the actual results that we expect to achieve in future periods. This report does contain our first quarter to quarter comparison of our business in 2004 and 2005 and, in general, reveals that our insurance and reinsurance businesses each have grown and the insurance segment has become a bigger proportion of our business in the first quarter of 2005 as compared to the first quarter of 2004. We expect that this trend will continue throughout 2005. This trend is not expected to occur evenly during the quarters as the reinsurance business has traditionally been more concentrated in the first and third quarter.

We generated approximately $142.9 million of net premiums written after premiums ceded on purchased reinsurance protection and $91.5 million of net premiums earned during the three months ended March 31, 2005 as compared to approximately $112.5 million of net premiums written after premiums ceded on purchased reinsurance protection and $27.2 million of net premiums earned during the three months ended March 31, 2004.

The primary drivers of growth in our lines of business and net written premiums are the continued development of our relationships with important insurance and reinsurance brokers, our success during the January 2005 renewal season in the reinsurance industry, and the development of specialty insurance lines of business including Syndicate 4000. Our specialty insurance segment demonstrated continued premium growth during the three months ended March 31, 2005 and our Lloyd's segment increased its underwriting specialty insurance business following receipt of regulatory approvals during the fourth quarter of 2004. Our specialty insurance segment continues to become an increasingly significant contributor to our overall business and represented approximately 38.8% of our total gross premiums written in the three months ended March 31, 2005 compared to 32.0% in the three months ended March 31, 2004. We believe that our net premiums written and net premiums earned will increase as we further develop our current businesses and enter new product lines and insurance and reinsurance markets. In addition, we believe that our portfolio is not yet fully diversified either among classes of risks or source of origination. For example, during the three months ended March 31, 2005, we grew our residential builders' and contractors' program, which we refer to as the HBW program, that accounted for approximately 61.3% of our specialty insurance segment gross written premium. We expect that this concentration will remain significant through the remainder of 2005. In addition, the HBW program and the other insurance programs we write, accounted for 62.1 % of our specialty insurance segment gross written premium in the three months ended March 31, 2005. We expect that the other insurance programs we write will have increasing gross written premium through the remainder of 2005 and that the concentration of our programs business in our specialty insurance segment will continue to be significant. As described below, our specialty reinsurance segment showed significant concentrations across certain risk classes. In addition, our specialty reinsurance segment generated approximately 43.9% and 21.1% of its gross written premiums through two brokers. We expect, but cannot assure you, that our portfolio will continue to diversify through 2005.

A number of insurance companies have been subpoenaed by U.S. regulators in connection with investigations relating to business and accounting practices in the insurance industry. To date, we have not been served any subpoenas. We have received, and have responded to, inquiries from the North Carolina Department of Insurance and the Colorado Department of Insurance. From January 1, 2004 to September 30, 2004 we were party to placement service agreements, known as PSAs and market service agreements, known as MSAs, with Aon Corporation and Marsh Inc. and have paid a total of $31,000 under these agreements as of March 31, 2005. We have accrued approximately $1.1 million in addition to the amount we have already paid under these agreements. At this time, it is not possible for us to determine the impact of any outcome of these investigations on our future results of operations. In addition, we do not know what the ramifications of the brokers' stated intent to formulate a different commission structure will be on our future results of operations, financial condition or liquidity as brokers seek our participation in this commission structure.

With respect to market conditions, we believe that premium rates continue to remain unchanged with exceptions in the property insurance and property and casualty reinsurance lines of business where we see deteriorating pricing trends. In the professional liability insurance market, where we had previously seen deteriorating pricing trends, we have seen recent signs of greater rate stability, and

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more prudent pricing appears to be taking hold. We believe that favorable market conditions will continue to exist in the markets we are targeting during the remainder of 2005. We will also continue to seek opportunities to provide insurance and reinsurance in areas that require both capacity and highly technical underwriting expertise.

Segment Information

We organize our business along five product lines and three geographies. Our two traditional product lines are specialty insurance and specialty reinsurance. We also have programs and structured products product lines. The products we offer our clients are written either as traditional insurance or reinsurance policies or are provided as a program, a structured product or a combination of a traditional policy with a program or a structured product. Our fifth product line is our technical services line. However, for financial reporting purposes, some of our product lines are aggregated for purposes of the reportable segment disclosure included below:

•

Specialty insurance.    Our specialty insurance segment excludes our Lloyd's operations, which, due to its characteristics, has its own reportable segment as described below. Our specialty insurance segment includes our traditional, structured and program specialty insurance products. Our traditional specialty insurance products include technical risk property, professional liability, environmental liability, fidelity and crime, surety, trade credit and political risk and marine and aviation. Our specialty insurance segment writes business both on a direct basis with insured clients or by reinsuring policies that are issued on our behalf by third party insurers and reinsurers. Our specialty insurance programs include the HBW program.

•	Specialty reinsurance.    Our specialty reinsurance segment includes our traditional, structured and program specialty reinsurance products. Our specialty reinsurance products include property, casualty and marine and aviation products while our structured reinsurance products include our trade credit business lines. We currently do not write reinsurance on a program basis.

•	Lloyd's.    Syndicate 4000 at Lloyd's, our Lloyd's segment, was created in December 2004 and currently writes traditional specialty insurance products including professional liability (professional indemnity and directors' and officers' coverage), fidelity and crime (financial institutions). We also plan to write specie and fine art coverages.

•

Technical services.    Our technical services segment provides diversified environmental investigation, remediation and engineering services, assessment services, other technical and information management services primarily in the environmental area in the U.S. Our technical services segment also provides technical and information management services to our specialty insurance and reinsurance segments.

The determination of these reportable segments reflects how we manage and monitor the performance of our insurance and reinsurance operations. We refer to the specialty insurance, specialty reinsurance and Lloyd's segments as our underwriting segments. We refer to our risk consulting and management operations as our technical services segment. We evaluate each segment based on its underwriting or technical services results, as applicable, including items of revenue and expense that are associated with, and directly related to, each segment.

We allocate corporate general and administrative expenses to each segment based upon each product line's allocated capital for the current reporting period. We allocate capital to each of our product lines through the estimated value-at-risk method, which uses statistical analyses of historical market trends and volatility to estimate the probable amounts of capital at risk for each reporting period. We do not manage our assets by segment and, as a result, net investment income, and depreciation and amortization are not evaluated at the segment level.

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Main Drivers of our Results

Revenues

We derive the majority of our revenues from two principal sources: premiums from policies written by our underwriting segments and investment income from our investment portfolios.

We record premiums written at the time that there is sufficient evidence of agreement to the significant terms of the contract but no earlier than the effective date of the policy. The amount of our insurance and reinsurance premiums written depends on the number and type of policies we write, the amount of reinsurance protection we provide, as well as prevailing market prices. Furthermore, the amount of net premiums earned depends upon the type of contracts we write, the contractual periods of the contracts we write, the inception date of the contracts, the expired portions of the contract periods and the type of purchased reinsurance protection. Because of all these factors, the amount of premiums written and ceded may not result in a correlative level of profitability.

Our investment income depends on the average invested assets in our investment portfolios and the yield that we earn on those invested assets. Our investment yield is a function of market interest rates and the credit quality and maturity period of our invested assets. Our investment portfolio consists principally of fixed income securities, short-term liquidity funds, cash, and cash equivalents. In addition, we realize capital gains or losses on sales of investments as a result of changing market conditions, including changes in market interest rates and changes in the credit quality of our invested assets. Under U.S. GAAP, our available-for-sale investments are carried at fair market value with unrealized gains and losses on the investments included on our balance sheet in accumulated other comprehensive income net of income taxes as a separate component of shareholders' equity. Our trading investments that relate to deposits associated with non-risk bearing contracts are recorded at estimated fair value with the change in fair value included in net realized gains and losses on investments in the consolidated statement of operations and comprehensive loss. The objective of our current investment strategy is to preserve investment principal, maintain liquidity and to manage duration risk between investment assets and insurance liabilities, while maximizing investment returns through a diversified portfolio. Our investment returns are benchmarked against certain specified indices. However, the volatility in claim payments and the interest rate environment can significantly affect the returns we generate on our investment portfolios.

Our technical services segment operates primarily in the environmental area and its revenues principally comprise fees from technical services and risk management services provided under various short-term service contracts and from revenues for services performed by subcontractors we engage on behalf of clients. We also generate revenues from remediation fees which are used to extinguish environmental remediation obligations that we have assumed under contracts of remediation. The amount of technical services and remediation fees and subcontractor revenues is a function of political and economic conditions and the impact these conditions have on clients' discretionary spending on environmental projects.

Expenses

Our expenses primarily consist of net loss and loss expenses, acquisition expenses, direct technical services costs and general and administrative expenses.

Net loss and loss expenses, which are net of loss and loss expenses recovered under our ceded reinsurance contracts, depend on the number and type of insurance and reinsurance contracts we write and reflect our best estimate of ultimate losses and loss expenses we expect to incur on each contract written using various actuarial analyses. Actual losses and loss expenses will depend on actual costs to settle insurance and reinsurance claims. Our ability to accurately estimate expected ultimate loss and loss expense at the time of pricing each insurance and reinsurance contract and the occurrence of unexpected high loss severity catastrophe events will be critical factors in determining our profitability.

Acquisition expenses, which are net of expenses recovered under our ceded reinsurance contracts, consist principally of commissions, fees, brokerage and tax expenses that are directly related to

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obtaining and writing insurance and reinsurance contracts. Typically, acquisition expenses are based on a certain percentage of the premiums written on contracts of insurance and reinsurance. These expenses are a function of the number and type of insurance and reinsurance contracts written.

General and administrative expenses consist primarily of personnel related expenses, information technology, other operating overheads and professional fees. From time to time we engage administrative service providers and legal, accounting, tax and financial advisors. General and administrative expenses are a function of the development of our business and infrastructure, including the growth in personnel and the volume of insurance and reinsurance contracts written. These general and administrative expenses may be incurred directly by a segment or indirectly at the corporate level.

We also incur expenses directly related to and arising from our technical services and environmental remediation activities. These direct costs primarily include expenses associated with direct technical labor, subcontractors we engage on behalf of our technical services clients, and other technical services or remediation contract related expenses. These costs are a function of, and are proportional to, the level of technical services and remediation revenues earned from the provision of technical services and completion of remediation activities.

Results of Operations

The following is a discussion of our consolidated results of operations for the three months ended March 31, 2005 and 2004.

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Three months ended March 31, 2005 and 2004

Results of operations for the three months ended March 31, 2005 and 2004 were as follows:

				Three months ended March 31, 2005				Three months ended March 31, 2004
				Restated
				($ in thousands)
Revenues
Gross premiums written				$	172,726			$	118,729
Net premiums written				$	142,877			$	112,455
Net premiums earned				$	91,486			$	27,235
Technical services revenues					7,150				6,507
Net investment income					5,225				3,235
Net realized (losses) gains on investments					(483	)			1,195
Net foreign exchange (losses) gains					(112	)			224
Other income					1,686				191
Total revenues					104,952				38,587
Expenses
Net losses and loss expenses					(57,496	)			(15,895	)
Acquisition expenses					(20,477	)			(6,617	)
Direct technical services costs					(4,861	)			(4,384	)
General and administrative expenses					(20,871	)			(15,829	)
Interest expense					(826	)			—
Depreciation and amortization of intangible assets					(842	)			(387	)
Total expenses					(105,373	)			(43,112	)
Loss before income taxes					(421	)			(4,525	)
Income taxes					(223	)			—
Net loss				$	(644	)		$	(4,525	)

Revenues.

Substantially all of our revenues were generated by our underwriting subsidiaries in Bermuda, the U.S and Europe. Technical services revenues were derived from the operations of ESC.

Premiums.    Gross premiums written were $172.7 million for the three months ended March 31, 2005, an increase of $54.0 million, or 45.5%, compared to $118.7 million for the three months ended March 31, 2004. The increase of $54.0 million in gross premiums written reflects the continued growth of our specialty lines of business, the contribution of our Lloyd's segment and a solid January 2005 renewal season for our specialty reinsurance segment.

We expect during 2005 that our insurance and reinsurance gross and net premiums written will continue to grow and that our Lloyd's segment will become a more significant contributor as we focus on continuing to execute our business strategy.

Gross premiums ceded were $29.9 million for the three months ended March 31, 2005 an increase of $23.6 million compared to $6.3 million for the three months ended March 31, 2004. The increase in gross premiums ceded reflects the increase in our gross premiums written and the reinsurance treaties that we have entered into for our product lines in order to limit our net loss exposures to our planned net limits and to control our aggregate exposures to particular classes of risk. These reinsurance treaties provide us with reinsurance protection on either a quota share, excess of loss treaty or facultative basis for policies written in our insurance product lines of business.

Net premiums earned were $91.5 million for the three months ended March 31, 2005 an increase of $64.3 million, or 235.9%, compared to $27.2 million for the three months ended March 31, 2004

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reflecting the earning of premiums on contracts written during the three months ended March 31, 2005 and during the year ended December 31, 2004. We expect that our net premiums earned will increase in future periods as we enter into more insurance and reinsurance contracts and as our existing portfolios mature. Our net premiums written are typically earned over the risk periods of the underlying insurance policies which are generally twelve months. Net written premiums that are not yet earned and are deferred as unearned premium reserves, net of deferred reinsurance premiums, totaled $251.9 million at March 31, 2005 and will be earned and recognized in our results of operations in future periods. Because we only began to write insurance and reinsurance business during the fourth quarter of 2003 and because our Lloyd's segment commenced operations in December 2004, we believe that our net premiums earned are not yet representative of a fully developed and diversified portfolio of insurance and reinsurance contracts.

Technical services revenues.    Technical services revenues were $7.1 million for the three months ended March 31, 2005 an increase of $0.6 million, or 9.9%, compared to $6.5 million for the three months ended March 31, 2004. Technical services revenues of $7.1 million for the three months ended March 31, 2005 consisted of $3.9 million from direct labor and $3.2 million from subcontractor related activities.

Net investment income and net realized losses.    Net investment income and net realized losses totaled $4.7 million for the three months ended March 31, 2005 an increase of $0.3 million, or 7.0%, compared to $4.4 million for the three months ended March 31, 2004. This is due to an increase in net investment income of $2.0 million compared to the three months ended March 31, 2004 which is attributable to the larger amount of invested assets and to a lesser extent by interest rates and is offset by a change in net realized losses of $1.7 million.

Net investment income was $5.2 million for the three months ended March 31, 2005 and was derived primarily from interest earned on fixed maturity and short term investments, partially offset by investment management fees and amortization of discounts on fixed maturity investments. Our average annualized effective yield (calculated by dividing net investment income by the average amortized cost of invested assets, net of amounts payable or receivable for investments purchased or sold) was approximately 3.2% for the three months ended March 31, 2005. Net realized losses of $0.4 million were generated primarily from the sale of fixed maturity securities as we sought to manage our total investment returns and the duration of our investment portfolios.

As of March 31, 2005, the average duration of our investment portfolio was approximately 2.6 years with an average credit rating of approximately "AA".

Other income.    Other income was $1.7 million for the three months ended March 31, 2005 and includes amounts recognized on non-traditional insurance and reinsurance contracts of $1.0 million. A more detailed description of these non-traditional contracts is provided under "— Non-Traditional Contracts" below.

Expenses.

Net losses and loss expenses.    Net losses and loss expenses were $57.5 million for the three months ended March 31, 2005 an increase of $41.6 million, or 261.7%, compared to $15.9 million for the three months ended March 31, 2004. The increase in net losses and loss expenses is due to the increase in the number of insurance and reinsurance contracts we entered into and the associated net premiums earned as our insurance and reinsurance portfolios continue to mature. Net losses and loss expenses are a function of our net premiums earned and our expected ultimate losses and loss expenses for reported and unreported claims on contracts of insurance and reinsurance underwritten. Included in our expected ultimate losses during the three months ended March 31, 2005 are reported loss estimates, including $4.9 million related to damage caused by an oil pipeline in California which ruptured during a mudslide, for which the damage is covered by a insurance contract issued by our environmental liability product line, and adverse development of $1.0 million related to contracts of reinsurance insuring claims arising from the 2004 hurricanes Charley, Frances, Ivan and Jeanne. Our estimate of our exposure to ultimate claim costs from these reported losses is based on currently available information, claims notifications received to date, industry loss estimates, output from

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industry models, a detailed review of affected contracts and discussion with cedants and brokers. The actual amount of losses from reported events may vary significantly from our estimates. As of March 31, 2005, other than claims related to the ruptured oil pipeline in California and the four hurricanes we have received a limited amount of other reported losses. However, we participate in lines of business where claims may not be reported for some period of time after those claims are incurred.

Our total net loss ratio (calculated by dividing net losses and loss expenses by net premiums earned) was 62.8% for the three months ended March 31, 2005 an increase of 4.4% compared to a total net loss ratio of 58.4% for the three months ended March 31, 2004. The increase in the total net loss ratio is due to the ruptured oil pipeline in California and the adverse development related to the hurricanes. We expect that our total net loss ratio will decrease during 2005 as we continue to expand and diversify our lines of business and increase our net premiums earned. This expectation could change depending upon the occurrence of unusual or unexpected claim events.

Acquisition expenses.    Acquisition expenses were $20.5 million for the three months ended March 31, 2005 an increase of $13.9 million, or 209.5%, compared to $6.6 million for the three months ended March 31, 2004. The increase in acquisition expenses is due to the increase in the number of insurance and reinsurance contracts we entered into and the associated net premiums earned. Our acquisition cost ratio (calculated by dividing acquisition expenses by net premiums earned) for the three months ended March 31, 2005 was 22.4% a decrease of 1.9% compared to our acquisition cost ratio of 24.3% for the three months ended March 31, 2004. The decrease is due to ceding commission income that we are recovering on our specialty insurance segment's reinsurance treaties and lower commissions payable on our HBW program as a result of the contracts containing sliding scale commission provisions that vary with changes in the selected loss ratio. Deferred acquisition costs include, as of March 31, 2005, $46.3 million of acquisition expenses on written contracts of insurance and reinsurance that will by amortized in future periods as the premiums written to which they relate are earned.

Direct technical services costs.    Direct technical services costs were $4.9 million for the three months ended March 31, 2005 an increase of $0.5 million, or 10.9%, compared to $4.4 million for the three months ended March 31, 2004 and were comprised of subcontractor and direct labor expenses. Direct technical services costs, as a percentage of technical services revenues, was approximately 68.0% for the period and was consistent with 67.4% for the three months ended March 31, 2004.

General and administrative expenses.    General and administrative expenses were $20.9 million for the three months ended March 31, 2005 an increase of $5.1 million, or 31.9%, compared to $15.8 million for the three months ended March 31, 2004 and were comprised of $13.3 million of personnel related expenses and $7.6 million of other general and administrative expenses. The increase in general and administrative is in line with expectations as we grew our lines of business and increased the number of employees. General and administrative expenses include $19.2 million related to our underwriting segment, including $0.8 million of expenses charged by our technical services segment for information management services provided, and $2.5 million of expenses related to our technical services segment.

Our general and administrative expense ratio (calculated by dividing underwriting related general and administrative expenses by net premiums written) was 13.4% for the three months ended March 31, 2005 an increase of 1.1% compared to 12.3% for the three months ended March 31, 2004 due to the additional number of employees hired and development of our infrastructure as we grew our lines of business in the first quarter of 2005.

Depreciation and amortization of intangible assets.    Depreciation and amortization of intangible assets was $0.8 million for the three months ended March 31, 2005 an increase of $0.4 million, or 117.6%, compared to $0.4 million for the three months ended March 31, 2004 and consisted of amortization of intangible assets related to the acquisition of ESC and depreciation of fixed assets. The increase in depreciation and amortization is due to the purchase of additional fixed assets throughout 2004 as we grew our lines of business.

We have not recorded any net deferred income tax benefits or assets relating to tax operating losses generated by our subsidiaries since our results of operations include a 100% valuation allowance

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against net deferred tax assets. For the three months ended March 31, 2005, the net valuation allowance was approximately $1.7 million.

Results by Operating Segments

Underwriting

We principally provide insurance and reinsurance protection for risks that are often unusual or difficult to place, that do not fit the underwriting criteria of standard commercial product carriers and that require extensive technical underwriting and assessment resources in order to be profitably underwritten. Our underwriting objective is to deploy capital to what we believe are the most attractive lines of business at the most opportune times in order to maximize our risk-adjusted returns on capital. In measuring the performance of our specialty insurance, specialty reinsurance and Lloyd's segments, we consider each segment's net underwriting income and a number of financial ratios. Net underwriting income is the sum of net premiums earned less net losses and loss expenses, acquisition expenses and direct and allocated general and administrative expenses. The financial ratios we use include the net loss and loss expense ratio, the acquisition expense ratio and the general and administrative expense ratio. Our net loss and loss expense ratio is calculated as net losses and loss expenses incurred divided by net premiums earned. Our acquisition expense ratio is calculated by dividing acquisition expenses by net premiums earned. Our net loss and loss expense ratio and acquisition expense ratio provide a measure of the current profitability of the earned portions of our written insurance and reinsurance contracts. Our general and administrative expense ratio is calculated by dividing underwriting related general and administrative expenses by net premiums written and indicates the level of indirect costs that we incur in acquiring and writing insurance and reinsurance business. Our combined ratio is the aggregate of our loss and loss expense, acquisition expense and general and administrative expense ratios. We believe that these financial ratios appropriately reflect the profitability of our underwriting segments. A combined ratio of less than 100% indicates an underwriting profit and over 100%, an underwriting loss. Because we have a limited operating history, our combined ratio may be subject to significant volatility and may not be indicative of future profitability.

We allocate indirect corporate general and administrative expenses among each of our segments, including those related to underwriting operations, as described above under "Segment Information."

Three months ended March 31, 2005 and 2004

The following table summarizes our net underwriting results and profitability measures for our segments for the three months ended March 31, 2005 and 2004:

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Specialty insurance

				Three months ended March 31, 2005				Three months ended March 31, 2004				Change
				($ in thousands)
Direct insurance				$	66,178			$	15,949			$	50,229
Reinsurance assumed					848				22,083				(21,235	)
Total gross premiums written					67,026				38,032				28,994
Premiums ceded					(24,930	)			(6,274	)			(18,656	)
Net premiums written				$	42,096			$	31,758			$	10,338
Net premiums earned				$	34,540			$	4,009			$	30,531
Other income					254				—				254
Net losses and loss expenses					(26,005	)			(2,175	)			(23,830	)
Acquisition expenses					(6,340	)			(822	)			(5,518	)
General and administrative expenses					(9,465	)			(8,649	)			(816	)
Net underwriting (loss) income				$	(7,016	)		$	(7,637	)		$	621
Ratios:
Loss and loss expense ratio					75.3	%			54.3	%			(21.0	)%
Acquisition expense ratio					18.4	%			20.5	%			2.1	%
General and administrative expense ratio					22.5	%			27.2	%			4.7	%
Combined ratio					116.2	%			102.0	%			(14.2	)%

Premiums.    Gross and net written premiums were $67.0 million and $42.1 million for the three months ended March 31, 2005 compared to $38.0 million and $31.8 million for the three months ended March 31, 2004. The increase in our specialty insurance segment's gross and net premiums written was due primarily to growth in U.S. insurance business as we grew from our start-up phase into a more recognized insurer. The increase reflects our increasing participation in the insurance marketplace and development of our insurance portfolios.

The table below shows gross written premiums by product line for the three months ended March 31, 2005 and 2004 whether written on a traditional insurance, programs or structured basis:

				Three months ended March 31, 2005				Three months ended March 31, 2004
				($ in thousands)
Technical risk property				$	43,887				22,040
Professional liability					8,918				4,205
Environmental liability					5,842				10,196
Fidelity and crime					3,892				1,591
Surety					2,871				—
Trade credit and political risk					1,616				—
Total				$	67,026			$	38,032

During the three months ended March 31, 2005 we continued to write, in our technical risk property product line, a residential builders' and contractors' program that provides warranty, general liability, builders' risk and excess liability coverage's for new home contractors throughout the U.S. This program, which we refer to as the HBW program, accounted for approximately $41.1 million, or 93.7%, of the technical risk property line of business and $41.1 million of total specialty insurance segment gross written premiums in the three months ended March 31, 2005. The policies in the program are underwritten through a third party agent that we believe is an established specialist in this technical field. We expect that this program will continue to contribute substantial net written

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premiums during the remainder of 2005 and that we will experience further growth and diversification in our other specialty insurance lines of business.

Approximately 61.3% of our specialty insurance segment gross written premiums of $67.0 million were generated through our HBW program. The remaining 38.7% of our specialty insurance segment gross written premiums were generated through seventy brokers, none of which accounted for more than 10% of our total specialty insurance segment gross written premiums.

Ceded premiums were $24.9 million during the three months ended March 31, 2005 an increase of $18.6 million compared to $6.3 million for the three months ended March 31, 2004. The increase in ceded premiums reflects the increase in our gross written premiums and the reinsurance treaties that we have entered into for each of our specialty insurance product lines in order to limit our net loss exposures to our planned net limits and to control our aggregate exposures to particular classes of risk. Gross premiums written and ceded premiums are earned over the period of each insured risk. The terms of our insurance contracts range from between one and ten years. Net premiums earned during the three months ended March 31, 2005 were $34.5 million representing the earning and amortization of premiums written and ceded during the year ended December 31, 2004 and the three months ended March 31, 2005.

Other income.    Other income was $0.3 million for the three months ended March 31, 2005 and related to income, including fees, recognized on non-traditional insurance contracts. A more detailed description of these non-traditional contracts is provided under "— Non-Traditional Contracts" below.

Net losses and loss expenses.    Net losses and loss expenses were $26.0 million for the three months ended March 31, 2005 an increase of $23.8 million compared to $2.2 million for the three months ended March 31, 2004. The increase of $23.8 million in net losses and loss expenses incurred was due to the increase in the number of insurance contracts we entered into and the associated net premiums earned. Net losses and loss expenses were a function of our net premiums earned and our expected ultimate losses and loss expenses for reported and unreported claims on contracts of insurance underwritten. Included in our expected ultimate losses during the three months ended March 31, 2005 is $4.9 million of specific loss related to damages from a ruptured oil pipeline in California which was covered by an insurance contract issued by our environmental liability product line.

Our loss ratio was 75.3% for the three months ended March 31, 2005 compared to 54.3% for the three months ended March 31, 2004. The increase of 21.0% in our loss ratio is due, in part, to the environmental loss described above. We have received a limited number of other loss notifications in our specialty insurance segment. However, we participate in lines of business where claims may not be reported for some period of time after those claims are incurred. We expect that our loss and loss expense ratio will decrease during 2005 as we continue to expand and diversify our lines of business and increase our net premiums earned.

Acquisition expenses.    Acquisition expenses were $6.3 million for the three months ended March 31, 2005 an increase of $5.5 million compared to $0.8 million for the three months ended March 31, 2004. The increase of $5.5 million in acquisition expenses was due to the increase in the number of insurance contracts we entered into and the associated net premiums earned. These acquisition expenses primarily represented brokerage fees, commission fees and premium tax expenses and were net of ceding commissions earned on purchased reinsurance treaties.

Our acquisition expense ratio was 18.4% for the three months ended March 31, 2005 a decrease of 2.1% compared to 20.5% for the three months ended March 31, 2004. The reduction in our acquisition expense ratio in the specialty insurance segment is primarily due to the acquisition costs on our technical risk property contracts, including the residential builders' and contractors' risk program described above, being lower during the three months ended March 31, 2005 as a result of the contracts containing sliding scale commission provisions that vary with changes in the selected loss ratio. The reduction in our acquisition expense ratio is also due to ceding commission income that we are earning on the reinsurance treaties that we have entered into for each of our specialty insurance product lines. We expect that our acquisition expense ratio will remain constant during 2005.

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General and administrative expenses.    Direct and allocated indirect general and administrative expenses totaled $9.5 million for the three months ended March 31, 2005 an increase of $0.8 compared to $8.7 million for the three months ended March 31, 2004. The increase in our general and administrative expense ratio was due to the additional number of employees hired throughout 2004 as we grew our specialty insurance lines of business.

Our general and administrative expense ratio was 22.5% of net premiums written for the three months ended March 31, 2005 a decrease of 4.7% compared to 27.2% for the three months ended March 31, 2004 and was due to the increase in our net premiums written. We expect our general and administrative expense ratio to continue to decrease, although not evenly, during the remainder of 2005 as we continue to expand our lines of business and increase our net premiums written.

Specialty reinsurance

				Three months ended March 31, 2005				Three months ended March 31, 2004				Change
				Restated								Restated
				($ in thousands)
Reinsurance assumed				$	89,407			$	80,697			$	8,710
Total gross premiums written					89,407				80,697				8,710
Premiums ceded					(1,297	)			—				(1,297	)
Net premiums written				$	88,110			$	80,697			$	7,413
Net premiums earned				$	53,637			$	23,226			$	30,411
Other income					790				—				790
Net losses and loss expenses					(29,648	)			(13,720	)			(15,928	)
Acquisition expenses					(13,804	)			(5,795	)			(8,009	)
General and administrative expenses					(5,156	)			(5,192	)			36
Net underwriting income (loss)				$	5,819			$	(1,481	)		$	7,300
Ratios:
Loss and loss expense ratio					55.3	%			59.1	%			3.8	%
Acquisition expense ratio					25.7	%			25.0	%			(0.7	)%
General and administrative expense ratio					5.9	%			6.4	%			0.5	%
Combined ratio					86.9	%			90.5	%			3.6	%

Premiums.    Gross and net premiums written were $89.4 million and $88.1 million for the three months ended March 31, 2005 compared to $80.7 million of gross and net premiums for the three months ended March 31, 2004. The increase in our specialty reinsurance segment's gross and net written premiums was due primarily to the reinsurance opportunities during the January 2005 renewal season and premium generated from existing reinsurance contracts entered into during the year ended December 31, 2004 as our risks attaching reinsurance policies mature.

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The table below shows gross written premiums by product line whether written on a traditional reinsurance, programs or structured basis:

				Three months ended March 31, 2005				Three months ended March 31, 2004
				($ in thousands)
Property				$	44,439			$	44,966
Casualty					29,104				20,325
Marine, technical risk and aviation					15,864				15,406
Total				$	89,407			$	80,697

Our property reinsurance gross premiums written during the three months ended March 31, 2005 are summarized in the table below by risk class.

Homeowners and commercial property					73.6	%
Crop hail					26.4	%
Total					100.0	%

Our homeowners and commercial property risk class includes a single treaty covering property risks of small regional accounts throughout the U.S., which accounted for approximately 32.9% of our total property reinsurance gross premiums written during the three months ended March 31, 2005. Our crop hail category covers crops throughout the U.S.

Our property premiums written include contracts written on excess of loss and quota share bases. Of our total property reinsurance gross premiums written for the three months ended March 31, 2005, 17.7% represents excess of loss contracts that we believe are exposed to losses from natural catastrophe events worldwide. The majority of our property quota share contracts are exposed to natural perils, including natural catastrophes.

Our casualty reinsurance gross premiums written during the three months ended March 31, 2005 are summarized in the table below by risk class.

Directors and officers' liability					28.2	%
Other professional liability					15.5	%
Other					56.3	%
Total					100.0	%

Our casualty reinsurance gross premiums written included in our "other" casualty category, was spread across 21 different risk classes, none of which accounted for more than 10% of our casualty reinsurance premiums written for the three months ended March 31, 2005.

Approximately 43.9% and 21.1% of our reinsurance segment gross written premiums were generated through Guy Carpenter & Company, Inc. and Benfield Group.

Gross reinsurance premiums written are being earned over the periods of reinsured or underlying insured risks which are typically one year. Ceded premiums were $1.3 million during the three months ended March 31, 2005 under the reinsurance treaties we purchased for our marine, technical risk and aviation product line. Gross premiums written and ceded premiums are earned over the period of each insured risk. We expect to purchase additional reinsurance treaties during the second quarter of 2005 in order to limit our net loss exposures to our planned net limits and to control our aggregate exposures to particular classes of risk for our property reinsurance product line.

Net premiums earned of $53.6 million reflect the earning of premiums on contracts written during the year ended December 31, 2004 and during the three months ended March 31, 2005.

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Other income.    Other income was $0.8 million for the three months ended March 31, 2005 and related to income, including fees, recognized on non-traditional reinsurance contracts. A more detailed description of these non-traditional contracts is provided under "— Non-Traditional Contracts" below.

Net losses and loss expenses.    Net losses and loss expenses were $29.6 million for the three months ended March 31, 2005 an increase of $15.9 million compared to $13.7 million for the three months ended March 31, 2004. The increase of $15.9 million in net losses and loss expenses incurred was due to the increase in the number of reinsurance contracts we entered into and the associated net premiums earned. Net losses and loss expenses were a function of our net premiums earned and our expected ultimate losses and loss expenses for reported and unreported claims on contracts of reinsurance underwritten. Included in our expected ultimate losses is adverse development of $1.0 million related to our loss estimates on contracts of reinsurance and insurance insuring claims arising from hurricanes Charley, Frances, Ivan and Jeanne. The actual amount of losses from the hurricanes may vary significantly from the estimate. Other than claims related to the 2004 hurricanes, as of March 31, 2005 we have received a limited amount of other reported losses. However, we participate in lines of business where claims may not be reported for some period of time after those claims are incurred.

Our total net loss ratio (calculated by dividing net losses and loss expenses by net premiums earned) was 55.3% for the three months ended March 31, 2005 a decrease of 3.8% compared to 59.1% for the three months ended March 31, 2004. The decrease in our total net loss ratio reflects a decrease in the concentration of crop hail contracts included in the specialty reinsurance segment's net premiums earned during the three months ended March 31, 2005 compared to the three months ended March 31, 2004. We expect that this ratio will remain constant during the remainder of 2005 barring any further significant catastrophe losses. In addition, we expect during the second quarter of 2005 to enter into reinsurance treaties in our property reinsurance line of business to reduce the potential impact to our total net loss ratio from catastrophic events of similar magnitude as we experienced in 2004.

Acquisition expenses.    Acquisition expenses were $13.8 million for the three months ended March 31, 2005 an increase of $8.0 million compared to $5.8 million for the three months ended March 31, 2004. The increase in acquisition expenses was due to the increase in the number of reinsurance contracts we entered into and the associated net premiums earned. These acquisition expenses primarily represented brokerage and ceding commissions.

Our acquisition expense ratio was 25.7% for the three months ended March 31, 2005 which is slightly higher than or acquisition expense ratio of 25.0% for the three months ended March 31, 2004. The increase reflects certain contracts with higher commission rates that were written during the second and third quarters of 2004, particularly in our property reinsurance product line.

General and administrative expenses.    Direct and allocated indirect general and administrative expenses totaled $5.2 million for the three months ended March 31, 2005 and were constant compared to the three months ended March 31, 2004. Our general and administrative expense ratio was 5.9% of net premiums written for the three months ended March 31, 2005 a decrease of 0.5% compared to 6.4% for the three months ended March 31, 2004 and was due to the increase in our net premiums written.

Lloyd's

We did not commence writing business at our Lloyd's Syndicate 4000 until the fourth quarter of 2004 and accordingly there is no comparative review of the three months ended March 31, 2005 to the three months ended March 31, 2004.

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				Three months ended March 31, 2005
				($ in thousands)
Direct insurance				$	16,293
Reinsurance assumed					—
Total gross premiums written					16,293
Premiums ceded					(3,622	)
Net premiums written				$	12,671
Net premiums earned				$	3,309
Other income					—
Net losses and loss expenses					(1,843	)
Acquisition expenses					(333	)
General and administrative expenses					(4,560	)
Net underwriting loss				$	(3,427	)
Ratios:
Loss and loss expense ratio					55.7	%
Acquisition expense ratio					10.1	%
General and administrative expense ratio					36.0	%
Combined ratio					101.8	%

Premiums.    We commenced underwriting specialty insurance lines at Syndicate 4000 at Lloyd's in December 2004. Gross and net written premiums were $16.3 million and $12.7 million for the three months ended March 31, 2005 and represented professional liability insurance business. We expect that our gross and net premiums written will increase in future periods as we continue to grow our Syndicate 4000 at Lloyd's and enter into additional insurance contracts.

Net premiums earned in the three months ended March 31, 2005 were $3.3 million and reflect the earning of premiums on contracts written during the year ended December 31, 2004 and during the three months ended March 31, 2005. We expect that our gross and net premiums written and net premiums earned will increase in future periods as Syndicate 4000 at Lloyd's continues to grow and enters into additional insurance contracts.

Losses and loss expenses.    Net losses and loss expenses incurred were $1.8 million for the three months ended March 31, 2005 and reflect a loss and loss expense ratio (calculated as losses and loss expenses incurred divided by net premium earned) of 55.7%. For the three months ended March 31, 2005, given the segment's limited operating history and historical claims experience, we adopted an expected loss ratio methodology to estimate our ultimate cost of losses. As of March 31, 2005, we had not received any notifications of significant reported losses that were covered under Syndicate 4000's insurance contracts. However, we participate in lines of business where claims may not be reported for some period of time after those claims are incurred.

Acquisition expenses.    Acquisition expenses were $0.3 million for the three months ended March 31, 2005 and reflect an acquisition expense ratio of 10.1% and were a function of the number and type of insurance contracts we entered into and the associated net premiums earned. These acquisition expenses primarily represented brokerage expenses.

General and administrative expenses.    Direct and allocated indirect general and administrative expenses totaled $4.6 million, or 36.0%, of net premiums written for the three months ended March 31, 2005 and were largely comprised of employee and other Lloyd's and corporate related expenses. We expect our general and administrative expense ratio to decrease during the remainder of 2005 as we continue to expand our lines of business and increase our net premiums written.

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Technical services

Three months ended March 31, 2005 and 2004

				Three months ended March 31, 2005				Three months ended March 31, 2004				Change
				($ in thousands)
Technical services revenues				$	7,999			$	7,036			$	963
Other income					123				159				(36	)
Direct technical services costs					(4,861	)			(4,384	)			(477	)
General and administrative expenses					(2,539	)			(2,517	)			(22	)
Net technical services income				$	722			$	294			$	428

Technical services revenues.    Technical services revenues were $8.0 million for the three months ended March 31, 2005, an increase of $1.0 million, or 13.7%, compared to $7.0 million for the three months ended March 31, 2004. The increase of $1.0 million in technical services revenues consists is attributable to increases in direct labor revenue which is a result of an increase in client spending on environmental projects.

Other income.    Other income was $0.1 million for the three months ended March 31, 2005 as compared to $0.2 million for the three months ended March 31, 2004. Other income was primarily generated from our liability assumption program under which we assume specified environmental liabilities. This income represents fees earned relating to the remediation services performed.

Direct technical services costs.    Direct technical services costs were $4.9 million for the three months ended March 31, 2005, an increase of $0.5 million, or 10.9%, compared to $4.4 million for the three months ended March 31, 2004. The increase in direct technical services costs was primarily attributable to increased direct labor expenses which resulted from an increase in the number, and change in the scope and nature of, remediation projects undertaken during the three months ended March 31, 2005 compared to the three months ended March 31, 2004. Direct technical services costs, as a percentage of revenue was 60.8% for the three months ended March 31, 2005 compared to 62.3% for the three months ended March 31, 2004. The reduction in direct technical services costs as a percentage of revenues was primarily due to the decreased subcontractor activity as a percentage of revenues during the period.

General and administrative expenses.    Direct and indirect allocated general and administrative expenses were $2.5 million for the three months ended March 31, 2005 which was constant with $2.5 million for the three months ended March 31, 2004.

Financial Condition and Liquidity

Quanta Holdings is organized as a Bermuda holding company, and as such, has no direct operations of its own. Our assets consist of investments in our subsidiaries through which we conduct substantially all of our insurance, reinsurance and technical services operations. As of March 31, 2005, we had operations in Bermuda, the U.S., Ireland and the U.K., including Syndicate 4000 at Lloyd's.

As a holding company, we will have continuing funding needs for general corporate expenses, the payment of principal and interest on current and future borrowings, taxes, and the payment of other obligations. Funds to meet these obligations will come primarily from dividends, interest and other statutorily permissible payments from our operating subsidiaries. The ability of our operating subsidiaries to make these payments is limited by the applicable laws and regulations of the domiciles in which the subsidiaries operate. These laws and regulations subject our subsidiaries to significant restrictions and require, among other things, that some of our subsidiaries maintain minimum solvency requirements and limit the amount of dividends that these subsidiaries can pay to us.

Financial condition

Our available-for-sale investments, excluding trading investments related to deposit liabilities, totaled $611.0 million as of March 31, 2005 compared to $559.4 million at December 31, 2004. The

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majority of our investment portfolio consists of fixed maturity investments which are managed by the following external investment advisors: Pacific Investment Management Company LLC, JP Morgan Investment Management Inc. and Loomis, Sayles & Company, L.P. Custodians of our externally managed investment portfolios are JP Morgan Chase Bank N.A. and Citibank N.A. Included in our investment portfolio is a mortality-risk-linked security for which the repayment of principal is dependent on the performance of a specified mortality index. The total market value of this security was $20.0 million as of March 31, 2005. As of March 31, 2005, all of the fixed maturity investments were investment grade, with a weighted average credit rating of "AA" based on ratings assigned by S&P. Our cash and cash equivalents totaled $53.0 million as of March 31, 2005 compared to $32.8 million at December 31, 2004. The increase in our available-for-sale investments and cash and cash equivalents is primarily due to the growth in our premiums written during the three months ended March 31, 2005 and the issuance of $21.6 million of Junior Subordinated Debentures, partially offset by claims notifications and associated loss payments we have made up to and including March 31, 2005. We expect that our fixed maturity investments and cash and cash equivalent balances will decrease during the early part of 2005 as we continue to pay loss and loss expenses related to reported claims, particularly those arising from the hurricane events during the third quarter of 2004.

Our insurance and reinsurance premiums receivable balances totaled $185.6 million as of March 31, 2005 compared to $146.8 million at December 31, 2004. The increase in premiums receivable reflects our growth across all specialty insurance and reinsurance segments during the three months ended March 31, 2005 and the associated increase in the level of premiums written. Included in our premiums receivable are approximately $141.3 million of written premium installments that are not yet currently due under the terms of the related insurance and reinsurance contracts. As of March 31, 2005, based on our review of the remaining balance of $44.3 million, which represents premiums installments that are currently due, there are no individually significant balances that are delinquent or uncollectible.

Our deferred acquisition costs and unearned premiums, net of deferred reinsurance premiums, totaled $46.3 million and $251.9 million, respectively, as of March 31, 2005 compared to $41.5 million and $200.5 million as of December 31, 2004. These increases were due to the growth in our premiums written during the three months ended March 31, 2005. These amounts represent premiums and acquisition expenses on written contracts of insurance and reinsurance that will be recognized in earnings in future periods. Substantially all of these amounts will be recognized over the next 12 months.

Our reserves for losses and loss adjustment expenses, net of reinsurance recoverable, totaled $190.5 million as of March 31, 2005 compared to $146.3 million as of December 31, 2004. The increase in our net loss and loss expense reserves reflects the growth in our business, the associated insured risks we assumed during the three months ended March 31, 2005 and include our estimate of ultimate unpaid loss expenses totaling $9.3 million relating to hurricanes Charley, Frances, Ivan and Jeanne and $4.9 million relating to the environmental claim that we incurred during the three months ended March 31, 2005. Our estimate of our unpaid exposure to ultimate claim costs associated with these losses is based on currently available information, claim notifications received to date, industry loss estimates, output from industry models, a detailed review of affected contracts and discussion with clients, cedants and brokers. The actual amount of future loss payments relating to these loss events may vary significantly from this estimate. As of March 31, 2005 we have received a limited amount of other reported losses. However, we participate in lines of business where claims may not be reported for some period of time after those claims are incurred.

Our shareholders' equity was $423.0 million as of March 31, 2005 compared to $430.9 million as of December 31, 2004, reflecting a decrease of $7.9 million that was primarily related to a net change in unrealized losses on our investment portfolios of $7.3 million during the three months ended March 31, 2005 and our net loss of $0.6 million for the three months ended March 31, 2005. As of March 31, 2005, we have provided a 100% cumulative valuation allowance against our deferred tax assets in the amount of $15.0 million. These deferred tax assets were generated primarily from net operating losses. As a start-up company with limited operating history, the realization of these deferred tax assets is neither assured nor accurately determinable.

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Liquidity

Operating Cashflow

We generated net operating cash flow of approximately $31.8 million during the three months ended March 31, 2005, primarily related to premiums and investment income received and offset by general and administrative expenses paid. In addition, we also generated net proceeds from the issuance of Junior Subordinated Debentures of $19.6 million. During the same period, we invested net cash of $31.2 million in our investment assets and, as of March 31, 2005, had net cash and cash equivalent balances of $53.0 million. Included in our cash and cash equivalents and investments is $106.7 million that is held by Lloyd's to support our underwriting activities, $112.1 million held in trust funds for the benefit of ceding companies and to fund our obligations associated with the assumption of an environmental remediation liability, $144.4 million that is pledged as collateral for letters of credit, $29.3 million that is on deposit with, or has been pledged to, U.S. state insurance departments and $42.7 million held in trust funds that are related to our deposit liabilities. Our cash flows from operations for the three months ended March 31, 2005 provided us with sufficient liquidity to meet operating cash requirements during that period.

Sources of cash

Our sources of cash consist primarily of existing cash and cash equivalents, premiums written, proceeds from sales and redemptions of investment assets, capital or debt issuances, investment income, reinsurance recoveries, and, to a lesser extent, our secured bank credit facility and collections of receivables for technical services rendered to third parties.

On July 13, 2004, Quanta Holdings and certain designated insurance subsidiaries entered into a credit agreement providing for a secured bank credit facility and a revolving credit facility with a syndicate of lenders in the amount of $150 million. Up to $25 million may be borrowed under the facility on a revolving basis for general corporate purposes and working capital requirements. The facility is secured by specified investments of the borrowers. As of March 31, 2005, we had $144.4 million of secured letters of credit issued and outstanding under the facility. As of March 31, 2005, we have not made any borrowings under the revolving credit facility. The availability to a borrower is based on the amount of eligible investments pledged by that borrower and no material adverse change provisions. Regulatory restrictions will also limit the amount of investments that may be pledged by our U.S. insurance borrowers and, consequently, the amount available for letters of credit and borrowings under the facility to those borrowers.

The credit agreement has certain financial covenants, including a leverage ratio (consolidated indebtedness to consolidated total capital) of not greater than 0.35 to 1, a minimum consolidated net worth of at least $340 million and maintenance of the Company's insurance ratings. In addition, the credit agreement contains certain covenants restricting the activities of Quanta Holdings and its subsidiaries, such as the incurrence of additional indebtedness, liens and dividends and other payments to Quanta Holdings. Quanta Holdings has also unconditionally and irrevocably guaranteed all of the obligations of its subsidiaries to the lenders. The facility terminates on July 12, 2005. We intend to renew this facility or enter into a new facility but cannot assure you that this will be available to us on terms that are commercially reasonable, or at all. We may also enter into other credit facilities to support portions of our business.

On February 24, 2005, we participated in a private placement of $20.0 million of floating rate capital securities (the "Trust Preferred Securities") issued by Quanta Capital Statutory Trust II ("Quanta Trust II"), a subsidiary Delaware trust formed on February 24, 2004. The Trust Preferred Securities mature on June 15, 2035 are redeemable at our option at par beginning June 15, 2010, and require quarterly distributions of interest by Quanta Trust II to the holder of the Trust Preferred Securities. Distributions will be payable at a variable per annum rate of interest, reset quarterly, equal to the London Interbank Offered Rate ("LIBOR") rate plus 350 basis points. Quanta Trust II used the proceeds from the sale of the Trust Preferred Securities and the issuance of its common securities to purchase $20.6 million of junior subordinated debt securities, due March 15, 2035, in the principal

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amount of $20.6 million issued by us (the "Trust II Debentures"). We are using the net proceeds of $19.6 million, after the deduction of approximately $0.4 million of commissions paid to the placement agents in the transaction, from the sale of the Trust II Debentures to Quanta Trust II for working capital purposes and to support the growth of our business.

Uses of cash

In the near term, our principal cash requirements are expected to be investments in operating subsidiaries, losses and loss adjustment expenses and other policy holder benefits, brokerage and commissions, expenses to develop and implement our business strategy, other operating expenses, premiums ceded, capital expenditures, the servicing of borrowing arrangements (including the Junior Subordinated Debentures), and taxes. The potential for a large claim under one of our insurance or reinsurance contracts means that we may need to make substantial and unpredictable payments within relatively short periods of time. While our board of directors currently does not intend to declare dividends or make any other distributions to the shareholders of Quanta Holdings, our board plans to periodically reevaluate our dividend policy. Our cash requirements will also include the payment of any future dividends to our shareholders if and when our board of directors determines to change our dividend policy.

We paid additional claims of $8.1 million during the first quarter of 2005 relating to the hurricane events of 2004. We expect that our cash requirements for the payment of these and other claims will be significant in future periods as we receive and settle claims, including those relating to these hurricanes.

We are in the process of hiring additional employees in 2005 to complement the growth in our specialty insurance and reinsurance segments. As a result our general and administrative expenses for the three months ended March 31, 2005 are not fully representative of our expected employee base. We anticipate that our cash requirements for the payment of annual salaries and benefits for these employees will increase in future periods as compared to the three months ended March 31, 2005.

We incurred capital expenditures of $1.2 million during the three months ended March 31, 2005 related primarily to the purchase and development of information technology assets. During the remainder of 2005, we expect capital expenditures principally relating to information systems, furniture and fixtures and leasehold improvements to be less than $10 million. We expect to fund these capital expenditures through cash provided by our operating activities.

In addition to these cash requirements, under the purchase agreement with ESC, we will be required to pay ESC's former shareholders an earn-out payment if ESC achieves specified EBITDA targets. EBITDA generally is defined to mean earnings before interest, taxes, depreciation and amortization. Under the earn-out arrangements, if EBITDA for the two-year period ending December 31, 2005 is $7.5 million or greater, we will be required to pay an earn-out payment of $5.0 million. If EBITDA is greater than $7.0 million and less than $7.5 million, then we will be required to pay a pro rata portion of the $5.0 million. We cannot, at this time, determine with any certainty whether ESC will achieve these EBITDA targets, or estimate the amount of any potential earn-out payments that would be required if these targets are achieved.

We may also have substantial liabilities to clients, third parties and government authorities for property damage, personal injuries, breach of contract or breach of warranty claims, fines and penalties and regulatory action that could adversely affect our business arising from the assessment, analysis and assumption of environmental liabilities, and the management, remediation, and engineering of environmental conditions constitute a significant portion of our technical services business. From time to time, we may offer a liability assumption program under which a special-purpose entity assumes specified liabilities (at times including taking title to property) associated with environmental conditions for which we provide technical services, which may be insured or guaranteed by us. These businesses involve significant risks, including the possibility that we may have substantial liabilities to clients, third parties and governmental authorities for property damage, personal injuries, breach of contract or breach of warranty claims, fines and penalties and regulatory action that could adversely affect our business.

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While we had sufficient liquidity to pay the losses we experienced in the past hurricane season, we may raise additional funds to further expand our business strategy, enter new lines of business and manage our expected growth. We may raise capital through debt or equity or other securities. The amount and timing of this capital raise will depend on many factors, including our ability to write new business successfully and to establish premium rates and reserves at levels sufficient to cover losses. At this time, we are not able to quantify the amount of additional capital we may raise or will require in the future or predict the timing of any other future capital needs. Any future equity or debt financing, if available at all, may be on terms that are not favorable to us. If we raise capital through equity financings, your interest in our company will be diluted, and the securities we issue may have rights, preferences and privileges that are senior to those of the shares that are currently issued and outstanding. If we cannot maintain or obtain adequate capital to manage our business strategy and expected growth targets, our business, results of operations and financial condition may be adversely affected.

Commitments

We have contractual obligations relating to commitments under the trust preferred securities and non-cancelable operating leases for property and office equipment described above under "Liquidity" as of March 31, 2005 as follows:

				Payments due by period
Contractual obligations ($000's)				Total				Less than 1 year				1-3 years				3-5 years				More than 5 years
Long-term debt obligations				$	61,857			$	—			$	—			$	—			$	61,857
Interest on long-term debt obligations (1)					116,354				3,868				7,736				7,736				97,014
Operating lease obligations					40,755				4,481				8,019				5,554				22,701
Total				$	218,966			$	8,349			$	15,755			$	13,290			$	181,572

(1)	The interest on the long-term debt obligation is based on a spread above LIBOR. We have reflected the interest due based upon the current interest rate at March 31, 2005 on the facility.

Off-balance sheet arrangements

Other than as described under "Liquidity" related to our Trust Preferred Securities offerings through the Quanta Capital Statutory Trust I ("Quanta Trust I") and Quanta Trust II (together "Quanta Trust I and II"), as of March 31, 2005, we have not entered into any off-balance sheet arrangements with special purpose entities or variable interest entities. We did not consolidate Quanta Trust I and II, the issuers' of the Trust Preferred Securities and variable interest entities, since we are not the primary beneficiary of Quanta Trust I or II. As of March 31, 2005, we have recorded the $61.9 million of Debentures, which were issued to Quanta Trust I and II, on our consolidated balance sheet. The net proceeds of $58.4 million from the sale of the Debentures to Quanta Trust I and II will be used for working capital purposes and to support the growth of our business. Distributions will be payable at a variable per annum rate of interest, reset quarterly, equal to LIBOR plus 385 basis points by the Company to Quanta Trust I and equal to LIBOR plus 350 basis points by the Company to Quanta Trust II as described above under "Commitments." The Debentures are redeemable at the Company's option at par beginning March 15, 2010.

Adequacy of Regulatory and Rating Capital

While insurance regulation differs by location, each jurisdiction requires that minimum levels of capital be maintained in order to write new insurance business. Factors that affect capital requirements generally include premium volume, the extent and nature of loss and loss expense reserves, the type and form of insurance and reinsurance business underwritten and the availability of reinsurance protection from adequately rated retrocessionaires on terms that are acceptable to us.

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In all of the jurisdictions in which we operate insurers and reinsurers are required to maintain certain minimum levels of capital and risk-based capital, the calculation of which includes numerous factors as specified by the respective insurance regulatory authorities and the related insurance regulations. We capitalize our insurance operations in excess of the minimum regulatory requirements so that we may maintain adequate financial ratings. Generally, a higher financial rating creates a higher demand for insurance products. A higher financial rating will enable us both to write more business and to be more selective in the business we underwrite. Accordingly, allocation of capital sufficient to achieve business objectives is a critical aspect of any insurance organization, particularly a start-up insurance operation such as ours.

We currently have sufficient capital and surplus to meet regulatory and rating agency requirements at our current rating levels. Substantially all of our capital has been distributed among our rated operating subsidiaries based on our assessment of the levels of capital that we believe are prudent to support our expected levels of business, the applicable regulatory requirements, and the recommendations of the insurance regulatory authorities and rating agencies.

Posting of Security by Our Non-U.S. Operating Subsidiaries

Our Bermuda, United Kingdom, and Irish operating subsidiaries are not licensed, accredited or otherwise approved as reinsurers anywhere in the United States. Many U.S. jurisdictions do not permit insurance companies to take credit on their U.S. statutory financial statements for reinsurance to cover unpaid liabilities, such as loss and loss adjustment expense and unearned premium reserves, obtained from unlicensed or non-admitted insurers without appropriate security acceptable to U.S. insurance commissioners. Typically, this type of security will take the form of a letter of credit issued by an acceptable bank, the establishment of a trust, funds withheld or a combination of these elements.

As described under "Liquidity" above we entered into a secured bank credit facility with a syndicate of lenders that allows us to provide to our insured clients up to $150 million in letters of credit as security under the terms of insurance and reinsurance contracts. The availability to a borrower is based on the amount of eligible investments pledged by that borrower and no material adverse change provisions. Regulatory restrictions will also limit the amount of investments that may be pledged by our U.S. insurance borrowers and, consequently, the amount available for letters of credit and borrowings under the facility to those borrowers. As of March 31, 2005, we had $144.4 million of secured letters of credit issued and outstanding under the facility.

If we fail to maintain adequate letter of credit facilities, and are unable to otherwise provide the necessary security, U.S. insurance companies may be less willing to purchase our reinsurance products, which could have a material adverse effect on our results of operations.

Ratings

Ratings by independent agencies are an important factor in establishing the competitive position of insurance and reinsurance companies and are important to our ability to market and sell our products. Rating organizations continually review the financial positions of insurers. S&P maintains a letter scale rating system ranging from "AAA" (Extremely Strong) to "R" (under regulatory supervision). A.M. Best maintains a letter scale rating system ranging from "A++" (Superior) to "F" (in liquidation). The objective of S&P and A.M. Best's ratings systems is to provide an opinion of an insurer's or reinsurer's financial strength and ability to meet ongoing obligations to its policyholders. These ratings reflect our ability to pay policyholder claims and are not applicable to our securities, nor are they a recommendation to buy, sell or hold our shares. These ratings are subject to periodic review by, and may be revised or revoked at the sole discretion of, S&P and A.M. Best.

We have received a rating of "A–" (excellent) from A.M. Best, which is the fourth highest of fifteen rating levels and indicates A.M. Best's opinion of our financial strength and ability to meet ongoing obligations to our future policyholders. We cannot assure you that we will be able to maintain this rating. A significant ratings downgrade would result in a substantial loss of business and business

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opportunities as insureds and ceding companies purchase insurance from companies with higher claims-paying and financial strength ratings instead of from us and would have a material adverse effect on letters of credit outstanding under our credit facility and on certain other agreements. We have not been rated by S&P.

Critical Accounting Policies and Estimates

Our management makes certain judgments, estimates and assumptions in the application of accounting policies used to determine inherently subjective amounts reported in our condensed consolidated financial statements. If management uses different assumptions and estimates than it currently does, it could produce materially different estimates of the reported amounts. For a detailed discussion of our critical accounting policies, judgments, estimates and assumptions management uses please refer to the Form 10-K for the year ended December 31, 2004 as filed with the SEC on March 30, 2005. There were no significant changes in the application of our critical accounting policies and estimates subsequent to December 31, 2004.

Non-Traditional Contracts

We write non-traditional contracts of insurance and reinsurance. We may account for these transactions as deposits held on behalf of our clients instead of as insurance and reinsurance premiums, as appropriate. Under the deposit method of accounting, revenues and expenses from insurance and reinsurance contracts are not recognized as written premium and incurred losses. Instead, amounts from these contracts are recognized as other income or investment income over the expected contract or service period.

Pursuant to our revenue recognition policy, a contract is non-traditional if it contains certain terms and features or otherwise results in a structure that we believe limits our insurance risks, including timing risks, or that does not provide for a reasonable possibility of significant loss. These terms or features include, among others, experience based adjustable features, consideration of investment income, an amount of funding or financing of a portion of potential expected losses and coverage for the adverse development of previously incurred losses. Non-traditional contracts are also those contracts that are not necessarily intended to provide for the transfer of economic risk but for which coverage is triggered by a non-insurance event or for which coverage is provided to achieve temporary accounting or regulatory relief or other non-economic or risk management benefits. For example, one of our non-traditional contracts is a life surplus relief transaction that provides temporary statutory capital benefit to a U.S. life insurance entity. We use the test set forth in SFAS 113 to ascertain whether we believe our underwriting risk is limited or whether there is not a reasonable possibility of significant loss. These tests include a number of subjective judgments. Because of this subjectivity and in the context of evolving practices and application of existing and future standards, we could be required in the future to adjust our accounting treatment of these transactions. This could have a material effect on our financial condition and results of operations.

During the first quarter of 2005, we recognized in "other income" $1.0 million of fees and revenues relating to non-traditional contracts which we accounted for using the deposit method. If these contracts transferred risk as determined by Statement of Financial Accounting Standards ("SFAS") No. 113 "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts", gross premium relating to these contracts would total approximately $28 million in the first quarter of 2005.

Of the $1.0 million, $0.2 million of this other income relates to fees earned from a surplus relief life reinsurance arrangement with a U.S. insurance company which meets our definition of a non-traditional contract. In the fourth quarter of 2004, under this contract we made an arrangement with our client and assumed, through novation agreements, several life reinsurance contracts it had made. Because we assumed these contracts, our client, which is subject to insurance regulation in the United States and therefore is required to maintain a certain amount of statutory capital, may reduce its statutory capital requirements. In exchange for our assumption of the contracts we received a fee. The arrangement, among other things, also provides that on certain dates and during specific periods,

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our client has the right but not the obligation to recapture the life reinsurance contracts we have assumed, provided that the underlying cedants do not reasonably withhold their consent to this recapture. We believe that our client is economically incentivized to exercise the recapture provision in the future, as the amount of statutory relief that the client receives from its regulator over the period of this contract reduces over time.

We believe the arrangement, including our client's option to recapture, and the assumption of the life insurance contracts constitute one contract with minimal mortality, credit or other insurance or economic risk which leads us to the use of deposit accounting. Although we believe our client will exercise the recapture, we cannot assure you that this will be the case. If our client does not recapture the underlying insurance contracts in the future, we may be viewed as having had the risks described above and, as a result, we could become the life reinsurer and may be required to account for some or all of the underlying insurance contracts as life insurance, recognizing life premiums written and life benefit reserves in our consolidated statement of operations. With respect to this particular arrangement, at this time, we believe that the gross life reinsurance premiums written, of approximately $5.6 million, that we would have had to recognize had deposit accounting not been appropriate, would not have had a material effect on our financial position and results of operations. However, as the underlying life insurance contracts mature the effect on our financial condition and results of operations may become material.

The remaining $0.8 million of the $1.0 million of other income relates to revenues earned from three reinsurance contracts accounted for as deposits. Although these contracts did possess some underwriting and timing risks as prescribed by SFAS No. 113, we do not believe we are exposed to a reasonable possibility of significant loss.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk can be described as the risk of change in fair value of a financial instrument due to changes in interest rates, creditworthiness, foreign exchange rates or other factors. We are exposed to potential loss from these factors. Our most significant financial instruments are our investment assets which consist primarily of fixed maturity securities and cash equivalents that are denominated in both U.S. and foreign currencies. External investment professionals manage our investment portfolios in accordance with our investment guidelines. Our investment guidelines also permit our investment managers to use derivative instruments in very limited circumstances. We will seek to mitigate market risks by a number of actions, as described below.

Derivative Valuation Risk

Our derivative policy permits the use of derivatives to manage our portfolio's duration, yield curve, currency exposure, credit exposure, exposure to volatility and to take advantage of inefficiencies in derivatives markets. We may also enter into derivative transactions (1) to hedge capital market risks that may be present in our contracts of insurance or reinsurance and (2) as replication transactions which we define as a set of derivative, insurance and/or securities transactions that, when combined, produce the equivalent economic result of an investment security or insurance or reinsurance contract that meets our investment or underwriting guidelines.

We utilize derivative instruments only when we believe the terms and structure of the contracts are thoroughly understood and its total return profile and risk characteristics can be fully analyzed. Also, any single derivative or group of derivatives in the aggregate cannot create risk characteristics that are inconsistent with our overall risk profile and investment portfolio guidelines.

Foreign Currency Risk and Functional Currency

Our reporting currency is the U.S. dollar. Although we have not experienced any significant net exposures to foreign currency risk, we expect that in the future our exposure to market risk for changes in foreign exchange rates will be concentrated in our investment assets, investments in foreign subsidiaries, premiums receivable and insurance reserves arising from known or probable losses that

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are denominated in foreign currencies. We generally manage our foreign currency risk by maintaining assets denominated in the same currency as our insurance liabilities resulting in a natural hedge or by entering into foreign currency forward derivative contracts in an effort to hedge against movements in the value of foreign currencies against the U.S. dollar. These contracts are not designated as specific hedges for financial reporting purposes and therefore realized and unrealized gains and losses on these contracts are recorded in income in the period in which they occur. These contracts generally have maturities of three months or less. A foreign currency forward contract results in an obligation to purchase or sell a specified currency at future date and price specified at the time of the contract. Foreign currency forward contracts will not eliminate fluctuations in the value of our assets and liabilities denominated in foreign currencies but rather allow us to establish a rate of exchange for a future point in time. We have not and do not expect to enter into such contracts with respect to a material amount of our assets or liabilities.

Our non-U.S. subsidiaries maintain both assets and liabilities in their functional currencies, principally Euro and sterling. Assets and liabilities denominated in foreign currencies are exposed to changes in currency exchange rates. Exchange rate fluctuations in Euro and sterling functional currencies against our U.S. dollar reporting currency are reported as a separate component of other comprehensive (loss) income in shareholders' equity. Foreign exchange risk associated with non-US dollar functional currencies of our foreign subsidiaries is reviewed as part of our risk management process and we employ foreign currency risk management strategies, as described above, to manage our exposure. Exchange rate fluctuations against non-U.S. dollar functional currencies may materially impact our consolidated statement of operations and financial position.

Our investment guidelines limit the amount of our investment portfolio that may be denominated in foreign currencies to 20% (as measured by market value). Furthermore, our guidelines limit the amount of foreign currency denominated investments that can be held without a corresponding hedge against the foreign currency exposure to 5% (as measured by market value). As of March 31, 2005, our investment portfolio included $11.9 million, or 2.1%, of our total net invested assets, of securities that were denominated in foreign currencies and were purchased by our investment managers for the purpose of improving overall portfolio yield. $10.9 million of these securities were rated AAA and $1.0 million were rated BAA, and were substantially hedged into U.S. dollars according to our investment guidelines by entering into foreign currency forward contracts. At March 31, 2005, the net fair market value of foreign currency forward contracts relating to foreign currency denominated investments was $0.3 million.

Interest Rate Risk

Our exposure to market risk for changes in interest rates is concentrated in our investment portfolio. Our investment portfolio primarily consists of fixed income securities. Accordingly, our primary market risk exposure is to changes in interest rates. Fluctuations in interest rates have a direct impact on the market valuation of fixed income securities. As interest rates rise, the market value of our fixed-income portfolio falls, and the converse is also true.

Our strategy for managing interest rate risk includes maintaining a high quality investment portfolio that is actively managed by our managers in accordance with our investment guidelines in order to balance our exposure to interest rates with the requirement to tailor the duration, yield, currency and liquidity characteristics to the anticipated cash outflow characteristics of claim reserve liabilities. As of March 31, 2005, assuming parallel shifts in interest rates, the impact of an immediate 100 basis point increase in market interest rates on our net invested assets, including cash and cash equivalents, under Management by Third Party Investment Managers of approximately $642.1 million would have been an estimated decrease in market value of approximately $18.0 million, or 2.8%, and the impact on our net invested assets, including cash and cash equivalents, under management by third party investment managers of an immediate 100 basis point decrease in market interest rates would have been an estimated increase in market value of approximately $15.3 million, or 2.4%.

As of March 31, 2005, our investment portfolio included AAA rated mortgage-backed securities with a market value of $153.3 million, or 25.1%, excluding trading investments related to deposit

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liabilities. As with other fixed income investments, the fair market value of these securities fluctuates depending on market and other general economic conditions and the interest rate environment. Changes in interest rates can also expose us to prepayment and extension risks on these investments. In periods of declining interest rates, the frequency of mortgage prepayments generally increase as mortgagees seek to refinance at a lower interest rate cost. Mortgage prepayments result in the early repayment of the underlying principal of mortgage-backed securities requiring us to reinvest the proceeds at the then current market rates. When interest rates increase, these assets are exposed to extension risk, which occurs when holders of underlying mortgages reduce the frequency on which they prepay the outstanding principal before the maturity date and delay any refinancing of the outstanding principal.

Credit Risk

We have exposure to credit risk primarily as a holder of fixed income securities. This risk is defined as the default or the potential loss in market value resulting from adverse changes in the borrower's ability to repay the debt. Our risk management strategy and investment policy is to invest in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to particular ratings categories and to any one issuer. We attempt to limit our overall credit exposure by purchasing fixed income securities that are generally rated investment grade by Moody's Investors Service, Inc. and/or S&P. Our investment guidelines require that the average credit quality of our portfolio will be Aa3/AA– and that no more than 5% of our investment portfolio's market value shall be invested in securities rated below BBB–/Baa3. We also limit our exposure to any single issuer to 5% or less of our portfolio's market value at the time of purchase, with the exception of U.S. government and agency securities. As of March 31, 2005, the average credit quality of our investment portfolio was AA, and all fixed income securities held were investment grade. Included in our investment portfolio was $20.0 million in par value of variable rate mortality linked securities issued by a single issuer which mature on January 1, 2007. We are subject to loss of principal and interest in the event of the occurrence of certain changes in a predefined mortality index. As of March 31, 2005, the fair value of the security was $20.0 million and represented approximately 3.3% of our investments excluding trading investments related to deposit liabilities.

We are also exposed to the credit risk of our insurance and reinsurance brokers to whom we make claims payments for insureds and our reinsureds, as well as to the credit risk of our reinsurers and retrocessionaires who assume business from us. To mitigate the risk of nonpayment of amounts due under these arrangements, we have established business and financial standards for reinsurer and broker approval, incorporating ratings by major rating agencies and considering the financial condition of the counterparty and the current market information.

We are also exposed to credit risk relating to our premiums receivable balance. As of March 31, 2005, our premiums receivable balance was $185.6 million. We believe that credit risk exposure related to these balances is mitigated by several factors, including but not limited to credit monitoring controls performed as part of the underwriting process and monitoring of aged receivable balances. In addition, as the majority of our insurance and reinsurance contracts permit the right of offset the premiums receivable against losses payable, we believe that the credit risk in this area is substantially reduced.

Effects of Inflation

We do not believe that inflation has had a material effect on our consolidated results of operations. The effects of inflation could cause the severity of claim costs to increase in the future. Our estimates for losses and loss expenses include assumptions, including those relating to inflation, about future payments for settlement of claims and claims handling expenses. To the extent inflation causes these costs to increase above our estimated reserves that are established for these claims, we will be required to increase reserves for losses and loss expenses with a corresponding reduction in our earnings in the period in which the deficiency is identified. The actual effects of inflation on our results cannot be accurately determined until claims are ultimately settled.

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ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we evaluated under the supervision and with the participation of management, including the Company's Chief Executive Officer and the Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Securities and Exchange Act of 1934 (the "Exchange Act"). Based upon that re-evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, due to the material weakness discussed below, our disclosure controls and procedures were ineffective in ensuring that the information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms.

Subsequent to the period covered by this quarterly report, in connection with our routine monthly closing process for our books at the April month-end, we discovered a mathematical error in the calculation of policy acquisition expenses used in the reporting of our first quarter results. To address the error discovered as a part of this process, and as announced in our Current Report on Form 8-K filed with the Securities and Exchange Commission on May 13, 2005, we are restating our financial statements for the quarter ended March 31, 2005. See further discussion in the Explanatory Note and Note 10 to our unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2005 contained herein. We have determined that this mathematical error only affected our financial statements for the quarter ended March 31, 2005 and did not affect any of our financial statements for prior periods.

A material weakness in internal control is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by us. We have evaluated the effectiveness of our internal controls for the calculation of acquisition expenses as of the end of the period covered by this quarterly report, and have determined that the mathematical error referenced above indicates a material weakness in internal control over financial reporting with respect to the calculation of acquisition expenses. We are taking steps to ensure that the material weakness is remedied, including adding staffing and implementing enhanced analytics and control processes over the calculation of acquisition expenses.

As a non-accelerated registrant, we are currently in the process of reviewing and formalizing our internal controls over financial reporting in accordance with the Securities and Exchange Commission's rules implementing the internal control reporting requirements included in Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"). Changes have been and will continue to be made to our internal controls over financial reporting as a result of these efforts. We are dedicating significant resources to our ongoing Section 404 assessment. We will continue to work to improve our controls and procedures and to educate and train our employees on our existing controls and procedures in connection with our efforts to maintain an effective controls infrastructure.

Limitations on the Effectiveness of Controls

We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our Chief Executive Officer and Chief Financial Officer have concluded that, except as otherwise described above, such controls and procedures are effective at the "reasonable assurance" level.

Changes in Internal Controls

There was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2005, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We are not a party to any pending or threatened material litigation and are not currently aware of any pending or threatened material litigation other than routine legal proceedings that we believe are, in the aggregate, not material to our financial condition and results of operations. In the normal course of business we may become involved in various claims and legal proceedings.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended March 31, 2005, the Company issued to certain employees an aggregate of 880,942 options to purchase common stock and 106,835 performance share units. These transactions were completed without registration of the relevant security under the Securities Act of 1933, as amended, in reliance upon the exemptions provided by Section 4(2) for transactions not involving a public offering.

ITEM 6.    EXHIBITS

10.1	Form of Stock Option Agreement (previously filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, which was filed on May 5, 2005, and incorporated herein by reference).

10.2	Form of Performance Share Unit Agreement (previously filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, which was filed on May 5, 2005, and incorporated herein by reference).

31.1	Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

				Quanta Capital Holdings Ltd.
Date:    May 13, 2005				/s/ Tobey J. Russ
				Tobey J. Russ                 (On behalf of the registrant and as                 Principal Executive Officer)
Date:    May 13, 2005				/s/ John S. Brittain, Jr.
				John S. Brittain, Jr.                 (Principal Financial Officer)

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Index to Exhibits

10.1	Form of Stock Option Agreement (previously filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, which was filed on May 5, 2005, and incorporated herein by reference).

10.2	Form of Performance Share Unit Agreement (previously filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, which was filed on May 5, 2005, and incorporated herein by reference).

31.1	Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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