, New Jersey 07601

Attn: Michael Forman, Esq.

          21. IPO
CONTINGENCY.

          For
the avoidance of doubt, the effectiveness of this Agreement is contingent upon
the consummation of the IPO, and if the IPO is not consummated by December 1,
2006 this Agreement shall be null and void.

          22. SEVERABILITY.

          In
the event that any provision or portion of this Agreement shall be determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.

          23. SURVIVORSHIP.

          The
respective rights and obligations of the Parties shall survive any termination
of this Agreement to the extent necessary to the intended preservation of such
rights and obligations.

          24. REFERENCE.

          In
the event of the Executive’s death or a judicial determination of his
incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his estate or other legal representative.

          25. GOVERNING
LAW.

          This
Agreement shall be governed by and construed and interpreted in accordance with
the laws of the State of New York without reference to the principles of
conflict of laws.

          26. SECTION
409A.  

          It
is intended that this Agreement will comply with Section 409A of the Code (and
any regulations and guidelines issued thereunder) to the extent the Agreement
is subject thereto, and the Agreement shall be interpreted on a basis
consistent with such intent.  If an
amendment of the Agreement is necessary in order for it to comply with Section
409A, the par-

ties hereto
will negotiate in good faith to amend the Agreement in a manner that preserves
the original intent of the parties to the extent reasonably possible.

          27. HEADINGS.

          The
heading of the sections contained in this Agreement are for convenience only
and shall not be deemed to control or affect the meaning or construction of any
provision of this Agreement.

          28. COUNTERPARTS.

          This
Agreement may be executed in one or more counterparts.

          IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.

	
 

	
 

	
 

	
SECURITY
  CAPITAL ASSURANCE LTD

	
 

	
 

	
 

	
By: /s/
  Paul S. Giordano

	
 

	
 

	
 

	
EDWARD B.
  HUBBARD

	
 

	
 

	
 

	
/s/ Edward
  B. Hubbard

	
 

	
 

	
 

	
GUARANTORS:

	
 

	
 

	
 

	
SCA HOLDINGS
  US INC

	
 

	
 

	
 

	
By: /s/
  Paul S. Giordano

	
 

	
 

	
 

	
XL FINANCIAL
  ASSURANCE LTD

	
 

	
 

	
 

	
By: /s/
  Paul S. Giordano

EXHIBIT A

CHANGE IN CONTROL

          For
purposes of this Agreement, “Change in Control” shall mean:

          (i) the acquisition
by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange
Act (a “Person”), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) of 30% or more of either (1) the then outstanding shares of
common stock of the Company (the “Outstanding Company Common Stock”) or (2) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding Company
Voting Securities”);provided, however, that the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition by the Company or any of its Subsidiaries; (ii) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any of its Subsidiaries; (iii) any acquisition by any corporation
with respect to which, following such acquisition, more than 60% of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such acquisition in substantially the same proportions as
their ownership, immediately prior to such acquisition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be (unless a Person’s ownership of the acquiring corporation results in that
Person directly or indirectly owning 30% or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities); or (iv) any acquisition
by XL Capital Ltd or its wholly-owned subsidiaries unless, at any time after
the Effective Date and prior to such acquisition, XL Capital Ltd and its
subsidiaries own less than 30% of the Outstanding Company Voting Securities;

          (ii) during
any period of two consecutive years, individuals who, as of the beginning of
such period, constitute the Board (the “Incumbent Board”) cease for any reason
to constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the beginning of such
period whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act);

          (iii) consummation
of a reorganization, scheme of arrangement, merger, consolidation or similar
transaction (collectively, a “Transaction”), in each case, with respect to
which all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock and
outstanding Company Voting Securities immediately prior to such Transaction, do
not, following such Transaction, beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Transaction in substantially the same
proportions as their ownership, immediately prior to such Transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as the
case may be;

          (iv) consummation
of a sale or other disposition of all or substantially all of the assets of the
Company, other than to a corporation with respect to which following such sale
or other disposition, more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportions as their ownership,
immediately prior to such sale or other disposition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be; or

          (v) approval
by the shareholders of the Company of a complete liquidation or dissolution (or
similar transaction) of the Company.

EXHIBIT B

GOOD REASON

          For
purposes of this Agreement, “Good Reason” shall mean any of the
following, unless done with the prior express written consent of the Executive:

	
 

	
 

	
 

	
     (i) (A)
  The assignment to Executive of duties inconsistent with Executive’s position
  (including duties, responsibilities, status, titles or offices as set forth
  in Section 3 hereof); or (B) any elimination, diminution or reduction of Executive’s
  duties or responsibilities except in connection with the termination of
  Executive’s employment for Cause, disability or as a result of Executive’s
  death or by Executive other than for Good Reason; and for purposes for this
  clause (i), the determination of whether there has been a reduction of duties
  or responsibilities or an assignment of duties inconsistent with the Executive’s
  position shall take into account the Executive’s duties, responsibilities and
  position with the ultimate parent of the parent/subsidiary group as a whole
  which includes the Company;

	
 

	
 

	
 

	
     (ii) The
  (A) reduction in Executive’s Base Salary from the level in effect immediately
  prior to the Change in Control, or (B) payment of an annual bonus in an
  amount less than the lesser of (x) the most recent annual bonus paid prior to
  the Change in Control or (y) the greater of (I) the most recent target bonus,
  if any, established prior to the Change in Control or (II) the annual average
  bonus paid for the preceding three complete years prior to the Change in
  Control (or such lesser number of complete years as the Executive shall have
  been employed by the Company);

	
 

	
 

	
 

	
     (iii) The
  failure by the Company to obtain the specific written assumption of this
  Agreement by any successor or assign of the Company or any person acquiring
  substantially all of the Company’s assets;

	
 

	
 

	
 

	
     (iv) Any
  breach by the Company of any provision of this Agreement or any agreements
  entered into pursuant thereto that remains uncured for 20 calendar days
  following written notice of same by the Executive;

	
 

	
 

	
 

	
     (v) Notwithstanding
  the provisions of Section 3(b) of this Agreement, requiring the Executive to
  be based at any office or location that is greater than 35 miles from the
  office or location at which the Executive was principally located immediately
  prior to the Change in Control;

	
 

	
 

	
 

	
     (vi) During
  the Post Change Period, (A) the failure to continue in effect any
  compensation or incentive plan in which Executive participates immediately
  prior to the time of the Change in Control unless an equitable arrangement
  (embodied in an ongoing substitute or alternative plan providing Executive
  with at least the same aggregate economic opportunity on an after-tax basis
  available to the Executive immediately prior to the Change in Control) has
  been made with respect to such plan in connection with the Change in Control,
  or the failure to continue Executive’s participation therein on substan-

	
 

	
 

	
 

	
tially the
  same basis both in terms of the amount of benefits provided and the level of
  his participation relative to other participants, as existed at the time of
  the Change in Control; or (B) the failure to continue to provide Executive
  with benefits and coverage at least as favorable in the aggregate as those
  enjoyed by him under the Company’s pension, life insurance, medical, health
  and accident, disability, deferred compensation or savings plans in which he
  was participating at the time of the Change in Control; or

	
 

	
 

	
 

	
     (vii) The
  failure by the Company to pay within 7 calendar days of the due date any
  amounts due under any benefit or compensation plan, including any deferred
  compensation plan.

Notwithstanding
any provision in this Agreement to the contrary, the Executive must give
written notice of his intention to terminate his employment for Good Reason
within sixty (60) days after the act or omission which constitutes Good Reason,
and any failure to give such written notice within such period will result in a
waiver by the Executive of his right to terminate for Good Reason as a result
of such act or omission.

-2-Exhibit 10.6

November 8,
2006

Private &
Confidential

Mr. Claude L.
LeBlanc

XL Capital Ltd

Dear Claude,

                    We
are pleased to confirm effective on or about November 1, 2006 (but not later
than November 16) your transfer to the position of Executive Vice President,
Corporate Development & Strategy, Security Capital Assurance Ltd (SCA or
the “Company”) reporting to Paul Giordano, CEO of SCA. Accordingly: 

	
 

	
 

	
 

	
1. Position
  & Responsibilities:
  The basic functions of
  this position, although not exclusively, are (i) working with senior
  management to develop the company’s corporate strategy, (ii) overseeing all
  corporate development activities, (iii) overseeing capital management and
  pricing model development, (iv) managing rating agency relations, (v)
  assuming such other reasonably related responsibilities as provided by the
  CEO in his discretion and (vi) serving as a member of the Executive
  Committee.

	
 

	
 

	
 

	
2. Salary
  and Bonus: Your
  base annualized salary will increase to (USD) $300,000 (“Base Salary”), and
  current benefits and perquisites associated with your grade will remain the
  same. In addition, your target bonus will increase to 70% (“Target Bonus”) of
  your Base Salary and your potential long term incentive award opportunity
  will be targeted at 75% of your total cash (base plus bonus) compensation. As
  long as you continue to be based in Bermuda, you are entitled to receive a
  housing allowance. The value of your housing allowance will be $11,000 per
  month.

	
 

	
 

	
 

	
3. Minimum
  Employment Period: SCA will employ you on the terms herein,
  together with SCA’s other policies and terms of employment applicable to you,
  for a minimum period of two years from your commencement date (the “Minimum
  Employment Period”). Thereafter, you will be an employee on the same terms
  and conditions applicable to similarly situated Bermuda-based executives.
  Although there is no intention to diminish your benefits after such two-year
  period, no assurance can be given that benefits for similarly situated
  Bermuda-based executives, as a class, will not be modified or reduced in the
  future except as specifically provided for with respect to the housing
  allowance. The foregoing should not be construed as a guarantee of future
  payment of any bonus, LTI or other variable compensation.

	
 

	
 

	
 

	
4. Guaranteed
  Bonus for 2006/Sign-on Bonus: For the 2006 Plan year, you are guaranteed to receive a
  full-year’s cash bonus at a minimum of $150,000 (excluding the signing bonus)
  paid to you at the time that bonuses are customarily paid, provided that you
  remain otherwise eligible to receive such award under the terms of the SCA
  Annual Incentive Plan, i.e. that you are an employee in good standing on the
  date that such bonus is paid. SCA will have sole responsibility for payment
  of such bonus and will not pro-rate it, or offset it by other bonuses and
  benefits paid or payable, for the 2006 performance year. In addition, you

	
 

	
 

	
 

	
will receive
  a one time signing bonus of $75,000 payable within one month of your transfer
  date. Should you leave SCA within the first year (prior to November 1, 2007)
  of your transfer, you will be required to repay this signing bonus.

	
 

	
 

	
 

	
5. Long
  Term Incentive Award:
  In the quarter immediately following the commencement date of your employment
  with SCA, (expected to be January 2007), the Company shall recommend to the
  Board of Directors that you receive an equity award valued at $125,000, in
  the form of restricted stock. Such award shall vest and otherwise be subject
  to the terms and conditions set forth in the SCA Long Term Incentive Plan. In
  addition, at the time the Company regularly grants annual long term incentive
  awards to executives in 2007 based upon such executives’ 2006 service, you
  will be eligible for a full-year’s long term incentive award, as determined
  by the SCA Compensation Committee, and such award will not be pro-rated.

	
 

	
 

	
 

	
6. Severance
  Provisions Upon Certain Termination Events: In the event your employment is terminated by the Company
  by reason of (i) reduction in force, (ii) reorganization, (iii) position elimination
  or (iv) by reason of your Death in service or due to Disability (as
  determined pursuant to the Company’s Long-Term Disability Plan), within the
  minimum employment period, you shall receive: (i) your Base Salary accrued
  but not yet paid through your date of separation paid in accordance with the
  Company’s payroll practices in effect at the time, (ii) provided you sign a
  waiver and release of employment claims acceptable to the Company, a lump sum
  payment equal to your Base Salary for the then remaining portion of the
  Minimum Employment Period, (iii) any annual bonus earned by you under the AIP
  but not yet paid to you, (iv) a bonus for the year in which your termination
  occurs at your target award level pro-rated for the time you actually worked
  during the year, (v) rights with respect to equity securities of the Company,
  including any restricted stock or other securities, held by you, or rights to
  any cash-based long term incentives, as determined in accordance with the
  terms thereof or the applicable plan, and (vi) any rights to accrued benefits
  at the time of your separation from employment under any Company benefit plan
  or program including vacation time accrued but not yet taken. The latter
  payment will not be subject to your signing a waiver and release of claims.

	
 

	
 

	
 

	
For the
  avoidance of doubt, your voluntary resignation from the Company during the
  Minimum Employment Period does not entitle you to severance payments
  hereunder.

The above
constitutes your Amendment to Statement of Employment in accordance with the
Employment Act 2000. To acknowledge this transfer, please return a signed copy
of this document to Human Resources for your personnel file.

We wish you
the best in your career with SCA.

Yours
sincerely,

/s/ Sheila
I.L. Hendrickson

Sheila I.L.
Hendrickson

Assistant Vice President, Recruitment Specialist

XL Services (Bermuda) Ltd

cc: Paul S.
Giordano

	
 

	
 

	
 

	
 

	
 

	
Acceptance:

	
/s/ Claude L. LeBlanc

	
 

	
Date:

	
November 8, 2006

	
 

	

	
 

	
 

	
 

	
 

	
Claude L.
  LeBlanc

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