Edgar Filing: XL CAPITAL LTD

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement

[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14a-6(e) (2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to ss. 240.14a-12

XL CAPITAL LTD
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.

(1) Title of each class of securities to which transaction applies:

----------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

----------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):

----------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

----------------------------------------------------------------------------

(5) Total fee paid:

----------------------------------------------------------------------------

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

----------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement No.:

----------------------------------------------------------------------------

(3) Filing Party:

----------------------------------------------------------------------------

(4) Date Filed:

----------------------------------------------------------------------------

XL CAPITAL LTD

---------------------

NOTICE OF ANNUAL GENERAL MEETING OF ORDINARY SHAREHOLDERS

TO BE HELD ON MAY 9, 2003

---------------------

Hamilton, Bermuda

April 4, 2003

TO THE CLASS A ORDINARY SHAREHOLDERS OF XL CAPITAL LTD:

Notice is Hereby Given that the Annual General Meeting of Class A Ordinary
Shareholders ("Shareholders") of XL CAPITAL LTD (the "Company") will be held at
the Executive Offices of the Company, XL House, One Bermudiana Road, Hamilton HM
11, Bermuda, on Friday, May 9, 2003 at 8:30 a.m. local time for the following
purposes:

1. To elect four Class II Directors to hold office until 2006;

2. To appoint PricewaterhouseCoopers LLP, New York, New York, to act as
the independent auditors of the Company for the fiscal year ending
December 31, 2003;

3. To approve the amendment and restatement of the Company's 1991
Performance Incentive Program;

4. To approve the amendment and restatement of the Company's Directors
Stock & Option Plan that expires in 2003; and

5. To transact such other business as may properly come before the
meeting or any adjournments thereof.

Only Shareholders of record, as shown by the transfer books of the Company
at the close of business on March 24, 2003, are entitled to notice of and to
vote at the Annual General Meeting.

PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON, YOU
MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT. A PROXY NEED
NOT BE A SHAREHOLDER OF THE COMPANY. YOUR SHARES WILL BE VOTED WITH THE
INSTRUCTIONS CONTAINED IN THE PROXY STATEMENT. IF NO INSTRUCTION IS GIVEN, YOUR
SHARES WILL BE VOTED "FOR" ITEMS 1 THROUGH 4 (INCLUSIVE) IN THE PROXY.

By Order of The Board of Directors,

/s/ Paul S. Giordano

Paul S. Giordano
SECRETARY

XL CAPITAL LTD
XL HOUSE, ONE BERMUDIANA ROAD, HAMILTON HM 11, BERMUDA

---------------------

PROXY STATEMENT

FOR

THE ANNUAL GENERAL MEETING OF ORDINARY SHAREHOLDERS

TO BE HELD ON MAY 9, 2003

---------------------

April 4, 2003

The accompanying proxy is solicited by the Board of Directors of XL CAPITAL
LTD (the "Company") to be voted at the Annual General Meeting of Class A
Ordinary Shareholders ("Shareholders") of the Company to be held on May 9, 2003
and any adjournments thereof.

When such proxy is properly executed and returned, the Class A Ordinary
Shares, par value U.S.$0.01 per share ("Ordinary Shares" or "Shares"), of the
Company it represents will be voted at the meeting on the following: (1) the
election of the four nominees for Class II Directors identified herein; (2) the
appointment of PricewaterhouseCoopers LLP, New York, New York ("Auditors"), to
act as the independent auditors of the Company for the fiscal year ending
December 31, 2003; (3) to approve the amendment and restatement of the Company's
1991 Performance Incentive Program; (4) to approve the amendment and restatement
of the Company's Directors Stock & Option Plan that expires in 2003; and (5)
such other business as may properly come before the meeting or any adjournments
thereof.

Any Shareholder giving a proxy has the power to revoke it prior to its
exercise by notice of revocation to the Secretary of the Company in writing, by
voting in person at the Annual General Meeting or by execution of a subsequent
proxy, provided that such action is taken in sufficient time to permit the
necessary examination and tabulation of the subsequent proxy or revocation
before the vote is taken.

Shareholders of record as of the close of business on March 24, 2003 will
be entitled to vote at the meeting. As of March 24, 2003, there were 135,524,453
outstanding Ordinary Shares entitled to vote at the meeting, with each Share
entitling the holder of record on such date to one vote (subject to certain
limitations set forth in the Company's Articles of Association--see "Beneficial
Ownership").

This Proxy Statement, the attached Notice of Annual General Meeting and the
accompanying proxy card are first being mailed to Shareholders on or about April
4, 2003.

Other than the approval of the minutes of the 2002 Annual General Meeting,
the Company knows of no specific matter to be brought before the Annual General
Meeting, which is not referred to in this Notice of Meeting. If any such matter
comes before the meeting, including any Shareholder proposal properly made the
proxy holders will vote proxies in accordance with their judgment.

Directors will be elected at the Annual General Meeting by a majority of
the votes cast at the meeting by the holders of Shares represented in person or
by proxy at the meeting, provided there is a quorum (consisting of holders of at
least fifty percent (50%) of the outstanding Shares being present in person or
by proxy). Approval of the appointment of the Auditors and the other matters
referred to in Items 1 through 4 above will be by similar vote.

BENEFICIAL OWNERSHIP

The following table lists the beneficial ownership of each person or group
who, as of a recent date, owned, to the Company's knowledge, more than 5% of the
Company's Class A Ordinary Shares outstanding. The table is based upon
information contained in filings with the Securities and Exchange Commission.

AMOUNT AND NATURE OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------ ----------------------------------- -------------------- ---------------

Ordinary Share, Capital Research and Management Company 12,775,700 9.4%
Class A 333 South Hope Street, Los Angeles, CA 90071

Ordinary Share, Janus Capital Management LLC 7,733,960 5.7%
Class A 100 Fillmore Street, Denver, Colorado 80206-4923

Ordinary Share, Franklin Resources, Inc. 7,564,843 5.6%
Class A One San Mateo, CA 94403-1906

Ordinary Share, Putnam Investment Management, LLC 7,413,653 5.5%
Class A One Post Office Square, Boston, MA 12110

----------
(1) Each Ordinary Share has one vote, except that if, and so long as, the
Controlled Shares (as hereinafter defined) of any person constitute 10% or
more of the issued Ordinary Shares, the voting rights with respect to the
Controlled Shares owned by such person shall be limited, in the aggregate,
to a voting power of approximately 10%, pursuant to a formula specified in
the Company's Articles of Association. "Controlled Shares" include, among
other things, all Ordinary Shares that such person is deemed to beneficially
own directly, indirectly or constructively (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934).

BOARD OF DIRECTORS

The Company's Articles of Association provide that the Board of Directors
(sometimes referred to herein as the "Board") shall be divided into three
classes designated Class I, Class II and Class III, each class consisting as
nearly as possible of one-third of the total number of Directors constituting
the entire Board of Directors.

The term of office for each Director in Class II expires at the Annual
General Meeting of the Company in 2003; the term of office for each Director in
Class III expires at the Annual General Meeting in 2004; and the term of office
for each Director in Class I expires at the Annual General Meeting in 2005; and
at each Annual General Meeting the successors of the class of Directors whose
term expires at that meeting shall be elected to hold office for a term expiring
at the Annual General Meeting to be held in the third year following the year of
their election.

In fiscal 2002, there were six meetings of the Board and all incumbent
Directors, other than Mr. Jeanbart, attended at least 75% of such meetings and
of the meetings held by all committees of the Board of which they were a member.
Mr. Jeanbart attended 59% of the meetings of the Board and committees of the
Board of which he was a member. At each regularly scheduled meeting of the
Board, the non-management directors meet in executive session without any member
of management in attendance. Mr. Loudon and, in his absence, Mr. Weiser were
selected by the independent Directors to preside at such executive sessions of
the Board. The Board plans to consider annually the selection of the independent
Director to preside at executive sessions of non-management Directors.

The Board of Directors has established four standing committees: an Audit
Committee, a Compensation Committee, a Nominating and Corporate Governance
Committee and a Finance Committee. The Board has determined that each of the
directors of the Company, other than Messrs. Esposito and O'Hara, are
independent directors; the Audit, Compensation and Nominating and Corporate
Governance Committees consist solely of independent directors as so determined.

AUDIT COMMITTEE

The Audit Committee's primary purpose is to assist the Board's oversight of
the integrity of the Company's financial statements and system of internal
control, the independent auditor's qualifications, independence and performance,
the performance of the Company's internal audit function, and the Company's
compliance with legal and regulatory requirements. The Audit Committee has the
sole authority to appoint and terminate the independent auditors and to approve
their compensation. Messrs. Thornton (Chairman), Jeanbart, Rance, Senter, Dr.
Thrower and Sir Brian Corby comprise the Audit Committee. The Audit Committee
met six times during fiscal 2002. The Board has determined that at least two
financial experts, Messrs. Senter and Thornton, serve on the Audit Committee.

COMPENSATION COMMITTEE

The Compensation Committee reviews the performance and compensation of the
Chairman, the Chief Executive Officer and other senior corporate officers,
establishes overall employee compensation policies and recommends to the Board
major compensation programs. The Compensation Committee also recommends to the
Board restricted stock and option awards under the Company's stock incentive
plans and benefits under other compensation plans of the Company. Messrs. Comey
(Chairman), Glauber, Loudon and Weiser comprise the Compensation Committee. The
Compensation Committee met six times during fiscal 2002.

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

The Nominating and Corporate Governance Committee makes recommendations to
the Board as to nominations for the Board (including qualifications and criteria
for Board and Committee memberships) and compensation for Board and Committee
members, as well as structural, governance and procedural matters. The
Nominating and Corporate Governance Committee also reviews shareholder
proposals, the performance of the Board, tenure and retirement policies of the
Board and the Company's succession planning. Messrs. Weiser (Chairman), Loudon
and Dr. Parker comprise the Nominating and Corporate Governance Committee. The
Nominating and Corporate Governance Committee met six times during fiscal 2002.

FINANCE COMMITTEE

The Finance Committee establishes and recommends the financial policies of
the Company and reviews the Company's capital management practices, dividend
policy, mergers, acquisitions and divestitures, significant strategic
investments, overall investment policy and performance. Messrs. Loudon
(Chairman), Bornhuetter, Esposito, Glauber, O'Hara, Dr. Parker, Senter, Thornton
and Weiser comprise the Finance Committee. The Finance Committee met six times
during fiscal 2002.

DIRECTORS COMPENSATION

During fiscal 2002, all Directors (except for the Chairman of the Board and
Directors who are also employees of the Company) received an annual fee of
$35,000, plus $3,000 per meeting, including informational meetings. Committee
Chairmen also received an additional annual fee of $3,000 and all Committee
members received an attendance fee of $1,500 per meeting. Prior to the beginning
of each fiscal year, Directors may elect to defer all or part of the Board
annual retainer in increments of $5,000. Deferred payments are credited in the
form of share units, calculated by dividing 110% of the deferred payment by the
market value of the Company's Ordinary Shares at the beginning of the fiscal
year, in accordance with the terms of the Company's Directors Stock & Option
Plan, as amended. Alternatively, Directors may elect to receive their annual
retainers in the form of Shares having a value equal to their annual fees.

The following Directors elected to defer all or a portion of their annual
retainer for fiscal 2002:

SHARE
AMOUNT UNITS
DIRECTORS DEFERRED CREDITED
-------- -------- --------
Ronald L. Bornhuetter ...................... $35,000 423
Dale Comey ................................. $35,000 423
Robert Glauber ............................. $35,000 423
John Loudon ................................ $15,000 181
Robert S. Parker ........................... $20,000 241
John Thornton .............................. $35,000 423
Ellen E. Thrower ........................... $20,000 242

On March 8, 2002, all non-employee Directors were granted 5,000 options
exercisable at $93.00 per share (the fair market value on March 8, 2002)
pursuant to the terms of the 1991 Performance Incentive Program, as amended and
restated. In addition, under the Company's Stock Plan for Non-employee Directors
(the "Stock Plan"), as of January 1 of each year, Ordinary Share units are
credited to the account of each non-employee Director. The number of Ordinary
Share units credited each year is equal to the annual retainer fee divided by
the fair market value of an Ordinary Share on each January 1. Dividends are
credited as additional Ordinary Share units. Benefits under the Stock Plan will
be distributed in the form of Ordinary Shares following termination of a
non-employee Director's service on the Board.

Michael P. Esposito, Jr.'s annual compensation as Chairman of the Board
with respect to fiscal 2002 comprised a salary of $612,500, pension
contributions of $136,250, a bonus of $750,000, a grant of 80,000 options at an
exercise price of $68.62 per Ordinary Share and a restricted stock award of
10,000 Ordinary Shares. In fiscal 2002, Mr. Esposito was granted 90,000 options
at an exercise price of $93.00 per Ordinary Share for fiscal 2001 services.

Under the terms of an agreement entered into in connection with the
acquisition in 1999 of NAC Re Corporation ("Nac Re") by the Company, Mr.
Bornhuetter, who had been Chairman of the Board and Chief Executive Officer of
Nac Re and who became a director of the Company, receives a supplemental pension
of $162,892 per year, which commenced in August 1999, for his lifetime and, upon
his death, 50% of that amount per year will be received by his surviving spouse
for her lifetime. In addition, the agreement provides that Mr. Bornhuetter is
entitled to the continuance of certain insurance benefits.

The Company provided to Mr. O'Hara, a Director and the President and Chief
Executive Officer of the Company, a facility to borrow up to $1 million from the
Company. This facility did not bear interest unless Mr. O'Hara terminated his
employment with the Company, at which time the interest would have been the
applicable United States Federal rate for long-term loans determined in
accordance with Section 1274(d) of the United States Internal Revenue Code of
1986, as amended. The facility required repayment of amounts drawn in ten annual
installments. In calendar year 2002, the largest amount outstanding under this
facility was $440,000. The facility was terminated in December 2002 and all
outstanding loans were then repaid.

CERTAIN TRANSACTIONS

As of December 31, 2002 a subsidiary of the Company owned an approximately
33.4% equity interest (calculated excluding unexercised employee stock options)
in Measurisk LLC ("Measurisk"), a New York limited liability company, in which
Mr. Glauber holds a 19.8% equity interest (calculated excluding unexercised
employee stock options). During 2002 the Company increased its equity interest
in Measurisk from 26.7% to 33.4% and paid $500,000 to Measurisk for such
increased interest (in addition to fees for risk analysis services, a portion of
which was credited to increase the Company's equity interest). During 2002 the
Company paid Measurisk $277,000 for risk analysis services provided to it by
Measurisk.

An investment vehicle (the "Partnership") was formed in 2001. The general
partner of the Partnership is a wholly owned subsidiary of the Company (the
"General Partner"). All of the limited partners of the Partnership are current
or former senior personnel or Directors of the Company or its subsidiaries (the
"Limited Partners"). 80% of the investments in the Partnership have been made by
the General Partner and 20% by the Limited Partners. In March 2002, the
Partnership invested in 90,000 Series A convertible voting preferred shares of
Primus Guaranty Ltd. ("Primus") for a purchase price of $2,250,000. The Company
also invested in 2,910,000 Series A Convertible voting preferred shares of
Primus for a purchase price of $72.75 million. In addition, the Company received
warrants to purchase 11,317,972 common shares of Primus at an exercise price of
$0.6481 per common share. The Partnership determined in May 2002 not to make
co-investments with the Company and not to make any investments not previously
committed to and, accordingly, returned uncommitted cash (together with interest
earned on such cash) to the partners who had deposited such cash with the
Partnership; the Partnership is, therefore, basically in wind down. Otherwise,
no distributions have been made to the General or Limited Partners by the
Partnership since its formation. Under the Partnership Agreement, as amended in
2003, distributions, when made, are to the General Partner and the Limited
Partners pro rata in proportion to each of their capital contributions. Net
limited partner capital contributions of present executive officers and
directors (other than Messrs. Comey, Glauber and Weiser who did not participate
in the Partnership) are as follows: $114,678.44 for Messrs. O'Hara and Esposito;
$91,742.75 for Mr. Keeling, Ms. Luck and Mr. Lusardi; $68,807.06 for Mr.
Greetham; and less than $50,000 in the case of each other person.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
persons who own more than 10% of a registered class of the Company's equity
securities to file with the Securities and Exchange Commission (the "SEC") and
the NYSE reports on Forms 3, 4 and 5 concerning their ownership of the common
stock and other equity securities of the Company.

The Company believes that all of its officers and directors and those
greater-than-10% Shareholders that filed any reports, filed all of such reports
on a timely basis during the year ended December 31, 2002, with the exception of
one Form 4 filing for Mr. Thornton that was filed after the date due.

I. ELECTION OF DIRECTORS

At the Annual General Meeting, four Class II Directors are to be elected to
hold office until the 2006 Annual General Meeting of Ordinary Shareholders. All
of the nominees are currently serving as Directors and were appointed or elected
in accordance with the Company's Articles of Association. The Directors of the
Company will continue to serve in accordance with their previously appointed or
elected terms.

Unless authority is withheld by the Shareholders, it is the intention of
the persons named in the enclosed proxy to vote for the nominees listed below.
All of the nominees have consented to serve if elected, but if any becomes
unavailable to serve, the persons named as proxies may exercise their discretion
to vote for a substitute nominee. The name, principal occupation and other
information concerning each Director is set forth below.

YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES.

NOMINEES FOR WHOM PROXIES WILL BE VOTED

NOMINEES FOR CLASS II DIRECTORS FOR TERMS TO EXPIRE IN 2006:

Dale R. Comey, age 60, has been a Director of the Company since November
2001. He was Executive Vice President at the corporate headquarters of the ITT
Corporation from 1990 to 1996, where he was responsible for directing the
operations of several ITT business units, including ITT Hartford and ITT
Financial Corporation. Mr. Comey also served as President of Hartford Fire
Insurance Company from 1988 to 1990. Before that, Mr. Comey was President and
Chief Operating Officer of ITT Hartford Fire Insurance Company.

Brian M. O'Hara, age 54, has been President and Chief Executive Officer of
the Company since 1994 and a Director of the Company since 1986 having
previously served as Vice Chairman of the Company from 1987 to 1994. He has also
served as Chairman of XL Insurance (Bermuda) Ltd since December 1995, having
served prior thereto as Chairman, President and Chief Executive Officer from
1994, as President and Chief Executive Officer from 1992 and as President and
Chief Operating Officer from 1986. Mr. O'Hara currently serves as a Trustee of
The School of Risk Management, St. John's University.

John T. Thornton, age 65, has been a Director of the Company since 1988.
Mr. Thornton is the Chairman of JT Investments, a property and investment
company he founded in 1999. Mr. Thornton served as Executive Vice President and
Chief Financial Officer of Wells Fargo & Company (formerly Norwest Corporation)
from 1987 to November 1998. Mr. Thornton also served as Executive Vice President
and Financial Executive of Wells Fargo & Company from December 1998 until
November 1999.

John W. Weiser, age 71, has been a Director of the Company since 1986. Mr.
Weiser served as Senior Vice President and director of Bechtel Group, Inc. from
1980 to 1998. Mr. Weiser served as President of Bechtel Enterprises, Inc. from
1988 to 1992; as General Counsel of Bechtel Group, Inc. from 1980 to 1988 and
from 1992 to 1996; and as Director of Alliances from 1986 to 2002. Mr. Weiser
also served as a director of Fremont Group Inc. from 1986 to 2002. Mr. Weiser is
currently a Director of GRX Technologies Inc. and Chairman of the Board of The
Graduate Theological Union.

DIRECTORS WHOSE TERMS OF OFFICE DO NOT EXPIRE AT THIS MEETING

CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 2004:

John Loudon, age 67, has been a Director of the Company since 1992. Mr.
Loudon is Chairman of Caneminster Ltd., a British investment company and Simon
Murray & Company Limited. Mr. Loudon serves as a director of Heineken N.V., Exel
plc and Derby Trust plc. Mr. Loudon also served as Chairman of Warrior
International Limited from 1988 to 1991 and director of NM Rothschild & Sons Ltd
from 1970 to 1988.

Robert S. Parker, age 65, has been a Director of the Company since 1991.
Dr. Parker is currently Dean Emeritus and the Robert S. Parker Chaired Professor
of the McDonough School of Business at Georgetown University. He served as Dean
of the School of Business Administration at Georgetown University from 1986 to
1997. Dr. Parker currently serves as a director of Middlesex Mutual Assurance
Company.

Alan Z. Senter, age 61, has been a Director of the Company since 1986. Mr.
Senter is the Chairman of AZ Senter Consulting LLC, a financial advisory firm he
founded in 1993. Mr. Senter served as Executive Vice President and Chief
Financial Officer of Nynex Corporation from 1994 to 1997. Mr. Senter served as a
director and Executive Vice

President and Chief Financial Officer of International Specialty Products from
1992 to 1994. Mr. Senter previously served as the Vice President and Senior
Financial Officer of Xerox Corporation from 1967 to 1992.

CLASS I DIRECTORS WHOSE TERMS EXPIRE IN 2005:

Ronald L. Bornhuetter, age 70, has been a Director of the Company since
June 1999. Mr. Bornhuetter acted as a Consultant to NAC Re from 1999 to 2001 and
served as Chairman of NAC Re from 1993 until 1999 and Chairman of the Board of
NAC Reinsurance Corporation from 1990 until 1999, having served as a director of
both companies since August 1985. Mr. Bornhuetter served as a director of NAC
Reinsurance International Limited from 1994 to 2000. Mr. Bornhuetter is a
director of Cybersettle.com Inc., a director of the Underwriter Insurance
Company Ltd. and R.K. Carvill Ltd. and a volunteer director of International
Executive Service Corporation. Mr. Bornhuetter served as Chairman of Denham
Syndicate Management Limited from 1997 to 2001, as Chief Financial Officer of
General Re Corporation from 1966 to 1985, and also served as director of
Frontier Inc. until May 2001. Mr. Bornhuetter is also a Fellow and former
President of the Casualty Actuarial Society; a member and former President of
the American Academy of Actuaries and he also served as Chairman of the
Actuarial Standards Board. He is also a member of the International Actuarial
Association, and a former Vice President and head of the U.S. delegation to its
Ruling Council. Mr. Bornhuetter is a Trustee of The College of Wooster, Wooster,
Ohio and a member of ASTIN and AFIR.

Michael P. Esposito, Jr., age 63, has been Chairman of the Board since 1995
and a Director of the Company since 1986. Mr. Esposito currently serves as a
director of Annuity and Life Re (Holdings), Ltd. and Forest City Enterprises.
Mr. Esposito was Co-Chairman of Inter-Atlantic Capital Partners, Inc. from 1995
to 2000. Mr. Esposito served as Chief Corporate Compliance, Control and
Administration Officer of The Chase Manhattan Corporation from 1991 to 1995,
having previously served as Executive Vice President and Chief Financial Officer
from 1987 to 1991.

Robert R. Glauber, age 64, has been a Director of the Company since August
1998. Mr. Glauber is the Chairman and Chief Executive Officer of The National
Association of Securities Dealers, Inc. Mr. Glauber is a director of Moody's
Corporation, Inc., and The National Association of Securities Dealers, Inc. Mr.
Glauber formerly was the Under Secretary at the U.S. Treasury Department,
Washington, D.C., a Director of various Dreyfus Corp. investment funds and the
Federal Reserve Bank of Boston. Mr. Glauber was a Lecturer at the John F.
Kennedy School of Government, Harvard University, in Cambridge, Massachusetts,
from 1992 to 2000 and was also a Professor of Business Administration at the
Harvard Business School.

Paul Jeanbart, age 63, has been a Director of the Company since August
1998. Mr. Jeanbart has been the Chief Executive Officer of Rolaco Group of
Companies since 1977. Mr. Jeanbart also serves as a director of Rolaco Holdings
S.A., Club Mediterranee S.A., Christofle S.A., Semiramis Hotels Co., Delta
International Bank S.A. and Sodexho Alliance S.A. and as President of Hotels
Intercontinental Geneva, S.A.

Cyril Rance, age 68, has been a Director of the Company since 1990. Mr.
Rance served as President and Chief Executive Officer of the Bermuda Fire &
Marine Insurance Co. Ltd. from 1985 to 1990. Mr. Rance has also had a long and
varied career in civic and government service. Mr. Rance also serves as a
director of several investment, real estate and insurance companies located in
Bermuda. He is currently the chairman of the advisory board of The Salvation
Army in Bermuda.

Ellen E. Thrower, age 56, has been a Director of the Company since December
1995. Dr. Thrower is Executive Director of The School of Risk Management, St.
John's University. Dr. Thrower also serves as a director on the Boards of
Pennsylvania National Insurance Corporation, SCOR U.S. Corporation, Risk
Foundation and United Educators Risk Retention Group, Inc. Dr. Thrower was also
President and Chief Executive Officer of The College of Insurance from 1988 to
2001.

EQUITY SECURITIES OWNED BENEFICIALLY AS OF FEBRUARY 28, 2003

The following table summarizes the beneficial ownership as of February 28,
2003 of the Shares of the Company by each Director and executive officer of the
Company for the year ended December 31, 2002, and all such Directors and
executive officers of the Company as a group.

NUMBER OF EXERCISABLE
SHARES OPTIONS (1) TOTAL (2)
---------- ---------- ---------
Ronald L .Bornhuetter (3) .............. 76,444 269,709 346,153
Nicholas M. Brown, Jr. ................. 27,167 300,544 327,711
Dale Comey ............................. 1,351 10,000 11,351
Sir Brian Corby ........................ 4,094 16,000 20,094
Jerry de St. Paer ...................... 13,000 38,334 51,334
Michael P. Esposito, Jr. (4) ........... 154,223 178,644 332,867
Robert R. Glauber ...................... 14,371 21,000 35,371
Paul Jeanbart (5) ...................... 129,122 19,066 148,188
Henry C.V. Keeling ..................... 137,601 140,001 277,602
John Loudon ............................ 6,833 31,000 37,833
Robert R. Lusardi (6) .................. 8,798 313,835 322,633
Brian M. O'Hara (7) .................... 351,875 919,826 1,271,701
Robert S. Parker ....................... 7,872 31,000 38,872
Cyril Rance ............................ 11,876 31,000 42,876
Alan Z. Senter ......................... 11,541 31,000 42,541
John T. Thornton ....................... 23,442 26,718 50,160
Ellen E. Thrower ....................... 5,103 29,000 34,103
John W. Weiser (8) ..................... 40,400 24,000 64,400

1,025,113 2,430,677 3,455,790

----------
(1) Shares underlying options that are exercisable within 60 days of February
28, 2003.

(2) To the Company's knowledge, no Director or executive officer had a
beneficial ownership interest in excess of one percent of the outstanding
Shares as of February 28, 2003. As a group, all Directors and executive
officers of the Company had a beneficial ownership interest in approximately
3% of the outstanding Shares on the basis of the number of outstanding
Shares as of February 28, 2003.

(3) Includes 22,372 Shares that Mr. Bornhuetter owns indirectly. (4) Includes
8,779 Shares that Mr. Esposito owns indirectly.

(5) Includes 125,644 Shares owned by Oryx Finance Limited in which Mr. Jeanbart
has an indirect interest. (6) Includes as options 40,500 Shares issuable
upon the exercise of a warrant dated as of December 1, 1997 purchased by
Mr. Lusardi from the Company. The warrant may be exercised in whole or in
part from time to time at an exercise price equal to $61.50 per share until
the close of business on November 30, 2007.

(7) Includes 2,234 shares that Mr. O'Hara owns indirectly.

(8) Includes 7,000 options assigned to a family partnership. Does not include
8,500 shares held by a charitable foundation as to which Mr. Weiser has
voting and/or investment power and as to which he disclaims beneficial
ownership.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table shows the compensation of the five most highly
compensated executive officers of the Company for services paid for or rendered
with respect to the Company and its subsidiaries in all capacities for the
Company's last three fiscal years:

LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------- -----------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARD(2) OPTIONS(3) COMPENSATION(4)
--------------------------- ---- ---------- ---------- --------------- ---------- ---------- ---------------

Brian M. O'Hara (5) 2002 $1,000,000 $1,000,000 $131,525 $862,500 140,000 $200,000
President and Chief 2001 $1,000,000 $1,000,000 $140,004 -- 140,000 $200,000
Executive Officer of 2000 $900,000 $950,000 $148,826 $988,910 75,000 $185,000
the Company

Jerry de St. Paer (6) 2002 $400,000 $700,000 $361,254 138,000 30,000 $110,000
Executive Vice President and 2001 $344,102 $850,000 $141,571 $1,014,000 85,000 $119,410
Chief Financial Officer of
the Company

Nicholas M. Brown, Jr. 2002 $650,000 $450,000 $85,280 $276,000 40,000 $2,710,000
Executive Vice President 2001 $650,000 $450,000 $39,032 -- 55,000 $55,232
of the Company and Chief 2000 $645,833 $450,000 -- $380,350 50,000 $25,703
Executive Officer of
Insurance Operations

Henry C.V. Keeling 2002 $482,910 $500,000 $195,045 $345,000 40,000 $94,829
Executive Vice President 2001 $450,000 $300,000 $204,443 -- 55,000 $75,000
of the Company and Chief 2000 $450,000 $275,000 $195,535 $456,420 -- $72,500
Executive Officer of
Reinsurance Operations

Robert R. Lusardi 2002 $550,000 $500,000 $3,832 $276,000 35,000 $77,500
Executive Vice President 2001 $550,000 $450,000 $150,500 -- 55,000 $55,000
of the Company and Chief 2000 $500,000 $450,000 $183,355 $760,700 60,000 $50,000
Executive Officer of
Financial Products and
Services

----------
(1) Mr. O'Hara received $96,000 for housing expenses in each of fiscal years
2002, 2001 and 2000. Mr. Brown received $65,000 for housing expenses in
fiscal year 2002. Mr. Lusardi received $144,000 for housing expenses in each
of fiscal years 2001 and 2000. Mr. de St. Paer, who commenced employment
with the Company on February 20, 2001, received $169,000 for housing
expenses in fiscal year 2002 and $132,000 in 2001 and relocation allowances
of $80,000 and $20,000 in 2002 and 2001, respectively.

(2) Messrs. O'Hara, de St. Paer, Brown, Keeling and Lusardi were granted 12,500,
2,000, 4,000, 5,000 and 4,000 shares of restricted stock, respectively, in
2003 for 2002. Each of these grants vests 25% annually over four years from
the date of grant. Messrs. O'Hara, Brown, Keeling and Lusardi were granted
13,000, 5,000, 6,000, and 10,000 shares of restricted stock, respectively,
in 2001 for 2000. Mr. de St. Paer was granted 13,000 shares of restricted
stock in 2001 upon commencement of his employment with the Company. Each of
these grants vests 25% annually over four years from the date of grant. As
of December 31, 2002, Messrs. O'Hara, de St. Paer, Brown, Keeling and
Lusardi held 13,250, 9,750, 6,250, 5,500 and 8,500 unvested shares of
restricted stock, respectively, having a fair market value of $1,023,562,
$753,188, $482,812, $424,875 and $656,625, respectively. Dividends will be
paid on the unvested restricted stock if, and to the extent, paid on
Ordinary Shares generally.

(3) Represents options granted in respect of compensation for the fiscal year
indicated.

(4) All other compensation relates to contributions to the Company's Pension
Plans except with respect to Mr. Brown who received a special bonus of $2.6
million paid in connection with the renegotiation of his new employment
agreement in 2002 in which, among other things, Mr. Brown agreed to waive
his right to terminate his employment and to extend the term of his
employment to January 1, 2005.

(5) See "Board of Directors--Directors Compensation."

(6) Mr. de St. Paer's 2001 bonus included a signing bonus of $400,000, which was
paid to him when he joined the Company in February 2001.

OPTIONS GRANTED IN LAST FISCAL YEAR

The following table shows the options granted in the last fiscal year to
the five most highly compensated executive officers of the Company together with
the potential realizable value at assumed rates of return:

POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
----------------------------------------------------------------------------------
NUMBER OF % OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE PRICE
NAME AND PRINCIPAL POSITION GRANTED(1) LAST FISCAL YEAR (PER SHARE)(2) EXPIRATION DATE 5% 10%
------------------------ --------- ------------- ----------- ------------- ---------- ----------

Brian M. O'Hara 138,925 3.8% $ 93.00 March 8, 2012 $8,125,334 $20,591,192
President and Chief 1,075(3) March 8, 2012 $62,874 $159,334
Executive Officer of
the Company

Jerry de St. Paer 53,925 1.5% $ 93.00 March 8, 2012 $3,153,922 $7,992,658
Executive Vice President and 1,075(3) March 8, 2012 $62,874 $159,334
Chief Financial Officer of
the Company

Nicholas M. Brown, Jr. 55,000 1.5% $ 93.00 March 8, 2012 $3,216,796 $8,151,993
Executive Vice President
of the Company and
Chief Executive Officer
of Insurance Operations

Henry C.V. Keeling 55,000 1.5% $ 93.00 March 8, 2012 $3,216,796 $8,151,993
Executive Vice President
of the Company and
Chief Executive Officer
of Reinsurance Operations

Robert R. Lusardi 55,000 1.5% $ 93.00 March 8, 2012 $3,216,796 $8,151,993
Executive Vice President
of the Company and
Chief Executive Officer
of Financial Products
and Services

----------
(1) All options were granted under the Company's 1991 Performance Incentive
Program.
(2) Market price at date of grant.
(3) Incentive stock options were granted under the 1991 Performance Incentive
Program.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

The following table shows the options exercised during the last fiscal year
by the five most highly compensated executive officers of the Company together
with the number and value of unexercised options at December 31, 2002:

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN THE
SHARES OPTIONS AT MONEY OPTIONS
ACQUIRED IMPLIED VALUE DECEMBER 31, 2002 AT DECEMBER 31, 2002
NAME AND PRINCIPAL POSITION ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
-------------------------- ----------- ------------ ------------------------ ------------------------

Brian M. O'Hara 22,233 $359,897 814,690/223,467 $23,883,808/$951,746
President and Chief
Executive Officer of
the Company

Jerry de St. Paer -- -- 10,000/70,000 $--/$--
Executive Vice
President and Chief
Financial Officer of
the Company

Nicholas M. Brown, Jr. 21,500 $1,274,924 265,544/117,613 $6,614,958/$749,860
Executive Vice
President of the
Company and Chief
Executive Officer of
Insurance Operations

Henry C.V. Keeling 102,635 $4,470,746 105,000/88,333 $857,074/$--
Executive Vice
President of the
Company and Chief
Executive Officer of
Reinsurance Operations

Robert R. Lusardi -- -- 235,001/94,999 $4,018,750/$--
Executive Vice
President of the
Company and Chief
Executive Officer of
Financial Products and Services

----------
* No options have adjustable exercise prices.

EQUITY COMPENSATION PLAN INFORMATION

NUMBER OF SECURITIES
NUMBER OF REMAINING AVAILABLE FOR
SECURITIES TO BE WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE EXERCISE PRICE OF COMPENSATION PLANS
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------- ---------------------- --------------------- ------------------------

Equity compensation plan approved 10,632,766 $72.43 10,338,426(1)
by security holders

Equity compensation plan not approved 565,300 $50.00 122,677(3)
by security holders (2)

TOTAL 11,198,066 $71.31 10,461,103

----------
(1) 997,621 shares may be issued as awards of restricted stock, restricted
stock units or performance shares.
(2) The Company's 1999 Performance Incentive Program for Employees (the "1999
Program") provides for grants of non-statutory stock options, restricted
stock, performance shares and performance units to employees of the Company
and its subsidiaries who are not subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934. The 1999 Program is
administered by the Board of Directors of the Company or the Compensation
Committee, as determined from time to time by the Board of Directors.
(3) 122,677 shares may be issued as awards of restricted stock or performance
shares.

EXISTING EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS OF NAMED EXECUTIVE OFFICERS

The Company or one of its subsidiaries has entered into employment
agreements with two of its named executive officers: Nicholas M. Brown, Jr.,
Executive Vice President of the Company and Chief Executive of Insurance
Operations, and Jerry de St. Paer, Executive Vice President and Chief Financial
Officer of the Company.

Mr. Brown entered into a new employment agreement with the Company as of
April 1, 2002. Mr. Brown's employment agreement provides that he will be
employed as the Chief Executive of Insurance Operations for the Company, an
Executive Vice President of the Company, and Chief Executive Officer of XL
Insurance, Inc. The agreement with Mr. Brown also provides for (i) a
continuation of his base salary at the rate in effect on the date of the
agreement, subject to annual review for possible increases at the discretion of
the Compensation Committee; (ii) an annual bonus as approved by the Compensation
Committee based on corporate, individual and business unit performance measures
established by the Compensation Committee, with a target annual bonus equal to
90% of base salary; (iii) a special bonus of $2,600,000 paid in 2002; (iv)
eligibility on the same basis as comparable executives to participate in the
Company's 1991 Performance Incentive Program, as determined in the discretion of
the administrator of that program; and (v) the right to participate in such
other employee benefit or fringe benefit programs for senior officers as are in
effect from time to time. The term of the employment agreement with Mr. Brown
will expire on January 1, 2005. Mr. Brown has agreed to certain confidentiality,
non-competition and non-solicitation provisions set forth in the agreement.

If Mr. Brown's employment is terminated by the Company without cause (as
defined) or by Mr. Brown for good reason (as defined), in either case within 2
years following a change in control (as defined), or his employment is
terminated by the Company in connection with or in anticipation of a change in
control within one year prior to the date on which a change in control occurs,
he will be entitled to (i) his then-current base salary through the date of
termination; (ii) a cash lump sum payment equal to (x) two times his base salary
and (y) two times the highest of the largest annual bonus awarded in the three
year period preceding the year in which the change in control occurs or the
targeted annual bonus for the year of such termination; (iii) an amount equal to
the higher of his annual bonus actually awarded in the year immediately
preceding the year of the change in control or his targeted annual bonus for the
year of termination, prorated for the period actually worked in the year of
termination; (iv) accelerated vesting as of the date of termination of all stock
options or restricted shares held by him to the extent specified in the
applicable agreements; (v) continued participation for up to two years in
employee benefit and fringe benefit programs of the Company; (vi) accelerated
vesting of accrued benefits under the Company's pension plans; and (vii)
continued participation under the Company's pension plans for two years
following termination of employment. Mr. Brown

will also be entitled to gross-up payments in the event excise taxes are imposed
on him under Section 280G of the United States Internal Revenue Code, as set
forth in the agreement.

In the event that Mr. Brown's employment is terminated by the Company not
for cause (other than in the circumstances described above) or Mr. Brown
terminates his employment (other than in the circumstances described above)
following the failure to appoint or reappoint him to the positions described
above, the assignment of duties to him that are inconsistent with his positions,
the relocation of his place of employment, or material breach by the Company of
the agreement, which, in any such case, is not cured as provided in the
agreement, Mr. Brown will receive the following: (i) his then current base
salary through the date of termination; (ii) a cash lump sum payment equal to
(x) the amount of his base salary which would have been payable over the
following two years and (y) two times (or one times if the date of termination
is after January 1, 2003) the higher of targeted annual bonus for the year of
termination or the bonus actually awarded for the immediately preceding year;
(iii) a pro rata bonus for the year of termination in an amount determined by
the Compensation Committee, based on actual achievement of corporate, business
unit and individual performance results; (iv) vesting of stock options and
restricted shares held by him as specified in the applicable agreements; and (v)
continued participation in employee benefit programs and fringe benefit programs
for the remainder of the stated term of the agreement (or two years if shorter).
In the event of Mr. Brown's death or disability, he (or his estate) would
receive a pro rata bonus, accelerated vesting of stock options and restricted
stock, accelerated vesting under the Company's pension plans, and base salary
for six months after termination.

Mr. Brown and the Company have also entered into a supplemental defined
benefit pension agreement. The supplemental defined benefit pension agreement
provides that Mr. Brown will receive a supplemental pension, beginning on the
later of his termination of employment or the date he attains age 50, equal to
50% of his final average compensation, including base salary and regular annual
bonus at target. Such supplemental pension benefits will be reduced by benefits
payable to Mr. Brown under the defined benefit plans of the Company or its
affiliates or under the defined benefit plans of Mr. Brown's prior employers.
Any retirement benefit that is payable prior to age 60 shall be reduced by 5%
per year to reflect its expected period of payment. This benefit will be payable
to Mr. Brown for his lifetime and, following his death, 50% of such amount would
be payable to his surviving spouse, if any, for her lifetime. As of December 31,
2002, the estimated aggregate annual benefit payable to Mr. Brown under his
defined benefit pension arrangements with the Company at age 60 is $517,350.

Mr. de St. Paer's employment agreement provides for (i) a base salary which
is subject to review for increase annually; (ii) an annual bonus pursuant to the
Company's incentive compensation plan as determined by the Compensation
Committee of the Board and stock option and restricted share grants pursuant to
the Company's performance incentive program; (iii) reimbursement for or payment
of certain travel, living and other expenses; and (iv) the right to participate
in such other employee or fringe benefit programs for senior executives as are
in effect from time to time. Mr. de St. Paer's employment agreement expires on
March 1, 2004 and will be automatically extended for additional one year periods
unless the Company or Mr. de St. Paer provides written notice at least three
months prior to the then scheduled expiration date. Mr. de St. Paer has agreed
to certain confidentiality, non-competition and non-solicitation provisions set
forth in the agreement.

Mr. de St. Paer's agreement further provides that, in the event of
termination of his employment prior to the expiration date by reason of death or
disability, Mr. de St. Paer (or in the case of death, Mr. de St. Paer's spouse
or estate) is entitled to receive his then current base salary through the end
of the sixth month after the month in which his employment is terminated. Mr. de
St. Paer's estate shall be entitled to any annual bonus awarded but not yet paid
and a bonus for the year of death in an amount determined by the Compensation
Committee. Mr. de St. Paer's estate shall also be entitled to accelerated
vesting of his rights under any option or restricted share grants and pension
plans.

In the event of termination of his employment without cause prior to a
Change in Control (as defined in his employment agreement), Mr. de St. Paer will
be entitled to his then current base salary through the date on which
termination occurs, and (i) if termination occurs after March 1, 2003, a cash
lump sum payment equal to two times his then current base salary and the higher
of (x) his annual bonus for the year of termination and (y) the annual bonus
actually awarded in the year immediately preceding the year of termination; or
(ii) if termination occurs on or prior to March 1, 2003, a cash lump sum payment
equal to two times his then current base salary and two times the annual bonus
for the year of termination, and accelerated vesting of his stock options and
restricted shares; as well as any annual bonus earned but not yet awarded and
rights under any option or restricted share grants.

If Mr. de St. Paer is terminated (i) by the Company without cause within
the 24-month period following a Change in Control and, if the Change in Control
is stockholder approval of an Event (as defined in his employment

agreement), prior to a termination of the agreement to effect the Event (the
"Post-Change Period"); (ii) by Mr. de St. Paer for Good Reason (as defined in
his employment agreement) during the Post-Change Period; or (iii) in connection
with or anticipation of a Change in Control within one year prior to the date on
which a Change in Control occurs; he will be entitled to (i) his then current
base salary through the date on which termination occurs; (ii) a cash lump sum
payment equal to (x) two times his then current base salary and (y) two times
the largest annual bonus awarded in each of the three years preceding the year
in which the Change in Control occurs, provided that such bonus is at least
equal to the targeted annual bonus for the year of such termination; (iii) an
amount equal to the higher of (x) his annual bonus actually awarded in the year
immediately preceding the year of termination and (y) his annual bonus for the
year of termination, pro rated by a fraction for the number of months or days
actually worked in the year of termination. Mr. de St. Paer will also be
entitled to rights under any option or restricted share grants. In addition, Mr.
de St. Paer will be entitled to gross-up payments in the event excise taxes are
imposed on him under Section 280G of the United States Internal Revenue Code, as
set forth in the agreement.

All grants of restricted shares and share options under the Company's
incentive compensation plans automatically vest upon a Change in Control (as
defined in such plans).

COMPENSATION COMMITTEE REPORT

The Compensation Committee is comprised of four non-executive, independent
directors appointed by the Board to review the performance and compensation of
the Chairman, the Chief Executive Officer and other senior officers, as well as
compensation and benefit policies, plans and programs of the Company. The
Committee charter is reviewed annually and submitted to the Board of Directors
for approval.

The Committee's objective is to ensure (1) that the Company has
compensation and benefit programs that will attract and retain superior talent,
and (2) that total compensation levels, especially for senior officers, are
significantly dependant upon the achievement of the Company's performance goals
to enhance shareholder value. In this regard, the Company's Compensation
Philosophy, Principles, Standards and Practice is reviewed annually by the
Committee and is approved in principal by the Board. In addition to receiving
recommendations from Management, the Committee retains independent compensation
consultants to review the strength of the Company's compensation programs
relative to the marketplace in general and to the principle competitors in the
Company's various businesses.

GLOBAL INCENTIVE COMPENSATION PLAN

The Company's basic compensation philosophy is to establish salary levels
that are at the market median relative to its key competitors in the various
markets in which it operates globally. In addition, the Company has implemented
a Global Incentive Compensation Plan that provides variable compensation
dependent upon the performance of the Company, its business units, and the
individual employee. It is the intent of this Plan, particularly for senior
officers, that performance-based variable compensation be significant and
provides above-market total compensation for successful performance.

Annual incentive compensation under the Plan is dependent upon the
Company's performance relative to its corporate goals for the year and the
comparison of the Company's performance to those achieved by a group of key
competitors. The corporate bonus pool is funded based on (1) return on common
equity and (2) operating earnings per share. The Company's performance relative
to its goals receives 60% weighting and the performance relative to its key
competitors receives 40% weighting. In addition, for 2002, about one-third of
the bonus pool was influenced by the Company's Total Return to Shareholders
(change in common stock price plus cash dividends paid) over a three year period
compared to its key competitors. Under the Plan, the Committee can adjust the
result by as much as 25% in either direction based on other performance measures
as it deems appropriate for the year.

Long-term incentive compensation under the Plan includes stock option
awards, restricted stock grants and deferred cash grants. The Committee approves
guidelines for these incentives that are based on competitive practices and,
with regard to stock options and restricted stock grants, stock dilution
considerations. These awards and grants generally vest equally over periods of
three or four years and, beginning in 2003, the Company will include the cost of
stock option awards as an expense item in the financial statements. Long-term
incentive compensation seeks to align management with the interests of the
Company's shareholders. The majority of the long-term variable compensation for
the most senior officer leaders of the Company is in stock options where
compensation received is dependent on enhancing shareholder value. The Committee
has adopted share ownership guidelines for senior officers to encourage

executives to establish and maintain ownership of the Company's Shares.
Restricted stock and deferred cash grants are a more significant portion of
long-term incentive compensation for other top performing and/or high potential
executives. Stock options and restricted stock grants may also be utilized in
connection with new hires, personnel retention following mergers or acquisitions
or in other special circumstances.

2002 COMPENSATION REVIEW

The Company's management has demonstrated a strong focus on improving the
profit potential of its underwriting portfolios. 2002 operating results provide
early indications of success and the improvement is particularly noticeable in
recently acquired businesses. The Company increased revenues significantly,
reflecting vastly improved prices, terms and conditions and achieved important
real growth in targeted classes of business.

The Company's results were adversely impacted by a net increase in reserve
levels for claims related to prior years' business. Primarily as a result of
these adjustments, the Company did not meet its internal goals relating to
operating earnings and return on equity. However, the Company's results did
compare favorably to those of its key competitors. And, the Company's book value
increased by more than 10% and was above target for the year.

On balance, the Committee believed the Company achieved good results for
2002. It recommended and the Board of Directors approved an annual incentive
bonus pool just below the Target level. In addition, the Committee believed that
Management demonstrated solid performance in actions taken and results achieved
that are aimed at enhancing shareholder value. Therefore, long-term incentive
compensation awards were approved for top performing and high potential
executives. These took the form of stock options, restricted stock and deferred
cash grants with stock options being the predominant award for the most senior
executive leaders of the Company.

CHIEF EXECUTIVE OFFICER AND CHAIRMAN'S COMPENSATION

The Committee and the Board of Directors believe that Mr. O'Hara continues
to demonstrate very strong, effective and appropriate leadership. His
aggressiveness in establishing clearly defined priorities for 2002 and managing
the focus on execution was particularly appropriate in this opportunistic stage
of the underwriting cycle. Because of the rapid growth of the Company, he is
developing and leading initiatives to keep the organization externally focused
while ensuring that cooperative activities across business segments are
effective and will enhance the development of key talent in the organization.
The Company remains well positioned in the marketplace and its financial
position is strong. Mr. O'Hara's compensation reflects the results achieved in
2002 but, more importantly, the future potential created by his leadership.

The compensation for Mr. Esposito as Chairman of the Board of Directors
reflects the significant time, commitment and contribution that he continues to
make to the Company. In 2002, Mr. Esposito provided excellent overall leadership
of the Board and was instrumental in successfully guiding the Company through
the changing and increasingly complex corporate governance environment. Mr.
Esposito also provided valuable input to management in connection with projects
in the areas of internal controls, financial reporting and disclosure and risk
management and also has utilized his experience and expertise to provide
management development leadership in new business ventures, particularly in the
financial products and services segment.

COMPENSATION COMMITTEE
Dale R. Comey, Chairman
Robert R. Glauber
John Loudon
John W. Weiser

PERFORMANCE GRAPH

Set forth below is a line graph comparing the yearly dollar change in the
cumulative total Shareholder return over a ten year period on the Company's
Class A Ordinary Shares (assuming reinvestment of dividends) from July 1991
through December 2002 as compared to the cumulative total return of the Standard
& Poor's 500 Stock Index and the cumulative total return of the Standard &
Poor's Property Casualty Index. This graph assumes the investment of $100 in
July 1991. The Company's Class A Ordinary Shares were listed on the New York
Stock Exchange on July 19, 1999.

[Data below represents a line chart in the printed report.]

S&P Prop and
XL Capital S&P 500 Casualty
---------- ------- ------------
Jul 91 100 100 100
Nov 91 106.25 98.9 94.7
May 92 119.05 111.1 99.3
Nov 92 158.89 117.1 124.5
May 93 165.36 124 129.4
Nov 93 154.84 128.9 126.9
May 94 152.56 129.3 126.1
Nov 94 138.04 128.5 119.5
May 95 174.77 153.2 145.2
Nov 95 236.31 176 173.4
Nov 96 294.71 225 218
May 97 349.64 254.6 249.8
Nov 97 492.05 293.7 284.9
May 98 609.06 340.9 316.6
Nov 98 615.21 366.4 294.5
May 99 505.4 412.5 282.8
Nov 99 429.94 445.5 214.2
Jun 00 464.72 469.7 205.1
Nov 00 759.82 429 331.7
Jun 01 722.52 400.3 339.2
Dec 01 812.69 378 305.1
Jun 02 761.49 328.3 315.9
Dec 02 703.08 294.5 271.5

* The performance shown above is not necessarily indicative of future price
performance.

AUDIT COMMITTEE REPORT

The primary purpose of the Audit Committee is to assist the Board's
oversight of the integrity of the Company's financial statements, system of
internal controls, the independent auditor's qualifications, independence and
performance, the performance of the Company's internal audit function, and the
Company's compliance with legal and regulatory requirements. The Audit Committee
is solely responsible for the appointment and compensation of the Company's
independent auditors. The Audit Committee comprises six independent directors
and operates under a written charter adopted and approved by the Board of
Directors on November 15, 2002, which is attached as Appendix A hereto. It is
not the responsibility of the Audit Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles and applicable
rules and regulations. This is the responsibility of management and the
independent auditors, as appropriate. It is also not the responsibility of the
Audit Committee to assure compliance with laws and regulations and the Company's
Code of Ethics or to set or determine the adequacy of the Company's reserves.

Based on the Audit Committee's review of the audited financial statements,
its discussions with management regarding the audited financial statements, its
receipt of written disclosures and the letter from independent auditors required
by Independence Standards Board Standard No. 1, its discussions with the
independent auditor regarding such auditor's independence, the audited financial
statements, the matters required to be discussed by the Statement on Auditing
Standards 61 and other matters the Audit Committee deemed relevant and
appropriate, the Audit

Committee recommended to the Board of Directors that the Company's audited
financial statements for the fiscal year ended December 31, 2002 be included in
the Company's Annual Report on Form 10-K for such fiscal year.

AUDIT COMMITTEE
John T. Thornton, Chairman
Brian Corby
Paul Jeanbart
Cyril Rance
Alan Z. Senter
Ellen E. Thrower

AUDIT AND AUDIT RELATED FEES

The aggregate fees billed by PricewaterhouseCoopers LLP for audit and audit
related professional services for the year ended December 31, 2002 and for the
review of the financial statements included in the Company's quarterly reports
on Form 10-Q during the year ended December 31, 2002 were approximately $10.0
million, including $3.8 million of audit related fees in connection with other
attestation services that comprised the audits for insurance statutory and
regulatory purposes in the various jurisdictions in which the Company operates,
and the provision of certain opinions relating to the Company's filings with the
SEC (including opinions delivered to securities underwriters in connection with
various equity and debt offerings during fiscal year 2002).

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

Prior to the divestiture of their consulting practice in September 2002,
PricewaterhouseCoopers LLP performed information technology services for the
Company relating to financial information systems design and implementation for
the fiscal year ended December 31, 2002. The fees billed for these services were
$6.2 million. These fees primarily related to the Company's newly-acquired
operations (primarily the Winterthur International operations, which were
acquired in July 2001) into the Company's existing technology platforms. Future
services of this type will not be performed by PricewaterhouseCoopers LLP.

ALL OTHER FEES

The aggregate fees billed by PricewaterhouseCoopers LLP for services
rendered to the Company, other than the services described above under "Audit
and Audit Related Fees" and "Financial Information Systems Design and
Implementation Fees", for the fiscal year ended December 31, 2002 were $7.4
million. These fees related to internal control, merger and integration-related
services in connection with the Company's acquired Winterthur International
operations.

GENERAL

The Audit Committee considered whether the provision of information
technology consulting services relating to financial information systems design
and implementation and other non-audit services performed by the independent
auditors is compatible with maintaining PricewaterhouseCoopers LLP's
independence. In reaching its conclusions, the Audit Committee took into
consideration the fact that the major proportion of these services were either
(i) primarily continuations of projects commenced in 2001 and will not be
performed by PricewaterhouseCoopers LLP subsequent to October 1, 2002 or (ii)
specifically related to the acquisition of the Winterthur International
operations.

II. APPOINTMENT OF INDEPENDENT AUDITORS

The Audit Committee and the Board of Directors have recommended the
appointment of PricewaterhouseCoopers LLP, New York, New York, as the
independent auditors of the Company for the fiscal year ending December 31,
2003. Representatives of the firm are expected to be present at the Annual
General Meeting with an opportunity to make a statement if they desire to do so
and to be available to respond to appropriate questions.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPOINT
PRICEWATERHOUSECOOPERS LLP, NEW YORK, NEW YORK.

III. AMENDMENT AND RESTATEMENT OF THE 1991 PERFORMANCE

INCENTIVE PROGRAM

The Board of Directors of the Company has amended and restated the XL
Capital Ltd 1991 Performance Incentive Program (the "Program"), subject to
shareholder approval.

The Company's ability to retain its executive personnel is of particular
concern in light of the fact that the Company's competitors have been
aggressively recruiting its employees due to the large demand for high quality
executives and professional staff in the insurance industry, and particularly in
the Bermuda insurance market. In this regard, the Company believes that
restricted stock is, in many cases, a more effective retention tool than stock
options, in that the forfeiture of restricted stock on termination, which the
employee has regarded as tangibly owned, has a more significant effect on the
employee than forfeiture of an option to purchase shares. In addition, as a
larger number of options is generally required to be awarded in order to deliver
the same dollar value of long-term incentive compensation tied to share price
performance as a smaller number of restricted shares, increasing the number of
restricted shares available for grant under the Program should allow the Company
to extend the life of the Program and reduce the potential dilution to its
shareholders. Accordingly, the Company has amended the Program, subject to
shareholder approval, to increase the number of shares available for issuance as
restricted stock (or as restricted stock units or performance shares which are
similar types of awards) from 10 percent of the aggregate number of shares
authorized by shareholders last year for issuance under the Program to 20
percent. The aggregate number of shares available for issuance under the Program
has not been changed. After giving effect to the amendment, up to approximately
1.5 million shares will be available under the Program to be issued as
restricted stock, restricted stock units or performance shares, but 750,000 of
such shares will be available to be issued only as performance-based awards. The
Compensation Committee of the Board of Directors will determine annually the
amount, terms and criteria for performance based restricted stock awards. Such
terms and criteria may include performance targets based on total return to the
Company's shareholders over defined periods of time and the delay of vesting of
such awards until performance objectives are attained. The Program has also been
amended to include separate addenda setting forth particular provisions of
certain stock options granted to employees in the United Kingdom, Italy and
France. These addenda will allow employees in those jurisdictions to receive
favorable tax treatment with respect to the stock options. The tax authorities
in those jurisdictions require that the addenda contain certain specific
provisions, including provisions relating to the minimum exercise price of
options. In no event will the Company issue stock options with an exercise price
per share that is less than the fair market value per share on the date of
grant. Additionally, the Program has been amended to authorize the issuance of
awards in the form of restricted stock units and to formally authorize the
delegation of certain administrative functions concerning the Program to outside
third parties. The shareholders are now requested to approve the amendment and
restatement of the Program. The following summary of the amended and restated
Program is qualified in its entirety by express reference to the Program, which
is attached as Appendix B to this proxy statement.

GENERAL

The Program is intended to provide incentives to attract, retain and
motivate employees and directors of the Company and its subsidiaries and
affiliates in order to achieve the Company's long-term growth and profitability
objectives. The Program will provide for the grant to eligible employees and
directors of stock options, share appreciation rights ("SARs"), restricted
stock, restricted stock units, performance shares, and performance units (the
"Awards"). 7,802,529 shares are currently available for issuance under the
Program. Up to approximately 1,500,000 of those shares can be issued as
restricted stock, restricted stock units and performance shares, of which
approximately 750,000 must be issued as performance-based awards. In addition,
the Program provides that the maximum number of shares with respect to which
options and SARs may be granted to any individual participant during any
calendar year will be 3 million shares, and the number of performance shares,
performance units, restricted stock and restricted stock units intended to
qualify as "qualified performance-based compensation" under applicable
provisions of the US Internal Revenue Code that can be granted to any individual
during a calendar year is limited to 150,000 shares. Any benefits payable under
a performance unit award will be payable in cash. Each of the share limits
referred to above is subject to anti-dilution adjustments in the event of
certain changes in the Company's capital structure.

ELIGIBILITY AND ADMINISTRATION

Officers and other employees of the Company and its subsidiaries and
affiliates and directors of the Company will be eligible to be granted Awards
under the Program. However, provided the amendment and restatement of the
Company's Directors Stock & Option Plan is approved by shareholders (see Item IV
below), no further awards to

non-employee directors will be made under the Program. The Program will be
administered by the Compensation Committee or such other Board committee or
subcommittee (or the entire Board) as may be designated by the Board (the
"Committee"). The Committee will determine which eligible employees and
directors receive Awards, the types of Awards to be received and the terms and
conditions thereof. The Committee will have authority to waive conditions
relating to an Award or accelerate vesting of Awards. The actual number of
employees who will receive awards under the Program cannot be determined because
selection for participation in the Program is in the sole discretion of the
Committee.

AWARDS

Incentive stock options ("ISOs") intended to qualify for special tax
treatment in accordance with the Code and nonqualified stock options not
intended to qualify for special tax treatment under the Code may be granted for
such number of shares as the Committee determines. The Committee will be
authorized to set the terms relating to an option, including the exercise price
and the time and method of exercise. The exercise price of stock options cannot
be less than the fair market value per share on the date of grant. The terms of
ISOs will comply with the provisions of Section 422 of the Code. ISOs may only
be granted to employees. Options and SARs may not be repriced without
shareholder approval.

Awards of restricted stock and restricted stock units will be subject to
such restrictions on transferability and other restrictions, if any, as the
Committee may impose. Such restrictions will lapse under circumstances as the
Committee may determine. Except as otherwise determined by the Committee,
eligible employees granted restricted stock will have all of the rights of a
stockholder, including the right to vote restricted stock and receive dividends
thereon. Restricted stock units will provide for the delivery of a number of
shares equivalent to the number of restricted stock units at the time and
subject to the terms and conditions set forth in the applicable award agreement.

Performance shares and performance units will provide for future issuance
of shares or payment of cash, respectively, to the recipient upon the attainment
of corporate performance goals established by the Committee over specified
performance periods. Prior to payment of performance shares or performance
units, the Committee will certify that the performance objectives were
satisfied. Performance objectives may vary from employee to employee.

If the Committee determines that an award of performance shares,
performance units, restricted stock or restricted stock units should qualify
under the performance-based compensation exception to the $1 million cap on
deductibility under Section 162(m) of the Code, the grant, vesting and/or
settlement of such awards shall be contingent upon achievement of
pre-established performance goals based on one or more of the following business
criteria for the Company, on a consolidated basis, and/or for specified
subsidiaries or business units of the Company (except with respect to the total
stockholder return and earnings per share criteria): earnings per share;
revenues; cash flow; cash flow return on investment; return on assets; return on
investment; return on capital; return on equity; economic value added; operating
margin; net income; pretax earnings; pretax earnings before interest,
depreciation and amortization; pretax operating earnings after interest expense
and before incentives, service fees, and extraordinary or special items;
operating earnings; total stockholder return; and any of the above goals as
compared to the performance of a published or special index deemed applicable by
the Committee including, but not limited to, the Standard & Poor's 500 Stock
Index.

AMENDMENT AND TERMINATION

The Board of Directors of the Company may, at any time and from time to
time, suspend or terminate the Program in whole or amend it from time to time in
such respects as the Board of Directors of the Company may deem appropriate, but
any such amendment will be subject to the approval of shareholders if required
by applicable law or the rules of any stock exchange on which the shares may
then be listed. In addition, without the consent of an affected participant, no
amendment, suspension, or termination of the Program may adversely affect the
rights of such participant under any award theretofore granted to him or her.

MARKET VALUE

The per share closing price of the Company's shares on March 24, 2003 was
$69.81.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the United States federal income tax
consequences of the Program, based upon current provisions of the Code, the
Treasury regulations promulgated thereunder and administrative and judicial
interpretations thereof, and does not address the consequences under any state,
local or foreign tax laws. Many of the Company's officers and employees are not
subject to United States personal income taxation and may be subject to taxation
under the laws of jurisdictions other than the United States.

STOCK OPTIONS

In general, the grant of an option will not be a taxable event to the
recipient and it will not result in a deduction to the Company. The tax
consequences associated with the exercise of an option and the subsequent
disposition of shares acquired on the exercise of such option depend on whether
the option is a nonqualified stock option or an ISO.

Upon the exercise of a nonqualified stock option, the participant will
recognize ordinary taxable income equal to the excess of the fair market value
of the shares received upon exercise over the exercise price. If the participant
is employed by a United States subsidiary, the subsidiary will generally be able
to claim a deduction in an equivalent amount. Any gain or loss upon a subsequent
sale or exchange of the shares will be capital gain or loss, long-term or
short-term, depending on the holding period for the shares.

Generally, a participant will not recognize ordinary taxable income at the
time of exercise of an ISO and no deduction will be available to the
participant's employer, provided the option is exercised while the participant
is an employee or within three months following termination of employment
(longer, in the case of disability or death). If an ISO granted under the
Program is exercised after these periods, the exercise will be treated for
United States federal income tax purposes as the exercise of a nonqualified
stock option. Also, an ISO granted under the Program will be treated as a
nonqualified stock option to the extent it (together with other ISOs granted to
the participant by the Company) first becomes exercisable in any calendar year
for shares having a fair market value, determined as of the date of grant, in
excess of $100,000.

If shares acquired upon exercise of an ISO are sold or exchanged more than
one year after the date of exercise and more than two years after the date of
grant of the option, any gain or loss will be long-term capital gain or loss. If
shares acquired upon exercise of an ISO are disposed of prior to the expiration
of these one-year or two-year holding periods (a "Disqualifying Disposition"),
the participant will recognize ordinary income at the time of disposition, and
the participant's employer will generally be entitled to a deduction, in an
amount equal to the excess of the fair market value of the shares at the date of
exercise over the exercise price. Any additional gain will be treated as capital
gain, long-term or short-term, depending on how long the shares have been held.

Although the exercise of an ISO as described above would not produce
ordinary taxable income to the participant, it would result in an increase in
the participant's alternative minimum taxable income and may result in an
alternative minimum tax liability.

If an option is exercised through the use of Company shares previously
owned by the participant, such exercise generally will not be considered a
taxable disposition of the previously owned shares and, thus, no gain or loss
will be recognized with respect to such previously owned shares upon such
exercise. The amount of any built-in gain on the previously owned shares
generally will not be recognized until the new shares acquired on the option
exercise are disposed of in a sale or other taxable transaction.

RESTRICTED STOCK

A participant who receives shares of restricted stock will generally
recognize ordinary income at the time that they "vest" I.E., when they are not
subject to a substantial risk of forfeiture. The amount of ordinary income so
recognized will be the fair market value of the shares at the time the income is
recognized (determined without regard to any restrictions other than
restrictions which by their terms will never lapse), less the amount, if any,
paid for the shares. This amount is generally deductible for federal income tax
purposes by the participant's employer. Dividends paid with respect to shares
that are non-vested will be ordinary compensation income to the participant (and
generally deductible by the employer). Any gain or loss upon a subsequent sale
or exchange of the shares measured by the difference between the sale price and
the fair market value on the date restrictions lapse, will be capital gain or
loss, long-term or short-term, depending on the holding period for the shares.
The holding period for this purpose will begin on the date following the date
restrictions lapse.

In lieu of the treatment described above, a participant may elect immediate
recognition of income under Section 83(b) of the Code. In such event, the
participant will recognize as income the fair market value of the restricted
stock at the time of grant (determined without regard to any restrictions other
than restrictions that by their terms will never lapse), and the participant's
employer will generally be entitled to a corresponding deduction. Dividends paid
with respect to shares as to which a proper Section 83(b) election has been made
will not be deductible. If a Section 83(b) election is made and the restricted
stock is subsequently forfeited, the participant will not be entitled to any
offsetting tax deduction.

SARS AND OTHER AWARDS

With respect to SARs, restricted stock units, performance shares, and
performance units, generally, when a participant receives payment with respect
to any such Award granted to him or her under the Program, the amount of cash
and the fair market value of any other property received will be ordinary income
to such participant and will be allowed as a deduction for federal income tax
purposes to the employer.

DEDUCTIBILITY LIMIT ON COMPENSATION IN EXCESS OF $1 MILLION

Section 162(m) of the Code generally limits the deductible amount of annual
compensation paid (including, unless an exception applies, compensation
otherwise deductible in connection with Awards granted under the Program) by a
public company to a "covered employee" (I.E., the chief executive officer and
four other most highly compensated executive officers of the Company) to no more
than $1 million. The Company currently intends to structure stock options
granted under the Program to comply with an exception to non-deductibility under
Section 162(m) of the Code in order to maximize the tax deductions available to
United States based subsidiaries of the Company.

NEW PROGRAM BENEFITS

The amount of benefits that will be granted under the Program cannot be
determined at this time.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND AND
RESTATE THE PROGRAM.

IV. AMENDMENT AND RESTATEMENT OF THE DIRECTORS STOCK & OPTION PLAN

The XL Capital Ltd Directors Stock & Option Plan (the "Directors Plan") was
originally approved by shareholders in 1994. At that time it provided for
formula grants of stock options to non-employee directors and an opportunity for
non-employee directors to defer their annual retainer fees in the form of share
units. The Directors Plan was subsequently amended to provide for no further
grants of stock options, and stock options have subsequently been granted to
non-employee directors under the 1991 Performance Incentive Program. 344,702
shares remain available for issuance under the Directors Plan solely for
elective deferrals of annual retainer fees or the elective payment of annual
retainer fees in the form of shares.

Since the Directors Plan is scheduled to expire on December 1, 2003 and
because the Board of Directors believes it is appropriate to have a separate
shareholder approved plan under which stock-based compensation awards are
granted to non-employee directors, the Board of Directors has amended and
restated the Directors Plan as described below, subject to shareholder approval.

The Directors Plan has been amended (i) to extend its term to April 30,
2008, (ii) to provide that the 344,702 shares currently available under the
Directors Plan will continue to be available only for elective deferrals of
annual retainer fees or the elective payment of annual retainer fees in the form
of shares (but not for issuances of stock options, restricted stock or other
stock-based compensation), and (iii) to provide for an additional 300,000 shares
which will be available for grants of non-qualified stock options, restricted
stock and restricted stock units, as described below. The shareholders are now
requested to approve the amendment and restatement of the Directors Plan.
Provided the Directors Plan is approved by shareholders, no further awards will
be made to non-employee directors under the Company's 1991 Performance Incentive
Program.

The following summary of the amended and restated Directors Plan is
qualified in its entirety by express reference to the Directors Plan, which is
attached as Appendix C to this proxy statement.

GENERAL

The Directors Plan is intended to advance the interests of the Company and
its shareholders by providing a means to attract, retain and motivate
non-employee directors of the Company upon whose judgment, initiative and effort
the continued success, growth and development of the Company is dependent. The
Directors Plan provides for the grant to non-employee directors of non-qualified
stock options, restricted stock, and restricted stock units. The Directors Plan
also provides for elective deferral of annual retainer fees and, as an
alternative, an election to receive annual retainer fees in the form of shares
of the Company. The aggregate number of shares which are available for issuance
under the Directors Plan in connection with elective deferral of annual retainer
fees or elections to receive annual retainer fees in the form of shares is
344,702, and an additional 300,000 are available for grants of nonqualified
stock options, restricted stock, restricted stock units, in each case subject to
anti-dilution adjustments in the event of certain changes in the Company's
capital structure. Shares issued pursuant to the Directors Plan will be either
authorized but unissued shares or treasury shares.

ELIGIBILITY AND ADMINISTRATION

Only non-employee members of the Company's Board of Directors will be
eligible to participate in the Directors Plan. The Directors Plan will be
administered by the full Board of Directors, which will determine the types of
awards to be received and the terms and conditions thereof. The number of
non-employee directors who will be eligible to receive awards under the
Directors Plan is currently eleven.

AWARDS AND DEFERRAL ELECTIONS

The Directors Plan provides for automatic annual grants of nonqualified
stock options to each non-employee director on the following terms. The date of
grant will be the date of each annual meeting of shareholders (beginning with
the 2004 annual meeting), and options will be granted to the non-employee
directors in office immediately following the annual meeting. The exercise price
per share will be equal to the fair market value per share on the date of grant,
and the number of shares subject to each option will be 5000 (or such other
amount as determined from time to time by the Board of Directors). The term of
each option will be ten years, each option will be fully exercisable on the date
of grant, and continued exercisability will not be dependent on continued
service on the Board of Directors.

In addition, when a non-employee director is first elected to the Board of
Directors an option to purchase 5,000 shares (or such other amount as determined
from time to time by the Board of Directors) shall be granted to the
non-employee director on the date of such first election. The other terms of the
option will be as described above in the case of the automatic annual option
grants.

The Directors Plan will also provide for discretionary grants of
nonqualified stock options, restricted stock and restricted stock units. The
specific terms of such grants will be as determined by the Board of Directors,
but the exercise price of an option may not be less than the fair market value
per Share on the date of grant. In addition, options may not be repriced without
shareholder approval.

Non-employee directors may elect to defer all or a portion of their annual
retainer fees. Amounts deferred will be credited to the non-employee directors'
accounts under the Directors Plan in the form of share units. The number of
share units credited will be equal to the number of Company shares having an
aggregate fair market value on the date the fees would otherwise have been paid
equal to 110% of the amount deferred. If any dividends are payable on Company
shares during the deferral period, additional share units will be credited to
the non-employee directors' accounts, based on the amount of the dividends and
the fair market value of Company shares at the time the dividend is paid.
Amounts deferred will be distributed (in the form of one Company share for each
share unit) either in a lump sum at the time of termination of the non-employee
director's service on the Board of Directors or in five annual installments
commencing at such time, as elected by the non-employee director in accordance
with the election provisions of the Directors Plan.

Alternatively, non-employee directors may elect to receive their annual
retainer fees currently in the form of Company shares instead of cash, based on
the fair market value of the shares on the date the fees would otherwise have
been paid.

AMENDMENTS AND TERMINATION

The Board of Directors may amend or terminate the Directors Plan, but any
such amendment or termination will be subject to the approval of shareholders if
required by applicable law or the rules of any stock exchange on which the
shares may then be listed. In addition, no amendment or termination may
adversely affect the rights of a participant under outstanding awards or
previously deferred fees without the consent of the affected participant.

MARKET MALUE

The per share closing price of the Company's shares on March 24, 2003 was
$69.81.

FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the United States federal income tax
consequences of the Directors Plan, based upon current provisions of the Code,
the Treasury regulations promulgated thereunder and administrative and judicial
interpretations thereof, and does not address the consequences under any state,
local or foreign tax laws.

STOCK OPTIONS

In general, the grant of a nonqualified stock option will not be a taxable
event to the recipient. Upon the exercise of a nonqualified stock option, the
participant will recognize ordinary taxable income equal to the excess of the
fair market value of the shares received upon exercise over the exercise price.
Any gain or loss upon a subsequent sale or exchange of the shares will be
capital gain or loss, long-term or short-term, depending on the holding period
for the shares.

RESTRICTED STOCK

A participant who receives shares of restricted stock will generally
recognize ordinary income at the time that they "vest", I.E., when they are not
subject to a substantial risk of forfeiture. The amount of ordinary income so
recognized will be the fair market value of the shares at the time the income is
recognized (determined without regard to any restrictions other than
restrictions which by their terms will never lapse), less the amount, if any,
paid for the shares. Dividends paid with respect to shares that are not vested
will be ordinary compensation income to the participant. Any gain or loss upon a
subsequent sale or exchange of the shares, measured by the difference between
the sale price and the fair market value on the date restrictions lapse, will be
capital gain or loss, long-term or short-term, depending on the holding period
for the shares. The holding period for this purpose will begin on the date
following the date restrictions lapse.

In lieu of the treatment described above, a participant may elect immediate
recognition of income under Section 83(b) of the Code. In such event, the
participant will recognize as income the fair market value of the restricted
stock at the time of grant (determined without regard to any restrictions other
than restrictions that by their terms will never lapse). Dividends paid with
respect to shares as to which a proper Section 83(b) election has been made will
not be deductible. If a Section 83(b) election is made and the restricted stock
is subsequently forfeited, the participant will not be entitled to any
offsetting tax deduction.

OTHER AWARDS AND DEFERRALS

With respect to restricted stock units and amounts deferred, generally, a
participant will be subject to income tax at ordinary income rates at the time
of receipt of payment with respect to any such restricted stock units or
deferrals, and the amount of such income will be the fair market value of the
shares received, determined at the time they are received.

The following table states the number of share units and stock options
which would have been received by or allocated to the current non-executive
director group for the fiscal year 2002 under the Amended and Restated Directors
Stock & Option Plan if such plan had been in effect:

NEW PLAN BENEFITS

AMENDED AND RESTATED DIRECTORS STOCK & OPTION PLAN

NAME AND POSITION NUMBER OF SHARE UNITS STOCK OPTIONS
----------------- --------------------- -------------
Non-Executive Director Group 2,356 55,000

YOUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
TO AMEND AND RESTATE THE DIRECTORS STOCK & OPTION PLAN.

V. SHAREHOLDER PROPOSALS FOR 2004 ANNUAL MEETING

Shareholder proposals intended for inclusion in the Proxy Statement for the
2004 Annual General Meeting of Ordinary Shareholders should be sent to the
Company's Secretary at XL House, One Bermudiana Road, Hamilton HM 11, Bermuda
and must be received by December 7, 2003. In addition, if a holder of the
Company's ordinary shares intends to present a proposal at the 2003 Annual
General Meeting other than pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934, and if the proposal is not received by the Company's Secretary by
February 20, 2004, then the proxies designated by the Board of Directors of the
Company for the 2004 Annual General Meeting of Shareholders may vote in their
discretion on any such proposal any Shares for which they have been appointed
proxies without mention of such matter in the Proxy Statement for such meeting
or on the proxy card for such meeting.

Any Shareholder entitled to vote at a meeting may nominate persons for
election as Directors if written notice of such intent is delivered or mailed,
postage prepaid, and received by the Secretary at the principal executive
offices of the Company not less than 5 days nor more than 21 days before the
date appointed for such meeting. The shareholder notice must include the
following information about the proposed nominee: (a) name, age, and business
and residence addresses; (b) principal occupation or employment; (c) class and
number of Shares or securities of the Company beneficially owned; and (d) any
other information required to be disclosed in solicitations of proxies pursuant
to Regulation 14A of the Securities Exchange Act of 1934, including the proposed
nominee's written consent to serve if elected. The notice must also include
information on the Shareholder making the nomination, including such
Shareholder's name and address as it appears on the Company's books and the
class and number of Shares of the Company beneficially owned. The nomination of
any person not made in compliance with the foregoing procedures shall be
disregarded.

VI. OTHER MATTERS

While management knows of no other issues, if any other matters properly
come before the meeting, it is the intention of the persons named in the
accompanying proxy form to vote the proxy in accordance with their judgment on
such matters.

PROXY SOLICITATION

The Company will bear the cost of this solicitation of proxies. Proxies may
be solicited by Directors, officers and employees of the Company and its
subsidiaries without receiving additional compensation. In addition to the
foregoing, the Company has retained Georgeson & Company Inc. to assist in the
solicitation of proxies for a fee of approximately $10,000 plus reasonable
out-of-pocket expenses and disbursements of that firm. Upon request, the Company
will also reimburse brokers and others holding stock in their names, or in the
names of nominees, for forwarding proxy materials to their principals.

THE COMPANY WILL FURNISH, WITHOUT CHARGE TO ANY ORDINARY SHAREHOLDER, A
COPY OF ITS ANNUAL REPORT ON FORM 10-K THAT IT FILES WITH THE SECURITIES AND
EXCHANGE COMMISSION. A COPY OF THIS REPORT FOR THE FISCAL YEAR ENDED DECEMBER
31, 2002 MAY BE OBTAINED UPON WRITTEN REQUEST TO THE COMPANY'S SECRETARY AT XL
HOUSE, ONE BERMUDIANA ROAD, HAMILTON HM 11, BERMUDA.

As ordered,

/s/ Brian M. O'Hara

Brian M. O'Hara
PRESIDENT AND CHIEF EXECUTIVE OFFICER

APPENDIX A

XL CAPITAL LTD

AUDIT COMMITTEE CHARTER

PURPOSE

The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Company,
including the Company's system of internal controls, (2) the independent
auditor's qualifications and independence, (3) the performance of the Company's
internal audit function and independent auditors, and (4) the compliance by the
Company with legal and regulatory requirements.

The Audit Committee shall prepare the report required to be included in the
Company's annual proxy statement.

COMMITTEE MEMBERSHIP

The Audit Committee shall consist of no fewer than three members, each of
whom shall be financially literate and at least one of whom shall be a
"financial expert" as defined in applicable laws, rules or regulations. The
members of the Audit Committee shall meet the independence, experience and other
requirements of the New York Stock Exchange and any other requirements set forth
in applicable laws, rules and regulations. Audit Committee members shall not
simultaneously serve on the audit committees of more than two other public
companies.

The members of the Audit Committee shall be appointed annually by the Board
on the recommendation of the Nominating & Governance Committee. Audit Committee
members may be replaced by the Board if necessary or appropriate.

MEETINGS

The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall meet periodically with
management (including the CEO and CFO where required by applicable law or
otherwise as appropriate), the internal auditors and the independent auditor in
separate executive sessions. The Audit Committee may request any officer or
employee of the Company or the Company's outside counsel or independent auditor
to attend a meeting of the Committee or to meet with any members of, or advisors
to, the Committee.

COMMITTEE AUTHORITY AND RESPONSIBILITIES

The Audit Committee shall have sole authority to appoint or replace the
independent auditor, subject to required shareholder ratification. The Audit
Committee shall be directly responsible for the compensation and oversight of
the work of the independent auditor (including resolution of disagreements
between management and the independent auditor regarding financial reporting)
for the purpose of or issuing an audit report or related work. The independent
auditor shall report directly to the Audit Committee.

The Audit Committee shall pre-approve all audit services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent auditor in accordance with applicable laws, rules
and regulations.

The Audit Committee may form and delegate authority to subcommittees
comprising one or more members of the Audit Committee, including the authority
to grant pre-approvals of audit and permitted non-audit services, provided that
decisions of such subcommittee to grant pre-approvals shall be presented to the
full Audit Committee at its next scheduled meeting.

The Audit Committee shall have the authority to retain independent legal,
accounting, actuarial and other advisors, as it determines to be necessary to
carry out its duties. The Company will provide for the appropriate funding, as
determined by the Audit Committee, for payment of compensation to the
independent auditor for the purpose of rendering or issuing an audit report and
to any advisors employed by the Audit Committee.

The Audit Committee shall make regular reports to the Board. The Audit
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Nominating and Corporate

A-1

Governance Committee and ultimately to the Board for approval. The Audit
Committee shall annually review the Audit Committee's own performance.

The Audit Committee, to the extent it deems necessary or appropriate,
shall:

FINANCIAL STATEMENTS, EARNINGS RELEASES AND RELATED DISCLOSURE MATTERS

1. Discuss with management and the independent auditor the Company's annual
audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Annual Report on Form
10-K.

2. Discuss with management and the independent auditor the Company's
quarterly financial statements prior to the filing of its Quarterly Reports on
Form 10-Q, including the results of the independent auditor's review of the
quarterly financial statements.

3. Discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with the preparation
of the Company's financial statements, including any significant changes in the
Company's selection or application of accounting principles, any major issues as
to the adequacy of the Company's internal controls, and any steps adopted in
light of material control deficiencies.

4. Receive, and take any required or appropriate action in relation to, all
reports and other communications which the independent auditor is required to
make to the Audit Committee, including timely reports concerning:-

a) all critical accounting policies and practices to be used;

b) all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditor; and

c) other material written communications between the independent auditor
and management, such as any management letter or schedule of
unadjusted differences.

5. Discuss with management the Company's earnings press releases, including
the use of "pro-forma" or "adjusted" non- GAAP information, as well as financial
information and earnings guidance provided to analysts and rating agencies. Such
discussion may be done generally by discussing the types of information to be
disclosed and the type of presentation to be made.

6. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives, as well as off-balance sheet structures,
on the Company's financial statements.

7. Discuss with management the Company's major financial risk exposures
and the steps management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management policies. Other
committees of the Board may also review such risk assessment and risk management
policies.

8. Discuss with management, the independent auditor and any external
actuary retained by the Company the reserving methodology and process of the
Company and the Company's reserves, together with internal or external reports
or studies.

9. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit, including any difficulties encountered in the course of the audit
work, any restrictions on the scope of activities or access to requested
information, and any significant disagreements with management.

10. Review disclosures by the Company's CEO and CFO in connection with
their certifications required under the rules of the New York Stock Exchange and
other applicable laws, rules or regulations.

RELATIONSHIP WITH INDEPENDENT AUDITOR

11. Review and evaluate the lead partner of the independent auditor team.

12. Obtain and review a report from the independent auditor at least
annually regarding (a) the independent auditor's internal quality-control
procedures, (b) any material issue raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities

A-2

within the preceding five years respecting one or more independent audits
carried out by the firm, (c) any steps taken to deal with any such issues, and
(d) all relationships between the independent auditor and the Company. Evaluate
the qualifications, performance and independence of the independent auditor,
including considering whether the auditor's quality controls are adequate and
the provision of permitted non-audit services is compatible with maintaining the
auditor's independence, and taking into account the opinions of management and
the internal auditor. The Audit Committee shall present its conclusions with
respect to the independent auditor to the Board and make any recommendations to
the Board concerning such matters as the Audit Committee deems advisable.

13. Ensure the rotation of the lead (or coordinating) audit partner (having
primary responsibility for the audit) and the audit partner responsible for
reviewing the audit as required by applicable law (I.E., in each case, if such
partner has performed audit services for the Company in each of the five
previous fiscal years).

14. Recommend to the Board policies for the Company's hiring of employees
or former employees of the independent auditor who participated in any capacity
in the audit of the Company during the one-year period preceding the date of
initiation of the audit.

15. Discuss with the national office of the independent auditor issues on
which they were consulted by the audit team for the Company and matters of audit
quality and consistency.

16. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.

INTERNAL AUDIT

17. Review the appointment and replacement of the senior internal auditing
executive.

18. Review the activities of the Company's internal audit department,
including the proposed annual audit plan, periodic progress reports on the
status of the plan, and summaries of any significant issues raised during the
performance of internal audits, including the resolution of recommendations made
concerning the Company's system of internal controls.

19. Discuss with the independent auditor and management the internal audit
department responsibilities, budget and staffing and any recommended changes in
the planned scope of the internal audit function.

INTERNAL CONTROLS

20. Discuss with management, the independent auditor and the senior
internal auditing executive the design and effectiveness of the Company's
internal controls.

21. Discuss with management, the independent auditor and the senior
internal auditing executive (a) any significant deficiencies in the design or
operation of internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data and any material
weaknesses to the Company's internal controls, and (b) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company's internal controls.

22. Discuss with management, the independent auditor and the senior
internal auditing executive the internal control report required to be included
in the Company's Annual Report on Form 10-K.

COMPLIANCE

23. Obtain from the independent auditor assurance it has complied with the
provisions of Section 10A (b) of the Securities Exchange Act of 1934.

24. Obtain at least annually reports from the Company's General Counsel and
Compliance Director as to whether the Company and its subsidiary/foreign
affiliated entities are in material compliance with applicable legal
requirements and the Company's Code of Business Conduct and Ethics.

25. Advise the Board at least annually with respect to the Company's
policies and procedures regarding compliance with applicable laws and
regulations and with the Company's Code of Business Conduct and Ethics.

26. Review at least annually with the General Counsel and the Compliance
Director compliance with the Company's Code of Business Conduct and Ethics, as
well as the administration, training, monitoring and auditing of the related
Compliance Program.

A-3

27. Discuss with the General Counsel, the Compliance Director, other
members of management and the independent auditor, as appropriate, any
correspondence with regulators or governmental agencies and any employee
complaints or published reports which raise material issues regarding the
Company's financial statements or accounting policies.

OTHER RESPONSIBILITIES

28. Discuss with the Company's General Counsel any legal matters that
reasonably could have a material impact on the financial statements or the
Company's compliance policies.

29. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls, or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters.

30. Perform such other activities as the Committee or the Board of
Directors may from time to time deem necessary or appropriate.

INTERPRETATION

For the avoidance of doubt, while the Audit Committee has the
responsibilities and powers set forth in this Charter, nothing in this Charter
should be interpreted as creating any duty or obligation on the part of the
Audit Committee to plan or conduct audits or to determine that the Company's
financial statements and disclosures are complete and accurate and are in
accordance with generally accepted accounting principles and applicable rules
and regulations. Also, nothing herein should be construed as imposing on the
Audit Committee responsibility to ensure compliance with laws and regulations
and the Company's Code of Business Conduct and Ethics, or to set or determine
the adequacy of the Company's reserves. All such matters are the
responsibilities of management and the independent auditor, as appropriate.

A-4

APPENDIX B

XL CAPITAL LTD

1991 PERFORMANCE INCENTIVE PROGRAM

(AS AMENDED AND RESTATED EFFECTIVE MARCH 7, 2003)

I. INTRODUCTION

A. PURPOSE OF THE PROGRAM

XL Capital Ltd (the "Company") has established the Program to further its
long-term financial success by offering stock, and stock-based compensation, to
employees and directors of the Company whereby they can share in achieving and
sustaining such success. The Program also provides a means to attract and retain
the executive talent needed to achieve the Company's long-term growth and
profitability objectives.

B. DEFINITIONS

When used in the Program, the following terms shall have the meanings set
forth below:

"Award(s)" shall mean Performance Shares, Restricted Stock, Restricted
Stock Units, Incentive Stock Options, Nonstatutory Stock Options, Stock
Appreciation Rights or Performance Units granted under the Program.

"Board" shall mean the Board of Directors of the Company.

"Change of Control" shall be deemed to have occurred if and when any
person, meaning an individual, a partnership, or other group or association as
defined in Sections 13(d) and 14(d) of the United States Securities Exchange Act
of 1934 (other than a group of which the Grantee is a member or which has been
organized by the Grantee for the purpose of making such acquisition), acquires,
directly or indirectly, 40 percent or more of the combined voting power of the
outstanding securities of the Company having a right to vote in the election of
directors. Ownership of 40 percent or more of the combined voting power of the
outstanding securities of the Company by any person controlled directly or
indirectly by the Company shall not be deemed a Change of Control of the
Company.

"Code" shall mean the United States Internal Revenue Code of 1986, as
amended.

"Committee" shall mean the entire Board or the Compensation Committee, or
such other committee or subcommittee of the Board as may be designated by the
Board to administer the Program.

"Common Stock" shall mean the class A ordinary shares of the Company, par
value of $0.01 per share, and may be either stock previously authorized but
unissued, or stock required by the Company.

"Company" shall mean XL Capital Ltd, a Cayman Islands corporation, any
other entity in which XL Capital Ltd owns 20% or more of the ordinary voting
power or equity, and any successor in a reorganization or similar transaction.

"Disability" shall mean the inability of a Participant to perform the
services normally rendered due to any physical or mental impairment that can be
expected to be of either permanent or indefinite duration, as determined by the
Committee on the basis of appropriate medical evidence, and that results in the
Participant's Termination of Employment; provided, however, that with respect to
any Participant who has entered into an employment agreement with the Company,
the term of which has not expired at the time a determination concerning
Disability is to be made, Disability shall have the meaning attributed in such
employment agreement.

"Fair Market Value" shall mean with respect to a given day, the closing
sales price of Common Stock, as reported by such responsible reporting service
as the Committee may select, or if there were no transactions in the Common
Stock on such day, then the last preceding day of which transactions took place.
The foregoing notwithstanding, the Committee may determine the Fair Market Value
in such other manner as it may deem more appropriate for Program purposes or as
is required by applicable laws or regulations.

B-1

"Incentive Stock Option" or "ISO" shall mean a right to purchase the
Company's Common Stock which is intended to comply with the terms and conditions
for an incentive stock option as set forth in Section 422 of the Code, or such
other sections of the Code as may be in effect from time to time.

"Nonstatutory Stock Option" or "NQSO" shall mean a right to purchase the
Company's Common Stock which is not intended to comply with the terms and
conditions for a tax-qualified stock option, as set forth in Section 422 of the
Code, or such other sections of the Code as may be in effect from time to time.

"Participant" shall mean any employee of the Company and any member of the
Board (whether or not an employee of the Company) who, in the judgment of the
Committee, is in a position to make a substantial contribution to the
management, growth, and success of the Company and is thus designated by the
Committee to receive an Award.

"Performance Goal" shall mean any financial, statistical or other measure
selected by the Committee, including without limitation (a) the attainment of a
specified financial or statistical objective or (b) the performance of the
Company relative to a peer group as applicable to a specific Performance Period.

"Performance Period" shall mean a period set by the Committee over which
Performance Shares or Performance Units may be earned. There may be more than
one Performance Period in existence at any one time, and the duration of
Performance Periods may differ from each other.

"Performance Shares" shall mean Common Stock granted to a Participant with
respect to a Performance Period under Article III of the Program, together with
any other rights attached thereto or associated therewith including without
limitation any right to receive cash in connection therewith.

"Performance Unit" shall mean a cash award made pursuant to Section VI of
the Program.

"Program" shall mean the Company's 1991 Performance Incentive Program.

"Restricted Stock" shall mean a share of Common Stock granted to a
Participant under Article IV of the Program. Restricted Stock awards entitle the
Participant to receive shares of Common Stock which have certain restrictions
that lapse upon satisfaction of conditions imposed by the Committee at the time
of award.

"Restricted Stock Unit" shall mean an award made under Article VIII of the
Program under which each unit represents a right to receive a share of Common
Stock upon the terms, and subject to the conditions, set forth by the Committee.

"Retirement" shall mean, except as otherwise set forth in an Award
agreement, a Participant's Termination of Employment by reason of the
Participant's retirement at his normal retirement date, pursuant to and in
accordance with a pension, retirement or similar plan or other regular
retirement practice of the Company, or in accordance with the early retirement
provisions thereof.

"Stock Appreciation Rights" or "SARs" shall mean a contingent right granted
to a Participant with respect to Stock Options granted under Article V of the
Program, which grants the Participant the right to receive the difference
between the Fair Market Value of the Common Stock on the date of exercise and
the price at which the SAR was granted.

"Termination of Employment" shall mean a cessation of the employee-employer
relationship between a Participant and the Company for any reason or, in the
case of a member of the Board, termination of the director's service on the
Board for any reason.

II. PROGRAM ADMINISTRATION

A. ADMINISTRATION

The Program shall be administered by the Committee. Subject to the express
provisions of the Program, the Committee shall have full and exclusive authority
to interpret the Program, to prescribe, amend and rescind rules and regulations
relating to the Program and to make all other determinations deemed necessary or
advisable in the implementation and administration of the Program; provided,
however, that subject to the express provisions hereof or unless required by
applicable law or regulation, no action of the Committee shall adversely affect
the terms and conditions of any Award made to, or any rights hereunder or under
any grant letter of, any Participant, without such Participant's consent. The
Committee's interpretation and construction of the Program shall be conclusive
and

B-2

binding on all persons, including the Company and all Participants. The Company
and the Committee may delegate their authority to perform any of their
ministerial or similar administrative functions under this Program to other
persons.

B. PARTICIPATION

The Committee may, from time to time, make all determinations with respect
to selection of Participants and the Award or Awards to be granted to each
Participant. In making such determinations, the Committee may take into account
the nature of the services rendered or expected to be rendered by the respective
Participants, their present and potential contributions to the Company's success
and such other factors as the Committee in its discretion shall deem relevant.

C. MAXIMUM NUMBER OF SHARES AVAILABLE

Subject to adjustment as provided under Article II, Paragraph D of the
Program, (i) the maximum number of shares which may be granted under the Program
after March 8, 2002 is 10,000,000 plus shares which subsequently become
available as a result of forfeitures, cancellation or expiration of options or
restricted stock granted under the Program or separate agreements entered into
before the effective date of the Program, and (ii) of such maximum number of
shares, no more than an aggregate of 2,000,000 shares may be granted as
Performance Shares, Restricted Stock or Restricted Stock Units after March 8,
2002 under the Program, and 750,000 of such 2,000,000 shares may only be issued
as performance-based Restricted Stock, Restricted Stock Units or Performance
Shares. In the event that a stock option issued under the Program expires or is
terminated unexercised as to any shares covered thereby, or shares are forfeited
for any reason under the Program, such shares shall thereafter be again
available for issuance under the Program, and the number of shares surrendered
in payment of any exercise or purchase price of any stock option or other Award
under the Program will again be available for Awards (other than Incentive Stock
Options) under the Program. At the Committee's discretion, these shares may be
granted as stock options, Performance Shares, Restricted Stock, Restricted Stock
Units, Stock Appreciation Rights or any combination of these provided that the
combined total number of shares granted does not exceed either the overall share
authorization described above or the specific share authorization set forth
above for Performance Shares, Restricted Stock and Restricted Stock Units.

Subject to adjustment as provided under Article II, Paragraph D of the
Program, (i) the maximum number of shares of Common Stock with respect to which
stock options and Stock Appreciation Rights may be granted during a calendar
year to any Participant under the Program shall be 3,000,000 shares, and (ii)
with respect to Performance Shares, Performance Units, Restricted Stock or
Restricted Stock Units intended to qualify, as set forth in Article VII, as
performance-based compensation within the meaning of Section 162(m) of the Code,
the maximum number of shares of Common Stock (or amount of cash in the case of
Performance Units) subject to such awards granted during a calendar year to any
Participant under the Program shall be the equivalent of 150,000 shares.

No Incentive Stock Options shall be granted after March 8, 2012.

D. ADJUSTMENTS

In the event of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations, exchanges of shares, spin-offs, liquidations,
reclassifications or other similar changes in the capitalization of the Company,
the number of shares of Common Stock available for grant under this Program
shall be adjusted proportionately or otherwise by the Board, and where deemed
appropriate, the number of shares covered by outstanding stock options, the
number of Performance Shares, shares of Restricted Stock and Restricted Stock
Units outstanding, and the option price of outstanding stock options shall be
similarly adjusted. Also, in instances where another corporation or other
business entity is acquired by the Company, and the Company has assumed
outstanding employee option grants under a prior existing plan of the acquired
entity, similar adjustments are permitted at the discretion of the Committee. In
the event of any other change affecting the Common Stock reserved under the
Program, such adjustment, if any, as may be deemed equitable by the Board, shall
be made to give proper effect to such event.

E. REGISTRATION CONDITIONS

1. Unless issued pursuant to a registration statement under the U.S.
Securities Act of 1933, as amended, no shares shall be issued to a Participant
under the Program unless the Participant represents and agrees with the Company
that such shares are being acquired for investment and not with a view to the
resale or distribution thereof, or such

B-3

other documentation is provided by the Participant as may be required by the
Company, unless in the opinion of counsel to the Company such representation,
agreement or documentation is not necessary to comply with such Act.

2. Any restriction on the resale of shares shall be evidenced by the
following legend on the stock certificate or such other legend as the Company
deems appropriate.

"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended. The shares cannot be offered,
transferred or sold unless (a) a registration statement under such Act is in
effect with respect to such shares, or (b) a written opinion from counsel
acceptable to the Company is obtained to the effect that no such registration is
required. The Company reserves the right to refuse the transfer of such shares
until such conditions have been fulfilled. The Articles of Association of the
Company contain other restrictions on share transfers."

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 a legend unless, in the opinion of counsel or the
Company, the securities represented thereby need no longer be subject to the
restriction contained herein. The provisions of this paragraph shall be binding
upon all subsequent holders of certificates bearing such legend.

F. COMMITTEE ACTION

The Committee may, through Award agreements, limit its discretion under
this Program. To the extent such discretion is not specifically waived in an
Award agreement, the Committee shall retain such discretion.

G. NO OPTION OR SAR REPRICING WITHOUT SHAREHOLDER APPROVAL

Except as provided in Article II.D hereof relating to certain anti-dilution
adjustments, unless the approval of shareholders of the Company is obtained,
ISOs, NQSOs and SARs issued under the Program shall not be amended to lower
their exercise prices and ISOs, NQSOs and SARs issued under the Plan will not be
exchanged for other stock options or SARs with lower exercise prices.

III. PERFORMANCE SHARES

A. GRANT OF PERFORMANCE SHARES

After selecting Participants who will receive Awards of Performance Shares
for a given Performance Period, the Committee shall inform each such Participant
of the Award to be granted to the Participant at the completion of the
Performance Period, and the applicable terms and conditions of the Award.

The Committee shall cause to be issued to each Participant a grant letter
specifying the number of Performance Shares under his Award and the number of
Performance Shares which may be awarded subject to the terms and conditions of
such grant letter and the Program.

B. ESTABLISHMENT OF PERFORMANCE GOALS

1. The Committee shall establish the Performance Goals for each Performance
Period. The Committee shall also establish a schedule for such Performance
Period setting forth the percentage of the Performance Share Award which will be
earned, based on the extent to which the Performance Goals for such Performance
Period are actually achieved, the date on which Performance Shares awarded
hereunder shall vest, or the date on which such Performance Shares shall be
forfeited (in whole or in part) by the Company for failure to meet the
Performance Goals, as specified by the Committee.

2. As promptly as practical after each Performance Period, the Committee
shall determine whether, or the extent to which, the Performance Goals have been
achieved. Based on such determination, the Participant shall be deemed to have
earned the Performance Shares awarded to him, or a percentage thereof as
provided in any schedule established by the Committee. In addition, the
Committee may, from time to time during a Performance Period and consistent with
the terms and conditions of applicable Awards and Performance Goals, determine
that all or a portion of the Performance Shares awarded to one or more
Participants have been earned.

B-4

3. If during the course of a Performance Period, there should occur, in the
opinion of the Committee, significant changes in economic conditions or in the
nature of the operations of the Company, or any other pertinent changes which
the Committee did not foresee or accurately predict the extent of in
establishing the Performance Goals for such Performance Period and which, in the
Committee's sole judgment, have, or are expected to have, a substantial effect
on the performance of the Company during such Performance Period, the Committee
may make such adjustment to the Performance Goals or measurement of such
Performance Goals as the Committee, in its sole judgment, may deem appropriate.

C. TERMINATION OF EMPLOYMENT

In the event of a Participant's Termination of Employment prior to
satisfaction of conditions related to outstanding Performance Share Awards for
reasons other than discharge or resignation, the Participant or the
Participant's estate or beneficiary, in the sole discretion of the Committee,
may be entitled to receive from Performance Shares held by the Corporation a pro
rata number of shares with respect to that Performance Share Award, or such
other portion of the Award, if any, as the Committee shall determine. In the
event of Termination of Employment due to resignation or discharge, the Award
will be cancelled, and the Participant shall not be entitled to any further
consideration with respect to the forfeited Performance Shares, subject to the
discretion of the Committee to release restrictions on all or any part of an
Award.

IV. RESTRICTED STOCK

A. GRANT OF RESTRICTED STOCK

1. Following the selection of Participants who will receive a Restricted
Stock Award, the Committee shall inform each such Participant of the number of
Restricted Stock shares granted to the Participant and the terms and applicable
conditions of the Award.

2. Each certificate for Restricted Stock shall be registered in the name of
the Participant and deposited, together with a stock power endorsed in blank,
with the Company.

B. OTHER TERMS AND CONDITIONS

Company stock, when awarded pursuant to a Restricted Stock Award, will be
represented by a stock certificate registered in the name of the Participant who
is granted the Restricted Stock Award. Such certificate shall be deposited
together with a stock power endorsed in blank with the Company. The Participant
shall be entitled to receive dividends and all other distributions during the
restriction period and shall have all shareholder's rights with respect to such
stock, if any, with the exception that: (1) the Participant may not transfer
ownership of the shares during the restriction period except by will or the laws
of descent and distribution, (2) the Participant will not be entitled to
delivery of the stock certificate during the restriction period, (3) the Company
will retain custody of the stock during the restriction period, and (4), a
breach of a restriction or a breach of the terms and conditions established by
the Committee pursuant to the Restricted Stock Award will cause a forfeiture of
the Restricted Stock shares. The Committee may impose additional restrictions,
terms, or conditions upon the Restricted Stock Award.

C. RESTRICTED STOCK AWARD AGREEMENT

Each Restricted Stock Award shall be evidenced by a Restricted Stock Award
Agreement in such form and containing such terms and conditions not inconsistent
with the provisions of the Program as the Committee from time to time shall
approve.

D. TERMINATION OF EMPLOYMENT

In the event of a Participant's Termination of Employment prior to
satisfaction of conditions related to outstanding Restricted Stock Awards for
reasons other than discharge or resignation, the Participant or the
Participant's estate or beneficiary, in the sole discretion of the Committee,
may be entitled to receive from Restricted Stock shares held by the Corporation
a pro rata number of shares with respect to that Restricted Stock Award, or such
other portion of the Restricted Stock Award, if any, as the Committee shall
determine. In the event of Termination of Employment due to resignation or
discharge, all Restricted Stock shares held by the Company shall be forfeited,
and the

B-5

Participant shall not be entitled to any further consideration with respect to
the forfeited Restricted Stock shares, subject to the discretion of the
Committee to release of restrictions on all or any part of an Award, or unless
otherwise stated in the Restricted Stock Agreement.

E. PAYMENT FOR RESTRICTED STOCK

Restricted Stock Awards may be made by the Committee under which the
Participant shall, upon payment of the par value, or, in the alternative, under
which the Participant shall pay all (or any lesser amount than all) of the Fair
Market Value of the stock, determined as of the date the Restricted Stock Award
is made, receive a Restricted Stock Award. If payment is required, such purchase
price shall be paid as provided in the Restricted Stock Award Agreement.

V. STOCK OPTIONS

A. STOCK OPTION TERMS AND CONDITIONS

All stock options granted to Participants under the Program shall be
evidenced by agreements which shall be subject to applicable provisions of the
Program, and such other provisions as the Committee may adopt, including the
following provisions:

1. PRICE: The option price per share of Nonstatutory Stock Options (NQSOs)
and Incentive Stock Options (ISOs) shall not be less than 100 percent of the
Fair Market Value of a share of Common Stock on the date of grant.

2. PERIOD: An ISO shall not be exercisable for a term longer than ten years
from date of its grant. NQSOs shall have a term not longer than ten years from
the date of grant.

3. TIME OF EXERCISE: The Committee may prescribe the timing of the exercise
of the stock option and any minimums and installment provisions and may
accelerate the time at which a stock option becomes exercisable.

4. EXERCISE PROCEDURES: A stock option, or a portion thereof, shall be
exercised by delivery of notice of exercise to the Company or the Program
administrator designated from time to time by the Company and payment of the
full price of the shares being purchased. Such notice shall be given in the form
designated from time to time by the Company.

5. PAYMENT: The price of an exercised stock option, or portion thereof, may
be paid:

(a) in cash or by check, bank draft or money order payable to the order of
the Company; or

(b) through the delivery of shares of Common Stock owned by the
Participant, having an aggregate Fair Market Value as determined on
the date of exercise equal to the option price; or

(c) by a combination of both a and b above. The Committee may impose such
limitations and prohibitions on the use of any shares of Common Stock
to exercise a stock option as it deems appropriate.

6. SPECIAL RULE FOR INCENTIVE STOCK OPTIONS: Notwithstanding any other
provisions of the Program, the aggregate Fair Market Value of the shares of
Common Stock, determined as of the time the stock option is granted, for which
the Participant may first exercise Incentive Stock Options in any calendar year
shall not exceed U.S. $100,000 or such other individual employee grant limit as
may be in effect under the Code.

7. EFFECT OF LEAVES OF ABSENCE: It shall not be considered a Termination of
Employment when a Participant is placed by the Company on military leave, sick
leave or other bona fide leave of absence. In case of such leave of absence, the
employment relationship for Program purposes shall be continued until the later
of the date when such leave of absence equals ninety days or when the
Participant's right to reemployment with the Company shall no longer be
guaranteed either by statute or contract.

8. TERMINATION OF EMPLOYMENT: In the event of Termination of Employment,
the following provisions shall apply unless waived by the Committee, or as
otherwise specifically provided in the Stock Option Agreement:

(a) Discharge for Cause: All outstanding options shall be cancelled.

B-6

(b) Termination Other Than for Cause: Unless and except as otherwise
specified in a Participant's agreement, all options shall expire on
the earlier of (i) 90 days following the Termination of Employment or
(ii) the expiration of the full term of the option.

Notwithstanding the foregoing, the Committee may rescind the right to
exercise stock options following Termination of Employment if the Participant
has been found to be directly or indirectly engaged in any activity which is in
competition with the Company or otherwise adverse to or not in the best interest
of the Company.

B. STOCK APPRECIATION RIGHTS (SARS)

1. Stock options granted under the Program may be granted with Stock
Appreciation Rights attached on a one-to-one basis. SARs are subject to all
terms and conditions of the related stock options. SARs may only be granted in
connection with a stock option, and as such are subject to the limit on shares
authorized under Article II, Paragraph C. A Stock Appreciation Right shall
entitle the Participant to receive from the Company an amount equal to the
positive difference between the Fair Market Value of a share of Common Stock on
the exercise of the Stock Appreciation Right and the exercise price of the
related stock option.

2. Stock Appreciation Rights will be subject to all applicable provisions
of the Program, as well as any other provisions the Committee may adopt. The
exercise of an SAR will result in the cancellation of the related stock option,
and options so cancelled shall not be available for future awards under the
Program. The exercise, expiration, forfeiture or other termination of a stock
option will result in termination of the attached SAR.

VI. PERFORMANCE UNIT AWARDS

A. Each Award shall be subject to the limitations and terms provided in the
Program. A new Award may commence on the first anniversary date of the preceding
Award. The Committee shall grant to each Participant in a Performance Unit Award
a number of units with a target cash value as shall be established by the
Committee prior to the first year of each Performance Period.

B. To allow for recognition of significant individual contributions to the
Company's performance, individual awards of Performance Units may be granted to
new Participants during the first year of a Performance Period, at the
discretion of the Committee.

C. Performance Unit Awards for each Participant shall be recommended by the
Chief Executive Officer and submitted to the Committee for approval.
Participants will generally be notified of their individual Performance Unit
Award within the first six months of a Performance Period.

D. Performance Goals for each Performance Period will be recommended by the
Chief Executive Officer of the Company, and submitted to the Committee for
approval.

E. Once a Performance Period has begun and Performance Goals have been
established, they may not be changed for that Performance Period except in the
event of:

1. A significant acquisition of another business concern by the Company,
as deemed by the Committee;

2. A disposition of a significant part of the business by the Company, as
deemed by the Committee;

3. An external calamitous event, such as a natural disaster, which has a
significant effect on the Company, as determined by the Committee;

4. Any significant changes due to legislation, as deemed by the
Committee; or

5. Any other extraordinary event, as deemed by the Committee.

F. A performance valuation schedule shall be recommended by the Chief
Executive Officer of the Company and approved by the Committee before grants are
made under the Program. The Committee shall approve or modify the proposed
schedule which will contain various levels of performance and corresponding
Performance Unit values.

G. At the end of a Performance Period, the Committee shall review actual
performance and determine the Award payouts, if any.

B-7

H. In the event of a Participant's Termination of Employment prior to the
satisfaction of conditions related to outstanding Performance Unit Awards for
reasons other than discharge or resignation, the Participant, or the
Participant's estate or beneficiary, in the sole discretion of the Committee,
may be entitled to receive a pro-rata distribution of outstanding Performance
Unit Awards. In the event of Termination of Employment due to resignation or
discharge, all Awards will be cancelled, and the Participant shall not be
entitled to any further consideration with respect to the forfeited Performance
Units, subject to the discretion of the Committee.

VII. PERFORMANCE AWARDS

A. PERFORMANCE AWARDS GRANTED TO DESIGNATED PARTICIPANTS

If the Committee determines that an award of Performance Shares,
Performance Units, Restricted Stock or Restricted Stock Units to be granted to a
Participant should qualify as "performance-based compensation" for purposes of
Section 162(m) of the Code, the grant, vesting and/or settlement of such award
shall be contingent upon achievement of pre-established performance goals and
other terms set forth in this Article VII.A.

1. PERFORMANCE GOALS GENERALLY. The performance goals for such awards
("Performance Awards") shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such criteria,
as specified by the Committee consistent with this Article VII.A. Performance
goals shall be objective and shall otherwise meet the requirements of Section
162(m) of the Code and regulations thereunder (including Regulation 1.162-27 and
successor regulations thereto). The Committee may determine that such
Performance Awards shall be granted, vested and/or settled upon achievement of
any one performance goal or that two or more of the performance goals must be
achieved as a condition to grant, vesting and/or settlement of such Performance
Awards. Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.

2. BUSINESS CRITERIA. One or more of the following business criteria for
the Company, on a consolidated basis, and/or for specified subsidiaries or
business units of the Company (except with respect to the total stockholder
return and earnings per share criteria), shall be used by the Committee in
establishing performance goals for such Performance Awards: (1) earnings per
share; (2) revenues; (3) cash flow; (4) cash flow return on investment; (5)
return on assets, return on investment, return on capital, return on equity; (6)
economic value added; (7) operating margin; (8) net income; pretax earnings;
pretax earnings before interest, depreciation and amortization; pretax operating
earnings after interest expense and before incentives, service fees, and
extraordinary or special items; operating earnings; (9) total stockholder
return; and (10) any of the above goals as compared to the performance of a
published or special index deemed applicable by the Committee including, but not
limited to, the Standard & Poor's 500 Stock Index.

3. PERFORMANCE PERIOD; TIMING FOR ESTABLISHED PERFORMANCE GOALS.
Achievement of performance goals in respect of such Performance Awards shall be
measured over a performance period, as specified by the Committee. Performance
goals shall be established not later than 90 days after the beginning of any
performance period applicable to such Performance Awards, or at such other date
as may be required or permitted for "performance-based compensation" under
Section 162(m) of the Code.

4. SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS. Settlement of such
Performance Awards shall be in cash, Common Stock or other property, in the
discretion of the Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with such Performance
Awards, but may not exercise discretion to increase any such amount payable to a
the Participant in respect of a Performance Award subject to this Article VII.A.
The Committee shall specify the circumstances in which such Performance Awards
shall be paid or forfeited in the event of Termination of Employment by the
Participant prior to the end of a performance period or settlement of
Performance Awards.

B. WRITTEN DETERMINATION

All determinations by the Committee as to the establishment of performance
goals or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Article VII.A. shall be
made in writing in the case of any award intended to qualify under Section
162(m) of the Code.

B-8

VIII. RESTRICTED STOCK UNITS

A. GRANT OF RESTRICTED STOCK UNITS

Following the selection of Participants who will receive an award of
Restricted Stock Units, the Committee shall inform each such Participant of the
number of Restricted Stock Units granted to the Participant and the terms and
applicable conditions of the Restricted Stock Unit Award.

B. OTHER TERMS AND CONDITIONS

Restricted Stock Unit Awards will provide for the delivery of the number of
shares of Common Stock equivalent to the number of Restricted Stock Units at the
time and subject to the terms and conditions set forth by the Committee.
Delivery of shares of Common Stock pursuant to the Restricted Stock Unit Awards
will occur upon expiration of the deferral period specified by the Committee. In
addition, Restricted Stock Unit Awards shall be subject to such restrictions,
including forfeiture conditions, as the Committee may impose. Prior to
distribution of shares of Common Stock under a Restricted Stock Unit Award, the
Participant shall have no rights as a shareholder with respect to the shares
subject to the Award.

C. RESTRICTED STOCK UNIT AWARD AGREEMENT

Each Restricted Stock Unit Award shall be evidenced by a Restricted Stock
Unit Award Agreement in such form and containing such terms and conditions, not
inconsistent with the provisions of the Program, as the Committee from time to
time shall approve.

D. TERMINATION OF EMPLOYMENT

In the event of a Participant's Termination of Employment prior to
satisfaction of conditions related to an outstanding Restricted Stock Unit Award
for reasons other than discharge or resignation, the Participant or the
Participant's estate or beneficiary, in the sole discretion of the Committee,
may be entitled to receive from the Restricted Stock Unit Award a pro rata
number of shares with respect to the Restricted Stock Unit Award, or such other
portion of the Restricted Stock Unit Award, if any, as the Committee shall
determine. In the event of Termination of Employment due to resignation or
discharge, all Restricted Stock Units held by the Participant shall be
forfeited, and the Participant shall not be entitled to any further
consideration with respect to the forfeited Restricted Stock Units, subject to
the discretion of the Committee to release restrictions and deliver shares in
respect of all or any part of an Award, or unless otherwise stated in the
Restricted Stock Unit Award Agreement.

IX. GENERAL PROVISIONS

A. AMENDMENT AND TERMINATION OF PROGRAM

The Board may, at any time and from time to time, suspend or terminate the
Program in whole or amend it from time to time in such respects as the Board may
deem appropriate; provided, however, that, without the consent of an affected
Participant, no amendment, suspension, or termination of the Program may
adversely affect the rights of such Participant under any Award theretofore
granted to him or her.

B. GOVERNMENT AND OTHER REGULATIONS

The right of the Company to issue Awards under the Program shall be subject
to all applicable laws, rules and regulations, and to such approvals by any
government agencies as may be required.

C. OTHER COMPENSATION PLANS AND PROGRAMS

The Program shall not be deemed to preclude the implementation by Company
of other compensation plans or programs which may be in effect from time to
time.

B-9

D. MISCELLANEOUS PROVISIONS

1. NO RIGHT TO CONTINUE EMPLOYMENT: Nothing in the Program or in any Award
confers upon any Participant the right to continue in the employ of the Company
or interferes with or restricts in any way the rights of the Company to
discharge any Participant at any time for any reason whatsoever, with or without
cause.

2. NON-TRANSFERABILITY: Except as otherwise determined by the Committee and
set forth in the applicable Award Agreement, prior to being earned under
Articles III, IV, or VI, being exercised under Article V, or having shares
distributed under Article VIII, no right or interest of any Participant in any
Award under the Program shall be (a) assignable or transferable, except by will
or the laws of descent and distribution or a valid beneficiary designation
taking effect at death made in accordance with procedures established by the
Committee, or (b) liable for, or subject to, any lien, obligation or liability,
except to the extent that Non-Qualified Stock Options may be pledged as security
in a margin account for their exercise.

3. DESIGNATION OF BENEFICIARY: A Participant, in accordance with procedures
established by the Committee, may designate a person or persons to receive, in
the event of the Participant's death, (a) any payments with respect to which the
Participant would then be entitled, and (b) the right to continue to participate
in the Program to the extent of such Participant's outstanding Awards. Such
designation shall be made upon forms supplied by and delivered to the Company
and may be revoked in writing.

4. WITHHOLDING TAXES: The Company may require a payment from a Participant
to cover applicable withholding for income and employment taxes. The Company
reserves the right to offset such tax payment from any other funds which may be
due the Participant by the Company.

5. PROGRAM EXPENSES: Any expenses of administering the Program shall be
borne by the Company.

6. CONSTRUCTION OF PROGRAM: The interpretation of the Program and the
application of any rules implemented hereunder shall be determined solely in
accordance with the laws of the State of New York.

7. UNFUNDED PROGRAM: The Program shall be unfunded, and the Company shall
not be required to segregate any assets which may at any time be represented by
Awards. Any liability of the Company to any person with respect to an Award
under this Program shall be based solely upon any obligations which may be
created by this Program. No such obligation of the Company shall be deemed to be
secured by any pledge or other encumbrance on any property of the Company.

8. BENEFIT PLAN COMPUTATIONS: Except as otherwise determined by the
Company, any benefits received or amounts paid to a Participant with respect to
any Award granted under the Program shall not have any effect on the level of
benefits provided to or received by any Participant, or the Participant's estate
or beneficiary, as part of any employee benefit plan (other than the Program) of
the Company.

9. PRONOUNS, SINGULAR AND PLURAL: The masculine may be read as feminine,
the singular as plural and the plural as singular as necessary to give effect to
the Program.

E. EFFECTIVE DATES

The amendment and restatement of the Program will become effective on
approval by the Board of the Company, subject to shareholder approval. All
outstanding Awards shall remain in effect until all outstanding awards have been
earned, have been exercised or repurchased, have expired or have been cancelled.

B-10

ADDENDUM FOR FRENCH STOCK OPTIONS

The following additional provisions constitute the 2002 French Stock Option
Addendum (the "French Addendum").

A. PURPOSE OF THE FRENCH ADDENDUM

The Committee has prescribed these additional provisions to the Program to
permit French Participants to be granted French Options under the Program and
only modify the Program as it relates to French Options granted under the
Program to French Participants. These provisions apply to French Participants
notwithstanding any other provisions of the Program, and do not apply to or
modify the Program in respect of any other Participants.

The Board has adopted these additional provisions in accordance with
Article II, Paragraph A of the Program.

B. DEFINITIONS

1. When used in this French Addendum, the following terms shall have the
meanings set forth below:

"Award" (or "stock option") shall mean a French Option granted under the
terms of the French Addendum and the Program.

"Cause" shall mean:

a. conviction of the French Participant of a felony involving moral
turpitude or dishonesty;

b. the French Participant, in carrying out his or her duties for the
Company, has been guilty of (1) gross neglect or (2) wilful
misconduct; provided, however, that any act or failure to act by
the French Participant shall not constitute Cause for this purpose
if such act or failure to act was committed, or omitted, by the
French Participant in good faith and in a manner reasonably
believed to be in the overall best interests of the Company. The
determination of whether the French Participant acted in good
faith and that he or she reasonably believed his or her action to
be in the Company's overall best interest will be in the
reasonable judgment of the General Counsel of the Company, or, if
the General Counsel shall have an actual or potential conflict of
interest, the Committee; or

c. the French Participant's continued wilful refusal to obey any
appropriate policy or requirement duly adopted by the Company and
the continuance of such refusal after receipt of notice.

"Company" shall mean XL Capital Ltd, a Cayman Islands corporation.

"French Option" shall mean a right to acquire stock granted under this
French Addendum.

"French Participant" shall mean an employee of a Group Company to whom a
subsisting French Option has been granted under this French Addendum, and any
reference to "Participant" in the other provisions of this Program shall be
construed as if it were a reference to "French Participant".

"Group Company" shall mean XL Capital Ltd, a Cayman Islands corporation or
any other entity in which XL Capital Ltd owns 20 % or more of the ordinary
voting power or equity.

"Market Value" shall mean on any day the market value of a share as derived
from the closing price of the Company's Common Stock on the composite tape of
the New York Stock Exchange, and any reference to "Fair Market Value" in the
other provisions of the Program shall be construed as though it were a reference
to "Market Value" for the purposes of grants under this French Addendum.

"Trading Day" shall mean any day that the New York Stock Exchange is open
for business.

B-11

2. The following definitions in Article I Paragraph B of the Program shall
not apply to this French Addendum:

"Incentive Stock Option"
"Nonstatutory Stock Option"
"Performance Goal"
"Performance Period"
"Performance Shares"
"Performance Unit"
"Restricted Stock"
"Restricted Stock Unit"
"Stock Appreciation Rights" or "SARs"

C. PROVISIONS RELATING TO PERFORMANCE SHARES, RESTRICTED STOCK, RESTRICTED STOCK
UNITS, PERFORMANCE UNIT AWARDS AND PERFORMANCE AWARDS

Articles III, IV, VI, VII, and VIII of the Program shall not apply to
French Options.

D. PARTICIPATION

1. French Options may be granted to any employee including "PDG" and
managers "mandataires sociaux".

2. No French Options may be granted to consultants who do not have a work
contract with the Company.

3. No French Options may be granted to an Administrator or member of the
Conseil de Surveillance, who does not have a work contract with the Company.

4. No French Options may be granted to any employee who, at the date of
grant, holds shares representing 10% or more of the issued share capital of XL
Capital Ltd.

E. PRICE

1. The option price per share of French Options shall not be less than:

a. for French Options relating to newly issued shares of Common
Stock, the higher of:

i. 100 per cent of the Market Value of a share of Common Stock
on the date of grant; and

ii. 80 per cent of the average of the middle market quotations
for a share of Common Stock derived from the composite tape
of the New York Stock Exchange for the 20 consecutive
Trading Days preceding the date of grant of such option.

b. for French Options relating to shares of Common Stock purchased
by the Company, the higher of:

i. 80 per cent of the average purchase price of a share of
Common Stock purchased by the Company; and

ii. 80 per cent of the average middle market quotations for a
share of Common Stock derived from the composite tape of the
New York Stock Exchange for the 20 consecutive Trading Days
preceding the date of grant of such option.

2. The option price of a French Option shall be determined and fixed at the
date of grant and may be adjusted only upon the occurrence of any of the events
specified under the French Code of Commerce (section L. 225-181) in accordance
with French law.

F. DATE OF GRANT

No French Option may be granted:

1. during the 20 consecutive Trading Days after the payment of a dividend;

2. during the 20 consecutive Trading Days after an increase of capital
reserved to the shareholders;

3. during the 10 consecutive Trading Days preceding the date of publication
of the consolidated accounts or any annual financial statements of the Company;

B-12

4. during the 10 consecutive Trading Days following the date of publication
of the consolidated accounts or any annual financial statements of the Company;

5. during the period starting on any date on which the corporate management
of the Company is aware of unpublished price-sensitive information and ending 10
Trading Days after the publication of such information;

G. EXERCISE FOLLOWING DEATH OF FRENCH PARTICIPANT

The heirs of a deceased French Participant may exercise the French Option
during the period of six months following the date of death. The French Option
may not be assigned or transferred in any other circumstances, and any purported
transfer, assignment, or charge shall cause the French Option to lapse
forthwith.

H. DISPOSAL OF SHARES

Any disposal of Common Stock by a French Participant less than four years
after the date of grant, and regardless of whether he has left employment with
the Company, shall be accompanied by a notice of disposal sent by the French
Participant to his employing company or former employing company within one week
of the disposal.

I. LAPSE OF FRENCH OPTIONS

French Options granted under this French Addendum shall lapse upon the
first of the following events to occur:

1. the tenth anniversary of the date of grant of the French Option;

2. the third anniversary of the Retirement or Disability of the French
Participant;

3. six months following the death of the French Participant;

4. unless otherwise provided in an Employment Agreement between the French
Participant and the Company, the third anniversary of the termination of the
French Participant's employment by the Company not for Cause within two years
following a Change of Control (the "Post-Change Period");

5. ninety days following termination of the French Participant's employment
by the Company not for Cause outside a Post-Change Period;

6. the last date of employment of the French Participant if employment is
terminated by the Company for Cause;

7. the French Participant being adjudicated bankrupt; or

8. thirty days after the last date of employment of the French Participant
if employment terminates other than as set forth above in this paragraph.

J. EXERCISE OF FRENCH OPTIONS

1. Article V, Paragraphs A.1, A.2, A.3 and A.6 of the Program shall not
apply.

2. Subject to the time limits in Paragraph I above, the French Options
shall become exercisable according to the vesting schedule detailed in the
French Participant's stock option agreement; provided, however, that the option
shall be immediately exercisable in full in the event of a Change of Control or
upon termination of the French Participant's employment due to death or
Disability.

3. The French Option may be exercisable in whole or in part by the French
Participant giving written notice of exercise to the Company or the Program
administrator designated from time to time by the Company stating the number of
shares with respect to which the French Option is being exercised, in the form
prescribed by the Company. Such exercise shall be effective upon receipt of such
notice by the Company or Program administrator and payment in full of the option
price.

4. When a French Option is exercised only in part, the balance shall remain
exercisable on the same terms as originally applied to the whole French Option
and the Company shall issue a new option certificate accordingly as soon as
possible after the partial exercise.

5. The French Participant may exercise his French Option at any time after
the French Option becomes exercisable in accordance with Subparagraph 2 of this
Paragraph J and before the French Option lapses for any reason stated in
Paragraph I of this French Addendum.

B-13

2002 ITALIAN STOCK OPTION ADDENDUM

The following additional provisions constitute the 2002 Italian Stock
Option Addendum (the "Italian Addendum").

A. PURPOSE OF THE ITALIAN ADDENDUM

The Committee has prescribed these additional provisions to the Program to
permit Italian Participants to be granted Italian Options under the Program and
only modify the Program as it relates to Italian Options granted under the
Program to Italian Participants. These provisions apply to Italian Participants
notwithstanding any other provisions of the Program, and do not apply to or
modify the Program in respect of any other Participants.

The Board has adopted these additional provisions in accordance with
Article II, Paragraph A of the Program.

B. DEFINITIONS

1. When used in this Italian Addendum, the following terms shall have the
meanings set forth below:

"Award" shall mean an Italian Option granted under the terms of the Italian
Addendum and the Program.

"Cause" shall mean:

a. conviction of the Italian Participant of a felony involving moral
turpitude or dishonesty;

b. the Italian Participant, in carrying out his or her duties for
the Company, has been guilty of (1) gross neglect or (2) wilful
misconduct; provided, however, that any act or failure to act by
the Italian Participant shall not constitute Cause for this
purpose if such act or failure to act was committed, or omitted,
by the Italian Participant in good faith and in a manner
reasonably believed to be in the overall best interests of the
Company. The determination of whether the Italian Participant
acted in good faith and that he or she reasonably believed his or
her action to be in the Company's overall best interest will be
in the reasonable judgment of the General Counsel of the Company,
or, if the General Counsel shall have an actual or potential
conflict of interest, the Committee; or

c. the Italian Participant's continued wilful refusal to obey any
appropriate policy or requirement duly adopted by the Company and
the continuance of such refusal after receipt of notice.

"Date of Offer" shall mean the date of the meeting during which the
Committee resolves to grant Italian Options pursuant to Article II, Paragraph B
of the Program.

"Fair Market Value" shall mean on any day the market value of a share as
derived from the closing price of the Company's Common Stock on the composite
tape of the New York Stock Exchange.

"Italian Option" shall mean a right to acquire stock granted under this
Italian Addendum.

"Italian Participant" shall mean an Italian resident employee of the
Company to whom a subsisting Italian Option has been granted under this Italian
Addendum, and any reference to "Participant" in the other provisions of this
Program shall be construed as if it were a reference to "Italian Participant".

2. The following definitions in Article I Paragraph B of the Program shall
not apply to this Italian Addendum:

B-14

C. PROVISIONS RELATING TO PERFORMANCE SHARES, RESTRICTED STOCK, RESTRICTED STOCK
UNITS PERFORMANCE UNIT AWARDS AND PERFORMANCE AWARDS

Articles III, IV, VI, VII, and VIII of the Program shall not apply to
Italian Options.

D. PARTICIPATION

1. Italian Options may be granted to any Italian resident employee of the
Company save for the exceptions listed in sub-paragraph 2 and 3 of this
paragraph D.

2. No Italian Options may be granted to any person who is not an employee
of the Company.

3. No Italian Options may be granted to any employee who, at the date of
grant, holds either:

a. shares representing 10% or more of the issued share capital of XL
Capital Ltd; or

b. 10% or more of the voting rights exercisable in the ordinary
general shareholders' meeting.

E. PRICE

1. The option price per share of Italian Options shall be:

a. for Italian Options relating to newly issued shares of Common
Stock, not less than 100 per cent of the Fair Market Value of a
share of Common Stock on the date of grant; and

b. for Italian Options relating to shares of Common Stock purchased
by the Company, not less than the nominal value of a Share

provided that such option price shall not be less than the average of the
middle market quotations for a share of Common Stock derived from the composite
tape of the New York Stock Exchange for the period commencing on the same date
as the Date of Offer in the previous calendar month (or in the event that such
date does not exist, the last day of that preceding calendar month) and ending
on the Date of Offer of such Italian Option.

F. EXERCISE FOLLOWING DEATH OF ITALIAN PARTICIPANT

Italian Options may be assigned or otherwise transferred only in the
following circumstances:

1. by will or the laws of descent and distribution; or

2. by valid beneficiary designation taking effect at death made in
accordance with procedures established by the Committee.

G. LAPSE OF ITALIAN OPTIONS

Italian Options granted under this Italian Addendum shall lapse upon the
first of the following events to occur:

1. the tenth anniversary of the date of grant of the Italian Option;

2. the third anniversary of the Retirement or Disability of the Italian
Participant;

3. six months following the death of the Italian Participant;

4. unless otherwise provided in an Employment Agreement between the Italian
Participant and the Company, the third anniversary of the termination of the
Italian Participant's employment by the Company not for Cause within two years
following a Change of Control (the "Post-Change Period");

5. ninety days following termination of the Italian Participant's
employment by the Company not for Cause outside a Post-Change Period;

6. the last date of employment of the Italian Participant if employment is
terminated by the Company for Cause;

7. the Italian Participant being adjudicated bankrupt; or

8. thirty days after the last date of employment of the Italian Participant
if employment terminates other than as set forth above in this paragraph.

B-15

H. EXERCISE OF ITALIAN OPTIONS

1. Article V, Paragraphs A.1, A.2, A.3 and A.6 of the Program shall not
apply.

2. Subject to the time limits in Paragraph G above, the Italian Options
shall become exercisable according to the vesting schedule detailed in the
Italian Participant's stock option agreement; provided, however, that the option
shall be immediately exercisable in full in the event of a Change of Control or
upon termination of the Italian Participant's employment due to death or
Disability.

3. The Italian Option may be exercisable in whole or in part by the Italian
Participant giving written notice of exercise to the Company or the Program
administrator designated from time to time by the Company stating the number of
shares with respect to which the Italian Option is being exercised, in the form
prescribed by the Company. Such exercise shall be effective upon receipt of such
notice by the Company or Program administrator and payment in full to the
Company of the option price.

4. When an Italian Option is exercised only in part, the balance shall
remain exercisable on the same terms as originally applied to the whole Italian
Option and the Company shall issue a new option certificate accordingly as soon
as possible after the partial exercise.

5. The Italian Participant may exercise his Italian Option at any time
after the Italian Option becomes exercisable in accordance with Subparagraph 2
of this Paragraph H and before the Italian Option lapses for any reason stated
in Paragraph G of this Italian Addendum.

B-16

ADDITIONAL PROVISIONS FOR UK PARTICIPANTS

The following additional provisions constitute the 2002 UK Approved Stock
Option Appendix (the "UK Subplan") for UK Participants.

A. PURPOSE OF THE UK SUBPLAN

The Committee has prescribed these additional provisions to the Program to
permit UK Participants to be granted Approved Options under the Program. These
provisions are to be read as a continuation of the Program and only modify the
Program as it relates to Approved Options granted under the Program to UK
Participants. These provisions do not apply to or modify the Program in respect
of any other Participants.

The Board has adopted these additional provisions in accordance with
Article II, Paragraph A of the Program.

In the event of any conflict between the terms of the Program and the UK
Subplan, the terms of the UK Subplan will take precedence insofar as Approved
Options granted to UK Eligible Employees are concerned.

B. DEFINITIONS

1. When used in this UK Subplan, the following additional terms shall have
the meanings set forth below:

"Approved Option" shall mean a right to acquire Common Stock granted under
this UK Subplan to a UK Participant while this UK Subplan is approved by the UK
Inland Revenue under the Taxes Act.

"Associated Company" in relation to the Company shall have the meaning
given by s416 of the Taxes Act.

"Cause" shall mean:

a. conviction of the UK Participant of a felony involving moral
turpitude or dishonesty;

b. the UK Participant, in carrying out his or her duties for the
Company, has been guilty of (1) gross neglect or (2) wilful
misconduct; provided, however, that any act or failure to act by
the UK Participant shall not constitute Cause for this purpose if
such act or failure to act was committed, or omitted, by the UK
Participant in good faith and in a manner reasonably believed to
be in the overall best interests of the Company. The
determination of whether the UK Participant acted in good faith
and that he or she reasonably believed his or her action to be in
the Company's overall best interest will be in the reasonable
judgment of the General Counsel of the Company, or, if the
General Counsel shall have an actual or potential conflict of
interest, the Committee; or

c. the UK Participant's continued wilful refusal to obey any
appropriate policy or requirement duly adopted by the Company and
the continuance of such refusal after receipt of notice.

"Control" shall have the meaning given by section 840 of the Taxes Act.

"Eligible Employee" shall mean:

a. any full-time director employed by a Participating Company and
required to devote not less than 25 hours per week to his duties
(excluding meal breaks); or

b. any other employee of a Participating Company

provided that the director or employee is not precluded by paragraph 8 of
Schedule 9 (material interest in a close company) from participating in this UK
Subplan.

"Exchange Rate" shall mean, on any day it falls to be calculated, the
closing mid-point of the pound/dollar exchange rate quoted in the Financial
Times on that day.

"Group Company" shall mean:

a. the Company; or

b. any company under the Control of the Company.

B-17

"Participating Company" shall mean any Group Company which is permitted by
the Inland Revenue to participate in the Program and which is designated by the
Committee as a Participating Company or a jointly owned company for which the
prior consent of the Inland Revenue has been obtained provided that if any
jointly owned company which has been nominated as a Participating Company ceases
to satisfy the necessary Inland Revenue requirements (unless as a consequence of
such cessation if becomes under the control of the Company) it shall forthwith
cease to be a Participating Company.

"Schedule 9" shall mean Schedule 9 to the Taxes Act.

"Taxes Act" shall mean the Income and Corporation Taxes Act 1988.

"UK Subplan" shall mean the 2002 UK Approved Stock Option Appendix, as
amended from time to time.

2. When used in this UK Subplan, the following terms in Article I,
Provision B shall be modified as set forth below in relation to Approved Options
only:

"Award" shall mean Approved Options granted under the terms of the Program
and the UK Subplan.

"Common Stock" shall mean the Class A ordinary shares of the Company, par
value of $0.01 per share, which satisfy the requirements of paragraph 10-14 of
Schedule 9, and may be either stock previously authorized but unissued, or stock
acquired by the Company.

"Company" shall mean XL Capital Ltd, a Cayman Islands corporation.

"Market Value" shall mean in respect of a share comprised in an Approved
Option:

a. On any day, the market value of a share as derived from the
mid-market price of the Company's Common Stock on the composite
tape of the New York Stock Exchange; or

b. If the shares are not for the time being fully quoted on the New
York Stock Exchange or the Daily Official List of the London
Stock Exchange, the value of a share over which such Approved
Option is granted as determined by the Committee as at the date
of grant and having regard to the provisions of Part VIII of the
Taxation of Chargeable Gains Act 1992 and agreed in advance with
the Inland Revenue Shares Valuation Division. Any reference to
"Fair Market Value" in the other provisions of the Program shall
be construed as though it were a reference to "Market Value" for
the purposes of grants under this UK Subplan.

"UK Participant" shall mean an Eligible Employee to whom a subsisting
Approved Option has been granted under this UK Subplan, and any reference to
"Participant" in the other provisions of this Program shall be construed as if
it were a reference to "UK Participant".

3. Terms and expressions not defined in this Paragraph B have the same
meaning as in section 185 and Schedule 9 of the Taxes Act, where appropriate.

4. References to any statutory provision are to that provision as amended
or re-enacted from time to time.

5. All references in the Program to Stock Appreciation Rights and Incentive
Stock Options shall not apply for the purposes of options granted under this UK
Subplan.

C. ADMINISTRATION

1. Article II, Paragraph A of the Program shall be modified by the addition
of the following words "No amendment to the UK Subplan or to this Program in so
far as it applies to Approved Options shall become effective unless and until it
is approved by the UK Inland Revenue. No Approved Options may be granted unless
and until the UK Subplan is approved by the UK Inland Revenue."

2. The rights and obligations of an option holder under the terms of his
contract of employment are not affected by his participation in this UK Subplan.

B-18

D. ADJUSTMENTS TO SHARE CAPITAL

1. Article II, Paragraph D shall be amended by the deletion of the words
"stock splits in the capitalization of the Company" and replaced by the
following "any capitalization (other than a scrip issue), rights issue,
consolidation, subdivision, reduction or other variation of the share capital of
the Company".

2. Article II, Paragraph D shall be amended by the deletion of the last two
sentences beginning "Also, in instances . . . ." and finishing " . . . . proper
effect to such an event".

3. Article II, Paragraph D of the Program shall be modified so that after
the words "outstanding stock options shall be similarly adjusted", the following
words are inserted:

a. the aggregate amount payable on the exercise of an Approved
Option in full is not increased;

b. no adjustment shall be made without the prior approval of the
Inland Revenue; and

c. following the adjustment the shares of Common Stock continue to
satisfy the conditions specified in paragraph 10-14 inclusive of
Schedule 9."

E. PROVISIONS RELATING TO PERFORMANCE SHARES, RESTRICTED STOCK, RESTRICTED STOCK
UNITS, PERFORMANCE UNIT AWARDS AND PERFORMANCE AWARDS

Articles II Paragraph F, III, IV, VI, VII, VIII, and IX Paragraph D.4 of
the Program shall not apply to Approved Options.

F. GRANT OF APPROVED OPTIONS

1. Approved Options granted to Eligible Employees chosen to participate may
be granted by deed. A single deed of grant may be executed in favour of any
number of Eligible Employees.

2. The first sentence of Article V, Paragraph A.1 shall be deleted and
replaced with the following words;

"All Approved Options granted to UK Participants under this UK Subplan
shall be evidenced by option certificates stating:

a. the date of grant of the Approved Option;

b. the number and class of shares over which the Approved Option is
granted;

c. the option price payable for each share;

d. any condition as to exercise imposed in accordance with Paragraph
F.3 below."

3. The exercise of an Approved Option may be conditional upon the
satisfaction of objective corporate performance condition(s) imposed by the
Committee at the date of grant. Any such performance conditions shall be deemed
waived in the event of a Change of Control, or termination of employment by
reason of death or Disability.

G. PRICE

Article V, Paragraph A.1 shall be modified by the addition of the following
words;

"The option price per share of Approved Options shall not be less than 100
per cent of the Market Value of a share of Common Stock on the date of grant."

H. PERIOD

Article V, Paragraph A.2 shall be modified so that after the words "an ISO"
the words "or an Approved Option" shall be inserted.

I. TIME OF EXERCISE

Article V, Paragraph A.3 shall be deleted and replaced with the following
words;

"Time of Exercise: Subject to the time limit in Article V, Paragraph A.2,
one-third of the Approved Options shall become exercisable on each of the first
three anniversaries of the date of grant; provided, however, that the option

B-19

shall be immediately exercisable in full in the event of a Change of Control or
upon termination of the UK Participant's employment due to his or her death or
Disability.

J. PAYMENT

Article V, Paragraphs A.5.b and A.5.c shall be deleted and replaced with a
new paragraph A.5.b as follows;

"by arrangements with the Company, which arrangements shall have been
approved in advance by the UK Inland Revenue."

K. LIMIT ON VALUE OF APPROVED OPTIONS HELD

The following new paragraph shall be inserted after Article V, Paragraph
A.6;

"Special Rule for Approved Options; notwithstanding any other provision of
the Program, the aggregate Market Value of the shares of Common Stock,
determined at the relevant grant dates (converted to pounds sterling at the
Exchange Rate on the relevant dates of grant), which the UK Participant may
acquire on the exercise in full of all unexercised Approved Options then held by
him under this UK Subplan and any other Inland Revenue approved discretionary
share option plan adopted by the Company and any Associated Company, shall not
exceed GB(pound)30,000 or such other amount as shall from time to time be
specified in paragraph 28 of Schedule 9."

L. LAPSE OF APPROVED OPTIONS

Article V, Paragraph A.8 shall be replaced by the following new paragraph;

1. Approved Options granted under this UK Subplan shall lapse upon the
first of the following events to occur:

a. the tenth anniversary of the date of grant of the Approved
Option;

b. the third anniversary of the Retirement or Disability of the UK
Participant;

c. the first anniversary of the death of the UK Participant;

d. unless otherwise provided in an Employment Agreement between the
UK Participant and the Company, the third anniversary of the
termination of the UK Participant's employment by the Company not
for Cause within two years following a Change of Control (the
"Post-Change Period");

e. ninety days following termination of the UK Participant's
employment by the Company not for Cause outside a Post-Change
Period;

f. the last date of employment of the UK Participant if employment
is terminated by the Company for Cause;

g. the UK Participant being adjudicated bankrupt; or

h. thirty days after the last date of employment of the UK
Participant if employment terminates other than as set forth
above in this paragraph.

M. EXERCISE OF APPROVED OPTIONS

1. No Approved Option may be exercised by an individual at any time when he
is precluded by paragraph 8 of Schedule 9 (material interest in a close company
within the preceding 12 months) from participating in this UK Subplan.

2. No Approved Option may be exercised at any time when the shares which
may be thereby acquired do not satisfy the conditions specified in paragraphs 10
- 14 of Schedule 9.

3. The Approved Option may be exercisable in whole or in part by the UK
Participant giving notice of exercise the Company or the Program administrator
designated from time to time by the Company stating the number of shares with
respect to which the Approved Option is being exercised, in the form prescribed
by the Company. Such exercise shall be effective upon receipt of such notice by
the Company or Program administrator and payment in full to the Company of the
option price.

B-20

4. Shares of Common Stock shall be allotted and issued pursuant to a notice
of exercise within 30 days of the date of exercise and a definitive share
certificate issued to the option holder in respect thereof. Save for any rights
determined by reference to a date preceding the date of allotment, such shares
of Common Stock shall rank pari passu with the other shares of the same class in
issue at the date of allotment.

5. When an Approved Option is exercised only in part, the balance shall
remain exercisable on the same terms as originally applied to the whole Approved
Option and the Company shall issue a new option certificate accordingly as soon
as possible after the partial exercise.

6. The Approved Option may be exercised by the personal representatives of
a deceased UK Participant during the period of one year following the date of
death. The Approved Option may not be assigned or transferred in any other
circumstances, and any purported transfer, assignment, or charge shall cause the
Approved Option to lapse forthwith.

7. The UK Participant may exercise his Approved Option at any time after
the Approved Option becomes exercisable in accordance with Paragraph I above and
before the Approved Option lapses for any reason stated in Paragraph L of this
UK Subplan.

N. EFFECTIVE DATES

In relation to Approved Options, Article VIII Paragraph E shall be modified
so that after the words "shareholder approval" the words "and the approval of
the UK Inland Revenue to the UK Subplan" shall be inserted.

O. EXCHANGE OF APPROVED OPTIONS ON A TAKEOVER

1. If any company ("the Acquiring Company") obtains Control of the Company
within the circumstances specified in paragraph 15(1) of Schedule 9 to the Taxes
Act, any UK Participant may, by agreement with the Acquiring Company at any time
within the period specified in paragraph 15(2) of that Schedule 9, release his
Approved Option ("the Old Option") in consideration of the grant to him of a new
approved option ("the New Option") which is equivalent to the Old Option (by
virtue of satisfying the requirements of paragraph 15(3) of Schedule 9 of the
Taxes Act) but relates to stock in a different company (whether the Acquiring
Company itself or another company within its group).

2. Where any New Options are granted pursuant to Paragraph O.1 above they
shall be regarded for the purposes of the subsequent application of the
provisions of this UK Subplan as having been granted at the time when the
corresponding Old Options were granted and, with effect from the date on which
the New Options are granted:

a. save for the definitions of "Participating Company" and "Group
Company" in Paragraph B of this UK Subplan, references to "the
Company" (including the definition in Paragraph B of this
Subplan) shall be construed as being references to the Acquiring
Company or such other company to whose stock the New Options
relate; and

b. references to "Common Stock" (including the definition in
Paragraph B of this Subplan) shall be construed as being
references to stock in the Acquiring Company or stock in such
other company to which the New Options relate but references to
Participating Company shall continue to be construed as if
references to the Company were references to XL Capital Ltd.

B-21

APPENDIX C

XL CAPITAL LTD

DIRECTORS STOCK & OPTION PLAN

(AS AMENDED AND RESTATED EFFECTIVE AS OF MARCH 7, 2003)

1. PURPOSES.

The purposes of the Directors Stock & Option Plan are to advance the
interests of XL Capital Ltd and its shareholders by providing a means to
attract, retain, and motivate Directors of the Company upon whose judgment,
initiative and efforts the continued success, growth and development of the
Company is dependent.

2. DEFINITIONS.

For purposes of the Plan, the following terms shall be defined as set forth
below:

(a) "Board" means the Board of Directors of the Company.

(b) "Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to
include successor provisions thereto and regulations thereunder.

(c) "Company" means XL Capital Ltd, a corporation organized under the laws
of the Cayman Islands, or any successor corporation.

(d) "Director" means a non-employee member of the Board.

(e) "Fair Market Value" means, with respect to Shares on any day, the
following:

(i) If the Shares are at the time listed or admitted to trading on
any stock exchange, then the Fair Market Value shall be the
closing selling price per share of Shares on the day preceding
the date in question on the stock exchange which is the primary
market for the Shares, as such price is officially quoted on such
exchange. If there is no reported sale of Shares on such exchange
on such date, then the Fair Market Value shall be the closing
selling price on the exchange on the last preceding date for
which such quotation exists; and

(ii) If the Shares are not at the time listed or admitted to trading
on any stock exchange but are traded in the over-the-counter
market, the Fair Market Value shall be the closing selling price
per share of Shares on the day preceding the date in question, as
such price is reported by the National Association of Securities
Dealers through the NASDAQ National Market System or any
successor system. If there is no reported closing selling price
for Shares on such date, then the closing selling price on the
last preceding date for which such quotation exists shall be
determinative of Fair Market Value.

(f) "Fiscal Year" means the calendar year.

(g) "Option" means a right, granted under Section 5, to purchase Shares.

(h) "Participant" means a Director who has been granted an Option,
Restricted Stock Award, Restricted Stock Unit Award or who has elected
to defer compensation under the Plan.

(i) "Plan" means this Directors Stock & Option Plan.

(j) "Restricted Stock Award" means an award granted under Section 5(g) of
the Plan.

(k) "Restricted Stock Unit Award" means an award granted under Section
5(h) of the Plan.

(l) "Shares" means class A ordinary shares, $.01 par value per share, of
the Company.

3. ADMINISTRATION.

The Plan shall be administered by the Board. Subject to the express
provisions of the Plan, the Board shall have full and exclusive authority to
interpret the Plan, to make all determinations with respect to awards to be
granted under the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, and to make all other determinations necessary or
advisable in the implementation and administration of the Plan. The Board's
interpretation and construction of the Plan shall be conclusive and binding on
all persons.

C-1

4. SHARES SUBJECT TO THE PLAN.

(a) Subject to adjustment as provided in Section 5(j), (i) the total number
of Shares reserved for issuance solely pursuant to Section 6 of the Plan shall
be 344,702, and (ii) an additional 300,000 Shares shall be reserved for issuance
as Options, Restricted Stock Awards or Restricted Stock Unit Awards under
Section 5 of the Plan. If any Shares subject to an Option, Restricted Stock
Award or Restricted Stock Unit Award hereunder are forfeited, cancelled or
surrendered, any Shares counted against the number of Shares reserved and
available under the Plan with respect to such Option, Restricted Stock Award or
Restricted Stock Unit Award shall, to the extent of any such forfeiture,
cancellation or surrender, again be available for issuance as such an award
under the Plan.

(b) Any Shares issued hereunder may consist, in whole or in part, of
authorized and unissued Shares or treasury Shares including Shares acquired by
purchase in the open market or in private transactions.

5. DIRECTOR'S AWARDS.

(a) INITIAL OPTION GRANT. Each Director who is first elected to the Board
subsequent to March 7, 2003 shall be granted an Option to purchase 5,000 Shares
(or such other number of Shares, as determined from time to time by the Board)
on the date such Director is first elected to the Board and such Option shall
have an exercise price per Share equal to 100% of the Fair Market Value per
Share at the date of grant; provided, however, that such price shall be at least
equal to the par value of a Share.

(b) ANNUAL OPTION GRANTS. On the date of each annual meeting of
shareholders of the Company, beginning with the annual meeting for 2004, each
Director in office immediately following the annual meeting shall automatically
be granted an Option to purchase 5000 Shares (or such other number of Shares, as
determined from time to time by the Board) with an exercise price per Share
equal to 100% of the Fair Market Value per Share at the date of grant; provided,
however, that such price per share shall be at least equal to the par value of a
Share.

(c) EXERCISABILITY. Each Option granted to a Director under Section 5(a) or
(b) of this Plan shall be fully exercisable on the date of grant and shall
expire on the tenth anniversary of the date of grant, and exercisability of such
an Option shall not be dependent upon the Director's continuing service on the
Board.

(d) TIME AND METHOD OF EXERCISE. The exercise price of an Option shall be
paid to the Company at the time of exercise in cash or through delivery of
Shares owned by the Director for more than six months having an aggregate Fair
Market Value on the date of exercise equal to the exercise price.

(e) DISCRETIONARY OPTIONS. Without limiting the operation of Section 5(a)
or (b) hereof, the Board may also make discretionary Option grants to Directors
hereunder. The Board may determine, in its discretion, the Directors to whom any
such Options are to be granted, the number of Shares to be subject to each such
Option and the other terms and conditions of such Options, consistent with the
terms of the Plan. The exercise price per share of any Option shall not be less
than 100% of the Fair Market Value of a Share on the date of grant, and the term
of an Option shall not be longer than ten years.

(f) NO OPTION REPRICING. Except as provided in Section 5(j) hereof relating
to certain antidilution adjustments, unless the approval of shareholders of the
Company is obtained, Options issued under the Plan shall not be amended to lower
their exercise prices and they will not be exchanged for other stock options
with lower exercise prices.

(g) RESTRICTED STOCK AWARDS. The Board may grant Restricted Stock Awards to
Directors on such terms and conditions, consistent with the provisions of this
Plan, as determined by the Board. Restricted Stock Awards shall be subject to
restrictions on transferability, forfeiture conditions and other restrictions,
if any, as the Board may impose, which restrictions and forfeiture conditions
may lapse under such circumstances as the Board may determine. A Director who is
granted a Restricted Stock Award shall have all of the rights of a shareholder
prior to vesting of the Restricted Stock Award, including, without limitation,
the right to vote the Restricted Stock and the right to receive dividends
thereon.

(h) RESTRICTED STOCK UNIT AWARDS. The Board may grant Restricted Stock Unit
Awards to Directors on such terms and conditions, consistent with the provisions
of this Plan, as determined by the Board. Restricted Stock Unit Awards will
provide for the delivery of a number of Shares equal to the number of Restricted
Stock Units at the time and subject to the terms and conditions set forth by the
Board. Delivery of Shares pursuant to the Restricted Stock Unit Awards will
occur upon expiration of the deferral period specified by the Board. In
addition, Restricted Stock Unit Awards shall be subject to such restrictions,
including forfeiture conditions, as the Board may impose.

C-2

(i) TRANSFERABILITY. The Options, Restricted Stock Awards and Restricted
Stock Unit Awards granted under the Plan may be assigned or otherwise
transferred only: (i) by will or the laws of descent and distribution; (ii) by
valid beneficiary designation taking effect at death made in accordance with
procedures established by the Board; or (iii) solely in the case of Options, by
the Director to members of his or her "immediate family", to a trust established
for the exclusive benefit of solely one or more members of the Director's
"immediate family" and/or the Director, or to a partnership or other entity
pursuant to which the only owners are one or more members of the Director's
"immediate family" and/or the Director. Any Option held by the transferee will
continue to be subject to the same terms and conditions that were applicable to
the Option immediately prior to the transfer, except that the Option will be
transferable by the transferee only by will or the laws of descent and
distribution. For purposes hereof, "immediate family" means the Director's
children, stepchildren, grandchildren, parents, stepparents, grandparents,
spouse, siblings (including half brothers and sisters), in-laws, and
relationships arising because of legal adoption.

(j) ADJUSTMENTS. In the event that subsequent to the Effective Date any
dividend in Shares, recapitalization, Share split, reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other such change, affects the Shares such that they are
increased or decreased or changed into or exchanged for a different number or
kind of Shares or other securities of the Company or of another corporation,
then in order to maintain the proportionate interest of the Directors and
preserve the value of the awards made hereunder (i) there shall automatically be
substituted for each Share subject to an unexercised Option, each Restricted
Stock Award, each Restricted Stock Unit Award, and each Share to be issued on a
formula basis under this Section 5 subsequent to such event, the number and kind
of Shares or other securities into which each outstanding Share shall be changed
or for which each such Share shall be exchanged, (ii) the exercise price of
outstanding Options shall be increased or decreased proportionately so that the
aggregate purchase price for the Shares subject to any unexercised Option shall
remain the same as immediately prior to such event, and (iii) the number and
kind of Shares available for issuance under the Plan shall be equitably adjusted
in order to take into account such transaction or other change.

(k) NONQUALIFIED OPTIONS. All Options granted under the Plan shall be
nonqualified options, not entitled to special tax treatment under Section 422 of
the Code.

6. DIRECTOR'S FEES.

(a) Each Director may make an irrevocable election on or before the October
31 immediately preceding the beginning of a Fiscal Year of the Company, by
written notice to the Company, to defer payment of all or a designated portion
(in increments of $5,000) of the cash compensation otherwise payable as his or
her annual retainer for service as a Director for the next Fiscal Year.
Notwithstanding the foregoing, a Director who is first elected or appointed to
the Board may make an election under this Section 6(a) within 60 days of such
election or appointment to the Board in respect of annual retainer fees payable
after the date of the election.

(b) Deferrals of compensation hereunder shall continue until the Director
notifies the Company in writing, on or prior to the October 31 immediately
preceding the commencement of any Fiscal Year, that he wishes his compensation
for such Fiscal Year and all succeeding periods to be paid in cash on a current
basis.

(c) All compensation which a Director elects to defer pursuant to this
Section 6 shall be credited in the form of units to a bookkeeping account
maintained by the Company in the name of the Director. Each such unit shall
represent the right to receive one Share at the time determined pursuant to the
terms of the Plan. In consideration for forgoing cash compensation, the number
of units so credited will be equal to the number of Shares having an aggregate
Fair Market Value (on the date the compensation would otherwise have been paid)
equal to 110% of the amount by which the Director's cash compensation was
reduced pursuant to the deferral election. Notwithstanding any other provision
of this Plan, in the case of any deferral election made prior to the date of
approval of this Plan by the affirmative votes of the holders of a majority of
voting securities of the Company, the crediting of Share units to the Director's
bookkeeping account shall be contingent on such shareholder approval. If such
shareholder approval is not obtained within one year from the Effective Date of
this Plan, compensation deferred pursuant to a prior election hereunder will be
paid to the Director in cash at the end of such year.

(d) As of each date on which a cash dividend is paid on Shares, there shall
be credited to each account that number of units (including fractional units)
determined by (i): multiplying the amount of such dividend (per Share) by the
number of units in such account; and (ii) dividing the total so determined by
the Fair Market Value of a Share on the date of payment of such cash dividend.
The additions to a Director's account pursuant to this Section 6(d) shall
continue until the Director's account is fully paid.

C-3

(e) The account of a Director shall be distributed (in the form of one
Share for each Share unit) either (x) in a lump sum at the time of termination
of the Director's service on the Board or (y) in up to five annual installments
commencing at the time of termination of the director's service on the Board, as
elected by the Director. Each Director's distribution election must be made in
writing within the later of (A) 60 days after December 1, 1998 or (B) 60 days
after the Director first becomes eligible to participate in the Plan; PROVIDED,
HOWEVER, that a Director may make a new distribution election with respect to
the entire portion of his or her account subject to this Section 6(e) so long as
such election is made at least one year in advance of the Director's termination
of service on the Board. In the case of an account distributed in installments,
the amount of Shares distributed in each installment shall be equal to the
number of Share units in the Director's account subject to such installment
distribution at the time of the distribution divided by the number of
installments remaining to be paid.

(f) The right of a Director to amounts described under this Section 6
(including Shares) shall not be subject to assignment or other disposition by
him or her other than by will or the laws of descent and distribution. In the
event that, notwithstanding this provision, a Director makes a prohibited
disposition, the Company may disregard the same and discharge its obligation
hereunder by making payment or delivery as though no such disposition had been
made.

(g) Each Director may make an election in writing on or prior to each
October 31 to receive the Director's annual retainer fees payable in the
following Fiscal Year in the form of Shares instead of cash. Any Shares elected
shall be payable at the time cash retainer fees are otherwise payable, and the
number of Shares distributed shall be equal to the amount of the annual retainer
fee otherwise payable on such payment date divided by the Fair Market Value of a
Share on such date. Notwithstanding the foregoing, a Director who is first
elected or appointed to the Board may make an election under this Section 6(g)
within 60 days of such election or appointment to the Board in respect of annual
retainer fees payable after the date of the election. Any election made under
this Section 6(g) shall remain in effect unless and until a new election is made
in accordance with the provisions of this Section 6(g).

(h) In the event that any dividend in Shares, recapitalization, Share
split, reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other such change, affects the
Shares such that they are increased or decreased or changed into or exchanged
for a different number or kind of Shares, other securities of the Company or of
another corporation or other consideration, then in order to maintain the
proportionate interest of the Directors and preserve the value of the Directors'
Share units, there shall automatically be substituted for each Share unit a new
unit representing the number and kind of Shares, other securities or other
consideration into which each outstanding Share shall be changed. The
substituted units shall be subject to the same terms and conditions as the
original Share units.

7. GENERAL PROVISIONS.

(a) COMPLIANCE WITH LEGAL AND TRADING REQUIREMENTS. The Plan shall be
subject to all applicable laws, rules and regulations, including, but not
limited to, U.S. federal and state laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may be required. The
Company, in its discretion, may postpone the issuance or delivery of Shares
under the Plan until completion of such stock exchange or market system listing
or registration or qualification of such Shares or other required action under
any U.S. state or federal law, rule or regulation or under laws, rules or
regulations of other jurisdictions as the Company may consider appropriate, and
may require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Shares in compliance with applicable laws, rules and regulations. No
provisions of the Plan shall be interpreted or construed to obligate the Company
to register any Shares under U.S. federal or state law or under the laws of
other jurisdictions.

(b) NO RIGHT TO CONTINUED SERVICE. Neither the Plan nor any action taken
thereunder shall be construed as giving any Director the right to be retained in
the service of the Company or any of its subsidiaries or affiliates, nor shall
it interfere in any way with the right of the Company or any of its subsidiaries
or affiliates to terminate any Director's service at any time.

(c) TAXES. The Company is authorized to withhold from any Shares delivered
under this Plan or on exercise of an Option any amounts of withholding and other
taxes due in connection therewith, and to take such other action as the Company
may deem advisable to enable the Company and a Participant to satisfy
obligations for the payment of any withholding taxes and other tax obligations
relating thereto. This authority shall include authority to withhold

C-4

or receive Shares or other property and to make cash payments in respect thereof
in satisfaction of a Participant's tax obligations.

(d) AMENDMENT. The Board may amend, alter, suspend, discontinue, or
terminate the Plan without the consent of shareholders of the Company or
Participants, except that any such amendment, alteration, suspension,
discontinuation, or termination shall be subject to the approval of the
Company's shareholders if such shareholder approval is required by any U.S.
federal law or regulation or the rules of any stock exchange or automated
quotation system on which the Shares may then be listed or quoted; PROVIDED,
HOWEVER, that, without the consent of an affected Participant, no amendment,
alteration, suspension, discontinuation, or termination of the Plan may impair
the rights or, in any other manner, adversely affect the rights of such
Participant under any award theretofore granted to him or her or compensation
previously deferred by him or her hereunder.

(e) UNFUNDED STATUS OF AWARDS. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to a Restricted Stock Unit Award
or a deferral election, nothing contained in the Plan shall give any such
Participant any rights that are greater than those of a general unsecured
creditor of the Company; PROVIDED, HOWEVER, that the Company may authorize the
creation of trusts or make other arrangements to meet the Company's obligations
under the Plan to deliver cash, Shares, or other property pursuant to any award,
which trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Company otherwise determines with the consent of
each affected Participant.

(f) NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for approval shall
be construed as creating any limitations on the power of the Board to adopt such
other compensation arrangements as it may deem desirable, including, without
limitation, the granting of options on Shares and other awards otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.

(g) NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered
pursuant to the Plan. Cash shall be paid in lieu of such fractional Shares.

(h) GOVERNING LAW. The validity, construction, and effect of the Plan shall
be determined in accordance with the laws of the State of New York, without
giving effect to principles of conflict of laws thereof.

(i) EFFECTIVE DATE; PLAN TERMINATION. The Plan as amended and restated
shall become effective as of March 7, 2003 (the "Effective Date"), upon approval
by the shareholder of the Company. The Plan shall terminate as to future awards
on April 28, 2008 or, if earlier, at such time as no Shares remain available for
issuance pursuant to Section 4, and the Company has no further obligations with
respect to any award granted or compensation deferred under the Plan.

(j) TITLES AND HEADINGS. The titles and headings of the Sections in the
Plan are for convenience of reference only. In the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.

C-5

XL CAPITAL [LOGO] 2003 Annual General Meeting
May 9, 2003
Hamilton, Bermuda

THERE ARE THREE WAYS TO VOTE YOUR PROXY

TELEPHONE

This method is available for residents of the U.S. and Canada. On a touch tone
telephone, call TOLL FREE 1 - 800 - 786 - 5337, 24 hours a day, 7 days a week.
You will be asked to enter ONLY the CONTROL NUMBER shown below. Have your Proxy
Card ready, then follow the prerecorded instructions. Available until 5 p.m.
Eastern Time on Thursday, May 8, 2003.

INTERNET

Visit the Internet website at HTTP://PROXY.GEORGESON.COM. Enter the COMPANY
NUMBER AND CONTROL NUMBER shown below and follow the instructions on your
screen. Available until 5 p.m. Eastern Time on Thursday, May 8, 2003.

MAIL

Simply complete, sign and date your Proxy Card and return it in the postage-paid
envelope. If you are delivering your proxy by telephone or the Internet, please
do not mail your Proxy Card.

------------------ --------------------
COMPANY NUMBER CONTROL NUMBER
------------------ --------------------

TO DELIVER YOUR PROXY BY MAIL, PLEASE DETACH PROXY CARD HERE
--------------------------------------------------------------------------------

----- PLEASE MARK YOUR
X VOTE AS INDICATED
----- IN THIS EXAMPLE.

--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSALS 1 THROUGH 4 (INCLUSIVE).
--------------------------------------------------------------------------------

FOR all nominees WITHHOLD
listed (except as AUTHORITY
marked to the to vote for all
contrary) nominees

1. To elect the following four Nominees [ ] [ ]
as Class II Directors to hold office
until 2006:

(01) D. R. Comey (02) B. M. O'Hara
(03) J. T. Thornton (04) J. W. Weiser

INSTRUCTION: To withhold authority to vote for any nominee listed,
write that nominee's name in the space provided below:

------------------------------------------------------------------

FOR AGAINST ABSTAIN

2. To appoint PricewaterhouseCoopers [ ] [ ] [ ]
LLP, New York, to act as the
Independent Auditors of the Company
for the fiscal year ending December
31, 2003.

FOR AGAINST ABSTAIN

3. To approve the amendment and [ ] [ ] [ ]
restatement of the Company's 1991
Performance Incentive Program.

FOR AGAINST ABSTAIN

4. To approve the amendment and [ ] [ ] [ ]
restatement of the Company's
Directors Stock & Option Plan.

DATE: , 2003
--------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
SIGNATURE(S)

IMPORTANT: Please sign exactly as your name(s) appear(s) hereon. If you are
acting as attorney-in-fact, corporate officer, or in a fiduciary capacity,
please indicate the capacity in which you are signing.

PLEASE DETACH PROXY CARD HERE
--------------------------------------------------------------------------------

P
R
O
X
Y
XL CAPITAL LTD

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned holder of class A ordinary shares of XL Capital Ltd hereby
appoints Brian M. O'Hara or, failing him, Paul S. Giordano to be its proxy and
to vote for the undersigned on all matters arising at the meeting or any
adjournment thereof and to represent the undersigned at the Annual General
Meeting of Class A Ordinary Shareholders of XL Capital Ltd to be held on May 9,
2003 in Hamilton, Bermuda.

THE SHARES REPRESENTED HEREBY WILL BE VOTED WITH THE INSTRUCTIONS CONTAINED
HEREIN. IF NO INSTRUCTION IS GIVEN, THE SHARES WILL BE VOTED "FOR" ITEMS 1
THROUGH 4 (INCLUSIVE) ON THE REVERSE HEREOF, ALL SAID ITEMS BEING FULLY
DESCRIBED IN THE NOTICE OF SUCH MEETING AND THE ACCOMPANYING PROXY STATEMENT,
RECEIPT OF WHICH ARE ACKNOWLEDGED.THE UNDERSIGNED RATIFIES AND CONFIRMS ALL THAT
SAID PROXIES OR THEIR SUBSTITUTES MAY LAWFULLY DO BY VIRTUE HEREOF.

(Continued, and to be marked, dated and signed, on the other side)

------------------
SEE REVERSE SIDE
------------------

XL CAPITAL [LOGO] 2003 Annual General Meeting
May 9, 2003
Hamilton, Bermuda

Simply complete, sign and date
your Card and return it in the
postage-paid envelope.

PLEASE DETACH PROXY CARD HERE
--------------------------------------------------------------------------------

----- PLEASE MARK YOUR
X VOTE AS INDICATED
----- IN THIS EXAMPLE.

1. To elect the following four Nominees [ ] [ ]
as Class II Directors to hold office
until 2006:

(01) D. R. Comey (02) B. M. O'Hara
(03) J. T. Thornton (04) J. W. Weiser

INSTRUCTION: To withhold authority to vote for any nominee listed,
write that nominee's name in the space provided below:

------------------------------------------------------------------

FOR AGAINST ABSTAIN

2. To appoint PricewaterhouseCoopers [ ] [ ] [ ]
LLP, New York, to act as the
Independent Auditors of the Company
for the fiscal year ending December
31, 2003.

FOR AGAINST ABSTAIN

3. To approve the amendment and [ ] [ ] [ ]
restatement of the Company's 1991
Performance Incentive Program.

FOR AGAINST ABSTAIN

4. To approve the amendment and [ ] [ ] [ ]
restatement of the Company's
Directors Stock & Option Plan.

DATE: , 2003
--------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
SIGNATURE(S)

PLEASE DETACH PROXY CARD HERE
--------------------------------------------------------------------------------

XL CAPITAL LTD

VOTING INSTRUCTION FORM FOR SHARES OF XL CAPITAL LTD
HELD BY PARTICIPANTS IN THE XL AMERICA EMPLOYEE SAVINGS PLAN

The Trustee for the above mentioned plan is hereby directed to vote, as
indicated on the reverse side of this Voting Instruction Form (VIF), in person
or by proxy, all of the class A ordinary shares of XL Capital Ltd allocated to
the undersigned's account at the 2003 Annual Meeting of XL Capital Ltd to be
held on Friday, May 9, 2003 and at any adjournment(s) thereof, in accordance
with the instructions notice on the reverse side. Receipt of notice of the
meeting and Proxy Statement is hereby acknowledged. The undersigned understands
that this VIF, properly completed, must be received no later than 5:00 p.m.,
Eastern time, on May 6, 2003, in order for the shares to be voted in accordance
with the instructions set forth on the reverse side. The undersigned also
understands that, by signing, dating and returning this VIF, the Trustee or
proxies will vote for each proposal for which voting instructions are not
provided and in the discretion of the Trustee or proxies on all matters that may
properly come before the Annual Meeting. The undersigned further understands
that the Trustee intends to vote or grant proxies with respect to all
uninstructed shares held under the Plan in the same proportion as the shares of
all Plan participants who have timely delivered properly executed voting
instructions, unless otherwise required by law.

UNDER THE TERMS OF THE PLAN,THE TRUSTEE WILL HOLD YOUR
VOTING INSTRUCTION IN CONFIDENCE.

(Continued, and to be marked, dated and signed, on the other side)