SCHEDULE 14A INFORMATION

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

                           Filed by the Registrant [X]

                 Filed by a Party other than the Registrant [ ]

                           Check the appropriate box:

                         [ ] Preliminary Proxy Statement

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

                         [X] Definitive Proxy Statement

                       [ ] Definitive Additional Materials

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


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


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

               Payment of Filing Fee (Check the appropriate box):

                              [X] No fee required.

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

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

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

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

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

(1) Amount Previously Paid:

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                                 XL CAPITAL LTD

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

            NOTICE OF ANNUAL GENERAL MEETING OF ORDINARY SHAREHOLDERS

                            TO BE HELD ON MAY 9, 2003

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



                                                               Hamilton, Bermuda

April 4, 2003

TO THE CLASS A ORDINARY SHAREHOLDERS OF XL CAPITAL LTD:

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

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

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

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

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

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

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

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

                                           By Order of The Board of Directors,

                                           /s/ Paul S. Giordano

                                           Paul S. Giordano
                                           SECRETARY



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

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

                                 PROXY STATEMENT

                                       FOR

               THE ANNUAL GENERAL MEETING OF ORDINARY SHAREHOLDERS

                            TO BE HELD ON MAY 9, 2003

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

                                                                   April 4, 2003

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

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

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

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

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

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

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


                                       1



                              BENEFICIAL OWNERSHIP

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



                                                                            AMOUNT AND NATURE OF
TITLE OF CLASS          NAME AND ADDRESS OF BENEFICIAL OWNER                BENEFICIAL OWNERSHIP   PERCENT OF CLASS
------------            -----------------------------------                 --------------------    ---------------
                                                                                                
Ordinary Share,         Capital Research and Management Company                  12,775,700              9.4%
Class A                 333 South Hope Street, Los Angeles, CA 90071

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

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

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


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


                               BOARD OF DIRECTORS

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

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

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

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

AUDIT COMMITTEE

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


                                       2



COMPENSATION COMMITTEE

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

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

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

FINANCE COMMITTEE

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

DIRECTORS COMPENSATION

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

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

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

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


                                       3



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

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

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

                              CERTAIN TRANSACTIONS

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

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

             SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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

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


                                       4



                            I. ELECTION OF DIRECTORS

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

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

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

                     NOMINEES FOR WHOM PROXIES WILL BE VOTED

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

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

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

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

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


          DIRECTORS WHOSE TERMS OF OFFICE DO NOT EXPIRE AT THIS MEETING

CLASS III DIRECTORS WHOSE TERMS EXPIRE IN 2004:

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

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

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


                                       5



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

CLASS I DIRECTORS WHOSE TERMS EXPIRE IN 2005:

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

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

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

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

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

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



                                       6



          EQUITY SECURITIES OWNED BENEFICIALLY AS OF FEBRUARY 28, 2003

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

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

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

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

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

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

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

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

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



                                       7



                             EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

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



                                                                                    LONG-TERM COMPENSATION
                                                   ANNUAL COMPENSATION                       AWARDS
                                     ---------------------------------------------  -----------------------
                                                                         OTHER      RESTRICTED  SECURITIES
                                                                        ANNUAL         STOCK    UNDERLYING     ALL OTHER
NAME AND PRINCIPAL POSITION          YEAR     SALARY        BONUS   COMPENSATION(1)  AWARD(2)   OPTIONS(3)   COMPENSATION(4)
---------------------------          ----   ----------   ---------- --------------- ----------  ----------  ---------------
                                                                                         
Brian M. O'Hara (5)                  2002   $1,000,000   $1,000,000    $131,525       $862,500    140,000       $200,000
   President and Chief               2001   $1,000,000   $1,000,000    $140,004             --    140,000       $200,000
   Executive Officer of              2000     $900,000     $950,000    $148,826       $988,910     75,000       $185,000
   the Company

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

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

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

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


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

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

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

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

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

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



                                       8



                       OPTIONS GRANTED IN LAST FISCAL YEAR

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



                                                                                               POTENTIAL REALIZABLE
                                                                                                 VALUE AT ASSUMED
                                                                                                  ANNUAL RATES OF
                                                                                                    STOCK PRICE
                                                                                                 APPRECIATION FOR
                                                        INDIVIDUAL GRANTS                           OPTION TERM
                                  ----------------------------------------------------------------------------------
                                    NUMBER OF       % OF
                                   SECURITIES   TOTAL OPTIONS
                                   UNDERLYING    GRANTED TO       EXERCISE
                                     OPTIONS    EMPLOYEES IN    OR BASE PRICE
NAME AND PRINCIPAL POSITION        GRANTED(1) LAST FISCAL YEAR (PER SHARE)(2) EXPIRATION DATE     5%          10%
------------------------            ---------   -------------    -----------   -------------  ----------  ----------
                                                                                        
Brian M. O'Hara                     138,925             3.8%        $ 93.00    March 8, 2012  $8,125,334  $20,591,192
   President and Chief                1,075(3)                                 March 8, 2012     $62,874     $159,334
   Executive Officer of
   the Company

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

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

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

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


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



                                       9



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

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



                                                                 NUMBER OF SECURITIES      VALUE OF UNEXERCISED
                                                                UNDERLYING UNEXERCISED            IN THE
                                      SHARES                          OPTIONS AT               MONEY OPTIONS
                                     ACQUIRED     IMPLIED VALUE    DECEMBER 31, 2002       AT DECEMBER 31, 2002
NAME AND PRINCIPAL POSITION         ON EXERCISE     REALIZED   EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--------------------------          -----------   ------------ ------------------------  ------------------------
                                                                               
Brian M. O'Hara                       22,233         $359,897       814,690/223,467        $23,883,808/$951,746
   President and Chief
   Executive Officer of
   the Company

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

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

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

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



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



                                       10



                      EQUITY COMPENSATION PLAN INFORMATION



                                                                                           NUMBER OF SECURITIES
                                              NUMBER OF                                   REMAINING AVAILABLE FOR
                                          SECURITIES TO BE        WEIGHTED-AVERAGE      FUTURE ISSUANCE UNDER EQUITY
                                        ISSUED UPON EXERCISE      EXERCISE PRICE OF         COMPENSATION PLANS
                                       OF OUTSTANDING OPTIONS,  OUTSTANDING OPTIONS,       (EXCLUDING SECURITIES
                                         WARRANTS AND RIGHTS     WARRANTS AND RIGHTS      REFLECTED IN COLUMN (A))
PLAN CATEGORY                                    (A)                     (B)                        (C)
-------------                          ----------------------   ---------------------     ------------------------
                                                                                       
Equity compensation plan approved            10,632,766                $72.43                   10,338,426(1)
  by security holders

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

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


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


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

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

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

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


                                       11


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

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

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

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

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

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

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


                                       12



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

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

COMPENSATION COMMITTEE REPORT

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

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

GLOBAL INCENTIVE COMPENSATION PLAN

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

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

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


                                       13



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

2002 COMPENSATION REVIEW

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

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

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

CHIEF EXECUTIVE OFFICER AND CHAIRMAN'S COMPENSATION

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

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

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




                                       14



PERFORMANCE GRAPH

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

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

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

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


AUDIT COMMITTEE REPORT

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

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


                                       15



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

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

AUDIT AND AUDIT RELATED FEES

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

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

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

ALL OTHER FEES

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

GENERAL

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

                     II. APPOINTMENT OF INDEPENDENT AUDITORS

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

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



                                       16



             III. AMENDMENT AND RESTATEMENT OF THE 1991 PERFORMANCE

                                INCENTIVE PROGRAM

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

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

GENERAL

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

ELIGIBILITY AND ADMINISTRATION

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


                                       17



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

AWARDS

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

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

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

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

AMENDMENT AND TERMINATION

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

MARKET VALUE

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


                                       18



FEDERAL INCOME TAX CONSEQUENCES

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

STOCK OPTIONS

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

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

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

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

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

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

RESTRICTED STOCK

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


                                       19



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

SARS AND OTHER AWARDS

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

DEDUCTIBILITY LIMIT ON COMPENSATION IN EXCESS OF $1 MILLION

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

NEW PROGRAM BENEFITS

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

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

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

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

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

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

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


                                       20



GENERAL

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

ELIGIBILITY AND ADMINISTRATION

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

AWARDS AND DEFERRAL ELECTIONS

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

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

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

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

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


                                       21



AMENDMENTS AND TERMINATION

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

MARKET MALUE

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

FEDERAL INCOME TAX CONSEQUENCES

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

STOCK OPTIONS

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

RESTRICTED STOCK

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

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

OTHER AWARDS AND DEFERRALS

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

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

                                NEW PLAN BENEFITS

               AMENDED AND RESTATED DIRECTORS STOCK & OPTION PLAN

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

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



                                       22



                V. SHAREHOLDER PROPOSALS FOR 2004 ANNUAL MEETING

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

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

                                VI. OTHER MATTERS

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

PROXY SOLICITATION

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

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

                                       As ordered,

                                       /s/ Brian M. O'Hara

                                       Brian M. O'Hara
                                       PRESIDENT AND CHIEF EXECUTIVE OFFICER




                                       23



                                                                      APPENDIX A

                                 XL CAPITAL LTD

                             AUDIT COMMITTEE CHARTER

PURPOSE

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

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

COMMITTEE MEMBERSHIP

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

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

MEETINGS

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

COMMITTEE AUTHORITY AND RESPONSIBILITIES

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

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

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

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

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


                                      A-1



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

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

FINANCIAL STATEMENTS, EARNINGS RELEASES AND RELATED DISCLOSURE MATTERS

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

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

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

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

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

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

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

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

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

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

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

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

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

RELATIONSHIP WITH INDEPENDENT AUDITOR

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

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


                                      A-2



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

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

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

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

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

INTERNAL AUDIT

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

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

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

INTERNAL CONTROLS

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

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

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

COMPLIANCE

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

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

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

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


                                      A-3



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

OTHER RESPONSIBILITIES

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

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

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

INTERPRETATION

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




                                      A-4



                                                                      APPENDIX B


                                 XL CAPITAL LTD

                       1991 PERFORMANCE INCENTIVE PROGRAM

                (AS AMENDED AND RESTATED EFFECTIVE MARCH 7, 2003)

                                 I. INTRODUCTION

A.   PURPOSE OF THE PROGRAM

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

B.   DEFINITIONS

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

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

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

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

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

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

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

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

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

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


                                      B-1



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

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

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

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

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

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

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

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

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

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

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

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

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

                           II. PROGRAM ADMINISTRATION

A.   ADMINISTRATION

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


                                      B-2



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

B.   PARTICIPATION

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

C.   MAXIMUM NUMBER OF SHARES AVAILABLE

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

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

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

D.   ADJUSTMENTS

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

E.   REGISTRATION CONDITIONS

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


                                      B-3



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

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

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

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

F.   COMMITTEE ACTION

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

G. NO OPTION OR SAR REPRICING WITHOUT SHAREHOLDER APPROVAL

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

                             III. PERFORMANCE SHARES

A.   GRANT OF PERFORMANCE SHARES

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

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

B.   ESTABLISHMENT OF PERFORMANCE GOALS

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

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


                                      B-4



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

C.   TERMINATION OF EMPLOYMENT

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

                              IV. RESTRICTED STOCK

A.   GRANT OF RESTRICTED STOCK

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

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

B.   OTHER TERMS AND CONDITIONS

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

C.   RESTRICTED STOCK AWARD AGREEMENT

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

D.   TERMINATION OF EMPLOYMENT

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


                                      B-5



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

E. PAYMENT FOR RESTRICTED STOCK

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

                                V. STOCK OPTIONS

A. STOCK OPTION TERMS AND CONDITIONS

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

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

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

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

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

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

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

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

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

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

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

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

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


                                      B-6



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

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

B.   STOCK APPRECIATION RIGHTS (SARS)

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

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

                           VI. PERFORMANCE UNIT AWARDS

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

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

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

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

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

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

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

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

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

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

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

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


                                      B-7



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

                             VII. PERFORMANCE AWARDS

A.   PERFORMANCE AWARDS GRANTED TO DESIGNATED PARTICIPANTS

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

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

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

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

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

B.   WRITTEN DETERMINATION

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


                                      B-8



                          VIII. RESTRICTED STOCK UNITS

A.   GRANT OF RESTRICTED STOCK UNITS

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

B.   OTHER TERMS AND CONDITIONS

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

C.   RESTRICTED STOCK UNIT AWARD AGREEMENT

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

D.   TERMINATION OF EMPLOYMENT

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

                             IX. GENERAL PROVISIONS

A.   AMENDMENT AND TERMINATION OF PROGRAM

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

B.   GOVERNMENT AND OTHER REGULATIONS

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

C.   OTHER COMPENSATION PLANS AND PROGRAMS

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


                                      B-9



D.   MISCELLANEOUS PROVISIONS

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

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

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

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

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

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

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

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

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

E.   EFFECTIVE DATES

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



                                      B-10



                        ADDENDUM FOR FRENCH STOCK OPTIONS

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

A.   PURPOSE OF THE FRENCH ADDENDUM

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

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

B.   DEFINITIONS

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

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

     "Cause" shall mean:

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

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

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

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

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

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

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

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

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



                                      B-11



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

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

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

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

D.   PARTICIPATION

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

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

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

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

E.   PRICE

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

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

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

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

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

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

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

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

F.   DATE OF GRANT

     No French Option may be granted:

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

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

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


                                      B-12



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

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

G. EXERCISE FOLLOWING DEATH OF FRENCH PARTICIPANT

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

H.   DISPOSAL OF SHARES

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

I.   LAPSE OF FRENCH OPTIONS

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

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

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

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

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

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

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

     7. the French Participant being adjudicated bankrupt; or

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

J.   EXERCISE OF FRENCH OPTIONS

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

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

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

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

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


                                      B-13



                       2002 ITALIAN STOCK OPTION ADDENDUM

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

A.   PURPOSE OF THE ITALIAN ADDENDUM

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

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

B.   DEFINITIONS

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

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

     "Cause" shall mean:

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

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

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

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

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

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

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

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

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



                                      B-14



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

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

D.   PARTICIPATION

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

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

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

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

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

E.   PRICE

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

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

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

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

F. EXERCISE FOLLOWING DEATH OF ITALIAN PARTICIPANT

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

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

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

G.   LAPSE OF ITALIAN OPTIONS

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

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

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

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

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

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

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

     7. the Italian Participant being adjudicated bankrupt; or

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


                                      B-15



H.   EXERCISE OF ITALIAN OPTIONS

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

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

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

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

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




                                      B-16



                    ADDITIONAL PROVISIONS FOR UK PARTICIPANTS

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

A. PURPOSE OF THE UK SUBPLAN

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

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

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

B.   DEFINITIONS

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

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

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

     "Cause" shall mean:

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

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

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

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

     "Eligible Employee" shall mean:

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

          b.   any other employee of a Participating Company

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

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

     "Group Company" shall mean:

          a.   the Company; or

          b.   any company under the Control of the Company.



                                      B-17



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

C.   ADMINISTRATION

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

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


                                      B-18



D. ADJUSTMENTS TO SHARE CAPITAL

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

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

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

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

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

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

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

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

F.   GRANT OF APPROVED OPTIONS

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

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

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

          a.   the date of grant of the Approved Option;

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

          c.   the option price payable for each share;

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

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

G.   PRICE

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

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

H.   PERIOD

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

I.   TIME OF EXERCISE

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

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


                                      B-19



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

J.   PAYMENT

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

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

K. LIMIT ON VALUE OF APPROVED OPTIONS HELD

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

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

L.   LAPSE OF APPROVED OPTIONS

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

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

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

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

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

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

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

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

          g.   the UK Participant being adjudicated bankrupt; or

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

M.   EXERCISE OF APPROVED OPTIONS

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

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

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


                                      B-20



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

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

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

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

N.   EFFECTIVE DATES

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

O. EXCHANGE OF APPROVED OPTIONS ON A TAKEOVER

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

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

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

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



                                      B-21



                                                                      APPENDIX C


                                 XL CAPITAL LTD

                          DIRECTORS STOCK & OPTION PLAN

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


1.   PURPOSES.

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

2.   DEFINITIONS.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3.   ADMINISTRATION.

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


                                      C-1



4.   SHARES SUBJECT TO THE PLAN.

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

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

5.   DIRECTOR'S AWARDS.

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

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

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

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

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

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

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

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


                                      C-2



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

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

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

6.   DIRECTOR'S FEES.

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

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

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

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


                                      C-3



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

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

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

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

7.   GENERAL PROVISIONS.

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

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

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


                                      C-4



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

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

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

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

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

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

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

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




                                      C-5


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


                    THERE ARE THREE WAYS TO VOTE YOUR PROXY


                                    TELEPHONE

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

                                    INTERNET

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

                                      MAIL

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


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


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


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

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

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

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

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


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

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

                                                 FOR      AGAINST    ABSTAIN

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

                                                 FOR      AGAINST    ABSTAIN

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

                                                 FOR      AGAINST    ABSTAIN

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


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


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


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

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




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

P
R
O
X
Y
                                 XL CAPITAL LTD

          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

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

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

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

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



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




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



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


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


--------------------------------------------------------------------------------
                 THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
                       PROPOSALS 1 THROUGH 4 (INCLUSIVE).
--------------------------------------------------------------------------------
                                              FOR all nominees      WITHHOLD
                                             listed (except as      AUTHORITY
                                               marked to the     to vote for all
                                                 contrary)          nominees

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

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


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

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


                                                 FOR      AGAINST    ABSTAIN

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

                                                 FOR      AGAINST    ABSTAIN

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

                                                 FOR      AGAINST    ABSTAIN

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


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


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


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

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



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


                                 XL CAPITAL LTD

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

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

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

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