Document:

<PAGE>
                                                                 Exhibit 10.13.3

                              SETTLEMENT AGREEMENT

      THIS SETTLEMENT AGREEMENT (the "Agreement") is made and entered into as of
June 30, 1999, by and between RONALD L. BORNHUETTER ("Executive"), NAC RE
CORPORATION, a Delaware corporation, and NAC REINSURANCE CORPORATION, a New York
corporation (together, the "Company").

                              STATEMENT OF PURPOSE

      Executive has been employed by the Company under the terms of that certain
Employment Agreement between Executive and the Company dated October 30, 1996
(the "Employment Agreement"). The Employment Agreement provides that Executive
will be entitled to receive certain payments and benefits if his employment is
terminated.

      Executive's employment with the Company ceased effective as of June 30,
1999. The Company and Executive wish to confirm in this Agreement that Executive
has terminated his employment for Good Reason pursuant to Section 8(c) of the
Employment Agreement and to specify the termination payments and other benefits
that will be provided to Executive under the Employment Agreement and certain
other documents, contracts and plans, as well as certain other consideration,
and to settle in full all matters and claims, contractual and non-contractual,
relating to Executive's employment with the Company.

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

      1. RESIGNATION; RETIREMENT.

      Executive hereby resigns from his position as Chief Executive Officer of
the Company and resigns his membership on the Board of Directors of the Company
and his position as Chairman thereof, effective June 18, 1999. Executive agrees
that he will resign from any and all offices and directorships of any and all
affiliates of the Company promptly following the request of such Board of
Directors. Effective as of June 30, 1999 (the "Termination Date"), Executive
shall cease to be an employee of the Company or any affiliate. For the purposes
of all Company benefit plans and programs, including, without limitation, the
Supplemental Pension pursuant to Section 5 of the Employment Agreement, such
termination of employment shall be treated as a retirement.

      2. TERMINATION PAYMENTS AND BENEFITS.

      Executive shall receive the following payments and benefits as a result of
his termination of employment:

<PAGE>
                                      -2-

      (a) LUMP SUM CASH SEVERANCE. On or before July 15, 1999, the Company shall
pay to Executive a lump sum cash severance payment and accrued bonus obligations
in the aggregate amount of $4,659,812, representing the following:

       Amount pursuant to Section 8(b)(i)(B)                       $3,946,785
       of the Employment Agreement

       Annual Incentive Plan                                         $144,394

       Long-term Incentive Plan                                      $568,633

      (b) STOCK OPTIONS. All of Executive's currently outstanding stock options,
listed on Exhibit A hereto, are fully vested and exercisable, have been
converted into options to purchase the number of shares of common stock of XL
Capital Ltd. ("XL") reflected in Exhibit A, and shall remain exercisable until
the expiration of the exercise period provided in the applicable option
agreement (but in no event beyond its maximum stated term), as provided in
Exhibit A.

      (c) SUPPLEMENTAL PENSION. In accordance with Section 5 of the Employment
Agreement, the Company shall pay to Executive $162,892 per year in equal monthly
installments commencing August 1, 1999. Such benefit shall be paid to Executive
for his lifetime and, following his death, 50% of such amount shall continue to
be paid to his surviving spouse for her lifetime commencing on the first day of
the month immediately after the date of Executive's death. Funding of the
benefit under this Section 2(c) shall be provided through a "Rabbi Trust"
established by the Company. The Company will maintain the assets of the trust at
a level at least equal to the lump sum value of future payments, determined
using the following accepted actuarial principles and assumptions: for
mortality, the UP 1984 Mortality Table, and for interest, the applicable
interest rate, as then in effect, used by the Pension Benefit Guaranty
Corporation to value immediate annuities in connection with the termination of a
single-employer plan under the Employee Retirement Income Security Act of 1974,
as amended. To the extent the assets held in the trust exceed the foregoing lump
sum value, the excess amount shall be returned to the Company or shall remain in
the trust for the contingency of future increases in the lump sum value, as
elected by the Company.

      (d) CONTINUATION OF MEDICAL, VISION AND DENTAL BENEFITS. The Company shall
provide Executive and his spouse with medical, vision and dental benefits on the
same basis as such benefits were provided prior to the Termination Date, by
purchasing and maintaining equivalent medical, vision and dental coverage on
Executive's behalf, for a period of 36 months commencing July 1, 1999. After
July 2002, the Company shall use its best efforts to continue the eligibility of
Executive and his spouse in its group insurance benefits; provided, however,
that the costs of such benefits shall be borne by Executive.

<PAGE>
                                      -3-

      (e) CONTINUATION OF LIFE INSURANCE BENEFIT. Commencing July 1, 1999 and
continuing until June 30, 2002, the Company shall maintain for the benefit of
Executive life insurance coverage with an aggregate death value of $750,000.
Commencing July 1, 2002, the Company shall purchase and maintain at its expense
for the remainder of Executive's life, and for Executive's benefit, life
insurance coverage having an aggregate death value of $100,000. Executive shall
be the owner of and shall have the right to designate or change the beneficiary
or beneficiaries of the insurance described in this Section 2(e), and such
insurance shall be provided in a form whereby Executive may create an
irrevocable trust as the owner of such insurance.

      (f) OTHER BENEFITS. Executive is a participant in the benefit plans listed
in Exhibit B hereto. This Agreement shall not change the terms of such plans or
the benefits earned by or due to Executive thereunder for services rendered to
the Company through the Termination Date. The benefits earned by or due to
Executive in accordance with the terms of such plans shall be paid or provided
by the Company or such plans (as the case may be) when due (whether such due
date is on, before or after the Termination Date), and full payments and
provision of benefits shall discharge fully all obligations of the Company and
such plans with respect to Executive's benefits under such plans. In addition,
the Company shall pay to Executive a lump sum amount equal to $48,293.21 (the
value of 19.5 vacation days based on six months of employment in 1999), payable
in accordance with the Company's general practices for reimbursement for unpaid
vacation days.

      3. TAX WITHHOLDING AND REPORTING.

      The Company shall be entitled to withhold from the benefits and payments
described herein all income and employment taxes required to be withheld by
applicable law.

      4. RELEASE OF THE COMPANY.

      Executive, on behalf of himself and his heirs, personal representatives,
successors and assigns, hereby releases and forever discharges the Company, its
affiliates, and each and every one of their respective present and former
directors, officers, employees, agents, successors and assigns from and against
any and all claims, demands, damages, actions, causes of action, costs and
expenses, which Executive now has, may ever have had or may have hereafter upon
or by reason of any matter, cause or thing occurring, done or omitted to be done
prior to the date of this Agreement, that constitute "Employment-Related Claims"
or rights and claims Executive has or might have under the Worker Adjustment and
Retraining Notification Act, the Age Discrimination in Employment Act of 1967,
as amended ("ADEA"), Title VII of the Civil Rights Act of 1964, as amended, and
the Americans with Disabilities Act of 1990, as amended; PROVIDED, HOWEVER, that
this release shall not apply to any claims which Executive may have for the
payments or provision of the benefits under this Agreement or programs described
or referenced in this Agreement, including the Exhibits hereto, and that

<PAGE>
                                      -4-

this release shall not apply to any rights Executive may have to obtain
contribution in the event of the entry of judgment against him as a result of
any act or failure to act for which both Executive and the Company are jointly
responsible. For purposes of this Agreement, "Employment -- Related Claims"
means all rights and claims Executive has or may have related to his employment
by or status as an employee, officer or director of the Company or any of its
affiliates or to the termination of that employment or status or to any
employment practices and policies of the Company or its affiliates.

      Executive acknowledges and agrees that he has read this release in its
entirety and that this release is a general release of all known and unknown
claims, including rights and claims arising under ADEA. Executive and the
Company further acknowledge and agree that:

      (i)   This release does not release, waive or discharge any rights or
            claims that may arise for actions or omissions which occur after the
            date of this Agreement;

      (ii)  Executive is entering into this Agreement and releasing, waiving and
            discharging rights or claims only in exchange for consideration
            which he is not already entitled to receive;

      (iii) Executive has been advised, and is being advised by this release, to
            consult with an attorney before executing this Agreement;

      (iv)  Executive has been advised, and is being advised by this release,
            that he has up to twenty-one (21) days within which to consider this
            release; and

      (v)   Executive is aware that this release will not become effective or
            enforceable until seven (7) days following his execution of this
            Agreement and that he may revoke this release at any time during
            such period by delivering (or causing to be delivered) to the
            Company at the address provided in Section 11 hereof written notice
            of his revocation of this release no later than 5:00 p.m. eastern
            time on the seventh (7th) full date following his execution of this
            Agreement.

      5. RELEASE OF EXECUTIVE.

      In consideration of Executive's entering into this Agreement, the Company,
for itself, its officers and directors, its affiliates and their respective
predecessors, successors and assigns hereby releases and forever discharges
Executive and his heirs, personal representatives, successors and assigns from
and against any and all claims, demands, damages, actions, causes of action,
costs and expenses, of whatever kind or nature, in law, equity or otherwise,

<PAGE>
                                      -5-

which the Company or any of said entities now has, may ever have had or may have
hereafter upon or by reason of any matter, cause or thing occurring, done or
omitted to be done prior to the date of this Agreement, including without
limitation all rights and claims the Company or any of said entities or any
third parties (including officers, directors and employees of the Company or its
affiliates) have or might have as a result of Executive's status as an officer,
director or employee of the Company or any of said entities or the termination
of that status; PROVIDED, HOWEVER, that this release shall not apply to any
claims the Company may have which arise out of or relate to the conviction of
Executive for the commission of a crime involving dishonesty with respect to the
Company, its affiliates or their respective predecessors. As of the date of this
Agreement, the Company has no knowledge of any potential claim against Executive
arising out of any of the events described above.

      6. INDEMNIFICATION.

      The Company and/or its affiliates shall indemnify and hold harmless
Executive, his heirs and his personal representatives to the fullest extent
permitted by applicable law, as now or hereafter in effect, with respect to any
acts, omissions or events that occurred while Executive was an employee of the
Company or any affiliate or served the Company, any affiliate or any other
corporation or enterprise of any kind in any capacity at the request of the
Company or any affiliate (an "Enterprise"). Without limiting the generality of
the foregoing, such indemnification shall include the prompt payment or
reimbursement to Executive for (a) all of Executive's reasonable expenses,
including attorneys' fees and court costs, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding or in connection
with any appeal thereof, to which Executive may be a party by reason of any
action taken or failure to act under or in connection with his service for the
Company, any affiliate or an Enterprise, and (b) all amounts required to be paid
in settlement or in satisfaction of a judgment in connection with any such
action, suit or proceeding; provided, however, that the Company and any
affiliate shall not be required to indemnify or hold harmless Executive, his
heirs or personal representatives in any matter whatsoever in the event and to
the extent that there is a final and nonappealable judgment by a court of
competent jurisdiction that the liability incurred by Executive resulted from
his gross negligence, fraud or willful malfeasance.

      7. GROSS-UP PAYMENT.

      In the event that any payments or benefits (the "Severance Payments")
provided for in this Agreement (including, but not limited to, the rights
provided under Section 2(b)) are subject to the tax (the "Excise Tax") imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended, or any
successor provision, the Company shall pay to the Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Severance Payments and any federal,
state and local income taxes and Excise Tax (including interest and penalties)
upon the pay-

<PAGE>
                                      -6-

ment provided for in this Section 7, shall be equal to the Severance Payments.
The determination whether any payments made pursuant to this Agreement are
subject to the Excise Tax shall be based on the opinion of tax counsel selected
by the Executive and reasonably acceptable to the Company. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal, state and local income taxes at the highest marginal rate of income
taxation applicable to any individual residing in the jurisdiction in which the
Executive resides in the calendar year in which the Gross-Up Payment is to be
made. In the event that the Excise Tax is subsequently determined to be less
than the amount initially determined hereunder, the Executive shall promptly
repay to the Company the portion of the Gross-Up Payment attributable to such
reduction. In the event that the Excise Tax is subsequently determined to exceed
the amount initially determined hereunder, the Company shall promptly make an
additional Gross-Up Payment in respect of such excess.

      8. CONFIDENTIALITY.

      (a) For the period during which this Agreement has not been publicly
disclosed by the Company, Executive hereby covenants and agrees to keep in full
confidence all information concerning this Agreement except (i) to the extent
disclosure is or may be required by a statute (or regulation thereunder), by a
court of law, by any governmental agency having supervisory authority over the
business of the Company or by any administrative or legislative body (including
a committee thereof) with apparent jurisdiction to order him to divulge,
disclose or make accessible such information, (ii) to the extent disclosure to
Executive's legal counsel and personal financial advisors is reasonably
necessary in connection with Executive's consideration of the terms of this
Agreement or Executive's personal financial dealings, or (iii) to members of his
immediate family.

      (b) The Company hereby covenants and agrees to keep in full confidence all
information concerning this Agreement except (i) to the extent disclosure is or
may be required by a statute (or regulation thereunder), by a court of law, by
any governmental agency having supervisory authority over the business of the
Company or by any administrative or legislative body (including a committee
thereof) with apparent jurisdiction to order the Company to divulge, disclose or
make accessible such information, (ii) to the extent disclosure to the Company's
legal counsel and auditors is reasonably necessary or (iii) to those persons
within the Company, who as reasonably determined by the Company, must know about
it in carrying out their duties.

      (c) Executive and the Company acknowledge and agree that each shall be
entitled to enforce specifically the covenants in this Section 8 by seeking an
injunction to prevent violation thereof in addition to any other remedies
available at law or in equity.

<PAGE>
                                      -7-

      9. MUTUAL NONDISPARAGEMENT.

      Executive shall not intentionally make any public statements, encourage
others to make statements or release information intended to disparage or defame
the Company or any of its affiliates or any of their respective directors or
officers. The Company shall not intentionally make any public statements,
encourage others to make statements or release information intended to disparage
or defame Executive's reputation. Notwithstanding the foregoing, nothing in this
Section 9 shall prohibit any person from making truthful statements when
required by order of a court or other body having jurisdiction.

      10. ARBITRATION; EQUITABLE RELIEF.

      Any disputes arising under or in connection with this Agreement shall be
resolved by binding arbitration, to be held in New York, New York, in accordance
with the rules and procedures of the American Arbitration Association. Judgment
upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Each party shall bear his or its own costs of the
arbitration or litigation, including, without limitation, his or its attorneys'
fees. Nothing herein shall prevent either party from seeking equitable relief in
court in connection with any breach or proposed breach of the provisions of
Sections 8 and 9. For the purpose of any such equitable relief, the parties
hereby submit to the exclusive jurisdiction of the courts of the state of New
York and the federal courts of the United States of America located in such
state and hereby waive, and agree not to assert, as a defense in any action,
suit or proceeding for such equitable relief, that he or it is not subject
thereto. The parties agree that service of process in such action, suit or
proceeding shall be deemed in every respect effective service of process upon
him or it if given in the manner set forth in Section 11, or if effected by any
legally permitted method of service.

      11. NOTICES.

      All notices, requests, demands or other communications under this
Agreement shall be in writing and shall be deemed effected when delivered by
messenger or overnight courier or by registered mail, return receipt requested,
to the party to whom such notice is being given as follows:

      To the Company at:        One Greenwich Plaza
                                Greenwich, CT  06836-2568
                                Attention:  General Counsel

      To Executive at:          29 Old Stone Bridge Road
                                Cos Cob, CT  06807

<PAGE>
                                      -8-

or such other address as may be stated in notice given as hereinbefore provided.
Either party may change his or its address or the name of the person to whose
attention the notice or other communication shall be directed from time to time
by serving notice thereof upon the other party as provided herein.

      12. ENTIRE AGREEMENT.

      This Agreement, together with the attachments to it, the agreements,
plans, contracts, documents and programs described or referenced herein, and the
Consulting Agreement between the Company and Executive effective as of July 1,
1999, constitutes the entire agreement between the Company and Executive, and
supersedes and invalidates any previous agreements or contracts not so described
or referenced herein, including, without limitation, the Employment Agreement,
such that the Company shall have no further liability or responsibility under
the Employment Agreement. No representations, inducements, promises or
agreements, oral or otherwise, which are not embodied herein, shall be of any
force or effect.

      13. MISCELLANEOUS.

      This Agreement, and the rights and obligations of the parties hereto,
shall be governed by and construed in accordance with the laws of the State of
New York, without regard to principles of conflicts of law. If any provision
hereof is unenforceable, such provision shall be fully severable, and this
Agreement shall be construed and enforced as if such unenforceable provision had
never comprised a part hereof, the remaining provisions hereof shall remain in
full force and effect, and the court construing the Agreement shall add as a
part hereof a provision as similar in terms and effect to such unenforceable
provision as may be enforceable, in lieu of the unenforceable provision. As used
in this Agreement, the term "affiliate" means a corporation which is a member of
the same controlled group of corporations (within the meaning of Section 1563(a)
of the Code) as the Company. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
agreed to in writing and signed by Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of any similar or dissimilar provisions or conditions
at the same or any prior or subsequent time. The headings of the sections and
subsections 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.

<PAGE>
                                      -9-

      14. COUNTERPARTS.

      This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.

<PAGE>
                                      -10-

      IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company
has caused this Agreement to be executed by its duly authorized representative,
all as of the date first above written.

                               NAC RE CORPORATION

                               By:
                                   ---------------------------------------------

                               NAC REINSURANCE CORPORATION

                               By:
                                   ---------------------------------------------

                               -------------------------------------------------
                                            Ronald L. Bornhuetter

<PAGE>

                                    EXHIBIT A

                     STATUS OF RONALD BORNHUETTER'S OPTIONS
 (ASSUMING RETIREMENT AND TERMINATION UPON THE CHANGE IN CONTROL ("CC") 6/30/99
                   CONVERTED TO OPTIONS TO PURCHASE XL SHARES)

<TABLE>
<CAPTION>

---------------------- --------------------------- --------------------------- --------------------------
                                                                                       LAST DATE
        DATE                   XL SHARES                      PLAN                    TO EXERCISE
---------------------- --------------------------- --------------------------- --------------------------
<S>                    <C>                         <C>                         <C>
        9/88                       154,406                 1989 Plan                    6/30/00
        12/90                       21,960                 1989 Plan                    6/30/00
        9/91                        19,215                 1989 Plan                    6/30/00
        3/92                        22,875                 1989 Plan                    6/30/00
        9/92                        19,215                 1989 Plan                    6/30/00
---------------------- --------------------------- --------------------------- --------------------------
        9/93                        29,280                 1993 Plan                    9/7/031
        8/94                        10,522                 1993 Plan                    6/30/04
        9/95                        34,312                 1993 Plan                    6/30/04
        9/96                        22,875                 1993 Plan                    6/30/04
        10/96                       60,390                 1993 Plan                    6/30/04
        10/96                       31,110                 1993 Plan                    6/30/04
---------------------- --------------------------- --------------------------- --------------------------
        6/97                        31,110                 1997 Plan                    6/30/04
        6/98                        31,110                 1997 Plan                    6/30/04
---------------------- --------------------------- --------------------------- --------------------------
</TABLE>

----------
1        Exercisable no later than option expiration date

<PAGE>

                                    EXHIBIT B

RONALD BORNHUETTER

<TABLE>
<CAPTION>

               BENEFIT PLAN                                       CONTINUING BENEFITS
----------------------------------------------   -----------------------------------------------------
<S>                                              <C>
401(k) Employee Savings Plan                     Basic match ceases June 30, 1999;
                                                 1999 discretionary match to be contributed March 31,
                                                 2000

Non-qualified Excess Saving Plan                 Basic match ceases June 30, 1999;
                                                 1999 discretionary match to be accrued March 31, 2000

Pension - NAC Re Corp. Retirement Program        Payments of $41,364 per year, commencing July 1, 1999,
                                                 assuming 50% joint and survivor annuity benefit

        - NAC Re Corp. Benefits Equalization     Payments of $173,352 per year, commencing July 1,
                                                 1999, assuming 50% joint and survivor annuity benefit

Stock Purchase Plan                              Eligibility discontinued.  Refund of $21,250 to be
                                                 paid July 15, 1999

Car lease                                        Lease to be transferred to individual name as of June
                                                 30, 1999
</TABLE><PAGE>
                                                                 Exhibit 10.13.5

                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

      AMENDED AND RESTATED EMPLOYMENT AGREEMENT, made as of June 18, 1999, by
and among XL Capital Ltd ("AXL"), Dasher Acquisition Corp. ("ACQUISITION"), NAC
Re Corporation ("NAC RE") and NAC Reinsurance Corporation ("NAC") (collectively,
NAC Re and NAC shall be referred to as the "COMPANY" or the "EMPLOYER"), and
Nicholas M. Brown, Jr. ("EXECUTIVE").

                               W I T N E S S E T H

      WHEREAS, as of June 10, 1998, the Company and the Executive entered into
an employment agreement (the "AGREEMENT"); and

      WHEREAS, XL, Acquisition and the Company have entered into an Agreement
and Plan of Merger (the "MERGER AGREEMENT"); and

      WHEREAS, XL, Acquisition and the Company wish to have the Executive
continue his employment under the Agreement through the consummation of the
merger transactions contemplated by the Merger Agreement (such consummation date
hereafter referred to as the "CIC DATE") and thereafter, as modified in certain
respects, and the Executive wishes to continue such employment.

      NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
parties hereto hereby agree to continue Executive's employment in accordance
with the terms of the Agreement, which continues in full force and effect, and
hereby amend and restate the Agreement in its entirety as follows effective as
of the CIC Date:

      1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere herein,
the following terms shall have the following meanings when used in this
Agreement with initial capital letters:

      (a) "ANNUAL INCENTIVE PLAN" shall mean: (i) prior to the CIC Date, the NAC
Re Corp. Amended and Restated Annual Incentive Plan ("NAC RE AIP") as referred
to in Exhibit 10.11 of the NAC Re Corp. 1997 Annual Report on Form 10-K ("FORM
10-K"); following the CIC Date and prior to February 28, 2002, either the NAC Re
AIP or the annual incentive plan maintained by XL for its senior executives ("XL
AIP"), as designated by the Executive prior to November 1 of each year; and
(iii) on or after February 28, 2002, the XL AIP.

<PAGE>
                                      -2-

      (b) "BOARD" shall mean, prior to the CIC Date, the Board of Directors of
NAC Re Corp., and following the CIC Date, the Board of Directors of XL and the
Board of Directors of XL America, Inc.

      (c) "CAUSE" shall mean Executive's willful breach of duty in the course of
his employment or Executive's habitual neglect of his employment duties in a
manner that materially impacts the business or reputation of Employer unless
such breach or neglect is of a nature that reasonably can be corrected and is
corrected within sixty (60) days following written notice to Executive in
respect thereof. For purposes of this Section 1(c), no act or failure to act on
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by Executive not in good faith and without reasonable belief that his action or
omission was in the best interest of Employer. Notwithstanding the foregoing,
Executive shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice to Executive and an opportunity for Executive,
together with Executive's counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, Executive was guilty of conduct set
forth above in this Section 1(c) and specifying the particulars thereof in
detail.

      (d) "CHANGE IN CONTROL" shall mean, through the CIC Date, a change in
control of NAC Re Corp. A Change in Control of NAC Re Corp. shall be deemed to
have occurred on the CIC Date.

      In the event XL has, as of the CIC Date, or thereafter enters into, with
any of its senior executives agreements with respect to the change in control of
XL which provide for greater benefits than due under Section 7(c) hereof in such
situation on a change in control of XL, a similar agreement shall be offered to
Executive to receive such amounts in lieu of the amounts due hereunder.

      (e) "CODE" shall mean the Internal Revenue Code of 1986, as amended.

      (f) "COMMON STOCK," prior to the CIC Date, shall mean the common stock,
ten cents (104) par value, of NAC Re Corp., and after the CIC Date, shall mean
the common stock, one cent ($.01) par value, of XL Capital Ltd.

      (g) "COMPENSATION" shall mean the sum of (i) Executive's annual base
salary pursuant to Section 5(a) hereof and (ii) Executive's annual bonus at
target pursuant to Section 5(b) hereof.

      (h) "COMPENSATION COMMITTEE" shall mean the Compensation Committee of the
Board.

<PAGE>
                                      -3-

      (i) "DISABILITY" shall mean permanent and total disability as such term is
defined in the Employer's long term disability plan in effect on the Effective
Date. Any question as to the existence of Disability upon which Executive and
Employer cannot agree shall be determined by a qualified independent physician
selected by Executive (or, if Executive is unable to make such selection, such
selection shall be made by any adult member of Executive's immediate family or
Executive's legal representative), and approved by Employer, said approval not
to be unreasonably withheld. The determination of such physician made in writing
to Employer and to Executive shall be final and conclusive for all purposes of
this Agreement.

      (j) "EFFECTIVE DATE" shall mean June 10, 1998. This Amendment and
Restatement of the Employment Agreement shall be effective as of the CIC Date.

      (k) "FINAL AVERAGE COMPENSATION" shall mean Executive's highest average
annual Compensation earned during any consecutive thirty-six (36) complete
months (or lesser actual period of receiving Compensation) during the period of
sixty (60) complete months (or lesser actual period of receiving Compensation)
immediately preceding Executive's termination of employment with Employer.

      (l) "GOOD REASON" shall mean, for all purposes other than with respect to
all restricted Common Stock which has been issued to Executive but is unvested
as of the CIC Date and all options to acquire Common Stock or stock appreciation
rights ("SARS") which have been granted to Executive but remain unvested as of
the CIC Date (the "EXECUTIVE EQUITY RIGHTS"), the occurrence, without (other
than with respect to (iv)) Executive's express written consent, of any of the
following circumstances:

            (i) the assignment to Executive of any duties inconsistent with his
      offices and status as of the Effective Date (or any offices and status to
      which Executive has been promoted at the time), or a substantial
      diminution in the nature or status of Executive' s responsibilities (other
      than as the result of the Company no longer being a public company);

            (ii) the failure of Employer to retain Executive as Chief Executive
      Officer of NAC Re or in any other capacities set forth in Section 2 hereof
      or a failure to maintain Executive as the most senior executive with
      regard to the operations of XL, Employer and their affiliates in North
      America with the powers, authorities and duties commensurate with such
      positions, subject to Executive's obligations to report to the CEO of XL
      (in his capacity as Executive Vice President of XL), the Board of
      Employer, the Board of Directors of XL and the Board of Directors of XL
      America, Inc.;

<PAGE>
                                      -4-

            (iii) a reduction in Executive's annual base salary as in effect on
      the Effective Date, on January 1, 1999, or as the same may be increased
      from time to time;

            (iv) an election by the Executive, on at least 30 days' written
      notice given at any time after July 31, 2001, to terminate his employment
      between September 1, 2001, and February 28, 2002 inclusive, for any reason
      (or no reason);

            (v) the relocation of the office in which Executive is located on
      the Effective Date to a location more than forty-five (45) miles
      therefrom;

            (vi) a material reduction in the aggregate benefits and compensation
      provided to Executive under employee pension and welfare benefit plans and
      incentive compensation, stock option and stock ownership plans from that
      which existed immediately prior to the CIC Date, or a failure to provide
      cash and equity incentives at a level comparable to similarly situated
      executives of XL;

            (vii) the failure of Employer to obtain a satisfactory agreement
      from any successor (other than any successor resulting from the
      transactions contemplated by the Merger Agreement) to assume and agree to
      perform this Agreement, as contemplated in Section 11 hereof;

            (viii) termination of Executive's employment as a result of his
      death or Disability prior to March 1, 2002;

            (ix) any purported termination of Executive's employment by Employer
      for Cause for which Executive is not given notice of such termination in
      accordance with Section 1(c) hereof; for purposes of this Agreement, no
      such purported termination shall be effective;

            (x) any other material breach of this Agreement by Employer or XL,
      including but not limited to any material breach of Section 2(b) hereof;

            (xi) Brian O'Hara ceasing to be Chief Executive Officer of XL, Brian
      O'Hara not being Chief Executive Officer of the parent entity in the group
      of entities controlling, controlled by, or under common control with XL,
      or Executive being required to report to anyone other than the Chief
      Executive Officer of XL (in Executive's capacity as Executive Vice
      President of XL), the Board of the Employer, the Board of Directors of XL
      or the Board of Directors of XL America, Inc.;

            (xii) the failure of either Employer or XL to make normal equity
      grants to Executive for 1999 in accordance with past practices of NAC Re
      and XL, as the case may be, based on Executive's level of position;
      provided, however, that such

<PAGE>
                                      -5-

      XL grant may be reduced by a number of shares equal to the product of (A)
      the number of shares subject to the 1999 NAC Re grant (as converted to XL
      options) multiplied by (B) a fraction, the numerator of which shall be the
      number of days from the date of the 1999 XL grant through the first
      anniversary of the 1999 NAC Re grant and the denominator of which shall be
      365.

      Notwithstanding anything in this Section 1(l) to the contrary, neither of
the following shall constitute "GOOD REASON": (A) any diminution of duties
resulting from the fact that NAC Re ceases to be a publicly traded, independent
reinsurance company as a result of the consummation of the transactions
contemplated by the Merger Agreement, and (B) any change in duties resulting
from failure to continue the Executive as Co-Chairman, or Chairman, of the
management committees specified in Section 2(d) of this Agreement if such
committees are discontinued, provided that he is offered similar titles and
responsibilities with the replacements (if any) therefor.

      Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
hereunder. Executive may terminate his employment for Good Reason (other than
pursuant to paragraphs (ii), (iv) (v) or (viii), with regard to which the
remainder of this paragraph shall not apply) only if Executive shall provide the
Company with not less than sixty (60) days' written notice of intent to
terminate for Good Reason, which notice shall set forth in reasonable detail the
facts and circumstances claimed to provide the basis for Executive's termination
for Good Reason, and the Company shall not have cured or remedied its violation
within sixty (60) days following its receipt of such written notice. If within
sixty (60) days following the date on which such notice of termination is given,
Employer notifies Executive that a dispute exists concerning the grounds for
termination, the date of termination for determining the timing of any
obligation under this Agreement shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties or by
arbitration pursuant to Section 15 hereof; provided, further, that the date of
termination shall be extended by a dispute only if such notice of dispute is
given in good faith and Employer pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, Employer
will continue to pay Executive his full Compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, annual base
salary) and continue Executive as a participant in all other incentive
compensation, benefit and insurance plans in which Executive was participating
when the notice giving rise to the dispute was given, until the dispute is
finally resolved in accordance with this Section 1(1), unless resolution of such
dispute is unreasonably delayed by Executive. Amounts paid under this Section
1(1) are in addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this Agreement.

<PAGE>
                                      -6-

      Notwithstanding the above, for all purposes relating to the Executive
Equity Rights (as such term is defined in this Section 1(l), the definition of
"GOOD REASON" shall not be amended as of the CIC Date but shall remain as
defined prior to this amendment and restatement, which definition is set forth
in Appendix "A" to this Amended and Restated Employment Agreement.

      (m) "GRANT DATE" shall mean the date on which the Board or the
Compensation Committee approves the grant of a non-qualified option to purchase
Common Stock (or a stock appreciation right) or the award of restricted Common
Stock to Executive

      (n) "LONG-TERM INCENTIVE PLAN" shall mean: (i) with respect to grants made
thereunder prior to the CIC Date, the NAC Re Corp. Long-Term Incentive Plan
("NAC RE LTIP") as referred to in Exhibit 10.12 to the Form 10-K; (ii) with
respect to grants made thereunder following the CIC Date and prior to February
28, 2002, either the NAC Re LTIP or the long-term incentive plan maintained by
XL for its senior executives ("XL LTIP"), as designated by Executive prior to
November 1 of each year; and (iii) with respect to grants made thereunder on or
after February 28, 2002, the XL LTIP.

      (o) "TERM" shall mean the term provided in Section 4 hereof.

      (p) "CIC DATE" shall mean the consummation date of the merger transactions
referred to in the Merger Agreement.

      (q) "MATERIAL CAUSE" shall mean Executive's willful (as defined in Section
1(c)) actions or inactions intended to result in material damage to XL or the
Employer. Notwithstanding the foregoing, Executive shall not be deemed to have
been terminated for Material Cause unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of the Board
at a meeting of the Board called and held for such purpose (after reasonable
notice to Executive and an opportunity for Executive, together with Executive's
counsel, to be heard before the Board), finding that, in the good faith opinion
of the Board, Executive was guilty of conduct set forth above in this Section
1(q) and specifying the particulars thereof in detail.

      (r) "MERGER AGREEMENT" shall mean the Agreement and Plan of Merger among
XL Capital Ltd ("XL"), NAC Re Acquisition Corp. ("ACQUISITION"), and NAC Re
Corporation ("NAC RE") dated as of February 15, 1999.

      2. EMPLOYMENT; DUTIES.

      (a) Commencing on the CIC Date, Executive shall be employed as the
Employer's, XL's and their affiliates' most senior executive with regard to
property and casualty

<PAGE>
                                      -7-

insurance and reinsurance operations in North America (subject to his
obligations to report to the CEO of XL (in his capacity as Executive Vice
President of XL), the Board of the Employer, the Board of XL and the Board of XL
America, Inc.), including but not limited to: (a) Chief Executive Officer,
President and Chairman of the Board of NAC Re, and (in his discretion) of its
principal operating subsidiaries; (b) Executive Vice President of XL; (c)
President and CEO of XL America, Inc.; and (d) Co-chairman of the XL Reinsurance
Executive Management Board and Chairman of the XL North American Insurance
Executive Management Board (with continuation in these chairmanships subject to
future changes in XL's business and management structures, provided he is given
similar titles and responsibilities with the replacements, if any, therefor.

      (b) As CEO of XL America, Inc., Executive will have management and profit
and loss responsibility for all current and future North American property and
casualty insurance and reinsurance operations and related service businesses
except to the extent that all or part of such responsibility is allocated to
other executives of XL or its subsidiaries with the express written consent of
Executive. As CEO of XL America, Inc. and NAC Re, Executive will have full
management and supervisory responsibility for all current and future employees
of XL America, Inc. and NAC Re and NAC Re's principal operating subsidiaries,
except to the extent such responsibilities are reasonably delegated to others or
shared with individuals outside of NAC Re or XL America, Inc., respectively,
with the express written consent of Executive.

      3. DIRECTORSHIPS. Executive has been appointed to, and shall continue to
serve on, the Boards of Directors of NAC Reinsurance Corporation, Greenwich
Insurance Company, and Indian Harbor Insurance Company. It is agreed that
Executive will be considered for membership on the XL Board of Directors if the
current practice of restricting membership to one member of management is
revised.

      4. TERM. The term of this Agreement shall commence on the Effective Date
and shall continue through June 30, 2003, unless terminated earlier pursuant to
Section 7 hereof.

      5. COMPENSATION AND BENEFITS DURING THE TERM.

      (a) Base Salary: Executive's annual base salary shall be FIVE HUNDRED AND
FIFTEEN THOUSAND DOLLARS ($515,000.00), and shall be SIX HUNDRED AND TWENTY-FIVE
THOUSAND DOLLARS ($625,000), effective January 1, 1999, and shall be reviewed
annually for increase commencing March 2000 in conjunction with normal salary
administration.

      (b) Annual Bonus Opportunity. During the Term, Executive shall participate
in the Annual Incentive Plan at the following levels of annual base salary
earned during

<PAGE>
                                      -8-

each such year based on corporate performance in accordance with the terms of
the Annual Incentive Plan and the determination of the Compensation Committee:

              (i)    NAC Re AIP:      45% (0-90% opportunity);

              (ii)   XL AIP:          comparable to that of other senior
                                      executives of comparable position at XL.

      (c) Long-Term Bonus Opportunity: During the Term, Executive shall
participate in the Long-Term Incentive Plan at the following target levels of
annual base salary earned during the applicable performance period; provided,
however, that for any performance period in which Executive has not received
annual base salary during the entire period, annual base salary during any
partial year shall be annualized:

              (i)    NAC Re LTIP:     prior to January 1, 1999 - 55% (0-110%
                                      opportunity); effective with respect to
                                      measurement periods ending after
                                      January 1, 1999 - 60% (0-120%
                                      opportunity);

              (ii)   XL LTIP:         comparable to that of other senior
                                      executives of comparable position at XL.

      (d) Special Stock Option Grant:

            (i) On or prior to the Effective Date, Executive shall be granted
      stock appreciation rights ("SARS"), which will automatically convert into
      non-qualified options on November 11, 1998, with respect to one hundred
      and twenty five thousand (125,000) shares of Common Stock, twenty percent
      (20%) of which shall vest on each of the five (5) anniversaries of the
      Grant Date, provided that Executive is employed by Employer on those
      dates. The exercise price of the foregoing SARs shall be the fair market
      value of a share of Common Stock on the Grant Date.

            (ii) Nothing herein shall have the effect of modifying or
      superseding the terms of any SARs or stock option grants or restrictive
      stock grants to which the Executive may be entitled pursuant to his prior
      employment contract.

            (iii) Options or SARs granted pursuant to this Agreement shall be
      subject to the terms and conditions of the Company's stock option plans
      and shall expire, unless exercised, ten (10) years following the Grant
      Date.

<PAGE>
                                      -9-

            (iv) Upon the consummation of the merger transactions contemplated
      by the Merger Agreement, each outstanding stock option into which an SAR
      granted under this section shall have been converted, and all other
      outstanding SAR, stock option, or restricted stock grants then held by
      Executive or to which he may then be entitled pursuant to a prior
      employment contract, shall be deemed to constitute an option or other
      equity grant with respect to common stock of XL Capital, Ltd upon the
      terms set forth in Section 1.6 of the Merger Agreement.

      To the extent necessary to cause the condition set forth in Section 6.1(g)
of the Merger Agreement to be satisfied, the Executive hereby waives the rights
he may have, if any, to receive a lump sum cash amount with respect to any
outstanding Stock Options.

      (e) Annual Stock Option Grant: Executive shall be given the opportunity to
be granted additional options or SARs with respect to shares of Common Stock
with an underlying market value at the time of grant of 100-125% of Executive's
annual base salary at the time of grant in accordance with and commencing upon
Employer's next regular grant of options following the Effective Date; provided,
however, that nothing contained in this Section 5(f) shall confer upon Executive
any right to such additional options or SARs. Following the CIC Date, any
opportunity for a grant of options or other equity grants, including grants of
SARs and restricted stock, will be in respect of common stock of XL Capital Ltd,
in accordance with the terms set forth in Section 1.6 of the Merger Agreement
and the relevant plans and policies of XL applicable to senior executives of XL
at a level comparable to Executive; provided, however, that nothing contained in
this Section 5(e) shall confer upon Executive any right to such options or other
equity grants.

      (f) Supplemental Retirement Benefit:

            (i) If Executive's employment terminates with Employer and its
      affiliates on or after his attaining age fifty (50), Executive shall be
      paid a lifetime annual retirement benefit, commencing within thirty (30)
      days following the date of such retirement, equal to fifty percent (50%)
      of Executive's Final Average Compensation, reduced by benefits from any
      defined benefit pension plans maintained by Employer or its affiliates and
      any defined benefit pension plans maintained by any previous employers.
      Any retirement benefit that is payable prior to age sixty (60) shall be
      reduced by five percent (5%) per year for each year prior to age sixty
      (60); e.g. at age fifty (50) the benefit would equal twenty five percent
      (25%) of Executive's Final Average Compensation. The benefit will be paid
      to Executive for his lifetime and, upon his death, fifty percent (50%) of
      his benefit will be paid to his surviving spouse, if any, for her
      lifetime. In the event of the Executive's death after age fifty (50) but
      prior to retirement, a benefit shall be paid to the Executive's surviving
      spouse, if any, for her lifetime

<PAGE>
                                      -10-

      equal to the benefit which would have been payable to the spouse assuming
      Executive had retired the day preceding the date of death and then died.

            (ii) If Executive's employment terminates with Employer and its
      affiliates during the term of this contract but prior to his attaining age
      fifty (50), for the purpose of allowing Executive to vest in the
      retirement benefit as set forth in (i) above, Employer or its affiliates
      shall provide Executive with additional service credit, in addition to
      actual service credit for purposes of determining the eligibility for the
      retirement benefit in subsection (i), above, equal to four (4) years
      service credit plus service credit equal to the greater of three (3) years
      credit or credit for the balance of the contract term. In the event of
      Executive's death during the term of this contract but prior to attaining
      age fifty (50), a benefit shall be paid to the Executive's surviving
      spouse, if any, assuming the Executive had terminated employment the day
      preceding the date of his death and then died.

            (iii) (1) If Executive's employment terminates with Employer and its
      affiliates due to his Disability, a supplemental disability benefit shall
      be payable under the terms of this Agreement. The amount of such
      supplemental disability benefit shall equal the difference between (x)
      fifty percent (50%) of Executive's Final Average Compensation and (y) the
      benefit received by Executive under the long term disability plan of
      Employer or its affiliates. Such supplemental benefit shall be payable at
      the same time and under the same terms as the long term disability plan
      benefit. This supplemental disability benefit shall cease when benefits
      under the long term disability plan cease.

            (iv) (2) Upon cessation of disability benefits at age sixty-five
      (65), the Executive will become eligible for a retirement benefit under
      paragraph (i) of this Section 5 (f). In the event supplemental disability
      benefits cease prior to age (65) and the Executive does not return to work
      with the Company or its affiliates, for purposes of this Section 5 (f) the
      Executive shall be considered to have terminated employment or died, as
      appropriate, as of the date supplemental disability benefits ceased.

            (v) The calculation of the benefits payable pursuant to this Section
      5(f) shall be performed by the actuary for the defined benefit pension
      plan(s) of the Employer or its affiliates, if any, otherwise by an
      independent actuary selected by the Employer or its affiliates, whose
      calculation shall be final and binding on all persons. The benefits
      payable pursuant to this Section 5(f) shall be unfunded and the Executive
      will not be considered to have received a taxable economic benefit prior
      to the time at which benefits are actually payable hereunder. Accordingly,
      the Employer or its affiliates shall not be required to segregate any of
      its assets for the benefit of the Executive

<PAGE>
                                      -11-

      and the Executive shall have only a contractual right against the Employer
      or its affiliates for the benefits payable hereunder.

      (g) Relocation: Employer has relocated Executive to New Canaan,
Connecticut in accordance with Employer's relocation policy. As such, Employer
has agreed to pay to Executive a mortgage subsidy of $20,260 per year through
December 2002. Employer shall pay to Executive, with respect to any payments in
connection with relocation that are subject to federal, state or local taxation,
an additional amount so that Executive shall incur no such taxes with respect to
such payments.

      (h) Pension and Welfare Benefit Programs: Executive shall be entitled to
participate, on a basis and to the extent consistent with Executive's senior
executive position (and on a basis no less favorable than other senior
executives), in any employee pension or welfare benefit plan, employee stock
purchase plan and other so-called fringe benefit programs from time to time in
effect for the benefit of employees of Employer generally and/or for any group
of employees of which Executive is a member, provided that Executive meets the
eligibility requirements of any such plan or program. Executive shall continue
to receive short-term and long-term disability coverage, life insurance, medical
insurance and dental insurance reasonably comparable to that in effect as of the
Effective Date.

      (i) Other Executive Benefits: (1) During the Term, Employer shall (i)
provide Executive with an automobile of a make and model commensurate with
Executive's position and shall pay all costs of insurance, maintenance and
operation for such automobile; (ii) provide Executive with reasonable financial
planning and tax services; and (iii) reimburse Executive for reasonable club
dues and initiation fees at a club of Executive's choice which is important to
the conduct of the business of Employer and which is used for business purposes.

            (2) During the Term, Employer shall, subject to Executive's
reasonable cooperation in doing so, obtain and pay all costs of a life insurance
policy in the amount of $4,000,000 with respect to which Executive shall be the
insured and shall have the right to designate a beneficiary, and shall fully
gross up Executive for any income tax on the provision of such life insurance
and the gross-up payment.

            (3) During the Term through February 28, 2002, Employer, through
insurance or out of its own assets, shall provide that Executive shall receive a
lump sum payment of $4,000,000 at such time as he shall incur a Disability for
the first time and shall fully gross up Executive for any income taxes on the
providing of such benefit (other than on the payment of the benefit) and the
gross-up payment.

      (j) VACATION: During the Term, Executive shall be entitled to no less than
five (5) weeks paid vacation per year.

<PAGE>
                                      -12-

      (k) SIGNING BONUS: Upon the execution of this Amended and Restated
Employment Agreement and consummation of the merger transaction contemplated by
the Merger Agreement, Executive shall be entitled to a special sign-on bonus in
the amount of $1,000,000, which shall be paid as soon as practicable thereafter.

      6. OTHER ACTIVITIES. During the Term, Executive is expected to devote to
Employer's business his full business time and attention so as to assure full
and efficient performance of Executive's duties hereunder. During the Term,
Executive shall not, without Employer's prior written consent, engage or
participate, directly or indirectly, in any other business as a sole proprietor,
partner, employee, officer, shareholder, trustee, paid advisor or paid
consultant or accept appointment or election as a director or in any other
fiduciary or honorary capacity in any other business, venture or project;
provided, however, that nothing in this Agreement shall preclude Executive from
devoting nonbusiness time and efforts to charitable, social and civic matters to
the extent that such activities do not interfere with Executive's performance of
his duties under this Agreement and provided, further, however, that Executive
shall not be precluded from making investments as described in the proviso to
the first sentence of Section 8(a) hereof.

      7. TERMINATION. Executive's employment under this Agreement may be
terminated by Employer at any time without prior notice, subject to the
requirement of prior notice if such termination is for Cause. Executive's
employment under this Agreement may be terminated by Executive upon not less
than two (2) months' prior notice, other than in the case of termination on
account of Executive's unforeseen health problems, Disability or Good Reason. If
Executive's employment under this Agreement is terminated, the following
provisions shall apply:

      (a) Termination of Employment after February 28, 2002 by Employer for a
Reason other than Cause or by Executive for Good Reason: If, before the end of
the Term and after February 28, 2002, Employer terminates Executive's employment
for a reason other than Cause, or if Executive terminates employment on account
of Good Reason, Employer shall pay to Executive, within thirty (30) days
following the date of such termination, a lump sum amount equal to the sum of
(i) Executive's then annual base salary plus (ii) the amounts that would be paid
to Executive under the Annual Incentive Plan and the Long-Term Incentive Plan at
Executive's targets for the year or performance period, as the case may be,
during which such termination occurs, which sum is multiplied by three (3).

      (b) Termination of Employment after February 28, 2002, by Employer for
Cause, by Executive other than for Good Reason, or on account of Death or
Disability, or at any time by Employer for Material Cause: If Executive's
employment is terminated (i) after February 28, 2002, by Employer for Cause, by
Executive other than for Good Reason, or on account of Executive's death or
Disability, or (ii) by Employer at any time for Material Cause,

<PAGE>
                                      -13-

Executive, or his estate in the case of his death, shall receive from Employer,
within thirty (30) days following the date of termination, a lump sum amount
equal to Executive's annual base salary which is accrued but unpaid as of the
date of termination and any amounts, if any, due under Sections 5(i)(2) and (3)
hereof.

      (c) Termination of Employment as a result of Death or Disability, by
Employer other than for Cause or Material Cause, or by Executive for Good
Reason, in each case prior to March 1, 2002: (1) If, prior to March 1, 2002,
Executive's employment is terminated as a result of death or Disability, by
Employer other than for Material Cause, or by Executive for Good Reason,
Employer shall pay to Executive, within thirty (30) days following such
termination, a lump sum amount equal to the sum of (w) Executive's annual base
salary which is accrued but unpaid as of the date of termination, plus (x) the
portions, if any, of amounts under the Annual Incentive Plan and Long-Term
Incentive Plan that were earned by Executive but unpaid as of the date of
termination, which, in the event bonuses are discretionary, will be determined
in good faith, without regard to the termination, based on the level of bonuses
for comparable executives, plus (y) the greater of 2.99 and the number of years
including fractions thereof, remaining from the CIC Date until June 30, 2003,
times the sum of (I) Executive's then annual base salary plus (II) the amounts
that would be paid to Executive under the Annual Incentive Plan and the
Long-Term Incentive Plan at Executive's targets as in effect immediately prior
to the CIC Date, as increased until the date of payment of the amount described
above in this Section 7(c)(y), at an annual compounded rate of 8%, plus (z) any
amounts, if any, due under Sections 5(i)(2) and (3) hereof. In no event shall
the sums of (I) and (II) be less than $1,218,250.

            (2) In addition, if, prior to March 1, 2002, Executive's employment
is terminated by Employer other than for Cause (but not as a result of death or
Disability) or by Executive for Good Reason, Executive shall vest in all issued
but unvested restricted Common Stock and granted but unvested options to acquire
Common Stock or stock appreciation rights then held by Executive. The parties
acknowledge that solely for purposes of this Section 7(c)(2) (but not any other
part of this Section 7), Executive's rights to terminate for Good Reason
pursuant to Section (l)(iv) of Appendix A as a result of the consummation of the
merger transactions contemplated by the Merger Agreement are not waived and
shall continue throughout the Term.

      (d) Non-Exclusivity of Rights: Nothing in this Agreement shall prevent or
limit Executive's present or future participation in any benefit, bonus,
incentive, or other plan or program provided by Employer for which Executive may
qualify, nor shall this Agreement limit or otherwise affect rights that
Executive may have under any stock option or other agreements with Employer.
Amounts or benefits that are vested or that Executive is otherwise entitled to
receive under any plan or program of Employer at, or subsequent to, the date of
termination of Executive's employment shall be payable in accordance with such
plan or pro-

<PAGE>
                                      -14-

gram; provided, however, that any compensation and benefits received by
Executive pursuant to this Agreement shall be in lieu of (but, if necessary to
give effect to this provision, shall be reduced by) any and all compensation and
benefits that Executive is entitled to receive or may become entitled to receive
under any reduction in force or severance pay plan, program or practice that
Employer now has in effect or may hereafter put into effect and shall be applied
toward satisfying any severance pay and benefits required under federal or state
law to be paid or provided to Executive.

      (e) Excise Tax Gross Up: If an excise tax under Section 4999 of the Code
or any comparable tax that is in excess of ordinary federal income taxes, as may
be in effect from time to time, is imposed on amounts paid to Executive
hereunder, or otherwise in connection with or relating to the transactions
contemplated by the Merger Agreement or any future transaction involving XL or
its affiliates, then Executive shall be reimbursed by Employer in an amount
equal to such excise tax and any further tax due on amounts reimbursed
hereunder, upon request, at th1e time Executive is required to make a payment
thereof.

      8. NON-COMPETITION; CONFIDENTIAL INFORMATION.

      (a) Executive agrees that during the Term, and if Executive's employment
is terminated by Executive other than for Good Reason, for a period of twelve
(12) months following the date of termination of this Agreement, Executive shall
not (i) engage anywhere within the geographical areas in which NAC Re Corp. and
its subsidiaries or affiliates (for purposes of this Section 8, the "NAC RE
GROUP") have conducted their business operations as of the Effective Date or at
any time prior to the date of termination of Executive's employment directly or
indirectly, alone or as a shareholder, principal, agent, partner, officer,
director, employee or consultant of any other organization, in the business
conducted by the NAC Re Group as a material component of its reinsurance
operations, in direct competition with the NAC Re Group; provided, however, that
it is acknowledged and agreed that this Section 8(a)(i) does not prohibit
Executive from engaging in the reinsurance business where the Executive is only
incidentally engaged in any activity which is a material component of the
operations of the NAC Re Group; and Executive further agrees that during the
Term, and if Executive's employment is terminated by Executive other than for
Good Reason, for a period of twenty-four (24) months following the date of
termination of this Agreement Executive shall not (ii) divert to any competitor
of the NAC Re Group any customer of the NAC Re Group; provided, however, that
Executive may invest in stocks, bonds, or other securities of any similar
business (but without otherwise participating in such similar business) if (A)
such stocks, bonds, or other securities are listed on any national or regional
securities exchange or have been registered under Section 12(g) of the Exchange
Act; and (B) his investment does not exceed, in the case of any class of the
capital stock of any one issuer, one percent (1%) of the issued and outstanding
shares, or, in the case of other securities, one percent (1%) of the aggregate
principal amount thereof issued and outstanding. If at any time the provisions
of

<PAGE>
                                      -15-

this Section 8 shall be determined to be invalid or unenforceable, by reason of
being vague or unreasonable as to area, duration or scope of activity, this
Section 8 shall be considered divisible and shall become and be immediately
amended to only such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter; and Executive agrees that this Section 8, as so amended, shall
be valid and binding as though any invalid or unenforceable provision had not
been included herein. Nothing in this Section 8 shall prevent or restrict
Executive from engaging in any business or industry other than those designated
herein in any capacity.

      (b) Executive also agrees that, during the Term, and if Executive's
employment is terminated by Executive other than for Good Reason, for a period
of twenty-four (24) months following the date of termination of this Agreement,
Executive shall not solicit any officer, employee or consultant of the NAC Re
Group to leave their employ for other employment;

      (c) Executive shall not at any time after the date of termination of
employment reveal to anyone other than authorized representatives of the NAC Re
Group, or use for Executive's own benefit, any trade secrets, customer
information or other information that has been designated as confidential by the
NAC Re Group or is understood by Executive to be confidential without the
written authorization of the Board in each instance, unless such information is
or becomes available to the public or is otherwise public knowledge or in the
public domain for reasons other than Executive's acts or omissions.

      (d) If Executive materially breaches any of the obligations under this
Section 8, Employer shall have no further compensation or benefit obligations
pursuant to this Agreement or pursuant to the Annual Incentive Plan or the
Long-Term Incentive Plan but shall remain obligated for compensation and
benefits for periods prior to such breach as provided in any other plans,
policies or practices then applicable to Executive in accordance with the terms
thereof. Executive hereby acknowledges that Employer's remedies at law for any
breach of Executive's obligations under this Section 8 would be inadequate, and
Executive and Employer agree that in addition to any other remedies provided for
herein or otherwise available at law, temporary and permanent injunctive relief
may be granted in any proceeding which may be properly brought by Employer to
enforce the provisions of this Section 8 without the necessity of proof of
actual damages.

      9. NO MITIGATION OBLIGATION; NO SET-OFF OR COUNTERCLAIMS. In no event
shall Executive be obligated to seek other employment by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement.
Any amounts that may be earned by Executive other than from Employer shall not
reduce Employer's obligation to make any payments hereunder. The amounts payable
by Employer hereunder shall not be subject to any right of set-off that Employer
may assert against Executive.

<PAGE>
                                      -16-

10. TAXES. Employer may withhold from any amounts payable under this Agreement
all federal, state, city, or other taxes as Employer is required to withhold
pursuant to any law, regulation or ruling. Executive shall bear all expense of,
except as otherwise contemplated herein, and be solely responsible for, all
federal, state, local or foreign taxes due with respect to any payment received
hereunder.

      11. SUCCESSORS AND BINDING AGREEMENT.

      (a) Employer will require any successor, whether direct or indirect, by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of Employer, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that Employer is
required to perform it. Failure of Employer to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Executive to compensation from Employer in the
same amount and on the same terms as Executive would be entitled hereunder if
Executive had terminated his employment for Good Reason following a Change in
Control, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the date on which
Executive's employment with Employer was terminated. As used in this Agreement
"Employer" shall include any successor to Employer's business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. Except as provided above, Employer may not assign this
Agreement. As of the CIC Date, XL agrees to guarantee payment of the obligations
of the Employer under this Agreement. Such guarantee shall be a guarantee of
payment, not collections. With respect to such guarantee, XL and Executive agree
to resolve any disputes as provided in Section 15 hereof and as part of the same
arbitration in which Executive and Employer participate.

      (b) This Agreement shall inure to the benefit of, and be enforceable by,
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive dies while
any amount is still payable hereunder, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legatee or other designee or, if there is no such designee,
to Executive's estate.

      12. NOTICES. For the purpose of this Agreement notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, provided that all notices to Employer
shall be directed to the attention of the Office of the General Counsel of NAC
Re Corp., or to such other address as either party may have furnished to the
other in

<PAGE>
                                      -17-

writing in accordance herewith, except that notice of change of address shall be
effective only upon receipt:

                  Employer:

                  NAC Re Corp.
                  Office of the General Counsel
                  One Greenwich Plaza
                  P.O. Box 2568
                  Greenwich, CT 06386-2568

                  Executive:

                  Nicholas M. Brown, Jr.,
                  297 Smith Ridge Road
                  New Canaan, Connecticut 06840

                  XL Capital Ltd or Dasher Acquisition Corp.:

                  XL Capital Ltd
                  Cumberland House
                  One Victoria Street
                  Hamilton HM 11 Bermuda

                  Attn:  General Counsel

      13. GOVERNING LAW. The validity, interpretation, construction, and
performance of this Agreement shall be governed by and construed in accordance
with the substantive laws of the State of New York, without giving effect to the
principles of conflict of laws of such State, to the extent not preempted by
applicable federal law.

      14. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

      15. ARBITRATION. Any dispute arising out of or in any way relating to this
Agreement or Executive's employment with Employer, including, without
limitation, any claims Executive may assert under the Age Discrimination in
Employment Act of 1967, as amended, shall be resolved by arbitration in
Connecticut through the Stamford, Connecticut office of the American Arbitration
Association in accordance with the Model Employment Arbitration Procedures of
the American Arbitration Association except to the extent such provisions are
modified as hereinafter provided. The arbitration proceeding shall be conducted

<PAGE>
                                      -18-

by three (3) arbitrators. Executive and Employer shall each designate one (1)
arbitrator, each of whom shall be an attorney admitted to practice in one or
more states who has ten (10) or more years of experience in employment matters,
and the arbitrators so selected shall thereafter designate a third arbitrator
(who shall be a member of the National Academy of Arbitrators) by mutual
agreement. The arbitrators shall have no authority to modify any provision of
this Agreement or to award a remedy for a dispute involving this Agreement other
than a benefit specifically provided under or by virtue of this Agreement. The
decision of the arbitrators shall be final and binding on Employer and
Executive. Employer and Executive shall each pay their own legal fees associated
with arbitration proceedings hereunder, but the fees of the arbitrators and any
other costs associated with such arbitration proceedings shall be shared
equally, provided, however, that in connection with any arbitration arising out
of the failure of Employer to pay all or any part of the payments due hereunder
on account of a termination prior to January 1, 2002, Employer shall reimburse
Executive his legal fees and disbursements, as well as his share of the cost of
the arbitrators and the other arbitration costs, if Executive should prevail on
any material matter in the arbitration.

      16. MERGER. This Agreement (coupled with other ancillary written
agreements to which Employer and Executive are a party such as stock option and
restricted stock agreements) expresses in full the understanding of Employer and
Executive, and all promises, representations, understandings, arrangements and
prior agreements with regard to Executive's employment by Employer are merged
herein.

      17. WAIVER. Failure by either party hereto to insist upon strict adherence
to any one or more of the covenants or terms contained herein, on one or more
occasions, shall not be construed to be a waiver nor deprive such party of the
right to require strict compliance with the same thereafter.

      18. AMENDMENTS. No amendments hereto, or waivers or releases of
obligations or liabilities hereunder, shall be effective unless agreed to in
writing by all parties hereto.

      19. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

      20. INDEMNIFICATION. XL and the Employer shall indemnify and hold
Executive harmless to the fullest extent permitted by applicable law with regard
to any action or inaction taken by Executive as a director or officer of
Employer or XL or the affiliates of either following the CIC Date. XL and
Employer shall cover Executive under director and officer liability insurance to
the highest level either covers any other officer or director following the CIC
Date and both during and after the Term hereof, so long as Executive may be
subject to any liability for actions or inactions he took following the CIC Date
while a director or offi-

<PAGE>
                                      -19-

cer of Employer or XL or affiliates of either, but no longer than six (6) years
following the end of the Term except as to any claim made prior thereto. In
addition, each of XL and Employer agree that the Executive shall be entitled to
the rights, benefits and remedies afforded under Section 5.11 of the Merger
Agreement and may enforce the same against XL and the Employer.

<PAGE>
                                      -20-

      IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Employment Agreement to be executed as of the year and day first above
written, to be effective as of the CIC Date, and this Amended and Restated
Employment Agreement shall in no event take effect in the event of the
termination and abandonment of the Merger Agreement.

         XL Capital Ltd                    NAC Re Corporation

         By:                               By:
             ------------------------          ------------------------

         Dasher Acquisition Corp.          NAC Reinsurance Corporation

         By:                               By:
             ------------------------          ------------------------

                                           ----------------------------
                                              Nicholas M. Brown, Jr.

<PAGE>

                                  APPENDIX "A"

      As stated in Section 1(l) of the Agreement, for all purposes with respect
to the Executive Equity Rights (as such term is defined in Section 1(l) of the
Agreement), the definition of "GOOD REASON" shall remain as set forth in Section
1(l) of the Agreement prior to the execution of this Amended and Restated
Employment Agreement, which definition is set forth below:

            A(l) "GOOD REASON" shall mean the occurrence, without Executive's
      express written consent, of any of the following circumstances unless, in
      the case of paragraphs (i), (vi), (vii), (viii) or (ix), such
      circumstances are fully corrected within sixty (60) days following
      Executive's written notice to Employer in respect thereof:

                  A(i) the assignment to Executive of any duties inconsistent
            with his offices and status as of the Effective Date (or any offices
            and status to which Executive has been promoted at the time), or a
            substantial diminution in the nature or status of Executive's
            responsibilities;

                  A(ii) the failure of Employer to retain Executive as Chief
            Executive Officer of NAC Re Corp. or to appoint Executive as
            Chairman of the Board as set forth in sections 2 and 3 hereof;

                  A(iii) a reduction in Executive's annual base salary as in
            effect on the Effective Date, on January 1, 1999 or as the same may
            be increased from time to time;

                  A(iv) in the event of a Change in Control, any circumstances
            in which Executive is not Chief Executive Officer of a publicly
            traded, independent reinsurance company; for the purposes of this
            provision, "independent reinsurance company" is deemed to mean that
            a single shareholder or group, other than an investment advisor
            holding shares for others, does not own 20% or more of the Company's
            stock;

                  A(v) the relocation of the office in which Executive is
            located on the Effective Date to a location more than forty-five
            (45) miles therefrom;

                  A(vi) a material reduction in the aggregate benefits and
            compensation provided to Executive under Employer's employee pension
            and welfare benefit plans and incentive compensation, stock option
            and stock ownership plans;

                                      A-1
<PAGE>

                  A(vii) the failure of Employer to obtain a satisfactory
            agreement from any successor to assume and agree to perform this
            Agreement, as contemplated in Section 11 hereof;

                  A(viii) the failure to Employer to offer to renew Executive's
            employment contract, within eighteen (18) months preceding its
            expiration, with terms which are at least as favorable as those set
            forth herein; or

                  A(ix) any purported termination of Executive's employment by
            Employer for Cause for which Executive is not given notice of such
            termination in accordance with Section 1(c) hereof; for purposes of
            this Agreement, no such purported termination shall be effective.

            "EXECUTIVE'S continued employment shall not constitute consent to,
or a waiver of rights with respect to, any circumstance constituting Good Reason
hereunder. In the event of a termination of Executive's employment by Executive
for Good Reason, Executive shall provide Employer not less than sixty (60) days'
notice of such termination. Such notice shall indicate that such termination is
for Good Reason and shall set forth in reasonable detail the facts and
circumstances claimed to provide the basis for Executive's termination for Good
Reason. If within sixty (60) days following the date on which such notice of
termination is given, Employer notifies Executive that a dispute exists
concerning the grounds for termination, the date of termination for determining
the timing of any obligation under this Agreement shall be the date on which the
dispute is finally determined, either by mutual written agreement of the parties
or by arbitration pursuant to Section 15 hereof; provided, further, that the
date of termination shall be extended by a dispute only if such notice of
dispute is given in good faith and Employer pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, Employer will continue to pay Executive his full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, annual base salary) and continue Executive as a participant in all other
incentive compensation, benefit and insurance plans in which Executive was
participating when the notice giving rise to the dispute was given, until the
dispute is finally resolved in accordance with this Section 1(l), unless
resolution of such dispute is unreasonably delayed by Executive. Amounts paid
under this Section 1(l) are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due under
this Agreement."

                                      A-2

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