Document:

<PAGE>

                                                                  EXHIBIT 10.1.1

                             ARCH CAPITAL GROUP LTD.

                           RESTRICTED SHARE AGREEMENT

        THIS AGREEMENT, dated as of April 24, 2000, between Arch Capital
Group Ltd. (the "Company"), a Delaware corporation, and Peter A. Appel (the
"Employee").

        WHEREAS, the Employee has been granted the following award in connection
with his retention as President and Chief Executive Officer and as compensation
for services to be rendered; and the following terms reflect the Company's 1995
Long Term Incentive and Share Award Plan (as amended, the "Plan");

        NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows.

        1. AWARD OF SHARES. Pursuant to the provisions of the Plan, the terms of
which are incorporated herein by reference, the Employee is hereby awarded
50,000 Restricted Shares (the "Award"), subject to the terms and conditions
herein set forth. Capitalized terms used herein and not defined shall have the
meanings set forth in the Plan.

        2. TERMS AND CONDITIONS. It is understood and agreed that the Award of
Restricted Shares evidenced hereby is subject to the following terms and
conditions:

           (a) VESTING OF AWARD. Subject to the other terms and conditions of
      this Agreement, this Award shall become vested in accordance with the
      following schedule:

<TABLE>
<CAPTION>

                                          The Following Number
                                          of Restricted Shares
                                          Shall Vest on
           On This Date                   Each Respective Date
           ------------                   ---------------------
<S>                                             <C>
               4/24/01                          16,667
               4/24/02                          16,667
               4/24/03                          16,666
</TABLE>

      ; provided that all such shares shall immediately become vested (i) to the
      extent provided in Section 2(b) hereof and (ii) upon a Change in Control.

            "Change in Control" means any of the following occurring after the
      date hereof:

               a. any person (within the meaning of the Securities Exchange Act
            of 1934, as amended (the "Exchange Act")), other than a Permitted
            Person or an Initial Investor, is or becomes the "beneficial owner"
            (as defined in Rule 13d-3 under the Exchange Act), directly or
            indirectly, of Voting Securities representing 35% or more of the
            total voting power of all the then outstanding Voting Securities; or

<PAGE>

               b. any Initial Investor is or becomes the "beneficial owner" (as
            defined in Rule 13d-3 under the Exchange Act), directly or
            indirectly, of Voting Securities representing 50% percent or more of
            the total voting power of all the then outstanding Voting
            Securities; or

               c. the individuals who, as of the date hereof, constitute the
            Board of Directors of the Company (the "Board") together with those
            who become directors subsequent to such date and whose
            recommendation, election or nomination for election to the Board was
            approved by a vote of at least a majority of the directors then
            still in office who either were directors as of such date or whose
            recommendation, election or nomination for election was previously
            so approved, cease for any reason to constitute a majority of the
            members of the Board; or

               d. the consummation of a merger, consolidation, recapitalization,
            liquidation, sale or disposition by the Company of all or
            substantially all of the Company's assets, or reorganization of the
            Company, other than any such transaction which would (x) result in
            at least 60% of the total voting power represented by the voting
            securities of the surviving entity or, in the case of an asset sale,
            the successor entity, outstanding immediately after such transaction
            being beneficially owned, directly or indirectly, by the
            stockholders of the Company immediately preceding the transaction
            and (y) not otherwise be deemed a Change in Control under
            subparagraphs a, b, c or e of this Section 2(a); or

               e. the Board adopts a resolution to the effect that, for purposes
            hereof, a Change in Control has occurred;

            PROVIDED, HOWEVER, that a Change in Control for purposes hereof
            shall not be deemed to have occurred in connection with the
            transactions described in the Asset Purchase Agreement, dated as of
            January 10, 2000, among the Company, Risk Capital Reinsurance
            Company, Folksamerica Holding Company, Inc. and Folksamerica
            Reinsurance Company.

                  (i) "Initial Investors" means (A) The Trident Partnership,
                  L.P.; (B) Marsh & McLennan Risk Capital Holdings, Ltd.; or (C)
                  any majority-owned subsidiary or parent (or equivalent in the
                  case of a non-corporate entity) of the foregoing.

                  (ii) "Permitted Persons" means (A) the Company; (B) any
                  Related Party; or (C) any group (as defined in Rule 13d-3
                  under the Exchange Act) comprised of any or all of the
                  foregoing.

                  (iii) "Related Party" means (A) a majority-owned subsidiary of
                  the Company; (B) a trustee or other fiduciary holding
                  securities under an employee benefit plan of the Company or
                  any majority-owned subsidiary of the Company; or (C) a
                  corporation owned directly or indirectly by the stockholders
                  of the Company in substantially the same proportion as their
                  ownership of Voting Securities.

                  (iv) "Voting Security" means any security of the Company which
                  carries the right to vote generally in the election of
                  directors.

        (b) TERMINATION OF SERVICE; FORFEITURE OF UNVESTED SHARES. In the
      event the Employee ceases to be an employee of the Company (i) due to
      retirement after attainment of age 65, (ii) due to

                                       2
<PAGE>

      death or disability, as determined under the Company's long-term
      disability plan, or (iii) due to (A) termination by the Company without
      Cause (as defined below) or (B) Constructive Termination (as defined
      below), the Restricted Shares subject to the Award, to the extent not
      already vested in full, shall become immediately and fully vested at
      the time of such termination of service. If the Employee ceases to be
      an employee of the Company for any other reason, the portion of the
      Award which is not then vested shall be forfeited by the Employee and
      become the property of the Company. For purposes of this Agreement,
      service with any of the Company's wholly owned subsidiaries shall be
      considered to be service with the Company. Termination of the
      Employee's employment by the Company or any of its subsidiaries for
      "Cause" shall mean termination by reason of the Employee's willful
      engagement in conduct which involves dishonesty or moral turpitude in
      connection with his employment and which is demonstrably and materially
      injurious to the financial condition or reputation of the Company. An
      act or omission shall be deemed "willful" only if done, or omitted to
      be done, in bad faith and without reasonable belief that it was in the
      best interest of the Company. Notwithstanding the foregoing, the
      Employee shall not be deemed to have been terminated for Cause unless
      and until there shall have been delivered to the Employee a written
      notice of termination from the compensation committee of the Board
      after reasonable notice to the Employee and an opportunity for him,
      together with his counsel, to be heard before such committee.
      Termination of employment by the Employee due to "Constructive
      Termination" shall mean termination by the Employee subsequent to any
      of the following: (a) the assignment of duties and responsibilities
      inconsistent in any material and adverse respect with the Employee's
      position or a significant diminution in his duties or responsibilities;
      provided, however, that Constructive Termination shall not be deemed to
      occur upon a change in duties or responsibilities that is solely and
      directly a result of the Company no longer being a publicly traded
      entity, and does not involve any other event set forth in this
      definition; (b) reduction in the Employee's base salary or bonus
      opportunity; (c) the requirement that the Employee work at a location
      outside of Fairfield County, Connecticut, or Westchester County, New
      York; (d) the failure to provide the Employee with benefits and
      incentive compensation opportunities at least as favorable, in the
      aggregate, as the benefits and incentive compensation opportunities
      available to the Employee immediately prior to a Change in Control; or
      (e) the failure to secure the agreement of any successor corporation or
      other entity to the Company to fully assume the Company's obligations
      under the arrangements described herein. The Employee shall exercise
      his right to terminate employment due to Constructive Termination by
      giving the Company a written notice of termination specifying in
      reasonable detail the circumstances constituting such Constructive
      Termination. In that event, the Employment's employment shall terminate
      on the last day of the month in which such notice is given unless an
      earlier date is specified in writing by the Executive. A termination of
      employment by the Employee shall be due to Constructive Termination if
      one of the occurrences specified in clauses (a) through (e) of this
      subsection shall have occurred, notwithstanding that the Employee may
      have other reasons for terminating employment, including employment by
      another employer which the Executive desires to accept.

        (c) CERTIFICATES. Each certificate issued in respect of Restricted
      Shares awarded hereunder shall be deposited with the Company, or its
      designee, together with, if requested by the Company, a stock power
      executed in blank by the Employee, and shall bear a legend disclosing the
      restrictions on transferability imposed on such Restricted Shares by this
      Agreement (the "Restrictive Legend"). Upon the vesting of Restricted
      Shares pursuant to Section 2(a) or 2(b) hereof and the satisfaction of any
      withholding tax liability pursuant to Section 5 hereof, the certificates
      evidencing such vested Shares, not bearing the Restrictive Legend, shall
      be delivered to the Employee.

                                       3
<PAGE>

        (d) RIGHTS OF A STOCKHOLDER. Prior to the time a Restricted Share is
      fully vested hereunder, the Employee shall have no right to transfer,
      pledge, hypothecate or otherwise encumber such Restricted Share. During
      such period, the Employee shall have all other rights of a stockholder,
      including, but not limited to, the right to vote and to receive dividends
      at the time paid on such Restricted Shares.

        (e) NO RIGHT TO CONTINUED EMPLOYMENT. This Award shall not confer upon
      the Employee any right with respect to continuance of employment by the
      Company nor shall this Award interfere with the right of the Company to
      terminate the Employee's employment at any time.

        3.  TRANSFER OF SHARES. The Shares delivered hereunder, or any interest
therein, may be sold, assigned, pledged, hypothecated, encumbered, or
transferred or disposed of in any other manner, in whole or in part, only in
compliance with the terms, conditions and restrictions as set forth in the
governing instruments of the Company, applicable United States federal and state
securities laws or any other applicable laws or regulations and the terms and
conditions hereof. Each certificate for Shares delivered hereunder, unless at
the time of issuance such Shares are registered under the Securities Act of
1933, as amended, shall bear the following legend or such other legend as the
Company deems appropriate:

      "The securities evidenced hereby have not been registered under the
      Securities Act of 1933, as amended (the 'Act'), and may not be offered,
      sold or otherwise transferred except (i) in compliance with the provisions
      of any applicable state securities or 'Blue Sky' laws and (ii) (A)
      pursuant to an effective registration under the Act, (B) in compliance
      with Rule 144 under the Act, (C) inside the United States to a Qualified
      Institutional Buyer in compliance with Rule 144A under the Act, (D)
      outside the United States in compliance with Rule 904 of Regulation S
      under the Act or (E) inside the United States to an institutional
      'accredited investor' as defined in Rule 501(a)(1), (2), (3) or (7) under
      the Act in a transaction which, in the opinion of counsel reasonably
      satisfactory to the Company, qualifies as an exempt transaction under the
      Act and the rules and regulations promulgated thereunder."

Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend or such other legend deemed appropriate by the
Company shall also bear such legend unless, in the opinion of counsel for the
Company, the securities represented thereby need no longer be subject to the
restriction contained herein. The provisions of this Section 3 shall be binding
upon all subsequent holders of certificates bearing the above legend.

        4. EXPENSES OF ISSUANCE OF SHARES. The issuance of stock certificates
hereunder shall be without charge to the Employee. The Company shall pay, and
indemnify the Employee from and against any issuance, stamp or documentary taxes
(other than transfer taxes) or charges imposed by any governmental body, agency
or official (other than income taxes) or by reason of the issuance of Shares.

        5. WITHHOLDING. The Employee agrees to make appropriate arrangements
with the Company for satisfaction of any applicable tax withholding
requirements, or similar requirements, arising out of this Agreement.

        6. REFERENCES. References herein to rights and obligations of the
Employee shall apply, where appropriate, to the Employee's legal representative
or estate without regard to whether specific reference to such legal
representative or estate is contained in a particular provision of this
Agreement.

                                       4
<PAGE>

        7. SETTLEMENT OF DISPUTES. Any dispute between the parties arising from
or relating to the terms of this Agreement shall be resolved by arbitration held
in the State of Connecticut in accordance with the rules of the American
Arbitration Association. All costs associated with any arbitration, including
all legal expenses, for both parties shall be borne by the Company.

        8. NO MITIGATION. To the extent that the vesting of any portion of the
Award is accelerated upon a Change in Control or upon a termination of service
as provided herein, neither the Shares delivered hereunder nor any interest
therein, shall be reduced by any compensation received by the Employee in
connection with any other employment.

        9. 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 by courier, or sent 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:

        Arch Capital Group Ltd.
        20 Horseneck Lane
        Greenwich, CT  06830
        Attn.: Secretary

    If to the Employee:

        Peter A. Appel
        [address of Employee]

        10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles of conflict of laws.

        11. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties relating to the subject matter hereof, and any previous
agreement or understanding among the parties with respect thereto is superseded
by this Agreement.

        12. COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall constitute one and the same instrument.

                                       5
<PAGE>

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

                                          ARCH CAPITAL GROUP LTD.

                                             By: /s/ Robert Clements
                                                --------------------------------
                                                Robert Clements
                                                Chairman

                                                 /s/ Peter A. Appel
                                                --------------------------------
                                                Peter A. Appel

                                       6<PAGE>

                                                                  EXHIBIT 10.1.2

      Mr. Robert Clements and Arch Capital Group Ltd. entered into the
following two restricted share agreements.

<PAGE>

                             ARCH CAPITAL GROUP LTD.

                           RESTRICTED SHARE AGREEMENT

        THIS AGREEMENT, dated as of May 5, 2000, between Arch Capital Group Ltd.
(the "Company"), a Delaware corporation, and Robert Clements (the "Executive").

        WHEREAS, the Executive has been granted the following award in
connection with his retention as Chairman of the Board of Directors and as
compensation for services to be rendered; and the following terms reflect the
Company's 1995 Long Term Incentive and Share Award Plan (as amended, the
"Plan");

        NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:

        1.  AWARD OF SHARES. Pursuant to the provisions of the Plan, the terms
of which are incorporated herein by reference, the Executive is hereby awarded
12,500 Restricted Shares (the "Award"), subject to the terms and conditions
herein set forth. Capitalized terms used herein and not defined shall have the
meanings set forth in the Plan.

        2.  TERMS AND CONDITIONS. It is understood and agreed that the Award of
Restricted Shares evidenced hereby is subject to the following terms and
conditions:

        (a) VESTING OF AWARD. Subject to the other terms and conditions of this
    Agreement, this Award shall become vested in full on January 1, 2001;
    provided that all such shares shall immediately become vested (i) to the
    extent provided in Section 2(b) hereof and (ii) upon a Change in Control.

            "Change in Control" means any of the following occurring after the
      date hereof:

               a. any person (within the meaning of the Securities Exchange Act
            of 1934, as amended (the "Exchange Act")), other than a Permitted
            Person or an Initial Investor, is or becomes the "beneficial owner"
            (as defined in Rule 13d-3 under the Exchange Act), directly or
            indirectly, of Voting Securities representing 35% or more of the
            total voting power of all the then outstanding Voting Securities; or

               b. any Initial Investor is or becomes the "beneficial owner" (as
            defined in Rule 13d-3 under the Exchange Act), directly or
            indirectly, of Voting Securities representing 50% or more of the
            total voting power of all the then outstanding Voting Securities; or

               c. the individuals who, as of the date hereof, constitute the
            Board of Directors of the Company (the "Board") together with those
            who become directors subsequent to such date and whose
            recommendation, election or nomination for election to the Board was
            approved by a vote of at least a majority of the directors then
            still in office who either were directors as of such date or whose
            recommendation, election or nomination for election was previously
            so approved, cease for any reason to constitute a majority of the
            members of the Board; or

<PAGE>

               d. the consummation of a merger, consolidation, recapitalization,
            liquidation, sale or disposition by the Company of all or
            substantially all of the Company's assets, or reorganization of the
            Company, other than any such transaction which would (x) result in
            at least 60% of the total voting power represented by the voting
            securities of the surviving entity or, in the case of an asset sale,
            the successor entity, outstanding immediately after such transaction
            being beneficially owned, directly or indirectly, by the
            stockholders of the Company immediately preceding the transaction
            and (y) not otherwise be deemed a Change in Control under
            subparagraphs a, b, c or e of this Section 2(a); or

               e. the Board adopts a resolution to the effect that, for purposes
            hereof, a Change in Control has occurred.

                  (i) "Initial Investors" means (A) The Trident Partnership,
                  L.P.; (B) Marsh & McLennan Risk Capital Holdings, Ltd.; or (C)
                  any majority-owned subsidiary or parent (or equivalent in the
                  case of a non-corporate entity) of the foregoing.

                  (ii) "Permitted Persons" means (A) the Company; (B) any
                  Related Party; or (C) any group (as defined in Rule 13d-3
                  under the Exchange Act) comprised of any or all of the
                  foregoing.

                  (iii) "Related Party" means (A) a majority-owned subsidiary of
                  the Company; (B) a trustee or other fiduciary holding
                  securities under an employee benefit plan of the Company or
                  any majority-owned subsidiary of the Company; or (C) a
                  corporation owned directly or indirectly by the stockholders
                  of the Company in substantially the same proportion as their
                  ownership of Voting Securities.

                  (iv) "Voting Security" means any security of the Company which
                  carries the right to vote generally in the election of
                  directors.

        (b) TERMINATION OF SERVICE; FORFEITURE OF UNVESTED SHARES. In the event
      the Executive's services as Chairman of the Board of Directors of the
      Company cease (i) due to death or Disability (as defined in the Retention
      and Change in Control Agreement, dated as of May 5, 2000, between the
      Company and the Executive (the "Retention Agreement")), or (ii) due to (A)
      termination by the Company without Cause (as defined in the Retention
      Agreement) or (B) Constructive Termination (as defined in the Retention
      Agreement), the Restricted Shares subject to the Award, to the extent not
      already vested in full, shall become immediately and fully vested at the
      time of such termination of service. If the Executive's services with the
      Company cease for any other reason, the portion of the Award which is not
      then vested shall be forfeited by the Executive and become the property of
      the Company. For purposes of this Agreement, service with any of the
      Company's wholly owned subsidiaries shall be considered to be service with
      the Company.

        (c) CERTIFICATES. Each certificate issued in respect of Restricted
      Shares awarded hereunder shall be deposited with the Company, or its
      designee, together with, if requested by the Company, a stock power
      executed in blank by the Executive, and shall bear a legend disclosing the
      restrictions on transferability imposed on such Restricted Shares by this
      Agreement (the "Restrictive Legend"). Upon the vesting of Restricted
      Shares pursuant to Section 2(a) or 2(b) hereof and the satisfaction of any
      withholding tax liability pursuant to Section 5 hereof, the

                                       3
<PAGE>

      certificates evidencing such vested Shares, not bearing the Restrictive
      Legend, shall be delivered to the Executive.

        (d) RIGHTS OF A STOCKHOLDER. Prior to the time a Restricted Share is
      fully vested hereunder, the Executive shall have no right to transfer,
      pledge, hypothecate or otherwise encumber such Restricted Share. During
      such period, the Executive shall have all other rights of a stockholder,
      including, but not limited to, the right to vote and to receive dividends
      at the time paid on such Restricted Shares.

        (e) NO RIGHT TO CONTINUED SERVICES. This Award shall not confer upon the
      Executive any right with respect to continuance of services with the
      Company nor shall this Award interfere with the right of the Company to
      terminate the Executive's services at any time.

        3.  TRANSFER OF SHARES. The Shares delivered hereunder, or any interest
therein, may be sold, assigned, pledged, hypothecated, encumbered, or
transferred or disposed of in any other manner, in whole or in part, only in
compliance with the terms, conditions and restrictions as set forth in the
governing instruments of the Company, applicable United States federal and state
securities laws or any other applicable laws or regulations and the terms and
conditions hereof. Each certificate for Shares delivered hereunder, unless at
the time of issuance such Shares are registered under the Securities Act of
1933, as amended, shall bear the following legend or such other legend as the
Company deems appropriate:

      "The securities evidenced hereby have not been registered under the
      Securities Act of 1933, as amended (the 'Act'), and may not be offered,
      sold or otherwise transferred except (i) in compliance with the provisions
      of any applicable state securities or 'Blue Sky' laws and (ii) (A)
      pursuant to an effective registration under the Act, (B) in compliance
      with Rule 144 under the Act, (C) inside the United States to a Qualified
      Institutional Buyer in compliance with Rule 144A under the Act, (D)
      outside the United States in compliance with Rule 904 of Regulation S
      under the Act or (E) inside the United States to an institutional
      'accredited investor' as defined in Rule 501(a)(1), (2), (3) or (7) under
      the Act in a transaction which, in the opinion of counsel reasonably
      satisfactory to the Company, qualifies as an exempt transaction under the
      Act and the rules and regulations promulgated thereunder."

Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend or such other legend deemed appropriate by the
Company shall also bear such legend unless, in the opinion of counsel for the
Company, the securities represented thereby need no longer be subject to the
restriction contained herein. The provisions of this Section 3 shall be binding
upon all subsequent holders of certificates bearing the above legend.

        4.  EXPENSES OF ISSUANCE OF SHARES. The issuance of stock certificates
hereunder shall be without charge to the Executive. The Company shall pay, and
indemnify the Executive from and against any issuance, stamp or documentary
taxes (other than transfer taxes) or charges imposed by any governmental body,
agency or official (other than income taxes) or by reason of the issuance of
Shares.

        5.  WITHHOLDING. The Executive agrees to make appropriate arrangements
with the Company for satisfaction of any applicable tax withholding
requirements, or similar requirements, arising out of this Agreement.

                                       4
<PAGE>

        6.  REFERENCES. References herein to rights and obligations of the
Executive shall apply, where appropriate, to the Executive's legal
representative or estate without regard to whether specific reference to such
legal representative or estate is contained in a particular provision of this
Agreement.

        7.  SETTLEMENT OF DISPUTES. Any dispute between the parties arising from
or relating to the terms of this Agreement shall be resolved by arbitration held
in the State of Connecticut in accordance with the rules of the American
Arbitration Association. All costs associated with any arbitration, including
all legal expenses, for both parties shall be borne by the Company.

        8.  NO MITIGATION. To the extent that the vesting of any portion of the
Award is accelerated upon a Change in Control or upon a termination of service
as provided herein, neither the Shares delivered hereunder nor any interest
therein, shall be reduced by any compensation received by the Executive in
connection with any other employment.

        9.  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 by courier, or sent 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:

        Arch Capital Group Ltd.
        20 Horseneck Lane
        Greenwich, CT  06830
        Attn.: Secretary

    If to the Executive:

        Robert Clements
        [address of Executive]

        10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles of conflict of laws.

        11. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties relating to the subject matter hereof, and any previous
agreement or understanding among the parties with respect thereto is superseded
by this Agreement.

        12. COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall constitute one and the same instrument.

                                       5
<PAGE>

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

                                          ARCH CAPITAL GROUP LTD.

                                                /s/ Peter A. Appel
                                             -----------------------------------
                                             By:    Peter A. Appel
                                             Title: President and Chief
                                                    Executive Officer

                                                /s/ Robert Clements
                                             -----------------------------------
                                             Robert Clements

                                       6
<PAGE>

                             ARCH CAPITAL GROUP LTD.

                           RESTRICTED SHARE AGREEMENT

        THIS AGREEMENT, dated as of May 5, 2000, between Arch Capital Group Ltd.
(the "Company"), a Delaware corporation, and Robert Clements (the "Executive").

        WHEREAS, the Company and the Executive have entered into a Retention and
Change in Control Agreement, dated as of May 5, 2000 (the "Retention
Agreement"), under which the Executive will receive compensation at an annual
rate equal to one-half of the salary of the Company's President and Chief
Executive as compensation for the Executive's services as Chairman of the Board
of Directors; and the following terms reflect the Company's 1995 Long Term
Incentive and Share Award Plan (as amended, the "Plan");

        NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:

        1.  AWARD OF SHARES. Pursuant to the provisions of the Plan, the terms
of which are incorporated herein by reference, the Executive is hereby awarded
11,718 Restricted Shares (the "Award"), subject to the terms and conditions
herein set forth. Capitalized terms used herein and not defined shall have the
meanings set forth in the Plan.

        2.  TERMS AND CONDITIONS. It is understood and agreed that the Award of
Restricted Shares evidenced hereby is subject to the following terms and
conditions:

        (a) VESTING OF AWARD. Subject to the other terms and conditions of this
    Agreement, this Award shall become vested in full on January 1, 2001;
    provided that all such shares shall immediately become vested (i) to the
    extent provided in Section 2(b) hereof and (ii) upon a Change in Control.

            "Change in Control" means any of the following occurring after the
      date hereof:

               a. any person (within the meaning of the Securities Exchange Act
            of 1934, as amended (the "Exchange Act")), other than a Permitted
            Person or an Initial Investor, is or becomes the "beneficial owner"
            (as defined in Rule 13d-3 under the Exchange Act), directly or
            indirectly, of Voting Securities representing 35% or more of the
            total voting power of all the then outstanding Voting Securities; or

               b. any Initial Investor is or becomes the "beneficial owner" (as
            defined in Rule 13d-3 under the Exchange Act), directly or
            indirectly, of Voting Securities representing 50% or more of the
            total voting power of all the then outstanding Voting Securities; or

               c. the individuals who, as of the date hereof, constitute the
            Board of Directors of the Company (the "Board") together with those
            who become directors subsequent to such date and whose
            recommendation, election or nomination for election to the Board was
            approved by a vote of at least a majority of the directors then
            still in office who either were directors as of such date or whose
            recommendation, election or nomination for election was previously
            so approved, cease for any reason to constitute a majority of the
            members of the Board; or

<PAGE>

               d. the consummation of a merger, consolidation, recapitalization,
            liquidation, sale or disposition by the Company of all or
            substantially all of the Company's assets, or reorganization of the
            Company, other than any such transaction which would (x) result in
            at least 60% of the total voting power represented by the voting
            securities of the surviving entity or, in the case of an asset sale,
            the successor entity, outstanding immediately after such transaction
            being beneficially owned, directly or indirectly, by the
            stockholders of the Company immediately preceding the transaction
            and (y) not otherwise be deemed a Change in Control under
            subparagraphs a, b, c or e of this Section 2(a); or

               e. the Board adopts a resolution to the effect that, for purposes
            hereof, a Change in Control has occurred.

                  (i) "Initial Investors" means (A) The Trident Partnership,
                  L.P.; (B) Marsh & McLennan Risk Capital Holdings, Ltd.; or (C)
                  any majority-owned subsidiary or parent (or equivalent in the
                  case of a non-corporate entity) of the foregoing.

                  (ii) "Permitted Persons" means (A) the Company; (B) any
                  Related Party; or (C) any group (as defined in Rule 13d-3
                  under the Exchange Act) comprised of any or all of the
                  foregoing.

                  (iii) "Related Party" means (A) a majority-owned subsidiary of
                  the Company; (B) a trustee or other fiduciary holding
                  securities under an employee benefit plan of the Company or
                  any majority-owned subsidiary of the Company; or (C) a
                  corporation owned directly or indirectly by the stockholders
                  of the Company in substantially the same proportion as their
                  ownership of Voting Securities.

                  (iv) "Voting Security" means any security of the Company which
                  carries the right to vote generally in the election of
                  directors.

        (b) TERMINATION OF SERVICE; FORFEITURE OF UNVESTED SHARES. In the event
      the Executive's services as Chairman of the Board of Directors of the
      Company cease (i) due to death or Disability (as defined in the Retention
      Agreement), or (ii) due to (A) termination by the Company without Cause
      (as defined in the Retention Agreement) or (B) Constructive Termination
      (as defined in the Retention Agreement), the Restricted Shares subject to
      the Award, to the extent not already vested in full, shall become
      immediately and fully vested at the time of such termination of service.
      If the Executive's services with the Company cease for any other reason,
      then a prorated portion of the Award based on the number of days the
      Executive served the Company during the calendar year of such termination
      shall become vested and the remaining portion of the Award shall be
      forfeited by the Executive and become the property of the Company. For
      purposes of this Agreement, service with any of the Company's wholly owned
      subsidiaries shall be considered to be service with the Company.

        (c) CERTIFICATES. Each certificate issued in respect of Restricted
      Shares awarded hereunder shall be deposited with the Company, or its
      designee, together with, if requested by the Company, a stock power
      executed in blank by the Executive, and shall bear a legend disclosing the
      restrictions on transferability imposed on such Restricted Shares by this
      Agreement (the "Restrictive Legend"). Upon the vesting of Restricted
      Shares pursuant to Section 2(a) or 2(b) hereof and the satisfaction of any
      withholding tax liability pursuant to Section 5 hereof, the

                                       2
<PAGE>

      certificates evidencing such vested Shares, not bearing the Restrictive
      Legend, shall be delivered to the Executive.

        (d) RIGHTS OF A STOCKHOLDER. Prior to the time a Restricted Share is
      fully vested hereunder, the Executive shall have no right to transfer,
      pledge, hypothecate or otherwise encumber such Restricted Share. During
      such period, the Executive shall have all other rights of a stockholder,
      including, but not limited to, the right to vote and to receive dividends
      at the time paid on such Restricted Shares.

        (e) NO RIGHT TO CONTINUED SERVICES. This Award shall not confer upon the
      Executive any right with respect to continuance of services with the
      Company nor shall this Award interfere with the right of the Company to
      terminate the Executive's services at any time.

        3.  TRANSFER OF SHARES. The Shares delivered hereunder, or any interest
therein, may be sold, assigned, pledged, hypothecated, encumbered, or
transferred or disposed of in any other manner, in whole or in part, only in
compliance with the terms, conditions and restrictions as set forth in the
governing instruments of the Company, applicable United States federal and state
securities laws or any other applicable laws or regulations and the terms and
conditions hereof. Each certificate for Shares delivered hereunder, unless at
the time of issuance such Shares are registered under the Securities Act of
1933, as amended, shall bear the following legend or such other legend as the
Company deems appropriate:

      "The securities evidenced hereby have not been registered under the
      Securities Act of 1933, as amended (the 'Act'), and may not be offered,
      sold or otherwise transferred except (i) in compliance with the provisions
      of any applicable state securities or 'Blue Sky' laws and (ii) (A)
      pursuant to an effective registration under the Act, (B) in compliance
      with Rule 144 under the Act, (C) inside the United States to a Qualified
      Institutional Buyer in compliance with Rule 144A under the Act, (D)
      outside the United States in compliance with Rule 904 of Regulation S
      under the Act or (E) inside the United States to an institutional
      'accredited investor' as defined in Rule 501(a)(1), (2), (3) or (7) under
      the Act in a transaction which, in the opinion of counsel reasonably
      satisfactory to the Company, qualifies as an exempt transaction under the
      Act and the rules and regulations promulgated thereunder."

Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend or such other legend deemed appropriate by the
Company shall also bear such legend unless, in the opinion of counsel for the
Company, the securities represented thereby need no longer be subject to the
restriction contained herein. The provisions of this Section 3 shall be binding
upon all subsequent holders of certificates bearing the above legend.

        4.  EXPENSES OF ISSUANCE OF SHARES. The issuance of stock certificates
hereunder shall be without charge to the Executive. The Company shall pay, and
indemnify the Executive from and against any issuance, stamp or documentary
taxes (other than transfer taxes) or charges imposed by any governmental body,
agency or official (other than income taxes) or by reason of the issuance of
Shares.

        5.  WITHHOLDING. The Executive agrees to make appropriate arrangements
with the Company for satisfaction of any applicable tax withholding
requirements, or similar requirements, arising out of this Agreement.

                                       3
<PAGE>

        6.  REFERENCES. References herein to rights and obligations of the
Executive shall apply, where appropriate, to the Executive's legal
representative or estate without regard to whether specific reference to such
legal representative or estate is contained in a particular provision of this
Agreement.

        7.  SETTLEMENT OF DISPUTES. Any dispute between the parties arising from
or relating to the terms of this Agreement shall be resolved by arbitration held
in the State of Connecticut in accordance with the rules of the American
Arbitration Association. All costs associated with any arbitration, including
all legal expenses, for both parties shall be borne by the Company.

        8.  NO MITIGATION. To the extent that the vesting of any portion of the
Award is accelerated upon a Change in Control or upon a termination of service
as provided herein, neither the Shares delivered hereunder nor any interest
therein, shall be reduced by any compensation received by the Executive in
connection with any other employment.

        9.  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 by courier, or sent 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:

        Arch Capital Group Ltd.
        20 Horseneck Lane
        Greenwich, CT  06830
        Attn.: Secretary

    If to the Executive:

        Robert Clements
        [address of Executive]

        10. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles of conflict of laws.

        11. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties relating to the subject matter hereof, and any previous
agreement or understanding among the parties with respect thereto is superseded
by this Agreement.

        12. COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall constitute one and the same instrument.

                                       4
<PAGE>

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

                                          ARCH CAPITAL GROUP LTD.

                                                /s/ Peter A. Appel
                                             -----------------------------------
                                             By:    Peter A. Appel
                                             Title: President and Chief
                                                    Executive Officer

                                                /s/ Robert Clements
                                             -----------------------------------
                                             Robert Clements

                                       5

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