10-K

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

      For the fiscal year ended December 31, 2002.

                                       OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

      For the transition period                      to                       .
                                ---------------------  ----------------------

                         Commission file number 0-31967

                          TRENWICK AMERICA CORPORATION
             (Exact name of registrant as specified in its charter)

            Delaware                                             06-1087672
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                One Canterbury Green, Stamford, Connecticut 06901
               (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code: 203-353-5500

        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K |X|

      There was no voting stock held by non-affiliates of the registrant on
April 8, 2003.

      The number of shares outstanding of each of the issuer's classes of common
stock as of the close of the period covered by this report:

                Class                   Outstanding at April 8, 2003
                -----                   ----------------------------
     Common Stock, $1.00 par value                   100

The registrant meets the conditions set forth in General Instruction I (1)(a)
and (b) of Form 10-K and is therefore filing this Form 10-K in the reduced
disclosure format.



                          TRENWICK AMERICA CORPORATION

                                Table of Contents

                                                                           Page
Item                                                                      Number
- ----                                                                      ------
                                     PART I

  1.  Business  ...........................................................  1
  2.  Properties  ......................................................... 23
  3.  Legal Proceedings  .................................................. 23
  4.  Submission of Matters to a Vote of Security Holders  ................ 23

                                     PART II

  5.  Market for the Corporation's Common Stock and Related Stockholder
      Matters ............................................................. 24
  6.  Selected Financial Data.............................................. 24
  7.  Management's Discussion and Analysis of Financial Condition and
      Results of Operation  ............................................... 24
  7a. Quantitative and Qualitative Disclosures About Market Risk........... 54
  8.  Financial Statements and Supplementary Data  ........................ 54
  9.  Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure  ............................................... 54

                                    PART III

 10.  Directors and Executive Officers  ................................... 54
 11.  Executive Compensation  ..............................................54
 12.  Security Ownership of Certain Beneficial Owners and Management  ..... 54
 13.  Certain Relationships and Related Transactions  ..................... 54
 14.  Controls and Procedures.............................................. 54

                                     PART IV

 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K ..... 54


                                       i


                           FORWARD-LOOKING STATEMENTS

Some of the statements under "Business," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
elsewhere in this Report may include forward-looking statements which reflect
our current views with respect to future events and financial performance. These
statements include forward-looking statements both with respect to us
specifically and the insurance and reinsurance sectors in general. Statements
which include the words "expect," "intend," "plan," "believe," "project,"
"anticipate," "will" and similar statements of a future or forward-looking
nature identify forward-looking statements for purposes of the federal
securities laws or otherwise.

All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that could
cause our actual results to differ materially from those indicated in these
statements. We believe that these factors include but are not limited to those
described under "Risk Factors" below and the following:

      -     our ceasing to function as a going concern;

      -     actions by insurance regulators seizing or otherwise taking control
            of our insurance company subsidiaries or their assets;

      -     actions by our creditors or securities holders commencing
            liquidation or similar proceedings against us, our subsidiaries or
            their assets;

      -     greater frequency or severity of claims and loss activity, including
            as a result of natural or man-made catastrophic events, than our
            underwriting, reserving or investment practices anticipate based on
            historical experience or industry data;

      -     failure of our business strategy due to changes in current or future
            market conditions;

      -     increased competition on the basis of financial strength, pricing,
            capacity, coverage terms or other factors;

      -     our lack of experience in operating insurance or reinsurance
            entities that are in runoff and are not writing new business;

      -     the effects of acts of terrorism or war;

      -     developments in the world's financial and capital markets that
            adversely affect the performance of our investments;

      -     changes in regulation or tax laws applicable to us, our
            subsidiaries, brokers or customers;

      -     changes in the availability, cost or quality of reinsurance;

      -     changes in the distribution or placement of risks due to increased
            consolidation of insurance and reinsurance brokers;

      -     decreased demand for our insurance and reinsurance products;

      -     loss of additional key personnel, or consultants;

      -     the effects of mergers, acquisitions and divestitures;


                                       2


      -     changes in rating agency policies or practices;

      -     changes in legal theories, including trends that impact verdicts in
            insurance claims litigation;

      -     changes in accounting policies or practices; and

      -     changes in general economic conditions, including inflation, foreign
            currency exchange rates, interest rates, and other factors.

The foregoing review of important factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary statements that are
included in this Report. We undertake no obligation to publicly update or review
any forward-looking statement, whether as a result of new information, future
developments or otherwise.

If one or more of these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may vary materially
from what we projected. Any forward-looking statements you read in this Report
reflect our current views with respect to future events and are subject to these
and other risks, uncertainties and assumptions relating to our operations,
results of operations, growth strategy and liquidity. All subsequent written and
oral forward-looking statements attributable to us or individuals acting on our
behalf are expressly qualified in their entirety by this paragraph. You should
specifically consider the factors identified in this Report which could cause
actual results to differ before making an investment decision.


                                       3


                                     PART I

Item 1. Business

General Background

Trenwick America Corporation ("Trenwick America"), a Delaware corporation, was
formed in 1983 and in 1985 became a wholly-owned direct subsidiary of Trenwick
Group Inc., for the purposes of serving as a United States holding company.
Trenwick America's treaty reinsurance business provides, through an underwriting
facility with Chubb Re, Inc. and its affiliate Federal Insurance Company
(together, "Chubb"), treaty reinsurance to insurers of property and casualty
risks.

On September 27, 2000, Trenwick Group Ltd. ("Trenwick"), a newly formed Bermuda
holding company, issued common shares to acquire Trenwick Group Inc. and another
publicly held Bermuda company, LaSalle Re Holdings Limited ("LaSalle Re
Holdings"), and the minority interest in LaSalle Re Limited ("LaSalle Re"), a
Bermuda subsidiary of LaSalle Re Holdings (the "Trenwick/LaSalle business
combination"). Trenwick Group Inc. then distributed the shares received from
Trenwick to its shareholders in a liquidating distribution. As a part of the
transaction, Trenwick Group Inc. completed a concurrent internal reorganization
of its subsidiary companies in which substantially all of Trenwick Group Inc.'s
assets and liabilities were transferred from Trenwick Group Inc. to a
subsidiary, which then merged with and into Trenwick America, with Trenwick
America as the surviving corporation. The result of the restructuring was that
Trenwick America became the intermediate holding company for Trenwick's United
States subsidiaries and Trenwick America became the primary obligor under
Trenwick Group Inc.'s senior notes, mandatorily redeemable preferred capital
securities and contingent interest notes referred to herein. This abbreviated
Annual Report on Form 10-K is required as a result of debt assumed by Trenwick
America in connection with the restructuring.

In 2002, Trenwick conducted several strategic reviews of its operations,
including Trenwick America's, in light of its capital constraints and determined
that it was necessary for Trenwick America to reduce its operating leverage by
reducing premium volumes, through either sales or discontinuance of certain
lines of business, to a level more commensurate with its capital base and to
concentrate its limited financial resources on its core franchise and business,
treaty reinsurance, where it would be able to write reinsurance based on direct
or indirect financial support. Trenwick America assessed its alternatives and
voluntarily placed into runoff its specialty program business formerly operated
through its subsidiary, Canterbury Financial Group, Inc. ("Canterbury").

As a result of a significant deterioration in Trenwick's financial condition,
more fully described in "Significant Developments" below, Trenwick hired
Greenhill & Co., LLC as its financial advisor to assist in the evaluation and
implementation of a possible restructuring of Trenwick America's outstanding
indebtedness and Trenwick's preferred equity as well as other strategic
alternatives.

Significant Developments

During 2002 and the first quarter of 2003, a number of developments have
occurred that have significantly and negatively affected Trenwick America's
operations, capital structure and the financial resources required to conduct
its businesses. Set forth below are brief descriptions of a number of these
developments as well as certain material transactions entered into by Trenwick
America to enable it to continue to conduct business operations despite the
adverse developments. Investors are cautioned that Trenwick America has had a
number of significant adverse events which could make it extremely difficult to
continue in its current businesses, if at all, and they should carefully review
the "Risk Factors" and "Forward-Looking Statements" sections, as well as other
sections, of this Report.


                                       4


Reserve Adjustments

Trenwick announced on October 25, 2002 that it had engaged independent actuaries
to conduct a review of reserves for unpaid claims and claims expenses at each of
Trenwick's operating subsidiaries, including Trenwick America's subsidiaries.
Based upon the study conducted by independent actuarial consultants and
additional work performed during the quarter by Trenwick's internal actuaries,
Trenwick America increased its reserves for unpaid claims and claims expenses in
the fourth quarter of 2002 by $100.4 million, which followed reserve increases
made by Trenwick America earlier in 2002. The aggregate reserve increase for
Trenwick America during 2002 was $229.4 million. Both the fourth quarter and
full year 2002 reserve increases are net of benefits related to reductions in
the liability under Trenwick America's contingent interest notes. (The
contingent interest notes are described in Note 7 of the Notes to the
Consolidated Financial Statements). The reserve increases reflect a reassessment
of Trenwick America's reserves for unpaid claims and claims expenses in light of
recent reported loss activity trends across its major business groups and
principally impact the 1998 to 2001 accident years. Included in the fourth
quarter 2002 reserve increase was $20 million relating to Trenwick America's
exposure to asbestos and environmental liabilities. Following this increase to
Trenwick America's asbestos and environmental reserves, Trenwick America's
three-year survival ratio (i.e., number of years that existing reserves will
last if the current level of average annual payments for the last three years
repeats itself indefinitely) for this type of exposure will be approximately 13
years. There can be no assurance that there will be no further adjustments to
Trenwick America's unpaid claims and claims expenses. See "-- Unpaid Claims and
Claims Expenses," below.

Deferred Income Tax Assets

Trenwick America incurred financial accounting losses in the years 1999 through
2002 and, in connection with such losses, recorded as an asset up to $119.2
million of net deferred income taxes (before application of a valuation
allowance). The net deferred income tax asset represented the future tax benefit
of the losses previously incurred by Trenwick America. Because of Trenwick
America's cumulative financial accounting losses, in the absence of specific
favorable factors, application of FASB Statement No. 109 required Trenwick
America to establish, during the third quarter of 2002, a 100% valuation
allowance against its deferred tax asset. The initial establishment of a 100%
valuation allowance against Trenwick America's deferred tax asset increased
Trenwick America's provision for income taxes and net loss by $54.5 million for
the year ended December 31, 2002. The maintenance of a full valuation allowance
against Trenwick America's net deferred tax asset through December 31, 2002
further increased Trenwick America's provision for income taxes and net loss by
$64.4 million for the year ended December 31, 2002. Trenwick America's
management will continue to monitor its tax position and reassess the need for a
valuation allowance on its deferred tax asset on a periodic basis.

Potential Events of Default Under Senior Secured Credit Facility

Concurrently with the Trenwick/LaSalle business combination, in September of
2000, Trenwick America and Trenwick Holdings Limited ("Trenwick Holdings"),
Trenwick's United Kingdom holding company, entered into an amended and restated
$490 million credit agreement with various lending institutions (the "Banks").
The credit agreement consisted of both a $260 million revolving credit facility
and a $230 million letter of credit facility. The revolving credit facility was
subsequently converted into a four-year term loan and repaid in full on June 17,
2002. Additionally, on December 24, 2002, the credit agreement was amended to
reduce the letter of credit facility, which is utilized by Trenwick to support
its underwriting operations at Lloyd's of London ("Lloyd's"), to the currently
outstanding $182.5 million. The letter of credit facility is scheduled to
terminate on December 31, 2003, although the letters of credit issued pursuant
to the facility will not expire until December 31, 2006.


                                       5


Pursuant to a guaranty agreement entered into concurrently with the credit
agreement, Trenwick has guaranteed the obligations of Trenwick America and
Trenwick Holdings under the credit agreement. In April of 2002, Trenwick pledged
the capital stock of LaSalle Re Holdings, which was a guarantor of the
obligations under the credit agreement, and LaSalle Re as collateral to the
Banks. In December of 2002, Trenwick, Trenwick America and Trenwick Holdings
agreed to provide the Banks additional security interests as described below.

On October 18, 2002, A.M. Best Company lowered the financial strength ratings of
Trenwick's, Trenwick America's and Trenwick Holdings' operating subsidiaries
below "A-." The lowered A.M. Best Company ratings constituted an event of
default under the credit agreement. In addition, increases in Trenwick's,
Trenwick America's and Trenwick Holdings' reserves for unpaid claims and claims
expenses and the establishment of a Trenwick America deferred tax asset
valuation allowance in the third quarter of 2002 resulted in violations of the
financial covenants in the credit agreement requiring Trenwick, Trenwick America
and Trenwick Holdings to maintain a minimum tangible net worth and minimum
risk-based capital. On November 13, 2002, Trenwick, Trenwick America, Trenwick
Holdings and the Banks executed a forbearance agreement with respect to the
events of default arising from the lowered A.M. Best Company ratings and
financial covenant violations.

Subsequently, an amendment and waiver of default under the credit agreement and
amendments to the guaranty agreement have been entered into on December 24, 2002
(the "December Amendments"). The December Amendments extended the letter of
credit facility through December 31, 2003 to support Trenwick's underwriting
operation at Lloyd's for the 2003 year of account. To those Banks extending
their letters of credit, Trenwick, Trenwick America and Trenwick Holdings agreed
to pay a 5% per annum cash letter of credit fee, issue pay-in-kind notes bearing
interest at LIBOR plus 2.5% per annum to evidence an additional 3.16% per annum
letter of credit fee, issue warrants equal to 10% of Trenwick's fully diluted
equity capital, and pay 15% of the profits earned by Trenwick and its
subsidiaries for the 2002 and 2003 Lloyd's years of account. Trenwick, Trenwick
America and Trenwick Holdings agreed to provide the Banks a security interest in
all of their respective equity interests in, and the assets and property of,
their direct and indirect subsidiaries as additional collateral for the Banks,
and to cause the subsidiaries to provide a guaranty to the Banks subject to
applicable laws and regulations and certain existing contractual rights of
holders of other indebtedness.

The December Amendments also prohibit Trenwick, Trenwick America and Trenwick
Holdings and their respective subsidiaries from declaring or paying any
dividends (including on Trenwick's common shares, the perpetual preferred shares
of LaSalle Re Holdings and the capital securities of Trenwick Capital Trust I).
The December amendments and the other amendments and waivers entered into the
first quarter of 2003 waive certain other defaults, add covenants further
restricting the operation of Trenwick's, Trenwick America's and Trenwick
Holdings' business, prohibit Trenwick, Trenwick America and Trenwick Holdings
and their respective subsidiaries from making certain payments without the
Banks' approval, prohibit Trenwick, Trenwick America and Trenwick Holdings and
their respective subsidiaries from selling or otherwise disposing of any assets
or property, require Trenwick to regularly report certain financial information
to the Banks, and adjust downward certain of the financial covenants.

Pursuant to the December Amendments, Trenwick is required to collateralize with
cash, cash equivalents and marketable securities 60% of the outstanding letters
of credit by August 1, 2003. If it is unable to do so, Trenwick's insurance
company subsidiaries, including those of Trenwick America, will be prohibited
from underwriting any insurance or reinsurance business without the Banks' prior
approval. In addition, Trenwick is required to use its best efforts to terminate
the letters of credit by December 31, 2003. In order to do so, the letters of
credit would need to be replaced with other letters of credit or collateral
acceptable to Lloyd's. In the event Trenwick has not terminated the letters of
credit by December 31, 2003, they are required on such date to collateralize
with cash, cash equivalents and marketable securities the full amount of the
outstanding


                                       6


letters of credit. At this time, Trenwick does not have sufficient available
liquidity to collateralize the letters of credit as required by the December
Amendments. Additionally, Trenwick does not believe that it will be able to
replace the letters of credit with other letters of credit or collateral
acceptable to Lloyd's. See Item 7- "Management's Discussion and Analysis of
Financial Condition and Results of Operation - Liquidity and Capital Resources."

Since December 2002, Trenwick, Trenwick America and Trenwick Holdings have
entered into additional amendments and numerous waivers with the Banks providing
for, among other things, waivers of potential covenant defaults, further
reductions in certain financial covenants, additional financial reporting,
approval of certain employee and other payments, approval of the extension of
the maturity of Trenwick America's senior notes from April 1, 2003 to August 1,
2003, the related payment of interest accrued through April 1, 2003 to the
senior noteholders and extension of numerous deadlines imposed under the
December Amendments.

If there is an event of default under the credit agreement, including as a
result of Trenwick failing to collateralize the letters of credit as described
above, or if there is an event of default under other outstanding indebtedness
of Trenwick or its subsidiaries, including under the senior notes of Trenwick
America, resulting in a cross default under the credit agreement, Trenwick,
Trenwick America and Trenwick Holdings may be required to fully and immediately
collateralize the outstanding letters of credit under the terms of the credit
agreement and the guaranty agreement. No liability for any such amounts has been
reflected in Trenwick's , Trenwick America's or Trenwick Holdings' financial
statements. If the potential future events of default occur and are not waived,
there is substantial doubt as to Trenwick's, Trenwick America's and Trenwick
Holdings' ability to continue as a going concern and Trenwick and/or one or more
of its subsidiaries, including Trenwick America may be forced to seek protection
from creditors through proceedings commenced in Bermuda and other jurisdictions
including the United States. In addition, at any time one or more of the
insurance regulatory authorities having jurisdiction over Trenwick's, Trenwick
America's and Trenwick Holdings' insurance company subsidiaries may commence
voluntary or involuntary proceedings for the formal supervision, rehabilitation
or liquidation of such subsidiaries, or one or more of the creditors of Trenwick
or its subsidiaries may commence proceedings against Trenwick or its unregulated
subsidiaries, including Trenwick America, seeking their liquidation.

Potential Event of Default under Senior Notes

Included in Trenwick America's indebtedness at December 31, 2002 are 6.7% senior
notes with an aggregate principal amount of $75 million, which were initially
due on April 1, 2003 and pursuant to an amendment have been extended to August
1, 2003 (the "Senior Notes"). Trenwick America is engaged in continuing
discussions with holders of the Senior Notes with respect to a possible
restructuring of these Senior Notes. The agreements entered into in connection
with the renewal of the letter of credit facility in December 2002, and as
further amended, as discussed above, provide that Trenwick America will replace,
refinance or restructure these Senior Notes by July 15, 2003. At this time,
Trenwick America does not have sufficient available liquidity to pay the amount
due on August 1, 2003 and is uncertain whether it will be able to complete the
restructuring by July 15, 2003. If Trenwick America is unable to restructure
these Senior Notes and either the banks under the credit facility or the senior
noteholders decide to exercise the rights available to them or take other action
with respect to the assets of Trenwick America, Trenwick America and/or one or
more of its subsidiaries may be forced to seek protection from creditors. In
addition, at any time the insurance regulatory authorities having jurisdiction
over Trenwick America's insurance company operating subsidiaries may commence
voluntary or involuntary proceedings for the formal supervision, rehabilitation
or liquidation of such subsidiaries, or one or more of the creditors of Trenwick
America or its subsidiaries may commence proceedings against Trenwick America or
its unregulated subsidiaries seeking their liquidation.


                                       7


Going Concern Qualification

Trenwick America's independent accountants, PricewaterhouseCoopers LLP, have
stated in their audit report dated March 31, 2003 except for Note 7 to the
financial statements as to which the date is April 9, 2003, with respect to
Trenwick America's financial statements as of and for the twelve months ended
December 31, 2002, that substantial doubt exists as to Trenwick America's
ability to continue as a going concern.

Recent Ratings Actions

Moody's Investors Service announced on January 31, 2003 that it had lowered the
senior debt rating of Trenwick from "Caa3" to "Ca", and had lowered the ratings
of the trust preferred securities of Trenwick America from "Ca" to "C",
following Trenwick's announcement that it would post a fourth quarter 2002
reserve charge. Moody's Investors Service noted that the reserve charge was
significant in relation to the book value reported by Trenwick at the end of the
third quarter of 2002 and also in relation to Trenwick's market capitalization,
which is well below that amount. Moody's Investors Service also noted that, in
its opinion, the charge further diminishes the value that creditors will be able
to extract from Trenwick America and its affiliates in its restructuring
efforts, and that currently virtually all of Trenwick America's financial assets
are held by regulated insurance subsidiaries, limiting resources available to
meet debt obligations.

Standard and Poor's Ratings Services announced on April 2, 2003 that it had
lowered the counter-party credit ratings on Trenwick, Trenwick America and
LaSalle Re Holdings to "D" following the announced non-payment of principal and
interest on the Senior Notes. Standard & Poor's also stated that despite the
agreement in principal to extend the maturity of the Senior Notes, it believes
that the prospect for significant recoveries to the senior note holders is very
low. Standard & Poor's also announced on March 4, 2003 that it placed its "CCC"
counterparty credit and financial strength ratings on Trenwick America's
subsidiaries, Trenwick America Reinsurance Corporation ("Trenwick America Re"),
Dakota Specialty Insurance Company ("Dakota") and The Insurance Corporation of
New York ("INSCORP") on CreditWatch negative. In addition, Standard and Poor's
withdrew its "CCC" counterparty credit and financial strength ratings on
Chartwell Insurance Company due to its merger with Trenwick America Re.

On April 2, 2003, A.M. Best Company announced that it had withdrawn the
financial strength rating of "C" (Weak) and assigned a "NR-4" rating (Rating
Withdrawn at Company's Request) to Trenwick America Re. Concurrently, A.M. Best
downgraded the debt rating of Trenwick America to "D" from "C" relating to its
Senior Notes. These rating actions followed the announced non-payment of
principal and interest on the Senior Notes. The financial strength rating of
Trenwick America Re had previously been downgraded to "C" (Weak) from "B-"
(Fair) on February 3, 2003. At that time, the ratings for all of Trenwick
America Re's subsidiaries were withdrawn, and Trenwick America's debt ratings
were downgraded to "C".

On April 3, 2003, Fitch Ratings announced that it had lowered its long term and
senior debt rating on Trenwick America to "D" from "C". In addition, Fitch
lowered its long term ratings on Trenwick and LaSalle Re Holdings to "D" from
"C". Fitch's "C" ratings on LaSalle Re Holding's preferred shares and the
capital securities of Trenwick Capital Trust I were unchanged. Fitch's rating
action also followed the announced non-payment of principal and interest on the
Senior Notes. Fitch's "D" rating indicates that they believe that Trenwick
America's senior note holders' recovery value is unlikely to exceed fifty
percent.

Actions by Insurance Regulators

On December 3, 2002, Trenwick America Re entered into a "letter of
understanding" with the State of Connecticut Insurance Department pursuant to
which Trenwick America Re agreed that it would not take certain actions without
the prior written approval of the Connecticut Insurance Commissioner or her
designee,


                                       8


including conducting business, disposing of any assets, settling any
intercompany balances or paying any dividends. For further discussion of the
Connecticut letter of understanding, see "-Regulation."

Trenwick America Re's reported Risk-Based Capital ("RBC") was at the "Regulatory
Action Level Event" at December 31, 2002. At this level, Trenwick America Re was
required to submit a Comprehensive Plan of Action to the Connecticut Insurance
Department. Such a plan was submitted to the Connecticut Insurance Department on
January 23, 2003. In addition, in connection with the Regulatory Action Level
Event the Connecticut Insurance Department, at its discretion, is authorized to
take any action deemed necessary under the circumstances.

INSCORP's reported RBC was at the "Mandatory Control Level Event" at December
31, 2002. New York Insurance Law requires that New York domiciled insurers
report their risk-based capital based on a formula calculated by applying
factors to various asset, premium and reserve items. Recently, INSCORP has been
informed by the New York Insurance Department ("NYID") that it will be required
to submit a plan by April 10, 2003 to cure the existing statutory capital
impairment. If the NYID is not satisfied that INSCORP has proposed a suitable
plan to eliminate the impairment by April 10, 2003, the Superintendent of the
NYID may proceed, or Trenwick America may of its own volition determine that it
is in its best interest for the NYID to proceed, against INSCORP pursuant to the
provisions of Article 74 of the New York Insurance Law, the statute authorizing
supervision, conservation, rehabilitation, liquidation and dissolution of
insurers, including domestic insurers. A plan to eliminate the capital
impairment of INSCORP was submitted on April 7, 2003. There can be no assurance
that the plan will be determined to be acceptable to the NYID.

Trenwick America has been notified by the NYID that, in the NYID's view,
approximately $26 million in loans made to Trenwick America by INSCORP in 2002
were in contravention of New York regulatory requirements. Trenwick America does
not currently have, and is unlikely in the near term to have sufficient
liquidity to repay the loan. As a result, INSCORP and Trenwick America may be
the subject of regulatory action brought by the NYID.

For a description of the RBC requirements applicable to Trenwick America's
insurance company subsidiaries, see "--Regulation - Risk Based Capital."

Chubb Facility

During the fourth quarter of 2002, Trenwick America Re entered into an
underwriting facility with Chubb which permits Trenwick America Re to underwrite
up to $400 million of treaty reinsurance business on behalf of Chubb through the
end of January 2004. The underwriting portion of the facility is subject to
cancellation prospectively by either party at any time. Given the current
financial condition of Trenwick America, the ratings of its operating insurance
company subsidiaries and the related impact on its ability to continue
underwriting, Trenwick America Re periodically reviews the viability of
maintaining this underwriting facility and may, at any time in order to reduce
costs, discontinue underwriting through the facility. Trenwick America Re is
entitled to receive two-thirds of any profits generated by the business, with
the initial profit distribution from Chubb to Trenwick America Re scheduled to
begin in 2006. See "-- Segment Information - Treaty Reinsurance Segment - Chubb
Underwriting Facility."

Runoff Operations

On October 30, 2002, Trenwick America announced that it had ceased underwriting
substantially all new insurance policies in its specialty program business,
which operated under the name Canterbury and through Trenwick America Re's
subsidiaries INSCORP, Dakota and Chartwell Insurance Company (merged with and
into Trenwick America Re effective December 31, 2002). Trenwick America's
subsidiaries will continue to


                                       9


administer and pay claims in connection with the insurance policies previously
underwritten through Canterbury. See "--Runoff Operations-Specialty Program
Insurance," below.

Intercompany Loans

During the year ended December 31, 2002, Trenwick America Re and INSCORP loaned
$33.3 million and $26.3 million, respectively, to Trenwick America. The funds
received through these loans were used to service Trenwick America's debt
obligations and to fund affiliate transactions. At this time, Trenwick America
does not have sufficient available liquidity to repay these loans.

Segment Information

Trenwick America's Treaty reinsurance is written principally through Trenwick
America Re, which is located in Stamford, Connecticut, and includes the runoff
of reinsurance business formerly written by Chartwell Insurance Company (which
merged with and into Trenwick America Re effective December 31, 2002) and
INSCORP. In addition, the Treaty reinsurance segment includes the results of the
Chubb underwriting facility.

Trenwick America's Specialty program insurance segment was written principally
through its subsidiary, Canterbury, and Trenwick America Re's operating
subsidiaries, INSCORP, Dakota and Chartwell Insurance Company. Trenwick America
ceased underwriting substantially all specialty program insurance effective
October 30, 2002. See "--Runoff Operations-Specialty Program Insurance," below.

Trenwick America's gross and net premium writings by business segment for the
years ended December 31, 2002, 2001 and 2000 were as follows:

                                              2002          2001          2000
                                            --------      --------      --------
                                                (expressed in thousands of
                                                   United States dollars)
Gross Premiums Written
Treaty reinsurance                          $409,172      $350,134      $338,794
Specialty program insurance                  401,491       291,433       187,545
                                            --------      --------      --------
  Total                                     $810,663      $641,567      $526,339
                                            ========      ========      ========

Net Premiums Written
Treaty reinsurance                          $392,365      $331,699      $251,284
Specialty program insurance                  168,984        99,708        54,028
                                            --------      --------      --------
  Total                                     $561,349      $431,407      $305,312
                                            ========      ========      ========

As a result of the events described under "Significant Developments," Trenwick
America anticipates that both gross and net premiums written in 2003 will be
substantially lower than in 2002. For additional financial information regarding
Trenwick America's business segments, see Note 4 to Trenwick America's
consolidated financial statements.

Treaty Reinsurance Segment - Chubb Underwriting Facility

In order to be able to continue to offer reinsurance despite the weakness of its
financial condition and its lowered financial strength ratings, Trenwick America
Re entered into an underwriting facility with Chubb on October 25, 2002 under
which Trenwick America Re will cause, subject to Chubb's approval, all of its
new and renewing treaty reinsurance business during the term of the underwriting
facility to be underwritten by Trenwick America Re as agent on behalf of Chubb,
which will issue the reinsurance. Chubb's approval may not be unreasonably
withheld. The underwriting facility permits Trenwick America Re to underwrite up
to $400 million of treaty reinsurance business as agent on behalf of Chubb
through January 31, 2004. The underwriting facility does not preclude Chubb from
writing any business outside of the facility. With respect to the underwriting
facility, a notional "experience account" has been established equal to premiums
collected (net of ceding commission and reinsurance brokerage), plus investment
credit on the experience account


                                       10


balance, plus recoverable reinsurance payment, less paid claims and claims
expenses, expense reimbursements, Chubb's fronting fee, and reinsurance premiums
paid (net of ceding commission). Trenwick America Re will be entitled to receive
a profit commission equal to two-thirds of the experience account, adjusted to
include unpaid claims and claims expenses. The profit commission to Trenwick
America Re, if any, will be paid by Chubb beginning in the first quarter of
2006.

Pursuant to the underwriting facility, which was effective as of November 1,
2002, the parties will jointly adjust and settle any claims arising under the
business underwritten, provided that Chubb will retain final claim settling
authority. Trenwick America Re has agreed that during the term of the
underwriting facility Trenwick America Re will not underwrite on behalf of any
other third party without Chubb's approval. Chubb has entered into a
non-competition agreement with Trenwick America Re restricting Chubb from
renewing certain business underwritten through the underwriting facility for one
year following the termination of the underwriting facility. Either party may
terminate underwriting through the facility prospectively at any time.
Termination of the facility or any modification thereof that is deemed by the
Banks under Trenwick's, Trenwick America's and Trenwick Holdings' credit
facility to be materially adverse constitutes an event of default under the
credit facility. All premiums collected from the facility are required to be
paid directly to Chubb.

Chubb will receive as a fronting fee either five percent of gross written
premium on two-thirds of the business underwritten through the underwriting
facility, or $15 million whichever is greater. Through December 31, 2002,
Trenwick America Re had paid $10 million of this amount to Chubb, and an
additional $1.25 million was paid during the first quarter of 2003. Additional
payments of $1.25 million are due to be paid by Trenwick America Re at the end
of each of the remaining three calendar quarters of 2003. Trenwick America Re is
entitled to receive a monthly expense reimbursement equal to 2.0% of the gross
written premiums underwritten on behalf of Chubb collected during the applicable
month. The total expense reimbursement payable to Trenwick America Re is subject
to a cap of $6.5 million, of which one third will be paid in cash to Trenwick
America Re during 2003; the remaining two thirds will be added to the experience
account. The minimum total expense reimbursement is $5.5 million, of which one
third will be paid in cash to Trenwick America Re during 2003; the remaining two
thirds will be added to the experience account. In the event that the
underwriting facility is terminated prior to the expiration of its term by
either party, the expense reimbursement will be prorated based on the amount of
time the underwriting agreement was in effect.

Trenwick America Re also has agreed to reinsure Chubb for 100% of all losses in
excess of premiums collected less certain expenses. To secure its reinsurance
obligations to Chubb, Trenwick America Re has posted a $50 million security
deposit with Chubb. Trenwick America Re is required to pay additional amounts to
Chubb for the security deposit, so that the security deposit is equal to the
greater of $50 million or the amount of Trenwick America Re's reinsurance
obligations. Given the long-term nature of the stop-loss reinsurance agreement,
the amount of the cash deposit may be greater than Trenwick America Re's
obligations under the stop-loss reinsurance agreement. The security deposit will
earn an investment credit at a rate equal to the three-year United States
Treasury bill as of the close of business on the first business day of the
applicable time period. The amount of the security deposit in excess of certain
decreasing amounts over time will be returned to Trenwick America Re on a
payment schedule beginning March 31, 2006, provided that at such times Trenwick
America Re has an A.M. Best rating of "A-" or better. On January 12, 2012,
regardless of whether Trenwick America Re has reacquired an "A-" or rating from
A.M. Best, that portion of the security deposit that exceeds the positive
difference (if any) of Trenwick America Re's obligations minus the amount in the
experience fund, will be returned to Trenwick America Re.

An "event of default" by Trenwick America Re under the Chubb facility would
occur if creditors attach or take possession of any material amount of Trenwick
America Re's assets, or if Trenwick America Re voluntarily or involuntarily
enters into rehabilitation, dissolution, winding-up, liquidation, administration
or reorganization proceedings under applicable bankruptcy, insolvency or similar
law. Upon the occurrence of


                                       11


an event of default by Trenwick America Re, no profit commission will be paid
and no reductions in the amount of collateral will be made until the event of
default ceases, or January 1, 2012, whichever is earlier. At that time, the
profit commission payment schedule and collateral reduction schedules will
recommence at the point at which the event of default occurred.

Since November 1, 2002, the effective date of the Chubb facility, Trenwick
America Re has written approximately $127 million in gross premiums under the
facility. To date, almost all of the bound premiums have been renewal business.

Recently, Trenwick America Re has demonstrated an inability to attract new
business. Trenwick America Re generally obtains all of its business through
brokers and reinsurance intermediaries which seek its participation on
reinsurance being placed for their customers. In writing reinsurance business,
Trenwick America Re does not target specific types of clients, classes of
business or types of reinsurance. Rather, it selects transactions based upon the
quality of the reinsured, the attractiveness of the reinsured's insurance rates
and policy conditions and the adequacy of the proposed reinsurance terms.

The major lines of reinsurance currently underwritten by Trenwick America Re
during 2002, 2001 and 2000 were accident and health, property, errors and
omissions, environmental liability and general liability. Together these lines
accounted for an aggregate of at least 71% of its net premiums written in each
of 2002, 2001, and 2000. During these periods Trenwick America Re also wrote
medical malpractice, workers' compensation, products liability and automobile
liability lines of reinsurance. The business written under the Chubb facility
has been and is expected to be similar in nature to that written in prior years,
with the exception of accident and health.

Three ceding companies generated a significant amount of the treaty reinsurance
business, accounting for 25%, 22%, and 31% of Trenwick America Re's gross
premiums written in 2002, 2001 and 2000, respectively. During 2002, XL America
Group, Zurich and Avemco Group accounted for 9%, 9% and 7%, respectively, of
Trenwick America Re's gross premiums written.

Marketing

Trenwick America's treaty reinsurance business segment generally obtains its
business through reinsurance brokers, which represent the ceding company and
clients in negotiations for the purchase of insurance or reinsurance. The
process of effecting a brokered placement typically begins when a client or
ceding company enlists the aid of a broker in structuring a reinsurance program.
Often the various parties will consult with one or more lead underwriters as to
the pricing and contract terms of the protection being sought. Once the terms
quoted by the lead underwriter have been approved, the broker will offer
participation to qualified insurers or reinsurers until the program is fully
subscribed at terms agreed to by all parties.

Trenwick America pays such intermediaries or brokers commissions representing
negotiated percentages of the premium it writes. These commissions constitute
part of Trenwick America's policy acquisition costs. Under certain limited
circumstances, selected administrators have the authority to bind a portion of
Trenwick America's business. These administrators are subject to periodic
financial and operational reviews. Trenwick America does not commit in advance
to accept any portion of the business that brokers submit to it. Business from
any company, whether new or renewal, is subject to acceptance by Trenwick
America.

During 2002, three brokers generated 30% of Trenwick America's gross premiums
written, of which Aon Reinsurance Agency accounted for 16%, Marsh and MacLennan
accounted for 9%, and Reinsurance Alternatives accounted for 5%. During 2001,
Aon Reinsurance Agency accounted for 19%, Marsh and MacLennan accounted for 8%,
Reinsurance Alternatives accounted for 6% and Heath Lambert accounted for 6% of
those gross premiums written. During the 2000 year, Aon Reinsurance Agency
provided 27%,


                                       12


Benfield Blanch provided 11% and Marsh and MacLennan provided 9% of the gross
written premiums reflected in Trenwick America's consolidated financial
statements.

Since November 2002, Trenwick America Re has only participated in reinsurance
underwriting through the Chubb facility.

Underwriting

Trenwick America's underwriting philosophy emphasizes a transactional approach
to underwriting in which any insurance or reinsurance transaction for any line
of property or casualty business is considered separately on its own merits. The
underwriter's primary objective is to assess the potential for an underwriting
profit for each submission. The risk assessment process undertaken by Trenwick
America's underwriters generally involves a comprehensive analysis of historical
data, when available, and estimates of future potential losses which may not be
evident in the historical data. The factors which Trenwick America considers
include the type of risk, details of the underlying insurance coverage provided,
adequacy of pricing using actuarial analysis and the terms and conditions.
Trenwick America has established formal underwriting policy standards for its
operations. This process involves pre-binding reviews of individual material
transactions by its senior underwriting staff. Underwriting policies for
insurance and reinsurance transactions are supplemented by conducting periodic
internal audits of each underwriting department to ensure compliance with
underwriting policies and procedures.

Since its treaty reinsurance operations comprise few but significantly sized
accounts, Trenwick America frequently conducts underwriting and claims audits of
ceding companies to assist it in evaluating the information submitted by the
ceding companies, before agreeing to participate in a reinsurance transaction,
as well as during the period the reinsurance is in effect.

Competition

The "Significant Developments" described above and other items described in this
report on Form 10-K as well as its significantly weakened financial condition
have had a materially adverse effect on Trenwick America's ability to
effectively compete. Trenwick America has only written a very small percentage
of new business through the Chubb facility and has been principally focused on
writing renewal business. Without the Chubb facility, or a similar relationship
with another unaffiliated highly rated third party insurer, Trenwick America
likely would be unable to write new or renewal business through its insurance
company subsidiaries. Additionally, even with the Chubb facility, Trenwick
America continues to experience difficulty in attracting new business as a
result of constraints imposed by its financial condition and the perception of
its continued instability.

Claims Administration

Claims are managed by Trenwick America's professional claims staff whose
responsibilities include the review of initial loss reports, creation of claim
files, determination of whether further investigation is required, establishment
and adjustment of case reserves and payment of claims. In addition, the claims
staff conducts comprehensive claims audits of both specific claims and overall
claims procedures at the offices of selected brokers, managing agents and ceding
companies. In certain instances, a claims audit may be performed prior to
assuming reinsurance business as part of a comprehensive risk evaluation
process. In reviewing claims, Trenwick America's claim staff uses their own
judgment as well as advice from lawyers and loss adjusters where appropriate.


                                       13


Runoff Operations - Specialty Program Insurance

Trenwick America announced on October 30, 2002 that it would cease underwriting
new specialty program insurance business effective immediately. The specialty
property and casualty sector is a segment of the property and casualty insurance
industry that underwrites risks that are generally more complicated or
specialized than those of traditional insureds. Operating under the Canterbury
name on an admitted and non-admitted basis through Trenwick America Re's
subsidiaries, INSCORP, Dakota and Chartwell Insurance Company (merged with and
into Trenwick America Re effective December 31, 2002), Trenwick America
underwrote on a primary basis property and casualty insurance primarily through
managing general agents, which managed specialty programs pursuant to
underwriting guidelines established from time to time. Examples of these
programs include commercial multi-peril policies on fire resistive triple-A
construction condominiums, small artisan contractors, personal lines insurance
for mobile homeowners including optional earthquake, workers' compensation
policies for small to medium sized employers of lower hazard classification, and
professional liability and contractors' pollution liability coverages.
Canterbury frequently conducts underwriting, claims and accounting audits of the
managing general agencies through which business was written. This assists
Canterbury in evaluating the information submitted by the managing general
agencies.

At the time that the property and specialty program insurance business through
Canterbury was discontinued, there were approximately 18 managing agents.
Trenwick America and third party administrators will continue to administer and
pay claims in connection with the insurance policies previously underwritten
under the program. In addition, Trenwick America is working with its specialty
program administrators to attempt to facilitate appropriate transitions for
their existing books of insurance business to other carriers. In accordance with
its existing obligations under certain programs and in some cases to provide
smooth transition to a new carrier, during the first six months of 2003 limited
new and renewal underwriting authority has been granted to selected managing
general agents, and a limited number of policies will be renewed by Canterbury
for up to 12 months.

Trenwick America's objective with respect to its insurance and reinsurance
business in runoff is to maximize the economic value of the runoff through
effective claims settlement, commutation of assumed obligations where
appropriate, collection of reinsurance recoverables and effective cash and
investment management. The overall financial condition of each of the runoff
operations will determine Trenwick America's ability to successfully accomplish
this goal. Trenwick America expects that it will manage each runoff subsidiary's
outstanding liabilities until their natural expiration, although it may explore
other strategic alternatives to assure that the interests of policyholders and
ceding companies are protected, while maximizing the potential for return. From
time to time Trenwick America may also seek the advice of outside experts and
retain consultants to assist in these efforts.

Unpaid Claims and Claims Expenses

General

Insurers and reinsurers establish claims and claims expense liabilities
representing estimates of future amounts needed to pay claims and related
expenses with respect to insured events which have occurred. Claims and claims
expense liabilities have two components: case liabilities, which are liabilities
for reported claims, and incurred but not reported, or "IBNR" liabilities, which
are liabilities for claims not yet reported. Significant periods of time may
elapse between the occurrence of an insured claim, the reporting of the claim to
the insurer and subsequent reporting of the claim to the reinsurer, the
insurer's payment of that claim, and later payments by the reinsurer to the
insurer.

Trenwick America first establishes its case liabilities for a reported claim
when it receives notice of the claim. It is Trenwick America's general policy in
the case of reinsurance to establish liabilities for reported claims


                                       14


in an amount equal to the greater of the liability recommended by the ceding
company or the claim as estimated by Trenwick America's claims personnel. In the
case of insurance, it is Trenwick America's general policy to establish
liability for reported claims in an amount equal to the claim amount reported by
the managing general agent. In the case of reinsurance, Trenwick America
periodically conducts investigations to determine if the amount reserved by the
ceding company is appropriate or should be adjusted. During the claim settlement
period, which may be many years, additional facts regarding individual claims
may become known. As additional facts become known, it may become necessary to
refine and adjust upward or downward the estimated liabilities on a claim, and
even then the ultimate net liabilities may differ from the revised estimates.

Actuarial Methods

Forecasting of reserves for future losses is based on historical experience and
future assumptions. As a result, reserves are inherently subjective and may
fluctuate based on actual future experience and changes to current or future
trends in the legal, social or economic environment.

Trenwick America utilizes several actuarial evaluation methods including the two
most common methods of actuarial evaluation used within the insurance industry,
the Bornhuetter-Ferguson method and the loss development method. The
Bornhuetter-Ferguson method involves the application of selected loss ratios to
Trenwick America's earned premiums to determine estimates of ultimate expected
unpaid claims and claims expenses for each underwriting year. Multiplying
expected losses by underwriting year by a selected loss reporting pattern gives
an estimate of reported and unreported IBNR losses. When the IBNR is added to
the loss and loss adjustment expense amounts with respect to claims that have
been reported to date, an estimated ultimate expected loss results. Trenwick
America believes that this method provides a more stable estimate of IBNR that
is insulated from wide variations in reported losses. In contrast, the loss
development method extrapolates the current value of reported losses to ultimate
expected losses by using selected reporting patterns of losses over time. The
selected reporting patterns are based on historical information (organized into
loss development triangles) and are adjusted to reflect the changing
characteristics of the book of business written by Trenwick America.

Trenwick announced on October 25, 2002 that it had engaged independent actuaries
to conduct a review of reserves for unpaid claims and claims expenses at each of
Trenwick's operating subsidiaries, including Trenwick America's. Following the
independent actuarial review, Trenwick America increased its reserves for unpaid
claims and claims expenses in the fourth quarter of 2002 by $100.4 million (net
of benefits related to reductions in the liability under Trenwick America's
contingent interest notes). The increases in Trenwick America's reserves were
based upon the study conducted by the independent actuarial consultants and
additional work performed by Trenwick's internal actuaries as well as subjective
analysis, by Trenwick America's management and represent management's best
estimate of ultimate expected claims liabilities. The reserve increase reflects
a reassessment of Trenwick America's reserves for unpaid claims and claims
expenses in light of recent reported loss activity trends across its major
business groups and principally impacts the 1998 to 2001 accident years.
Included in the reserve increase was $20 million relating to Trenwick America's
exposure to asbestos and environmental liabilities. Following this increase to
Trenwick America's asbestos and environmental reserves, Trenwick America's three
year survival ratio (i.e., number of years that existing reserves will last if
the current level of average annual payments for the last three years repeats
itself indefinitely) for this type of exposure will be approximately 13 years.

Trenwick's actuarial staff performs quarterly reserve reviews for its operating
insurance company subsidiaries. These reviews incorporate the latest reported
loss experience to Trenwick America, the updating of historical loss development
patterns and other appropriate adjustments for unusual trends or events, and may
result in additional reserve adjustments in the future.


                                       15


Trenwick America's reserves for unpaid claims and claim expenses are carried at
management's best estimate of the ultimate expected claim liabilities and claim
adjustment expense, generally without any discount to reflect the time value of
money, in accordance with both statutory accounting practices and accounting
practices generally accepted in the United States of America, sometimes referred
to as United States GAAP. Certain workers' compensation indemnity reserves for
unpaid claims and claims expenses, $4.7 million at December 31, 2002, are
discounted using an interest rate of 3.5%.

Net unpaid claims and claims expenses at December 31, 2002, 2001 and 2000
include reserves from all business units of Trenwick America. Reserves have
indicated deficiencies of $229.4 million, $22.4 million and $32.5 million for
December 31, 2001, 2000 and 1999 reserves respectively. These deficiencies were
across all business segments, related to claims occurring between 1998 and 2001
and were across multiple lines of business. The period from 1998 to 2001
represents a period of weak insurance and reinsurance pricing and the actual
loss results for business written during that period have turned out to be
significantly worse than originally estimated by Trenwick America when it
originally wrote the business and subsequently re-estimated reserves for this
business.

Trenwick America's business consists primarily of relatively short-tail
specialty insurance and reinsurance business. For a significant portion of its
specialty insurance business, the occurrence of losses may not be indicative of
future trends, as losses in this business are susceptible to significant changes
in both frequency and severity. Trenwick America's reinsurance business consists
of partial participation with others, in various reinsurance agreements with
individual insurance companies. As such, claim count information is not always
available to reinsurers. Trenwick America generally responds to the dollar
amount of losses reported by ceding companies during any calendar year.

In 2002, re-estimation of loss results was based upon additional information
obtained in 2002. As a result, reserve deficiencies increased due to significant
changes in reserving assumptions made during 2002, which included i) an increase
in certain loss ratio assumptions used in reserve calculations, generally
because of higher than expected reported loss activity to date on recent
accident years; ii) changes in loss development patterns based on the most
recent historical experience; and iii) an increase of asbestos and environmental
loss reserves of $20 million in the fourth quarter because of continued
expansion of claims and litigation in this area.

Trenwick's actuaries derive a central estimate of loss reserves by business unit
utilizing the reserving methodology judged to be the most appropriate for the
unit and line of business. A range of plus or minus 5% is judgmentally defined
about the central estimate reserve estimate as representing a "reasonable" range
for lower or higher outcomes. Trenwick America, after reviewing the results of
the actuarial reserve reviews, then determines its best estimate within the
range. At December 31, 2002, the range of net reserve (indications in $
millions) was as follows:

               Low Range Indication                   $920
               Central Indication                     $977
               High Range Indication                $1,035
               Actual Net Reserve                     $973
               Difference Central less Actual           $4

The $4 million difference between Indicated and Actual net reserves at year end
2002 arises from a different assessment than the external actuaries on the
results for accident year 2002 treaty reinsurance business.

As previously described, Trenwick engaged an independent actuary to conduct a
review of reserves for unpaid claims and claims expenses at each of Trenwick's
operating subsidiaries including Trenwick America's subsidiaries. The results of
this study, together with work performed by Trenwick's internal actuaries, was
used to establish management's best estimate of ultimate expected claims
liabilities at December 31, 2002.


                                       16


Trenwick's internal actuarial assessments of reserves materially differed from
those of the external actuaries in Trenwick America's asbestos and environmental
reserves. For Trenwick America's remaining reserves, the difference between the
independent actuaries' and internal actuaries' indications were not significant.

Asbestos & Environmental ("A&E") Reserves:

The study completed by the independent actuary on A&E reserves indicated that
there was significant uncertainty in the estimates beyond those normally
encountered in actuarial circumstances. The range of estimates established for
these reserves were also significantly wider than the 5% used by Trenwick's
internal actuaries in establishing a reasonable range of lower and higher
outcomes. In making its reserve estimate, management considered that the
addition of $20 million to INSCORP's A&E reserves resulted in a three-year
survival ratio of 12.9, which is higher than the property and casualty insurance
industry ratio at year-end 2001 as reported by A.M. Best and which Trenwick
America believes is consistent with levels of companies booking A&E adjustments
in 2002. Annual A&E payments at INSCORP have declined over the last three years,
being $9.7 million, $6.4 million and $5.0 million for 2000, 2001 and 2002,
respectively.

The NYID required that an independent actuary provide a reserve statement of
opinion for INSCORP with respect to its statutory basis reserves at December 31,
2002. INSCORP's independent actuary has issued a reserve opinion concluding that
INSCORP's loss reserves, excluding A&E related liabilities, make a reasonable
provision for all unpaid loss and loss expenses obligations of INSCORP. With
respect to the A&E reserves of INSCORP, the independent actuary stated that he
had not determined that the company's reserves were unreasonable, but that due
to certain risk factors, a reserve for the company's A&E claims cannot be
reasonably estimated at this time. The particular risk factors cited by the
independent actuary included:

      o     Significant recent changes in the asbestos environment, including a
            significant increase in the number of asbestos-related claims being
            made against defendants;

      o     Defendant bankruptcies;

      o     Dramatic settlement amounts;

      o     The increased number of plaintiff attorneys specializing in asbestos
            claims; and

      o     The spread of litigation to peripheral defendants.

The independent actuary noted that, given the low surplus level of INSCORP and
the magnitude of its liabilities arising from A&E claims relative to its surplus
level, he had limited the scope of his opinion to exclude A&E liabilities.

Trenwick America's unpaid claims and claims expense liability at December 31,
2002 and 2001 includes an estimate of Trenwick America's ultimate liability for
A&E claims of $112.0 million and $91.1 million, respectively, comprising gross
liabilities for unpaid claims and claims expenses of $145.0 million and $118.7
million, respectively, net of reinsurance recoverable on unpaid claims and
claims expenses of $33.0 million and $27.6 million.

Regulation

Trenwick America and its insurance and reinsurance company subsidiaries are
subject to regulatory oversight under the insurance statutes and regulations of
the jurisdictions in which they conduct business, including all states of the
United States. These regulations vary from jurisdiction to jurisdiction and are
generally designed to protect ceding insurance companies and policyholders by
regulating Trenwick America's financial integrity and solvency in its business
transactions and operations. Many of the insurance statutes and regulations
applicable to Trenwick America's subsidiaries relate to reporting and enable
regulators to closely monitor Trenwick America's performance. Typical required
reports include information concerning Trenwick America's capital structure,
ownership, financial condition, and general business operations.


                                       17


Because Trenwick America is a holding company, its principal sources of funds
consist of permissible dividends, tax allocation payments and other statutorily
permissible payments from its respective regulated operating insurance company
subsidiaries, each of which is subject to oversight and regulatory supervision
by insurance regulators in its jurisdiction of domicile. As a result of recent
losses incurred by these operating insurance company subsidiaries, their cash
distribution capacities have been significantly reduced. Each insurance
regulatory body, including those of New York, Connecticut and North Dakota may
act independently with respect to the company or companies domiciled in its
jurisdiction. To the extent that any such regulator takes action with respect to
an insurance company domiciled in its jurisdiction, such action could adversely
impact the ability of Trenwick America to continue to function, or could
precipitate other actions by other insurance regulators with respect to the
particular Trenwick America company or companies under their primary
jurisdiction. Additionally, although the financial statements contained in this
Report are set forth on a consolidated basis, the actual assets and liabilities
shown in the financial statements are held by the insurance company subsidiaries
and generally will not be available to satisfy the obligations of other
companies within the Trenwick America group of companies. Insurance regulators
may also review certain payments made to Trenwick America by its insurance
company subsidiaries, such as payments for administrative services, and could
attempt to seek return of such payments to the insurance company subsidiaries.

Trenwick America's operations are subject to extensive regulation under state
statutes that delegate regulatory, supervisory and administrative powers to
state insurance commissioners. The extent of regulation varies from state to
state, but generally has its source in statutes that delegate regulatory,
supervisory and administrative authority to a department of insurance in each
state. Among other things, state insurance commissioners regulate insurer
solvency standards, insurer licensing, authorized investments, premium rates,
restrictions on the size of risks that may be insured under a single policy,
loss and expense reserves and provisions for unearned premiums, deposits of
securities for the benefit of policyholders, policy form approval, and market
conduct regulation, including the use of credit information in underwriting and
other underwriting and claims practices. State insurance departments also
conduct periodic examinations of the affairs of insurance companies and require
the filing of annual and other reports relating to the financial condition of
companies and other matters. In general, regulated insurers must file all rates
for directly underwritten insurance with the insurance department of each state
in which they operate on an admitted basis; however, reinsurance generally is
not subject to rate regulation.

Under the insurance laws of their respective states of domicile, Trenwick
America's subsidiaries are required to maintain minimum levels of capital and
surplus as regards to policyholders. The failure of an insurer to maintain the
required surplus level can result in the placing of the insurer by the insurer's
domestic state's insurance department into supervision, rehabilitation or
liquidation proceedings, for the benefit of policyholders and creditors of the
insurer, and the general public.

On December 3, 2002, Trenwick America Re entered into a "letter of
understanding" with the Connecticut Department of Insurance pursuant to which
Trenwick America America Re agreed that it would not take any of the following
actions without the prior written approval of the Connecticut Insurance
Commissioner or her designee:

      o     Dispose of, convey or encumber any of its assets or business in
            force;

      o     Withdraw any of its bank accounts except in the ordinary course of
            business;

      o     Settle any intercompany balances;

      o     Lend any of its funds;

      o     Transfer any of its property;

      o     Make any new investments other than cash equivalents;

      o     Incur any debt, obligation or liability, except liabilities in the
            ordinary course of business;

      o     Make any material change in management;


                                       18


      o     Make any material change in its operations;

      o     Move any books and records from its office in Stamford, Connecticut;

      o     Pay any dividends, ordinary or extraordinary;

      o     Enter into any unaffiliated insurance or reinsurance contracts that
            would constitute new or renewal business, or any unaffiliated
            commutation agreements or settlement agreements in excess of $1
            million not in the ordinary course of business; or

      o     Enter into affiliated transactions of any nature.

Senior management of Trenwick America Re has also agreed to meet with the
Connecticut Insurance Department, in person or by conference call, with such
frequency as may be deemed necessary by the Connecticut Insurance Commissioner
or her designee, to provide updates on the status of Trenwick and any changes in
the status of Trenwick America Re. Trenwick America Re is also required to
provide to the Connecticut Insurance Department a monthly financial statement
consisting of a balance sheet and income statement on the 15th day of each month
as of the prior month end. The above described terms will remain in effect until
such time as the Connecticut Insurance Commissioner deems that they are no
longer necessary or issues an order that supercedes the letter of understanding.

On January 24, 2003, Trenwick America met with the Connecticut Department of
Insurance to present preliminary 2002 financial statements of the regulated
entities and provided the Connecticut Department of Insurance with an overview
of Trenwick America's proposed restructuring plan. Trenwick America also
discussed with the Connecticut Department of Insurance the reserve charges taken
for the fourth quarter of 2002 and provided a detailed review of the independent
actuarial analysis and Trenwick America's adjustments thereto. For a description
of the independent actuarial analysis, see "--Unpaid Claims and Claims
Expenses-- Actuarial Methods," above.

On January 29, 2003, Trenwick America met with the New York Insurance Department
(the "NYID") and had similar discussions to those with the Connecticut
Department of Insurance on January 24, 2003 described above. Trenwick America
received a letter from the NYID dated March 11, 2003 in which the NYID noted
that the surplus to policyholders of Trenwick America's New York domiciled
insurance subsidiary, INSCORP, as of December 31, 2002 was $18.3 million and
therefore was impaired in the amount of $16.7 million, based on the statutory
requirement that it maintain a minimum surplus to policyholders of at least $35
million. In the letter, the NYID notified INSCORP that the surplus impairment
must be corrected within 30 days, and directed it to advise the NYID within 30
days as to the steps management will take to remove the impairment and comply
with the minimum surplus requirement. A plan to eliminate the impairment was
submitted to the NYID on April 7, 2003. If the NYID is not satisfied that
INSCORP has proposed a suitable plan to eliminate the impairment or does not
accept the plan, the Superintendent of the NYID may proceed against INSCORP
pursuant to the provisions of Article 74 of the New York Insurance Law, the
statute authorizing supervision, rehabilitation, conservation, liquidation and
dissolution of insurers, including domestic insurers.

Trenwick has also been notified by the NYID that, in the NYID's view,
approximately $26 million in loans made to Trenwick America by INSCORP in 2002
were in contravention of New York regulatory requirements. Trenwick America does
not have, and is unlikely in the near term to have, sufficient liquidity to
repay the loan. As a result, INSCORP and Trenwick may be the subject of
regulatory action brought by the NYID.

To date, the State of Florida has suspended the underwriting authority of
INSCORP and Trenwick America Re to write any further business. In addition, the
State of Colorado has recently suspended INSCORP's underwriting authority. It is
anticipated that other states will suspend the underwriting authority of the
various insurance companies.


                                       19


Trenwick America's insurance subsidiaries are subject to guaranty fund laws
which can result in assessments, up to prescribed limits, for losses incurred by
policyholders as a result of the impairment or insolvency of unaffiliated
insurance companies. Typically, an insurance company is subject to the guaranty
fund laws of the states in which it conducts insurance business; however,
Trenwick America's insurance subsidiaries that conduct business on a surplus
lines basis in a particular state are generally exempt from that state's
guaranty fund laws. Trenwick America does not expect the amount of any such
guaranty fund assessments to be paid by Trenwick America, if any, in 2003 to be
material.

National Association of Insurance Commissioners ("NAIC")

The National Association of Insurance Commissioners, or NAIC, is an organization
which assists state insurance supervisory officials in the United States to
achieve insurance regulatory objectives, including the maintenance and
improvement of state regulation. From time to time various regulatory and
legislative changes have been proposed for the insurance and reinsurance
industry. Among the proposals that have in the past been or are at present being
considered are the possible introduction of federal regulation in addition to,
or in lieu of, the current system of state regulation of insurers, and proposals
in various state legislatures (some of which proposals have been enacted) to
conform portions of their insurance laws and regulations to various model acts
adopted by the NAIC. Trenwick America is unable to predict what effect, if any,
these developments may have on its operations and financial condition.

In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles, which is intended to standardize regulatory accounting and reporting
for the insurance industry. Codification provides guidance for areas where
statutory accounting has been silent and changes current statutory accounting in
some areas. However, statutory accounting principles will continue to be
established by individual state laws and permitted practices. Effective January
1, 2001, the states of Connecticut (domicile of Trenwick America Re), and North
Dakota (domicile of Dakota Specialty Insurance Company) adopted codification.
New York (domicile of INSCORP and its subsidiary, ReCor Insurance Company Inc.)
adopted codification as well as certain prescribed accounting practices that
differ from codification.

Risk Based Capital

The NAIC has adopted Risk-Based Capital, or RBC, requirements for property and
casualty insurance companies to evaluate the adequacy of statutory capital and
surplus in relation to investment and insurance risks such as asset quality,
asset and liability matching, loss reserve adequacy and other business factors.
RBC is generally calculated and reported to the regulatory authorities with an
insurance company's annual regulatory filings on or before March 1 of each year.
The RBC calculation yields a ratio of the total adjusted statutory capital of an
insurance company to the minimum level of statutory required capital as
calculated under the provisions of the RBC model. The RBC calculation takes into
account: (1) asset risk, (2) credit risk, (3) underwriting risk, and (4) all
other relevant risks including the insurance company's current underwriting
activities. The Model Act of the NAIC provides four levels of regulatory
activity if the RBC ratio yielded by the calculation falls below specified
minimums. At each of four successively lower RBC ratios specified by statute,
increasing regulatory action may be required. The four levels are: (1) Company
Action Level Event, (2) Regulatory Action Level Event, (3) Authorized Control
Level Event, and (4) Mandatory Control Level Event.

Trenwick America's significant reserve increases in the fourth quarter of 2002
have had an adverse impact on the RBC ratings of its principal insurance company
subsidiaries.

Trenwick America Re's RBC was at the "Regulatory Action Level Event" for the
year ended December 31, 2002. At this level, the regulated entity is required to
submit a Comprehensive Plan of Action to the regulatory body. Such a plan was
submitted to the Connecticut Department of Insurance on January 23, 2003.


                                       20


In addition, the Connecticut Department of Insurance, at its discretion, is also
able to take any action deemed necessary under the circumstances.

INSCORP's reported RBC was at the "Mandatory Control Level Event" for the year
ended December 31, 2002. As described above in "--Regulation", INSCORP has been
informed by the NYID that it will be required to submit a plan to cure the
existing statutory capital impairment. INSCORP has ceased underwriting new
business and is in ongoing communication with the NYID concerning its operations
and continued permitted activities. A plan to cure the existing statutory
capital impairment was submitted by INSCORP on April 7, 2003. There can be no
assurance that the plan will be determined to be acceptable to the NYID.

Holding Company Regulation

Trenwick America is subject to regulation under the insurance holding company
statutes of various states, including Connecticut, New York and North Dakota,
the domicile states of its insurance subsidiaries. The insurance holding company
laws and regulations vary from state to state, but generally require an
insurance holding company, and insurers and reinsurers that are subsidiaries of
an insurance holding company, to register with the state regulatory authorities
and to file with those authorities certain reports including information
concerning their capital structure, ownership, financial condition, affiliate
transactions and general business operations.

State laws also require prior notice or regulatory agency approval of direct or
indirect changes in control or deemed control of an insurer, reinsurer or its
holding company and of certain significant intercorporate transfers of assets
within the holding company structure. Significant transactions between a
domestic insurer and an affiliated company may require prior approval under the
holding company statutes, including service and tax allocation agreements, loans
and extensions of credit, reinsurance agreements, and dividends that exceed
certain percentages. The acquisition of securities representing or convertible
into more than ten percent of the voting power of the securities of Trenwick
America or of Trenwick by an investor would be subject to prior approval by the
Connecticut, New York and North Dakota insurance commissioners. Such investor
would also be required to file certain notices and reports with the insurance
commissioners prior to such acquisition.

Dividends

In concert with other actions being taken in the fourth quarter of 2002, on
November 29, 2002, Trenwick America ceased payment of dividends on the capital
securities of Trenwick Capital Trust I. Additionally, the December Amendments to
the letter of credit facility prohibit Trenwick America from paying dividends on
the capital securities. See Note 7 to the Notes to the Consolidated Financial
Statements.

Because Trenwick America's operations are conducted through its operating
subsidiaries, it is dependent upon the ability of its operating subsidiaries to
transfer funds, principally in the form of cash dividends, tax and expense
reimbursements and other statutorily permissible payments. In addition to
general legal restrictions on payments of dividends and other distributions to
shareholders applicable to all corporations, Trenwick America's insurance
subsidiaries are subject to further regulations that, among other things,
restrict the amount of dividends and other distributions that may be paid to
their parent corporations.

Under the applicable provisions of the insurance holding company laws of
Connecticut, the state of domicile of Trenwick America Re, such companies may
only pay dividends without the approval of the applicable state insurance
regulator, if such dividends, together with other dividends paid within the
preceding twelve months, are less than the greater of (i) 10% of the insurer's
policyholders' surplus as of the end of the prior calendar year or (ii) the
insurer's statutory net income, excluding realized capital gains, for the prior
calendar year. As a further restriction, the maximum amount of dividends which
may be paid is limited to the insurer's earned surplus, also known as its
unassigned funds. Any dividend in excess of the amount determined pursuant to
the


                                       21


foregoing formula would be characterized as an "extraordinary dividend"
requiring the prior approval of the state insurance regulator. Under the "letter
of understanding" entered into between Trenwick America Re and the Connecticut
Department of Insurance on December 3, 2002, Trenwick America Re is not
permitted to pay any dividends, ordinary or extraordinary, without the prior
written approval of the Connecticut Insurance Commissioner or her designee. See
"--Regulation."

Under New York law, which is applicable to INSCORP and ReCor Insurance Company
Inc., the maximum ordinary dividend payable in any twelve month period without
the approval of the New York Insurance Department is the lesser of (i) 10% of
policyholders surplus as shown on the company's last annual statement or any
more recent quarterly statement or (ii) the company's adjusted net investment
income. Adjusted net investment income is defined as net investment income for
the twelve months preceding the declaration of the dividend plus the excess, if
any, of net investment income over dividends declared or distributed during the
period commencing thirty-six months prior to the declaration or distribution of
the current dividend and ending twelve months prior thereto. In any case, New
York law permits the payment of an ordinary dividend by an insurer or reinsurer
only out of earned surplus.

Under the applicable provisions of the insurance holding company laws of North
Dakota, the state of domicile of Dakota Specialty Insurance Company, payment of
dividends in any year without prior regulatory approval is limited to the
greater of (i) 100% of statutory net income excluding realized capital gains for
the previous year, or (ii) 10% of the insurer's policyholder's surplus,
excluding surplus arising from unrealized appreciation on investments or other
assets.

The maximum dividend permitted by law may not be indicative of an insurer's
actual ability to pay dividends, which may be constrained by business and other
regulatory considerations, such as the impact of dividends on surplus, which
could affect an insurer's ratings or competitive position, the amount of
premiums that can be written and the ability to pay future dividends.
Furthermore, beyond the limits described above, insurance regulatory authorities
often have the discretion to limit the payment of dividends by insurance
companies domiciled in their jurisdictions.

During 2002, 2001 and 2000, Trenwick America Re paid cash dividends of $17.4
million, $53.3 million and $19.3 million, respectively. INSCORP paid $10.0
million of cash dividends in 2001; it did not pay any dividends in 2002 or 2000.
Trenwick America's other insurance subsidiaries did not pay any dividends in
2002, 2001 or 2000.

Investment Limitations

Connecticut, New York and North Dakota laws and regulations govern the types and
amounts of investments which are permissible for Trenwick America's insurance
subsidiaries. These rules are designated to ensure the safety and liquidity of
the insurers' investment portfolio. In general, these rules permit insurers to
purchase only investments which are interest bearing, interest accruing,
entitled to dividends or otherwise income earning and not then in default in any
respect, and the insurer must be entitled to receive for its exclusive account
and benefit the interest or income accruing thereon. No security or investment
is eligible for purchase at a price above its fair value or market value. In
addition, these rules require investments by Trenwick America to be diversified.
Trenwick America believes that it is in compliance in all material respects with
all applicable investment laws.

United States Financial Services Reform

In 1999, United States federal legislation was passed which implemented
fundamental changes in the regulation of the financial services industry in the
United States. The law permits mergers that combine commercial banks, insurers
and securities firms under one holding company, a "financial holding company."
Bank holding companies and other entities that qualify and elect to be treated
as a financial holding company


                                       22


may engage in activities, and acquire companies engaged in activities that are
"financial" in nature or "incidental" or "complementary" to such financial
activities. These financial activities include acting as principal, agent or
broker in the underwriting and sale of life, property, casualty and other forms
of insurance and annuities.

Until the passage of this legislation, the Bank Holding Company Act of 1956, as
amended, had restricted banks from being affiliated with insurers. The ability
of banks to affiliate with insurers may materially affect Trenwick America Re's
product lines by substantially increasing the number, size and financial
strength of potential competitors.

Item 2. Properties

Trenwick America Corporation's operations are located in approximately 46,000
total square feet of leased office space at Stamford, Connecticut. Management
believes Trenwick America Corporation's current office space is adequate for its
needs.

Item 3. Legal Proceedings

Trenwick America Corporation is party to various legal proceedings generally
arising in the normal course of its business. Trenwick America Corporation does
not believe that the eventual outcome of any such proceeding will have a
material effect on its financial condition or business. Trenwick America
Corporation's subsidiaries are regularly engaged in the investigation and the
defense of claims arising out of the conduct of their business. Pursuant to
Trenwick America Corporation's insurance and reinsurance arrangements, disputes
are generally required to be finally settled by arbitration.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of shareholders of Trenwick America
Corporation during the fourth quarter of 2002.


                                       23


                                     PART II

Item 5. Market for Corporation's Common Stock and Related Stockholder Matters

There is no established public trading market for Trenwick America Corporation's
stock. All of the outstanding shares of Trenwick America Corporation's common
stock are owned by Trenwick (Barbados) Ltd., which in turn is a wholly-owned
subsidiary of Trenwick Group Ltd.

Item 6. Selected Financial Data

Information required by Item 6 has been omitted because Trenwick America
Corporation meets the conditions set forth in General Instruction I (1)(a) and
(b) of Form 10-K and is therefore filing this Annual Report on Form 10-K in the
reduced disclosure format.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion highlights material factors affecting Trenwick America
Corporation's ("Trenwick America") results of operations for the years ended
December 31, 2002 and 2001. This discussion and analysis should be read in
conjunction with the consolidated financial statements and notes thereto of
Trenwick America for the years ended December 31, 2002, 2001 and 2000, contained
in this Annual Report on Form 10-K. Trenwick America meets the conditions set
forth in General Instruction I (1)(a) and (b) of Form 10-K and is therefore
omitting certain information otherwise required by Item 7.

Trenwick America discloses operating and non-operating income to enable the
reader to understand how management evaluates Trenwick America's results of
operations. These disclosures are not defined under accounting principles
generally accepted in the United States of America; accordingly the use of these
disclosures may not be comparable to other registrants.

Overview

Trenwick America is a Delaware holding company headquartered in Stamford,
Connecticut whose principal treaty reinsurance business provides, through an
underwriting facility with Chubb Re, Inc. and its affiliate Federal Insurance
Company (together "Chubb"), treaty reinsurance to insurers of property and
casualty risks.

In 2002, Trenwick Group Ltd. ("Trenwick"), Trenwick America's ultimate parent
company, conducted several strategic reviews of its operations in light of its
capital constraints and determined that it was necessary for Trenwick America to
reduce its operating leverage by reducing premium volumes, through either sales
or discontinuance of certain lines of business, to a level more commensurate
with its capital base and that of Trenwick and to concentrate its limited
financial resources on its core franchise and business, treaty reinsurance where
it would be able to write insurance and reinsurance based on direct or indirect
financial support. Trenwick America assessed its alternatives and voluntarily
placed into runoff its specialty program business formerly operated through its
subsidiary, Canterbury Financial Group, Inc. ("Canterbury").

As a result of a significant deterioration in Trenwick's financial condition,
more fully described in "Significant Developments" below, Trenwick hired
Greenhill & Co., LLC as its financial advisor to assist in the evaluation and
implementation of a possible restructuring of Trenwick America's outstanding
indebtedness and its preferred equity as well as other strategic alternatives.


                                       24


Significant Developments

During 2002 and the first quarter of 2003, a number of developments have
occurred that have significantly and negatively affected Trenwick America's
operations, capital structure and the financial resources required to conduct
its businesses. Set forth below are brief descriptions of a number of these
developments as well as certain material transactions entered into by Trenwick
America to enable it to continue to conduct business operations despite the
adverse developments. Investors are cautioned that Trenwick America has had a
number of significant adverse events which could make it extremely difficult to
continue in its current businesses, if at all, and they should carefully review
the "Risk Factors" and "Forward-Looking Statements" sections, as well as other
sections, of this Report.

Reserve Adjustments

Trenwick announced on October 25, 2002 that it had engaged independent actuaries
to conduct a review of reserves for unpaid claims and claims expenses at each of
Trenwick's operating subsidiaries, including Trenwick America's subsidiaries.
Based upon the study conducted by independent actuarial consultants and
additional work performed during the quarter by Trenwick's internal actuaries,
Trenwick America increased its reserves for unpaid claims and claims expenses in
the fourth quarter of 2002 by $100.4 million, which followed reserve increases
made by Trenwick America earlier in 2002. The aggregate reserve increase for
Trenwick America during 2002 was $229.4 million. Both the fourth quarter and
year to date 2002 reserve increases are net of benefits related to reductions in
the liability under Trenwick America's contingent interest notes. The reserve
increases reflect a reassessment of Trenwick America's reserves for unpaid
claims and claims expenses in light of recent reported loss activity trends
across its major business groups and principally impacts the 1998 to 2001
accident years. Included in the fourth quarter 2002 reserve increase was $20
million relating to Trenwick America's exposure to asbestos and environmental
liabilities. Following this increase to Trenwick America's asbestos and
environmental reserves, Trenwick America's three year survival ratio (i.e.,
number of years that existing reserves will last if the current level of average
annual payments for the last three years repeats itself indefinitely) for this
type of exposure will be approximately 13 years. See "-- Unpaid Claims and
Claims Expenses," below.

Deferred Income Tax Assets

Trenwick America incurred financial accounting losses in the years 1999 through
2002 and, in connection with such losses, recorded as an asset up to $119.2
million of net deferred income taxes (before application of a valuation
allowance). The net deferred income tax asset represented the future tax benefit
of the losses previously incurred by Trenwick America. Because of Trenwick
America's cumulative financial accounting losses, in the absence of specific
favorable factors, application of FASB Statement No. 109 required Trenwick
America to establish, during the third quarter of 2002, a 100% valuation
allowance against its deferred tax asset. The initial establishment of a 100%
valuation allowance against Trenwick America's deferred tax asset increased
Trenwick America's provision for income taxes and net loss by $54.5 million for
the year ended December 31, 2002. The maintenance of a full valuation allowance
against Trenwick America's net deferred tax asset through December 31, 2002
further increased Trenwick America's provision for income taxes and net loss by
$64.4 million for the year ended December 31, 2002. Trenwick America's
management will continue to monitor its tax position and reassess the need for a
valuation allowance on its deferred tax asset on a periodic basis.

Potential Events of Default Under Senior Secured Credit Facility

Concurrently with the business combination involving LaSalle Re Holdings and
Trenwick Group Inc. in September of 2000, Trenwick America and Trenwick Holdings
Limited ("Trenwick Holdings"), Trenwick's United Kingdom holding company,
entered into an amended and restated $490 million credit agreement with


                                       25


various lending institutions (the "Banks"). The credit agreement consisted of
both a $260 million revolving credit facility and a $230 million letter of
credit facility. The revolving credit facility was subsequently converted into a
four-year term loan and repaid in full on June 17, 2002. Additionally, on
December 24, 2002, the credit agreement was amended to reduce the letter of
credit facility, which is utilized by Trenwick to support its underwriting
operations at Lloyd's of London ("Lloyd's"), to the currently outstanding $182.5
million. The letter of credit facility is scheduled to terminate on December 31,
2003, although the letters of credit issued pursuant to the facility will not
expire until December 31, 2006.

Pursuant to a guaranty agreement entered into concurrently with the credit
agreement, Trenwick has guaranteed the obligations of Trenwick America and
Trenwick Holdings under the credit agreement. In April of 2002, Trenwick pledged
the capital stock of LaSalle Re Holdings, which was a guarantor of the
obligations under the credit agreement, and LaSalle Re as collateral to the
Banks. In December of 2002, Trenwick, Trenwick America and Trenwick Holdings
agreed to provide the Banks additional security interests as described below.

On October 18, 2002, A.M. Best Company lowered the financial strength ratings of
Trenwick's, Trenwick America's and Trenwick Holdings' operating subsidiaries
below "A-." The lowered A.M. Best Company ratings constituted an event of
default under the credit agreement. In addition, increases in Trenwick's,
Trenwick America's and Trenwick Holdings' reserves for unpaid claims and claims
expenses and the establishment of a Trenwick America deferred tax asset
valuation allowance in the third quarter of 2002 resulted in violations of the
financial covenants in the credit agreement requiring Trenwick, Trenwick America
and Trenwick Holdings to maintain a minimum tangible net worth and minimum
risk-based capital. On November 13, 2002, Trenwick, Trenwick America, Trenwick
Holdings and the Banks executed a forbearance agreement with respect to the
events of default arising from the lowered A.M. Best Company ratings and
financial covenant violations.

Subsequently, an amendment and waiver of default under the credit agreement and
amendments to the guaranty agreement have been entered into on December 24, 2002
(the "December Amendments"). The December Amendments extended the letter of
credit facility through December 31, 2003 to support Trenwick's underwriting
operations at Lloyd's for the 2003 year of account. To those Banks extending
their letters of credit, Trenwick, Trenwick America and Trenwick Holdings agreed
to pay a 5% per annum cash letter of credit fee, issue pay-in-kind notes bearing
interest at LIBOR plus 2.5% per annum to evidence an additional 3.16% per annum
letter of credit fee, issue warrants equal to 10% of Trenwick's fully diluted
equity capital, and pay 15% of the profits earned by Trenwick and its
subsidiaries for the 2002 and 2003 Lloyd's years of account. Trenwick, Trenwick
America and Trenwick Holdings agreed to provide the Banks a security interest in
all of their respective equity interests in, and the assets and property of,
their direct and indirect subsidiaries as additional collateral for the Banks,
and to cause the subsidiaries to provide a guaranty to the Banks subject to
applicable laws and regulations and certain existing contractual rights of
holders of other indebtedness.

The December Amendments also prohibit Trenwick, Trenwick America and Trenwick
Holdings and their respective subsidiaries from declaring or paying any
dividends (including on Trenwick's common shares, the perpetual preferred shares
of LaSalle Re Holdings and the capital securities of Trenwick Capital Trust I).
The December amendments and the other amendments and waivers entered into the
first quarter of 2003 waive certain other defaults, add covenants further
restricting the operation of Trenwick's, Trenwick America's and Trenwick
Holdings' business, prohibit Trenwick, Trenwick America and Trenwick Holdings
and their respective subsidiaries from making certain payments without the
Banks' approval, prohibit Trenwick, Trenwick America and Trenwick Holdings and
their respective subsidiaries from selling or otherwise disposing of any assets
or property, require Trenwick to regularly report certain financial information
to the Banks, and adjust downward certain of the financial covenants.


                                       26


Pursuant to the December Amendments, Trenwick is required to collateralize with
cash, cash equivalents and marketable securities 60% of the outstanding letters
of credit by August 1, 2003. If it is unable to do so, Trenwick's insurance
company subsidiaries, including those of Trenwick America, will be prohibited
from underwriting any insurance or reinsurance business without the Banks' prior
approval. In addition, Trenwick is required to use its best efforts to terminate
the letters of credit by December 31, 2003. In order to do so, the letters of
credit would need to be replaced with other letters of credit or collateral
acceptable to Lloyd's. In the event Trenwick has not terminated the letters of
credit by December 31, 2003, it is required on such date to collateralize with
cash, cash equivalents and marketable securities the full amount of the
outstanding letters of credit. At this time, Trenwick does not have sufficient
available liquidity to collateralize the letters of credit as required by the
December Amendments. Additionally, Trenwick does not believe that it will be
able to replace the letters of credit with other letters of credit or collateral
acceptable to Lloyd's. See Item 7- "Management's Discussion and Analysis of
Financial Condition and Results of Operation - Liquidity and Capital Resources."

Since December, 2002, Trenwick, Trenwick America and Trenwick Holdings have
entered into additional amendments and numerous waivers with the Banks providing
for, among other things, waivers of potential covenant defaults, further
reductions in certain financial covenants, additional financial reporting,
approval of certain employee and other payments, approval of the extension of
Trenwick America's senior notes from April 1, 2003 to August 1, 2003, the
related payment of interest accrued to April 1, 2003 to the senior note holders
and extension of numerous deadlines imposed under the December Amendments.

If there is an event of default under the credit agreement, including as a
result of Trenwick failing to collateralize the letters of credit as described
above, or if there is an event of default under other outstanding indebtedness
of Trenwick or its subsidiaries, including under the Senior Notes of Trenwick
America, resulting in a cross default under the credit agreement, Trenwick,
Trenwick America and Trenwick Holdings may be required to fully and immediately
collateralize the outstanding letters of credit under the terms of the credit
agreement and the guaranty agreement. No liability for any such amounts has been
reflected in Trenwick's, Trenwick Holdings' or Trenwick America's financial
statements. If the potential future events of default occur and are not waived,
there is substantial doubt as to Trenwick's and Trenwick America's ability to
continue as going concerns, and Trenwick and/or one or more of its subsidiaries,
including Trenwick America, may be forced to seek protection from creditors
through proceedings commenced in Bermuda and other jurisdictions including the
United States. In addition, at any time one or more of the insurance regulatory
authorities having jurisdiction over Trenwick's, Trenwick America's or Trenwick
Holdings' insurance company subsidiaries may commence voluntary or involuntary
proceedings for the formal supervision, rehabilitation or liquidation of such
subsidiaries, or one or more of the creditors of Trenwick or its subsidiaries
may commence proceedings against Trenwick or its unregulated subsidiaries,
including Trenwick America, seeking their liquidation.

Potential Event of Default under Senior Notes

Included in Trenwick America's indebtedness at December 31, 2002 are 6.7% senior
notes with an aggregate principal amount of $75 million, which were initially
due on April 1, 2003 and pursuant to an amendment have been extended to August
1, 2003 (the "Senior Notes"). Trenwick America is engaged in continuing
discussions with holders of the Senior Notes with respect to a possible
restructuring of these Senior Notes. The agreements entered into in connection
with the renewal of Trenwick, Trenwick America and Trenwick Holdings' letter of
credit facility in December 2002, and as further amended, provide that Trenwick
America will replace, refinance or restructure these senior notes by July 15,
2003. At this time, Trenwick America does not have sufficient available
liquidity to pay the amount due on August 1, 2003 and is uncertain whether it
will be able to complete the restructuring by July 15, 2003. If Trenwick America
is unable to restructure these Senior Notes and either the banks under the
credit facility or the holders of the Senior Notes decide to exercise the rights
available to them or take other action with respect to the assets of Trenwick
America, Trenwick America and/or one or more of its subsidiaries may be forced
to seek protection from creditors. In


                                       27


addition, at any time the insurance regulatory authorities having jurisdiction
over Trenwick America's insurance company operating subsidiaries may commence
voluntary or involuntary proceedings for the formal supervision, rehabilitation
or liquidation of such subsidiaries, or one or more of the creditors of Trenwick
America or its subsidiaries may commence proceedings against Trenwick America or
its unregulated subsidiaries seeking their liquidation.

Going Concern Qualification

Trenwick America's independent accountants, PricewaterhouseCoopers LLP, have
stated in their audit report dated March 31, 2003 except for Note 7 to the
financial statements as to which the date is April 9, 2003, with respect to
Trenwick America's financial statements as of and for the twelve months ended
December 31, 2002, that substantial doubt exists as to Trenwick America's
ability to continue as a going concern.

Recent Ratings Actions

Moody's Investors Service announced on January 31, 2003 that it had lowered the
senior debt rating of Trenwick from "Caa3" to "Ca", and had lowered the ratings
of the trust preferred securities of Trenwick America from "Ca" to "C",
following Trenwick's announcement that it would post a fourth quarter 2002
reserve charge. Moody's Investors Service noted that the reserve charge was
significant in relation to the book value reported by Trenwick at the end of the
third quarter of 2002 and also in relation to Trenwick's market capitalization,
which is well below that amount. Moody's Investors Service also noted that, in
its opinion, the charge further diminishes the value that creditors will be able
to extract from Trenwick America and its affiliates in its restructuring
efforts, and that currently virtually all of Trenwick America's financial assets
are held by regulated insurance subsidiaries, limiting resources available to
meet debt obligations.

Standard and Poor's Ratings Services announced on April 2, 2003 that it had
lowered the counterparty credit ratings on Trenwick and Trenwick America to "D"
following the announced non-payment of principal and interest on the senior
notes. Standard & Poor's also stated that despite the agreement in principal to
extend the maturity of the senior notes, it believes that the prospect for
significant recoveries to the senior note holders is very low. Standard & Poor's
also announced on March 4, 2003 that it placed its "CCC" counterparty credit and
financial strength ratings on Trenwick America's subsidiaries, Trenwick America
Reinsurance Corporation ("Trenwick America Re"), Dakota Specialty Insurance
Company ("Dakota") and The Insurance Corporation of New York ("INSCORP") on
CreditWatch negative. In addition, Standard and Poor's withdrew its "CCC"
counterparty credit and financial strength ratings on Chartwell Insurance
Company due to its merger with Trenwick America Re.

On April 2, 2003, A.M. Best Company announced that it had withdrawn the
financial strength rating of "C" (Weak) and assigned a "NR-4" rating (Rating
Withdrawn at Company's Request) to Trenwick America Re. Concurrently, A.M. Best
downgraded the debt rating of Trenwick America to "D" from "C" relating to its
Senior Notes. These rating actions followed the announced non-payment of
principal and interest on the Senior Notes. The financial strength rating of
Trenwick America Re had previously been downgraded to "C" (Weak) from "B-"
(Fair) on February 3, 2003. At that time, the ratings for all of Trenwick
America Re's subsidiaries were withdrawn, and Trenwick America's debt ratings
were downgraded to "C".

On April 3, 2003, Fitch Ratings announced that it had lowered its long term and
senior debt rating on Trenwick America to "D" from "C". In addition, Fitch
lowered its long term ratings on Trenwick and LaSalle Re Holdings to "D" from
"C". Fitch's "C" ratings on LaSalle Re Holdings' preferred shares and the
capital securities of Trenwick Capital Trust I were unchanged. Fitch's rating
action also followed the announced non-payment of principal and interest on the
Senior Notes. Fitch's "D" rating indicates that they believe that Trenwick
America's senior note holders' recovery value is unlikely to exceed fifty
percent.


                                       28


Actions by Insurance Regulators

On December 3, 2002, Trenwick America Re entered into a "letter of
understanding" with the state of Connecticut Insurance Department pursuant to
which Trenwick America Re agreed that it would not take certain actions without
the prior written approval of the Connecticut Insurance Commissioner or her
designee, including conducting business, disposing of any assets, settling any
intercompany balances or paying any dividends. For further discussion of the
Connecticut letter of understanding, see "Regulation ."

Trenwick America Re's reported Risk-Based Capital ("RBC") was at the "Regulatory
Action Level Event" at December 31, 2002. At this level, Trenwick America Re was
required to submit a Comprehensive Plan of Action to the Connecticut Insurance
Department. Such a plan was submitted to the Connecticut Insurance Department on
January 23, 2003. In addition, in connection with the Regulatory Action Level
Event the Connecticut Insurance Department, at its discretion, is authorized to
take any action deemed necessary under the circumstances.

INSCORP's reported RBC was at the "Mandatory Control Level Event" at December
31, 2002. New York Insurance Law requires that New York domiciled insurers
report their risk-based capital based on a formula calculated by applying
factors to various asset, premium and reserve items. Recently, INSCORP has been
informed by the New York Insurance Department ("NYID") that it will be required
to submit a plan by April 10, 2003 to cure the existing statutory capital
impairment. If the NYID is not satisfied that INSCORP has proposed a suitable
plan to eliminate the impairment or does not accept the plan, the Superintendent
of the NYID may proceed, or Trenwick America may of its own volition determine
that it is in its best interest for the NYID to proceed, against INSCORP
pursuant to the provisions of Article 74 of the New York Insurance Law, the
statute authorizing supervision, conservation, rehabilitation, liquidation and
dissolution of insurers, including domestic insurers. A plan to eliminate the
capital impairment of INSCORP was submitted on April 7, 2003. There can be no
assurance that the plan will be determined to be acceptable by the NYID.

Trenwick America has been notified by the NYID that, in the NYID's view,
approximately $26 million in loans made to Trenwick America by INSCORP in 2002
were in contravention of New York regulatory requirements. As a result, INSCORP
and Trenwick America may be the subject of regulatory action brought by the
NYID.

For a description of the RBC requirements applicable to Trenwick America's
United States insurance company subsidiaries, see "--Regulation - Risk Based
Capital."

Chubb Facility

During the fourth quarter of 2002, Trenwick America Re entered into an
underwriting facility with Chubb which permits Trenwick America Re to underwrite
up to $400 million of treaty reinsurance business on behalf of Chubb through the
end of January 2004. The underwriting portion of the facility is subject to
cancellation prospectively by either party at anytime. Given the current
financial condition of Trenwick America, the ratings of its operating insurance
company subsidiaries and the related impact on its ability to continue
underwriting, Trenwick America Re periodically reviews the viability of
maintaining this underwriting facility and may, at any time in order to reduce
costs, discontinue underwriting through the facility. Trenwick America Re is
entitled to receive two-thirds of any profits generated by the business, with
the initial profit distribution from Chubb to Trenwick America Re scheduled to
begin in 2006. See "-- Segment Information - Treaty Reinsurance Segment - Chubb
Underwriting Facility."


                                       29


Runoff Operations

On October 30, 2002, Trenwick America announced that it had ceased underwriting
substantially all new insurance policies in its United States specialty program
business, which operated under the name Canterbury and through Trenwick America
Re's subsidiaries INSCORP, Dakota and Chartwell Insurance Company (merged with
and into Trenwick America Re effective December 31, 2002). Trenwick America's
subsidiaries will continue to administer and pay claims in connection with the
insurance policies previously underwritten through Canterbury.

Intercompany Loans

During the year ended December 31, 2002, Trenwick America Re and INSCORP loaned
$33.3 million and $26.3 million, respectively, to Trenwick America. The funds
received through these loans were used to service Trenwick America's debt
obligations and to fund affiliate transactions. At this time, Trenwick America
does not have sufficient available liquidity to repay these loans.

Business Segments

During the years ended December 31, 2002, 2001 and 2000, Trenwick America
conducted its specialty insurance and reinsurance business in the following
business segments which are described in further detail below:

o     Treaty Reinsurance, and

o     Specialty program insurance (in runoff)

Trenwick America's reinsurance segment includes treaty reinsurance on United
States property and casualty risks. Treaty reinsurance is written principally
through Trenwick America Re, which is located in Stamford, Connecticut and
includes the runoff of reinsurance business formerly written by Chartwell
Insurance Company (merged with and into Trenwick America Re effective December
31, 2002) and INSCORP. In addition, Trenwick America Re entered into the Chubb
underwriting facility which permits Trenwick America Re to underwrite up to $400
million of treaty reinsurance business on behalf of Chubb through the end of
January 2004. Chubb retains final underwriting and claims authority with respect
to all business generated through the underwriting facility and retains the
premium in an experience account for the benefit of both Chubb and Trenwick
America Re. Chubb will receive one-third and Trenwick America Re will receive
two-thirds of any profits generated by the business with initial profit
distribution from Chubb scheduled to begin in 2006. In addition, Trenwick
America Re will reinsure Chubb for 100% of the claims, claims expenses and
underwriting expenses incurred under the underwriting facility in excess of the
premiums collected and investment income earned in the underwriting facility. To
collateralize its reinsurance obligations to Chubb, Trenwick America Re posted a
$50 million security deposit with Chubb. To date, Trenwick America Re has
underwritten approximately $127 million of premiums through the underwriting
facility.

Trenwick America's Specialty program insurance segment was written principally
through its subsidiary, Canterbury Financial Group, Inc. and its operating
subsidiaries, INSCORP, Dakota Specialty Insurance Company and Chartwell
Insurance Company (merged with and into Trenwick America Re effective December
31, 2002). Trenwick America ceased underwriting United States specialty program
insurance effective October 30, 2002. Therefore this segment will be
substantially limited to run off activities in 2003.

Excluded from the aforementioned segments is the Excess and Casualty Reinsurance
Association Pool ("ECRA Pool") runoff, which includes reinsurance that was
non-renewed. The ECRA Pool was a New York State licensed pool that underwrote
multi-line property and casualty business until it ceased underwriting in


                                       30


1983. Trenwick America Re participated in the ECRA pool during pool years 1978
to 1982 while INSCORP participated during pool years 1950 to 1956.

Results of Operations - Years Ended December 31, 2002 and 2001
(monetary amounts in tables expressed in thousands of United States dollars)

In addition to providing net income (loss) information, when comparing the
results of operations for the years ended December 31, 2002 and 2001, Trenwick
America has also provided operating income (loss) and underwriting income (loss)
as management believes they are both meaningful measures of Trenwick America's
results. Operating income (loss) differs from net income (loss) under accounting
principles generally accepted in the United States of America, sometimes
referred to as U.S. GAAP, and does not replace net income (loss) as the GAAP
measure of our results of operations. In arriving at operating income (loss), we
start with GAAP net income (loss) and exclude net realized investment gains and
losses, as well as non-recurring charges because i) net realized investment
gains and losses are unpredictable and not necessarily indicative of current or
future results and ii) charges such as reorganization expenses and the
cumulative effect of changes in accounting principles are non-recurring in
nature and are also not necessarily indicative of future results of operations.
Underwriting income (loss), also a non-GAAP financial measure, is net premiums
earned less claims and claims expenses incurred, acquisition costs and
underwriting expenses.



                                                           2002         2001        Change
                                                        ---------    ---------    ---------
                                                                         
Underwriting loss                                       $(204,549)   $ (66,303)   $(138,246)
Net investment income                                      53,629       68,041      (14,412)
Interest expense and subsidiary preferred
  share dividends                                         (22,551)     (31,336)       8,785
General and administrative expenses                        (2,663)      (4,074)       1,411
Other income, net                                           2,948        2,819          129
Foreign currency losses                                    (5,534)      (1,434)      (4,100)
                                                        ---------    ---------    ---------
Pretax operating loss                                    (178,720)     (32,287)    (146,433)
Applicable income taxes (benefit)                          52,635      (13,975)      66,610
                                                        ---------    ---------    ---------
Operating loss                                           (231,355)     (18,312)    (213,043)
Net realized investment gains (losses), net of income
  taxes                                                    16,100       (1,213)      17,313
Reorganization expenses                                    (8,620)          --       (8,620)
Cumulative effect of change in accounting principle       (52,119)          --      (52,119)
                                                        ---------    ---------    ---------
Net loss                                                $(275,994)   $ (19,525)   $(256,469)
                                                        =========    =========    =========


The operating loss of $231.4 million in 2002 represented a $213.1 million
greater loss than the operating loss of $18.3 million in 2001. The operating
losses in 2002 and 2001 include an aggregate of $229.4 million and $22.4 million
of loss reserve increases, respectively, as a result of adverse development of
prior years' losses. The establishment of deferred tax valuation allowances
contributed $54.5 million to the operating loss in 2002. The $276.0 million net
loss in 2002 compared to the $19.5 million net loss in 2001 was the result of
the net operating losses combined with (i) an extraordinary item, the writedown
of goodwill resulting from the Trenwick/LaSalle business combination, recorded
as a cumulative effect of a change in accounting principles and (ii)
reorganization expenses recorded in 2002. These items were offset in part by
realized investment gains. The non-operating items are discussed in further
detail under the caption "Non-Operating Income and Expenses."


                                       31


Underwriting Income (Loss)



                                                 2002          2001        Change
                                              ---------     ---------     ---------
                                                                 
Net premiums earned                           $ 489,671     $ 380,288     $ 109,383
                                              ---------     ---------     ---------

Claims and claims expenses incurred            (528,216)     (305,488)     (222,728)
Acquisition costs and underwriting expenses    (166,004)     (141,103)      (24,901)
                                              ---------     ---------     ---------
Total expenses                                 (694,220)     (446,591)     (247,629)
                                              ---------     ---------     ---------
Net underwriting loss                         $(204,549)    $ (66,303)    $(138,246)
                                              =========     =========     =========

Loss ratio                                        107.9%         80.3%         27.6%
Expense ratio                                      33.9%         37.1%         (3.2)%
Combined ratio                                    141.8%        117.4%         24.4%


The underwriting loss of $204.5 million in 2002 represented a $138.2 million
greater loss compared to the underwriting loss of $66.3 million in 2001. The
2002 underwriting loss included $229.4 million of reserve strengthening as a
result of prior years' reserve development, while the underwriting results for
2001 included additions to unpaid claims and claims expenses of $22.4 million as
a result of prior years' reserve development. Claims and claims expenses
incurred in both 2002 and 2001 are discussed further under the caption "Claims
and Claims Expenses."

The deterioration in the combined ratio in 2002 compared to 2001 resulted from
the increase in development on prior years' reserves.

Premiums Written

Gross premiums written for 2002 were $810.7 million compared to $641.6 million
for 2001, an increase of $169.1 million or 26.4%. Details of gross premiums
written are provided below.

                                              2002          2001        Change
                                            --------      --------      --------
Treaty reinsurance                          $409,172      $350,134      $ 59,038
Specialty program insurance                  401,491       291,433       110,058
                                            --------      --------      --------
Total                                       $810,663      $641,567      $169,096
                                            ========      ========      ========

Treaty reinsurance and specialty program insurance gross premiums written
increased from $350.1 million and $291.4 million, respectively, for 2001, to
$409.2 million, and $401.5 million, respectively, for 2002. The increase in
gross premiums written for treaty reinsurance was due primarily to increasing
rates on renewal treaties. The increase in gross premiums written for specialty
program insurance was due to increased volume on two of its larger programs
combined with the addition of ten new programs in 2002. Effective October 30,
2002, Trenwick America ceased underwriting substantially all new specialty
program insurance.

Premiums Earned

                                               2002         2001        Change
                                            ---------    ---------    ---------
Gross premiums written                      $ 810,663    $ 641,567    $ 169,096
Change in gross unearned premiums             (87,890)     (69,638)     (18,252)
                                            ---------    ---------    ---------
Gross premiums earned                         722,773      571,929      150,844
                                            ---------    ---------    ---------

Gross premiums ceded                         (249,314)    (210,160)     (39,154)
Change in gross unearned premiums ceded        16,212       18,519       (2,307)
                                            ---------    ---------    ---------
Ceded premiums earned                        (233,102)    (191,641)     (41,461)
                                            ---------    ---------    ---------
Net premiums earned                         $ 489,671    $ 380,288    $ 109,383
                                            =========    =========    =========


                                       32


A majority of gross premiums ceded in both 2002 and 2001 relates to the
specialty program insurance business, which cedes a greater portion of its
business written than the treaty reinsurance business. The increase in gross
premiums ceded in 2002 compared to 2001 can be attributed to the increase in
gross premiums written by the specialty program insurance segment.

Net premiums earned for 2002 were $489.7 million compared to $380.3 million for
2001. The increase in net premiums earned is commensurate with the increase in
net premiums written.

Claims and Claims Expenses

Trenwick America's net unpaid claims and claims expenses of $973.1 million and
$789.4 million at December 31, 2002 and 2001, respectively, include amounts
approved for payment but unpaid at the balance sheet date as well as the net
estimated amounts of claims and claim expenses for claims arising in 2002 and
2001 and in all prior years that are unpaid as of the balance sheet date,
including claims that have been incurred but not yet reported to Trenwick
America. Claims and claims expenses incurred during the year ended December 31,
2002 were $528.2 million, an increase of $222.7 million compared to claims and
claims expenses of $305.5 million for 2001, which includes adverse development
across all business units of $229.4 million and $22.4 million of development for
year end 2001 and 2000 reserves, respectively. The increase in claims and claims
expenses incurred in 2002 resulted mainly from the $229.4 million of loss
reserve strengthening recorded. The loss reserve increases are a result of the
reassessment of reserve levels, a culmination of work completed by both
Trenwick's internal actuaries and independent actuarial consultants, described
in detail below. Of the reserve increases recorded, approximately $183.9 million
or 80.2%, relates to Trenwick America's treaty reinsurance operations and
principally impacts the most recent accident years, 1998 to 2001, where
deterioration has occurred across all lines of business. A significant portion
of the deterioration arose in the general liability and asbestos and
environmental lines of business. Trenwick's specialty program insurance, now in
runoff, contributed approximately $45.5 million, or 19.8% of the reserve
increases recorded in 2002. This deterioration was concentrated in a small
number of programs and related primarily to general liability business.

As a result of deterioration in loss reserve indications during the first nine
months of 2002, Trenwick America engaged external actuarial consultants during
the fourth quarter to assist management in reviewing reserves for December 31,
2002. Based on the results of Trenwick's external and internal actuarial
studies, significant reserve adjustments of $100.4 million were made during the
fourth quarter of 2002.

The year end 2001 deficiency related to claims occurring between 1998 and 2001
and the deficiency was spread across multiple lines of business. The period from
1998 to 2001 represents a period of weak insurance and reinsurance pricing and
the actual loss results for business written during that period have turned out
to be significantly worse than originally estimated by Trenwick America when it
originally wrote the business and subsequently re-estimated reserves for this
business.

Trenwick America's unpaid claims and claims expense liability at December 31,
2002 and 2001 includes an estimate of Trenwick's ultimate liability for asbestos
and environmental claims of $112.0 million and $91.0 million, respectively,
comprising gross liabilities for unpaid claims and claims expenses of $145.0
million and $118.7 million, respectively, net of reinsurance recoverable on
unpaid claims and claims expenses of $33.0 million and $27.6 million.

Trenwick America strengthened its prior year loss reserves in 2001 by $22.4
million. This reserve strengthening includes $15.7 million related to the treaty
reinsurance segment's liability business, which was underwritten prior to 2001
and $11.5 million related to prior participation in the ECRA Pool. In addition,
$13.9 million of the loss reserve strengthening related to the specialty program
insurance segment.


                                       33


Acquisition Costs and Underwriting Expenses



                                                      2002        2001       Change
                                                    --------    --------    --------
                                                                   
Policy acquisition costs                            $143,642    $122,213    $ 21,429
Underwriting expenses                                 22,362      18,890       3,472
                                                    --------    --------    --------
Total acquisition costs and underwriting expenses   $166,004    $141,103    $ 24,901
                                                    ========    ========    ========
Expense ratio                                           33.9%       37.1%       (3.2)%
                                                    ========    ========    ========


Policy acquisition costs which consist primarily of commissions and brokerage
expenses and underwriting expenses for 2002 increased by $24.9 million compared
to 2001. The increase was primarily attributable to the increase in premiums
written during 2002. Acquisition costs and underwriting expenses as a percentage
of net premiums earned, or the expense ratio, were 33.9% for the 2002 year
compared to 37.1% for the 2001 year. The decrease in the expense ratio occurred
principally as a result of improved terms and conditions in the insurance
market.

Underwriting expenses for the year ended December 31, 2002 as a percentage of
earned premium decreased to 4.6%, as compared to 5.0% for the same period in
2001 The decrease in the underwriting expense ratio resulted principally from
the increase in premiums in 2002.

Net Investment Income



                                                        2002            2001           Change
                                                    -----------     -----------     -----------
                                                                           
Average invested assets                             $ 1,125,900     $ 1,204,605     $   (78,705)
Average annualized yields                                   5.9%            6.8%           (0.9)%
Investment income - portfolio                            66,347          82,156         (15,809)
Investment income - non portfolio                           207              --             207
Investment expenses                                     (12,925)        (14,115)          1,190
                                                    -----------     -----------     -----------
Net investment income                               $    53,629     $    68,041     $   (14,412)
                                                    ===========     ===========     ===========


Net investment income for 2002 was $53.6 million compared to $68.0 million for
2001. The principal reason for the decrease in net investment income in 2002 was
the decrease in market yields over the course of 2002. In addition, there was a
decrease in the average invested assets as a result of cash used in operations
and the payment of a $50.0 million security deposit to Chubb. Investment
expenses for both the years ended December 31, 2002 and 2001 includes interest
expense on funds withheld of $9.8 and $11.3 million, respectively, under the
terms of stop loss reinsurance agreements purchased by Trenwick America Re prior
to 2000. As a result of significant gains realized on Trenwick America's
investment portfolio in the fourth quarter of 2002 (refer to "Non-operating
Income and Expenses"), Trenwick America anticipates a reduction in future
investment income.

Interest Expense and Subsidiary Preferred Share Dividends

Interest expense and subsidiary preferred share dividends were $22.6 million for
2002, a decrease of $8.8 million from 2001. The decrease resulted from the
repayment of Trenwick America's term loan facility during the second quarter of
2002.

Foreign currency gains (losses)

Trenwick America recorded foreign currency losses of $5.5 million for 2002,
compared to foreign currency losses of $1.4 million for 2001. The increase in
foreign exchange losses during the year ended December 31, 2002 compared to the
year ended December 31, 2001 was primarily associated with an intercompany stop
loss treaty denominated in British pounds. The foreign exchange loss in 2002,
which was not eliminated in consolidation, resulted from a higher level of loss
reserves ceded under the intercompany stop loss agreement


                                       34


in 2002 relative to 2001, coupled with an increase in the United States dollar
to British pounds exchange rate from 2001 to 2002. The intercompany stop loss
treaty was commuted effective December 31, 2002.

Non-Operating Income and Expenses

Net realized gains on investments, net of applicable income taxes, were $16.1
million during 2002, compared to $1.2 million of net realized losses for 2001.
The gains in 2002 were a result of actions taken to reposition the investment
portfolio into higher quality, shorter duration fixed income securities.

Reorganization expenses incurred in 2002 of $8.6 million include non-recurring
severance costs; additionally the 2002 amount includes other non-recurring costs
related to Trenwick America's decision to cease underwriting specialty program
insurance.

Trenwick America adopted Statement of Financial Accounting Standards No. 142
effective January 1, 2002. The statement required that the remaining goodwill
balance be tested for impairment under either market value or cash flow tests.
Trenwick America conducted both market value and cash flow tests and, as a
result, recorded a $52.1 million write off of all of Trenwick America's
remaining goodwill. These transactions increased Trenwick America's net loss in
2002 by a net amount of $52.1 million and were recorded as a cumulative effect
of change in accounting principle.

Investments

Trenwick America's investment objective is to fund policyholder and other
liabilities in a manner that enhances shareholder value, subject to appropriate
risk constraints. Trenwick America seeks to meet this investment objective
through a mix of investments that reflect the characteristics of the liabilities
they support; diversify the types of investment risks by interest rate,
liquidity, credit and equity price risk; and achieve asset diversification by
investment type, industry, issuer and geographic location. Trenwick America
regularly projects duration and cash flow characteristics of its liabilities and
makes appropriate adjustments in its investment portfolios. At December 31,
2002, Trenwick America had investments, cash and cash equivalents of $1.1
billion, compared to $1.2 billion at December 31, 2001. All debt and equity
investments are classified as available for sale and reported at fair value with
the unrealized gain or loss, net of income taxes, reported in other
comprehensive income. During 2002, the net unrealized gain on Trenwick America's
debt and equity investments decreased by $3.3 million principally as a result of
the gains realized on investment sales during the year combined with the
declining interest rate environment in 2002.

Trenwick America's investments in debt securities consisted primarily of
investment grade securities, with 65% having a quality rating of Aa or better at
December 31, 2002. High yield, or non-investment grade debt securities carrying
a rating of below BBB-/Baa3 along with unrated securities, represented
approximately 11% of the portfolio at December 31, 2002. The following table
provides an aging of the unrealized losses on Trenwick's investment in debt
securities at December 31, 2002.

The aging of unrealized investment losses and fair value of the related
investments at December 31, 2002 are summarized, by stated maturity, as follows:

                                                        Gross
                                                        Unrealized
                                        Fair Value      Loss
                                        ----------      ----------
            0-6 months                  $   29,614      $   (2,810)
            7-12 months                     14,988          (2,762)
            Greater than 12 months          13,025          (2,999)
                                        ----------      ----------
              Total                     $   57,627      $   (8,571)
                                        ==========      ==========


                                       35


The foregoing data is presented based upon the stated maturities of the
securities. Actual maturities may differ for some securities because borrowers
may have the right to call or prepay obligations with or without prepayment
penalties.

None of these unrealized losses were determined to be other than temporarily
impaired and therefore no permanent impairment has been recognized at year end
2002. In the event that circumstances surrounding the potential impairment of
these investments change and management concludes the losses are other than
temporary, there could be a material impact on the earnings of Trenwick America.

The average maturity of Trenwick America's debt securities at December 31, 2002
was 6.5 years, relatively unchanged when compared to 6.3 years at December 31,
2001.

During the first quarter of 2001, Trenwick America sold almost all of its equity
securities and reinvested the proceeds in debt securities to increase operating
earnings and decrease the volatility of unrealized investment gains and losses.
Trenwick America also liquidated the remainder of its tax advantaged municipal
government portfolio in early 2001 to increase its taxable yield. Both of these
actions were taken to maximize Trenwick America's taxable income.

Trenwick America has not invested in derivative financial instruments such as
futures, forward contracts, swaps, options or other financial instruments with
similar characteristics such as interest rate caps or floors or fixed-rate loan
commitments. Trenwick America's portfolio includes market sensitive instruments,
such as mortgage-backed and asset-backed securities, which amounted to
approximately $165.9 million at December 31, 2002 or 15.1% of cash and invested
assets. There are various categories of mortgage-backed and asset-backed
securities that are subject to different degrees of risk from changes in
interest rates and, for those mortgage-backed and asset-backed securities that
are not agency-backed, defaults. Approximately 53% of Trenwick America's
mortgage-backed securities holdings were backed by government agencies, such as
GNMA, FNMA and FHLMC, at December 31, 2002 and approximately 97% of asset-backed
securities holdings were AAA- rated at December 31, 2002. The principal risks
inherent in holding mortgage-backed and asset-backed securities are prepayment
and extension risks related to significant decreases and increases in interest
rates, resulting in the repayment of principal from the underlying mortgages
either earlier or later than originally anticipated.

Deferred Income Tax Assets

Trenwick America incurred financial accounting losses in 1999 through 2002 and
in connection with such losses, recorded as an asset up to $119.2 million of net
deferred income taxes (before application of a valuation allowance). The net
deferred income tax asset represented the future tax benefit of the losses
previously incurred by Trenwick America's operations. Because of Trenwick
America's cumulative financial accounting losses, in the absence of specific
favorable factors, application of FASB Statement No. 109 required Trenwick
America to establish a 100% valuation allowance against its deferred tax asset
during 2002. The initial establishment of a 100% valuation allowance against
Trenwick America's deferred tax asset during 2002 increased Trenwick America's
provision for income taxes and net loss by $54.5 million. The maintenance of a
full valuation allowance against Trenwick America's deferred tax asset through
December 31, 2002 further increased Trenwick America's provision for income
taxes and net loss by $64.4 million for the year ended December 31, 2002.
Trenwick management will continue to monitor its tax position and reassess the
need for a valuation allowance on its deferred tax asset on a periodic basis.


                                       36


Liquidity and Capital Resources

Cash Flows

Trenwick America is a holding company whose principal assets are its investments
in the common stock of its operating subsidiaries. As a holding company,
Trenwick America's principal source of ongoing funding consists of permissible
dividends, tax allocation payments and other statutorily permissible payments
from its operating subsidiaries. At this time, and for the foreseeable future,
in the absence of external funding, it is likely that Trenwick America's sole
source of funding will arise from reimbursements and service fees paid to it
under its management agreement with its insurance subsidiaries and its
affiliates. All such reimbursements are subject to review and challenge by the
insurance departments of the domiciliary jurisdiction of the respective
insurance subsidiary.

Trenwick America's principal use of cash has been operating expenses, repayment
of loans to affiliates as well as to service its debt obligations. Trenwick
America's operating subsidiaries receive cash from premiums, investment income
and proceeds from sales and maturities of portfolio investments. They utilize
cash to pay claims, purchase their own reinsurance protections, meet operating
and capital expenses and purchase investment securities.

Trenwick America and its insurance and reinsurance company subsidiaries are
subject to regulatory oversight under the insurance statutes and regulations of
the jurisdictions in which they conduct business, including all states of the
United States. These regulations vary from jurisdiction to jurisdiction and are
generally designed to protect ceding insurance companies and policyholders by
regulating Trenwick America's financial integrity and solvency in its business
transactions and operations. Many of the insurance statutes and regulations
applicable to Trenwick America's subsidiaries relate to reporting and enable
regulators to closely monitor Trenwick America's performance. Typical required
reports include information concerning Trenwick America's capital structure,
ownership, financial condition, and general business operations.

On December 3, 2002 Trenwick America Re entered into a "letter of understanding"
with the Connecticut Department of Insurance pursuant to which, among other
things, Trenwick America Re is prohibited from paying any dividends, ordinary or
extraordinary, without the prior written approval of the Connecticut Department
of Insurance.

On November 29, 2002, Trenwick announced that it had elected to suspend, with
immediate effect and for an indefinite period of time, dividends or
distributions payable, including those on the outstanding capital securities of
Trenwick's Capital Trust I and on Trenwick America's senior notes. In addition,
the December amendments to the letter of credit facility prohibit Trenwick
America from paying dividends on the capital securities.

Cash used for Trenwick America's operating activities in 2002 was $47.9 million
compared to $29.9 million in 2001 and $98.2 million in 2000. The increase in
cash used for operations can be mainly attributed to a decrease in net
investment income received, a result of the decrease in market yields in 2002
combined with a decrease in invested assets.

Cash for financing activities in 2002 included $195.2 million related to the
repayment of Trenwick America's term loan facility, offset by the receipt of a
capital contribution of $199.5 million from its parent for the purpose of
repaying the debt.


                                       37


Financings, Financing Capacity and Capitalization

Trenwick America's financing obligations generally include debt and lease
payment obligations. At December 31, 2002, annual principal payments required by
Trenwick America through 2007 and thereafter relating to these financing
obligations are as follows (monetary amounts in tables expressed in thousands):



                                                Payments Due by Period
                                     ---------------------------------------------
Contractual                          Less than      1-3         4-5       After 5
Obligations                Total      1 Year       Years       Years       Years
- ----------------------------------------------------------------------------------
                                                          
Indebtedness and
  minority interest      $ 186,000   $  75,000   $      --   $   1,000   $ 110,000
Operating leases             9,405       1,858       3,482       3,364         701
                         ---------   ---------   ---------   ---------   ---------
Total contractual cash
  obligations            $ 195,405   $  76,858   $   3,482   $   4,364   $ 110,701
                         =========   =========   =========   =========   =========


Trenwick America does not have any material off-balance sheet arrangements,
trading activities involving non-exchange traded contracts accounted for at fair
value or relationships with persons or entities that derive benefits from a
non-independent relationship with Trenwick America or its related parties.

Concurrently with the business combination involving LaSalle Re Holdings and
Trenwick Group Inc. in September of 2000, Trenwick America and Trenwick Holdings
Limited ("Trenwick Holdings"), Trenwick's United States and United Kingdom
holding companies, entered into an amended and restated $490 million credit
agreement with various lending institutions ("the Banks"), which was guaranteed
by LaSalle Re Holdings. The credit agreement consisted of both a $260 million
revolving credit facility and a $230 million letter of credit facility. The
revolving credit facility was subsequently converted into a four-year term loan
and repaid in full on June 17, 2002. Additionally, on December 24, 2002, the
credit agreement was amended to reduce the letter of credit facility, which is
utilized by Trenwick to support its underwriting operations at Lloyd's, to the
currently outstanding $182.5 million. The letter of credit facility is scheduled
to terminate on December 31, 2003, although the letters of credit issued
pursuant to the facility will not expire until December 31, 2006.

Pursuant to a guaranty agreement entered into concurrently with the credit
agreement, Trenwick has guaranteed the obligations of Trenwick America and
Trenwick Holdings under the credit agreement. In April of 2002, Trenwick pledged
the capital stock of LaSalle Re Holdings, which was a guarantor of the
obligations under the credit agreement, and LaSalle Re as collateral to the
Banks. In December of 2002, Trenwick, Trenwick America and Trenwick Holdings
agreed to provide the Banks additional security interests as described below.

On October 18, 2002, A.M. Best Company lowered the financial strength ratings of
Trenwick's, Trenwick America's and Trenwick Holdings' operating subsidiaries
below "A-". The lowered A.M. Best Company ratings constituted an event of
default under the credit agreement. In addition, increases in Trenwick, Trenwick
America and Trenwick Holdings' reserves for unpaid claims and claims expenses
and the establishment of a Trenwick America deferred tax asset valuation
allowance in the third quarter of 2002 resulted in violations of the financial
covenants in the credit agreement requiring Trenwick, Trenwick America and
Trenwick Holdings to maintain a minimum tangible net worth and minimum
risk-based capital. On November 13, 2002, Trenwick, Trenwick America, Trenwick
Holdings, and the Banks executed a forbearance agreement with respect to the
events of default arising from the lowered A.M. Best Company ratings and
financial covenant violations.


                                       38


Subsequently, an amendment and waiver of default under the credit agreement and
amendments to the guaranty agreement were entered into on December 24, 2002 (the
"December Amendments"). The December Amendments extended the letter of credit
facility through December 31, 2003 to support Trenwick's underwriting operation
at Lloyd's for the 2003 year of account. To those Banks extending their letters
of credit, Trenwick, Trenwick America and Trenwick Holdings agreed to pay a 5%
per annum cash letter of credit fee, issue pay-in-kind notes bearing interest at
LIBOR plus 2.5% per annum to evidence an additional 3.16% per annum letter of
credit fee, issue warrants equal to 10% of Trenwick's fully diluted equity
capital, and pay 15% of the profits earned by Trenwick and its subsidiaries for
the 2002 and 2003 Lloyd's years of account. In addition, Trenwick, Trenwick
America and Trenwick Holdings agreed to provide the Banks a security interest in
all of their respective equity interests in, and the assets and property of,
their direct and indirect subsidiaries as additional collateral for the Banks,
and to cause the subsidiaries to provide a guaranty to the Banks subject to
applicable laws and regulations and certain existing contractual rights of
holders of other indebtedness.

The December Amendments also prohibit Trenwick, Trenwick America and Trenwick
Holdings' and their respective subsidiaries from declaring or paying any
dividends (including on Trenwick's common shares, the Series A preferred shares
of LaSalle Re Holdings and the capital securities of Trenwick Capital Trust I).
The December Amendments and the other amendments and waivers entered into in the
first quarter of 2003 waive certain other defaults, add covenants further
restricting the operation of Trenwick's, Trenwick America's and Trenwick
Holdings' business, prohibit Trenwick, Trenwick America and Trenwick Holdings
and their respective subsidiaries from making certain payments without the
Banks' approval, prohibit Trenwick, Trenwick America and Trenwick Holdings and
their respective subsidiaries from selling or otherwise disposing of any assets
or property, require Trenwick to regularly report certain financial information
to the Banks, and adjust downward certain of the financial covenants.

Pursuant to the December Amendments, Trenwick is required to collateralize with
cash, cash equivalents and marketable securities 60% of the outstanding letters
of credit by August 1, 2003. If it is unable to do so, Trenwick's insurance
company subsidiaries, including those of Trenwick America, will be prohibited
from underwriting any insurance or reinsurance without the Banks' prior
approval. In addition, Trenwick is required to use its best efforts to terminate
the letters of credit by December 31, 2003. In order to do so, the letters of
credit would need to be replaced with other letters of credit or collateral
acceptable to Lloyd's. In the event Trenwick has not terminated the letters of
credit by December 31, 2003, it is required on such date to collateralize with
cash, cash equivalents and marketable securities the full amount of the
outstanding letters of credit. At this time, Trenwick does not have sufficient
available liquidity to collateralize the letters of credit as required by the
December Amendments. Additionally, Trenwick does not believe that it will be
able to replace the letters of credit with other letters of credit or collateral
acceptable to Lloyd's.

Since December, 2002, Trenwick, Trenwick America and Trenwick Holdings have
entered into additional amendments and numerous waivers with the Banks providing
for, among other things, waivers of potential covenant defaults, further
reductions in certain financial covenants, additional financial reporting,
approval of certain employee and other payments, approval of the extension of
Trenwick America's senior notes from April 1, 2003 to August 1, 2003, the
related payment of interest accrued through April 1, 2003 to the holders of the
Senior Notes and extension of numerous deadlines imposed under the December
Amendments.

If there is an event of default under the credit agreement, including as a
result of Trenwick failing to collateralize the letters of credit as described
above, or if there is an event of default under other outstanding indebtedness
of Trenwick or its subsidiaries, including under the senior notes of Trenwick
America resulting in a cross default under the credit agreement, Trenwick,
Trenwick America and Trenwick Holdings may be required to fully and immediately
collateralize the outstanding letters of credit under the terms of the credit
agreement and the guaranty agreement. No liability for any such amounts has been
reflected in Trenwick's, Trenwick America's or Trenwick Holdings' financial
statements for any future event of default. If the


                                       39


potential future events of default are not waived, there is substantial doubt as
to Trenwick America's ability to continue as a going concern and Trenwick and/or
one or more of its subsidiaries, including Trenwick America may be forced to
seek protection from creditors through proceedings commenced in Bermuda and
other jurisdictions including the United States. In addition, at any time one or
more of the insurance regulatory authorities having jurisdiction over
Trenwick's, Trenwick America's and Trenwick Holdings' insurance company
subsidiaries may commence voluntary or involuntary proceedings for the formal
supervision, rehabilitation or liquidation of such subsidiaries, or one or more
of the creditors of Trenwick, Trenwick America and Trenwick Holdings or their
subsidiaries may commence proceedings against Trenwick or its unregulated
subsidiaries, including Trenwick America, seeking their liquidation.

In connection with the Trenwick/LaSalle business combination, Trenwick America
assumed, effective September 27, 2000, Trenwick Group Inc.'s obligations with
respect to $75 million aggregate principal amount of 6.70% senior notes (the
"Senior Notes"), which were initially due on April 1, 2003 and pursuant to an
amendment have been extended to August 1, 2003. They are unsecured obligations
and rank senior in right of payment to all existing and future subordinated
indebtedness of Trenwick America. Interest on the Senior Notes is payable
semi-annually at a rate of 6.7%. In connection with the amendment that extended
the maturity date of the Senior Notes from April 1, 2003 to August 1, 2003,
interest payable through April 1, 2003, in the aggregate amount of $2.5 million,
was paid. Trenwick America anticipates that it will be unable to make payment of
principal and interest on the Senior Notes on August 1, 2003 and has continued
discussions with the Senior Note holders concerning a proposed restructuring or
an additional amendment of the Senior Notes to extend the maturity thereof.
There can be no assurance that an agreement relating to this restructuring will
be reached by August 1, 2003. If such agreement cannot be reached, Trenwick
America will be in default under the terms of the Senior Notes. Additionally,
even if the Senior Notes are restructured, Trenwick America expects that, in
order to repay the principal amounts of the Senior Notes it will be required to
seek additional financing, engage in asset sales, subsidiary dividends or
similar transactions. There can be no assurance that Trenwick will be successful
in such efforts.

Trenwick America also assumed, effective September 27, 2000, Trenwick Group
Inc.'s $113.4 million 8.82% Junior Subordinated Deferrable Interest Debentures
held by Trenwick Capital Trust I in respect of the $110 million in 8.82%
Subordinated Capital Income Securities issued by the Trust. Under the terms of
the debentures, Trenwick America is not restricted from incurring indebtedness,
but is subject to limits on its ability to incur secured indebtedness for
borrowed money.

Upon consummation of the acquisition of Chartwell Re Corporation ("Chartwell")
in 1999, Trenwick Group Inc. became the successor obligor under Chartwell's
Contingent Interest Notes due June 30, 2006. Effective September 27, 2000,
Trenwick America assumed Trenwick Group Inc.'s obligations under the contingent
interest notes in connection with the Trenwick/LaSalle business combination. The
contingent interest notes were issued in an aggregate principal amount of $1
million, which accrues interest at a rate of 8% per annum, compounded annually.
The interest is not payable until the maturity or earlier redemption of the
contingent interest notes. In addition, the contingent interest notes entitle
their holders to receive at maturity, in proportion to the principal amount of
the contingent interest notes held by them, an aggregate of from $0 up to $55
million in contingent interest. The amount of contingent interest payable under
the contingent interest notes is dependent upon the level of unpaid claims and
claims expenses related to business written by Trenwick America's subsidiary,
INSCORP, prior to 1996. The contingent interest notes mature on June 30, 2006.

During the years ended December 31, 2002 and 2001, Trenwick America recorded
$18.3 million and $9.9 million, respectively, of adverse development related to
the subject business, and as a result, the carrying value of the contingent
interest notes at December 31, 2002 has been reduced to the minimum principal
value of $1 million plus accrued interest, which is the present value of the
amount expected to be paid at maturity. The contingent interest notes will
continue to accrue interest at a rate of 8% per year. The contingent interest


                                       40


notes contain covenants which relate to the maintenance of certain records and
limitations on certain indebtedness. At December 31, 2002, Trenwick America was
in compliance with these covenants.

Trenwick America's ability to refinance its existing debt obligations or raise
additional capital is dependent upon several factors, including financial
conditions with respect to both the equity and debt markets and the ratings of
its securities as established by the rating agencies. As a result of the
continued deterioration of Trenwick America's financial condition, its senior
debt ratings have been downgraded by Standard & Poor's Corporation to "D" and by
Moody's Investors Service to "Ca." Trenwick America's ability to refinance its
outstanding debt obligations, as well as the cost of such borrowings, has been
materially adversely affected by these ratings downgrades.

Restrictions on Certain Payments within Trenwick

Because Trenwick America's operations are conducted through its operating
subsidiaries, Trenwick America is dependent upon the ability of its operating
subsidiaries to transfer funds, principally in the form of cash dividends, tax
reimbursements, management service fees and other statutorily permissible
payments. In addition to general legal restrictions on payments of dividends and
other distributions to shareholders applicable to all corporations, Trenwick
America's insurance subsidiaries are subject to insurance laws and regulations
in the jurisdictions in which they operate that, among other things, restrict
the amount of dividends and other distributions that may be paid to their parent
corporations without prior approval by the insurance regulatory authorities. As
previously discussed, the December Amendments to Trenwick's letter of credit
facility prohibit Trenwick and its subsidiaries from declaring or paying any
dividends (including on Trenwick's common and preferred shares, the preferred
shares of LaSalle Re Holdings and the capital securities issued by Trenwick
Capital Trust I). The amendments also prohibit Trenwick and its subsidiaries,
including Trenwick America from making certain payments without the Banks'
approval.

On December 3, 2002, Trenwick America Re entered into a "letter of
understanding" with the Connecticut Department of Insurance pursuant to which,
among other things, Trenwick America Re is prohibited from paying any dividends,
ordinary or extraordinary, without the prior written approval of the Connecticut
Insurance Commissioner or her designee. On November 29, 2002, Trenwick elected
to suspend, with immediate effect and for an indefinite period of time,
dividends or distributions payable on on the capital securities of Trenwick
Capital Trust I. Since the ability of Trenwick America to meet both its
operating needs in the short term as well as its obligations in the long-term is
dependent upon such factors as market changes, insurance regulatory changes and
economic conditions, no assurance can be given that the available net cash flow
will be sufficient to meet its operating needs.

During the year ended December 31, 2002, Trenwick America Re and INSCORP loaned
$33.3 million and $26.3 million, respectively, to Trenwick America. The funds
received through these demand loans were used to service Trenwick America's debt
obligations and to fund affiliate transactions. At this time, Trenwick America
does not have sufficient available liquidity to repay these loans. At December
31, 2002, Trenwick America's consolidated balance sheet reflected demand loans
receivable from its United Kingdom affiliates of $48.2 million. These loans were
funded prior to 2002, and no repayment has been received by Trenwick America
since the inception of these loans. At this time, Trenwick America's United
Kingdom affiliates from which the loans are receivable do not have sufficient
liquidity available to repay these loans. The repayment of these loans is
contingent upon profitable operations at Lloyd's during 2003 and beyond.


                                       41


Reinsurance

Reinsurance agreements provide for recovery of a portion of certain claims and
claims expenses from reinsurers. Trenwick America Re and its subsidiaries enter
into reinsurance and retrocessional agreements to reduce their net liability on
individual risks, protect against catastrophic losses and maintain acceptable
loss ratios. Trenwick America Re and its subsidiaries remain liable in the event
that reinsurers are unable to meet their obligations; however, Trenwick America
Re and its subsidiaries hold partial collateral under several of these
agreements in order to mitigate the risk. Letters of credit, trust accounts and
funds withheld in the aggregate amount of $294.6 million (including interest)
have been arranged in favor of Trenwick America Re and its subsidiaries
collateralizing reinsurance recoverables with respect to certain
retrocessionaires.

Trenwick America's operating subsidiaries purchase reinsurance to reduce their
exposure to catastrophe claims and the frequency and severity of claims in all
lines of business. In 2002, 2001 and 2000, Trenwick America Re's reinsurance
treaties consisted principally of property catastrophe reinsurance treaties. In
1999, Trenwick America Re also entered into an excess of loss treaty for its
facultative casualty business. In addition, Trenwick America Re purchased an
annual aggregate excess of loss ratio treaty for casualty business effective
January 1, 1999. Subsequent to 1999, Trenwick America's reinsurance philosophy
was to utilize specific retrocessional and property catastrophe protections to
manage its underwriting results, and to eliminate the use of aggregate stop loss
coverages to provide capital enhancement. Canterbury purchased specific
reinsurance programs for each of the programs underwritten by its insurance
companies.

As part of its merger with Trenwick Group Inc., Chartwell purchased, on October
27, 1999, a reinsurance policy providing for up to $100 million in coverage in
order to indemnify Trenwick Group Inc. against unanticipated increases in
Chartwell's reserves for business written on or before the date the
Trenwick/Chartwell merger was completed. The reinsurance policy applied to all
of Chartwell's business, including its operations at Lloyd's and was fully
utilized as of year end 2000. In addition, as part of the merger, Chartwell
commuted several aggregate stop-loss reinsurance treaties.

Trenwick America Re and its subsidiaries remain liable with respect to insurance
and reinsurance ceded in the event that the reinsurer or retrocessionaire is
unable to meet its obligations. All reinsurers and retrocessionaires must be
formally approved by the operating company's security committee. The evaluation
process involves financial analysis of current audited financial data and
comparative analysis of such data in accordance with guidelines established by
Trenwick America. Business is not conducted with reinsurers or retrocessionaires
who are not currently approved by the security committee.

Critical Accounting Policies

The accounting policies described below are those Trenwick America considers
critical in preparing its consolidated financial statements. These policies
include significant estimates made by management using information available at
the time the estimates are made. However, as described below, these estimates
could change materially if different information or assumptions were used. The
descriptions below are summarized and have been simplified for clarity. A more
detailed description of the significant accounting policies used by Trenwick
America in preparing its financial statements is included in the Notes to the
Consolidated Financial Statements and the note references are included below.

Unpaid Claims and Claims Expenses

Claims and claims expenses are recorded as incurred, at management's best
estimate, in order to match claims and claims expense costs with premiums over
the contract periods. The amount provided for unpaid claims and claims expenses
consists of any unpaid reported claims and claims expenses and estimates for
incurred but not reported claims and claims expenses, net of salvage and
subrogation. The estimates for claims and


                                       42


claims expenses incurred but not reported were developed based on historical
claims and claims expense experience and an actuarial evaluation of expected
claims and claims expense experience. Workers' compensation indemnity
liabilities that are considered fixed and determinable are discounted using an
interest rate of 3.5%. Reserves for unpaid claims and claims expenses, by their
very nature, do not represent an exact calculation of the liability and, while
Trenwick America has established reserves equal to the current best estimate of
ultimate losses, there remains a high likelihood that further changes in such
claim estimates, either upward or downward, will occur in the future.
Adjustments to previously reported reserves for unpaid claims and claims
expenses are considered changes in estimates for accounting purposes and are
reflected in the income statement in the period in which the adjustment becomes
known.

Unpaid claims and claims expenses are recorded based on actuarial estimates of
losses inherent in that period's claims, including losses for which claims have
not yet been reported. Estimates of unpaid claims and claims expenses rely on
actuarial observations of ultimate loss experience for similar historical
events. Historical insurance industry experience indicates that a high degree of
inherent variability exists in assessing the ultimate amount of losses under
short-duration property and casualty contracts. This inherent variability is
particularly significant for liability-related exposures, including latent
claims issues (such as asbestos and environmental related coverage disputes),
because of the extended period of time, often many years, that transpires
between when a given claim event occurs and the ultimate full settlement of such
claim. This situation is then further exacerbated for reinsurance entities (as
opposed to primary insurers) due to coverage often being provided on an
"excess-of-loss" basis and the resulting lags in receiving current claims data.
Additionally, the uncertainty is increased as a result of the diversity of
development patterns among different types of reinsurance and the necessary
reliance on ceding companies for information regarding reported claims and
differing reserving practices among ceding companies. Other items that have been
considered in determining year-end reserves but may develop differently than
currently estimated include:

      o     Claims against financial services companies for certain types of
            practices including alleged misallocations of shares in initial
            public offerings;

      o     Directors and Officers liability insurance;

      o     Ultimate losses on business underwritten in the last four years, as
            reserve estimates are inherently more uncertain on recent business,
            where reported loss activity is still low relative to ultimate
            losses;

      o     Claims liabilities also include provisions for latent injury or
            toxic tort claims that cannot be estimated with traditional
            reserving techniques. Due to inconsistent court decisions in federal
            and state jurisdictions and the wide variation among insureds with
            respect to underlying facts and coverage, uncertainty exists with
            respect to these claims as to liabilities of ceding companies and,
            consequently, reinsurance coverage; and

      o     Reinsurance collectibility - Trenwick America reviews and monitors
            its reinsurance recoverables from its reinsurers and makes provision
            for uncollectible reinsurance as appropriate. However, given the
            magnitude of reinsurance recoverables, $641.2 million at year-end
            2002, Trenwick America has a significant exposure to collectibility
            issues.

Trenwick America's management continually evaluates the potential for changes in
unpaid claims and claims expenses to adjust recorded reserves and to proactively
modify underwriting criteria and product offerings. In recent periods and
continuing throughout 2002, the level of reported claims activity related to
prior year loss events, particularly for liability-related exposures
underwritten in 1997 through 2001, has been significantly higher than
anticipated. Full consideration of these trends was incorporated into a
comprehensive reserve study completed in the fourth quarter of 2002. Insurance
reserves, by their very nature, do not represent an exact calculation of
liability and, while Trenwick America has established reserves equal to the
current best


                                       43


estimate of ultimate losses, there remains a likelihood that further changes in
such loss estimates, either upward or downward, will occur in the future.

Management believes that Trenwick America's claim and claim expense liabilities
are adequate. However, the process of estimating claims and claim expense
liabilities is inherently imprecise and involves an evaluation of many
variables, including potentially unpredictable social and economic conditions.
Accordingly, there can be no assurance that Trenwick America's ultimate
liability will not vary significantly from amounts reserved. The uncertainties
in and the risk factors associated with the claims reserves at December 31, 2002
are similar to the uncertainties at prior year ends. However, given Trenwick
America's current surplus levels, it is now less financially equipped to handle
these uncertainties should there be adverse development in the loss reserves.

Reinsurance Recoverable Balances

Trenwick America purchases reinsurance to reduce its exposure on individual
risks, catastrophic losses and other large losses. Trenwick America estimates
the amount of uncollectable receivables from its reinsurers each period and
establishes an allowance for uncollectable amounts. The amount of the allowance
is based on the age of unpaid amounts, information about the creditworthiness of
Trenwick America's reinsurers, and other relevant information. Estimates of
uncollectable reinsurance amounts are revised each period, and changes are
recorded in the period they become known. A significant change in the level of
uncollectable reinsurance amounts would have a significant effect on Trenwick
America's results of operations. Also see Note 5 of Notes to the Consolidated
Financial Statements.

Investments

Investments are classified as available for sale and recorded at fair value, and
unrealized investment gains and losses are reflected in shareholders' equity.
Investment income is recorded when earned, and capital gains and losses are
recognized when investments are sold. Investments are reviewed periodically to
determine if they have suffered an impairment of value that is considered other
than temporary. If investments are determined to be impaired, a capital loss is
recognized at the date of determination.

Testing for impairment of investments also requires significant management
judgment. The identification of potentially impaired investments, the
determination of their fair value and the assessment of whether any decline in
value is other than temporary are the key judgment elements. The discovery of
new information and the passage of time can significantly change these
judgments. Revisions of impairment judgments are made when new information
becomes known, and any resulting impairment adjustments are made at that time.
The current economic environment and recent volatility of securities markets
increase the difficulty of determining fair value and assessing investment
impairment. The same influences tend to increase the risk of potentially
impaired assets.

Trenwick America seeks to match the maturities of invested assets with the
payment of expected liabilities. By doing this, Trenwick America attempts to
make cash available as payments become due. If a significant mismatch of the
maturities of assets and liabilities were to occur and Trenwick America had to
liquidate investments prior to their maturity, it may incur realized losses and,
the effect on Trenwick America's results of operations could be significant.
Also see Note 6 of Notes to the Consolidated Financial Statements.

Deferred Income Taxes

Deferred income tax assets and liabilities are computed based on temporary
differences between financial statement and income tax bases of assets and
liabilities using enacted income tax rates in effect for the year in which the
differences are expected to reverse. FASB Statement No. 109 requires a valuation
allowance to be


                                       44


recorded when it is more likely than not that some or all of the deferred tax
assets will not be realized. Due to Trenwick America's cumulative losses
generated in recent years and uncertainties as to the amount of taxable income
to be generated in future years, as of December 31, 2002, Trenwick America
management could not support the future realizability of its net deferred tax
asset. The effects of this determination on Trenwick America's results from
operations are significant. As of December 31, 2002, Trenwick America had
increased its valuation allowance by $118.9 million, so as to record a full
valuation allowance for the full amount of its net deferred tax asset. Also see
Note 8 of Notes to be Consolidated Financial Statements.

Quantitative and Qualitative Disclosure About Market Risk

The following sections address the significant market risks associated with
Trenwick America's business activities as of December 31, 2002 and 2001.
Trenwick America's primary market risk exposures are:

o     foreign currency exchange in particular the United States dollar to the
      Canadian dollar and British pound sterling;

o     interest rate risk on fixed and variable rate United States dollar and
      British pound sterling denominated short and long-term instruments; and

o     equity price risk.

With respect to Trenwick America's investment portfolio, the risk management
strategy is to place its investments with high credit quality issuers and to
limit the amount of credit exposure with respect to particular ratings
categories and any one issuer. Trenwick America selects investments with
characteristics such as duration, yield, currency and liquidity to reflect the
underlying characteristics of related estimated claim liabilities.

As of December 31, 2002, Trenwick America's exposure to high yield investments
was minimal. While these investments are more susceptible to credit risk, their
total market value represents 6% of total investments and cash and therefore
management believes that the exposure to credit risk is not material. Trenwick
America has no derivatives and its investments do not contain terms that may
result in potential losses due to leverage.

The borrowings of Trenwick America are summarized in Note 7 to the financial
statements, and under the caption "Financings, Financing Capacity and
Capitalization" in this Management's Discussion and Analysis of Financial
Condition and Results of Operations.

Foreign Currency Exchange Rate Risk

Foreign currency risk is the risk that Trenwick America will incur economic
losses due to adverse changes in foreign currency exchange rates. This risk
arises from Trenwick America's securities denominated in foreign currencies.

Trenwick America's reinsurance operations have exposures to movements in various
currencies, particularly the Canadian dollar and the British pound sterling, as
some of its business is denominated in those currencies. Therefore, changes in
currency exchange rates affect Trenwick America's balance sheet, statement of
operations and statement of cash flows. This exposure is somewhat mitigated by
the fact that premiums received are invested in the same currency portfolios, to
partially offset related unpaid claims and claims expense liabilities
denominated in the same currency.

Management estimates that a 10% immediate unfavorable change in each of the
foreign currency exchange rates to which Trenwick America is exposed at year end
2002 would have decreased the fair value of Trenwick America's foreign
denominated net assets by approximately $1 million. At year end 2001, the same


                                       45


10% shift in foreign currency exchange rates would have resulted in a potential
loss in fair value of the foreign denominated net liabilities of approximately
$1 million.

Interest Rate Risk

Trenwick America's fixed maturity investments and indebtedness are subject to
interest rate risk. Increases and decreases in prevailing interest rates
generally translate into decreases and increases in the fair value of fixed
maturity investments and the interest payable on Trenwick America's outstanding
variable rate debt. Additionally, the fair value of interest rate sensitive
instruments may be affected by the creditworthiness of the issuer, a prepayment
option, relative values of alternative investments, liquidity of the investment
and other general market conditions.

Trenwick America monitors its sensitivity to interest rate risk by evaluating
the change in its financial assets and liabilities relative to hypothetical
increases and decreases in interest rates. It is assumed that the changes occur
immediately and uniformly to each category of instrument containing interest
rate risks. Significant variations in market interest rates could produce
changes in the timing of repayments due to prepayment options available. The
fair value of such instruments could be affected and therefore actual results
might differ from those reflected in this summary.

A 100 basis point increase in market interest rates would have resulted in an
estimated pre-tax loss in the fair value of these instruments of $14 million and
$34.0 million at December 31, 2002 and 2001, respectively. Similarly, a 100
basis point decrease in market interest rates would have resulted in an
estimated pre-tax gain in the fair value of these instruments of $12 million and
$30 million at December 31, 2002 and 2001, respectively.

Equity Price Risk

The carrying values of investments subject to equity price risks are based on
quoted market prices or management's estimates of fair value as of the balance
sheet date. Market prices are subject to fluctuation and, consequently, the
amount realized in the subsequent sale of an investment may significantly differ
from the reported market value. Fluctuation in the market price of a security
may result from perceived changes in the underlying economic characteristics of
the investee, the relative price of alternative investments and general market
conditions. Furthermore, amounts realized in the sale of a particular security
may be affected by the relative quantity of the security being sold.

Trenwick America's equity portfolio at December 31, 2002 totaled $8.8 million of
common equity investments. Trenwick America's potential exposure on equity
securities is estimated in terms of an immediate 10% drop in equity prices
across all equity securities holdings from those prevailing at December 31, 2002
which would have resulted in a $1 million loss. At December 31, 2001, the same
drop in equity prices would have resulted in an $2 million loss.

The fair value estimates shown are based on the composition of the equity
security portfolio at year-end and these exposures will change as a result of
ongoing portfolio activities in response to management's assessment of changing
market conditions and available investment opportunities.

The above analyses do not take into account any correlation among foreign
currency exchange rates, or any correlation among various markets (i.e., the
fixed income markets and foreign exchange and equity markets). Trenwick
America's actual experience may differ from the results noted above due to the
correlation assumptions utilized, or if events occur that were not included in
the methodology, such as significant liquidity or market events. The selection
of the amount of increases or decreases in currency exchange rates, interest
rates and equity values in the above analyses should not be construed as a
prediction of future market


                                       46


events, but rather, to illustrate the potential impact of such events.

Effects of Inflation

The potential exists, after a catastrophe loss, for the development of
inflationary pressures in a local economy. The effects of inflation are
considered in pricing and in estimating reserves for unpaid claims and claim
expenses. The actual effects of inflation on Trenwick America's results cannot
be accurately known until claims are ultimately settled.

Accounting Standards

Effective January 1, 2002, Trenwick America adopted a new Financial Accounting
Standards Board statement which amended the accounting for goodwill and other
intangible assets. This new statement suspended systematic goodwill amortization
and required that goodwill be tested for impairment under either market value or
cash flow tests. Trenwick America conducted both market value and cash flow
tests and, as a result, recorded a $52.1 million write off of goodwill as a
cumulative effect of an accounting change as of January 1, 2002.

In January 2003, the FASB issued Interpretation No. ("FIN") 46, Consolidation of
Variable Interest Entities, which Trenwick America intends to adopt on July 1,
2003. FIN 46's consolidation criteria are based on analysis of risks and
rewards, not control, and represent a significant and complex modification of
previous accounting principles. FIN 46 represents an accounting change, not a
change in the underlying economics of asset sales. Under its provisions, certain
assets previously sold to special purpose entities (SPE's) could be consolidated
and, if consolidated, any assets and liabilities now on the books related to
those SPE's would be removed. Because Trenwick America has not traditionally
engaged in the types of securitization vehicles within the scope of FIN 46,
management does not believe adoption of the interpretation will impact future
results.


                                       47


                           FUTURE BUSINESS OPERATIONS

The future operations of Trenwick America and its financial results are likely
to differ materially from those of 2002 and prior years as Trenwick may be
required to dispose of one or all of its operating units in order to satisfy its
obligations to creditors and regulatory requirements or take further action to
reduce the costs of ongoing operations. In addition, under the terms of Trenwick
America's agreements with the Banks, and particularly under the December
Amendments, Trenwick America and its subsidiaries are subject to financial and
operational restrictions which limit Trenwick America's flexibility to pursue
business and strategic alternatives. These restrictions will apply so long as
Trenwick America has unpaid reimbursement obligations to the Banks with respect
to the letters of credit.

The result of the foregoing is that the future operations of Trenwick America,
at least in the next several years, are likely to consist substantially of the
sale or management in runoff of some or all of its existing insurance and
reinsurance businesses including administration of claims, regulatory reporting,
settlement of reinsurance agreements (including commutations thereof where
appropriate), cash and investment management and related matters. The costs
involved in such operations are likely to differ significantly from those of
prior years, where a significant portion of the operating costs related to
underwriting, marketing and securing reinsurance for new business. The
reimbursement of costs as they relate directly to the insurance entities
themselves will be subject to review by regulatory authorities which may
challenge these costs or impose other restrictions with respect to the runoff
including the provision of an acceptable runoff plan. Adverse loss developments
or weakness in reinsurance recoveries, among other factors, could significantly
and negatively impact the success of any runoff. It is unlikely that any amounts
will be available to the creditors or equity holders of the direct and indirect
parent companies of any regulated insurance subsidiary of Trenwick until such
time as the regulator having jurisdiction over such subsidiary has been assured
of the solvency of such entity, which may require several years if achievable at
all. It is possible that one or more of Trenwick America's insurance company
subsidiaries may be placed under the control of the regulatory body with
jurisdiction over such entity, voluntarily or involuntarily, through
rehabilitation, liquidation or other proceedings.

                                  RISK FACTORS

You should carefully consider the risks described below regarding us and our
securities. The risks and uncertainties described below are not the only ones we
face. There may be additional risks and uncertainties. If any of the following
risks actually occur or continue to occur, our business, financial condition or
results of operations could be materially and adversely affected and the trading
price of our securities could decline further.

Our auditors have expressed doubt as to our ability to continue as a going
concern.

Our independent accountants, PricewaterhouseCoopers LLP, have stated, in their
audit report with respect to our financial statements as at and for the twelve
months ended December 31, 2002, that substantial doubt exists as to our ability
to continue as a going concern.

We are unable to pay dividends on the capital securities of Trenwick Capital
Trust I and will continue to be unable to do so for the foreseeable future.

In connection with other actions being taken in the fourth quarter of 2002, on
November 29, 2002, Trenwick's Board of Directors elected to suspend the payment
of dividends, including those to holders of the capital securities of Trenwick
Capital Trust I effective immediately and for an indefinite period of time. We
do not


                                       48


expect to be able to pay dividends to holders of the capital securities of
Trenwick Capital Trust I for the foreseeable future.

If potential events of default under our credit facility are not cured or waived
by our lenders, there is substantial doubt as to our ability to continue as a
going concern.

We currently have outstanding $182.5 million of letters of credit issued by the
banks under our credit facility. We are obligated to reimburse the banks for any
amounts drawn on these letters of credit, and for related fees and expenses. No
amounts have been drawn on the letters of credit to date. The banks have
provided us with several waivers of potential defaults and extensions of
deadlines under the credit facility, but we presently do not have the liquidity
necessary to satisfy the banks by the deadlines that have been imposed. If the
potential events of default occur and are not waived, there is substantial doubt
as to our ability to continue as a going concern. In addition, we have entered
into many covenants in the senior credit facility and related agreements that
limit our ability to take certain actions without the consent of the banks,
including our ability to borrow money, to make particular types of investments
or other restricted payments (including dividend payments), to sell our assets,
or to merge or consolidate. These restrictions significantly limit our financial
and operational flexibility.

We are unable to repay $75 million in senior notes outstanding which are due
August 1, 2003, and are required to replace, refinance or restructure these
notes by that date.

We are engaged in continuing discussions with the holders of our senior notes
regarding a restructuring of our senior notes. At this time we do not have
sufficient liquidity to pay the principal amount of $75 million due on August 1,
2003, and it is uncertain whether we will be able to replace, refinance or
restructure the notes by that date. If we are unable to secure a waiver or
extension of this deadline, and either the banks under our credit facility or
the senior noteholders determine to exercise the rights available to them upon
this failure, we and/or one or more of our subsidiaries may be forced to seek
protection from creditors.

Our indirect parent, Trenwick Group Ltd., has issued convertible preferred
shares that may result in substantial dilution to existing common shareholders
and/or a change in control of Trenwick Group Ltd. Trenwick Group Ltd. does not
have the ability to control settlement of these convertible preferred shares.

As a result of the September 11, 2001 terrorist attacks, LaSalle Re incurred
large catastrophe losses that enabled Trenwick Group Ltd. to exercise its rights
under a catastrophe equity put option with European Reinsurance Company of
Zurich, a subsidiary of Swiss Reinsurance Company ("European Re"). In this
transaction, Trenwick Group Ltd. issued Series B shares to European Re for a
purchase price of $40 million. These Series B shares are convertible into
Trenwick Group Ltd. common shares upon the occurrence of certain events,
including Trenwick Group Ltd.'s failure to maintain a net worth (as defined)
under generally accepted accounting principles of $225 million. Trenwick Group
Ltd.'s net worth is below $225 million, and in the event that it remains below
that amount through April 19, 2003, European Re will be able to convert the
Series B Shares into common shares upon not less than 60 days' notice to
Trenwick Group Ltd., and substantial dilution to existing common shareholders of
Trenwick Group Ltd. will occur. In addition, depending on the conversion ratio
of preferred shares to common shares, which is based upon the trading price of
Trenwick Group Ltd.'s common shares and the book value and number of shares
converted, this conversion could result in European Re obtaining control of
Trenwick Group Ltd. subject to compliance with applicable insurance regulation.

We are a holding company and substantially all of our assets are held in our
insurance company subsidiaries. These assets are generally unavailable to pay
the debts of the holding company and there is substantial uncertainty as to
whether we will ultimately receive any value from our insurance company
subsidiaries.


                                       49


We are a holding company with no material assets other than the stock of our
operating subsidiaries. Our ability to meet our debt and securities obligations
and our ability to pay dividends to our shareholders will be dependent on the
earnings and cash flows of our subsidiaries and the ability of the subsidiaries
to pay dividends or to advance or repay funds to us. Payment of dividends and
advances and repayments from our operating insurance company subsidiaries are
regulated by state and foreign insurance laws and regulatory restrictions,
including minimum solvency and liquidity thresholds. We are required to maintain
specified minimum levels of capital and surplus and risk-based capital at our
insurance subsidiaries, which could restrict their ability to pay us dividends,
even if the dividends were permitted by relevant insurance laws and regulations.
We do not expect the majority of our operating subsidiaries will be able to pay
dividends or advance or repay any funds to us in the foreseeable future, which
would prevent us from making payments on our debt or securities obligations.

We are in discussions with insurance regulators concerning capital impairment
and other issues relating to our insurance company subsidiaries, and these
regulators may institute supervision, rehabilitation, conservation or
liquidation proceedings with respect to these subsidiaries.

We have been engaged in discussions with the insurance regulators of the
jurisdictions in which our insurance company subsidiaries are domiciled. We have
been required to restrict our Connecticut insurance company subsidiary from
taking certain actions such as paying dividends or disposing of assets, and we
have been required to submit a plan of action to eliminate the statutory capital
impairment at our New York insurance company subsidiary. The New York Insurance
Department ("NYID") has indicated that the NYID would expect to impose
restrictions on our New York insurance company subsidiary that are at a minimum
similar to those imposed by the Connecticut Insurance Department on our
Connecticut subsidiary. Trenwick America has also been notified by the NYID
that, in the NYID's view, approximately $26 million in loans made to Trenwick
America by INSCORP in 2002 were in contravention of New York regulatory
requirements. As a result, INSCORP and Trenwick America may be the subject of
regulatory action brought by the NYID. Each of these regulators, as well as the
State of North Dakota, may act independently of one another with respect to the
insurance company domiciled in its jurisdiction. Any action by an insurance
regulator, such as the commencement of voluntary or involuntary supervision,
rehabilitation, conservation or liquidation proceedings with respect to one of
these companies, could precipitate additional actions by the other insurance
regulators. In the event of any such proceedings, it is unlikely that the assets
of the insurance companies will be available to satisfy each others'
liabilities, or the liabilities of Trenwick America.

Our insurance company subsidiaries are no longer rated by A.M. Best Company.

Ratings have become an increasingly important factor in establishing the
competitive position of insurance companies. As a result of recent events, our
insurance company subsidiaries are no longer rated by A.M. Best. These ratings
reflect A.M. Best's opinion of an insurance company's financial strength,
operating performance, strategic position and ability to meet its obligations to
policyholders. The lack of ratings will adversely affect our ability to market
our insurance and reinsurance products and will have a significant and adverse
effect on our future prospects for growth and profitability.

We have written substantially all of our business in 2003 as agent for a highly
rated unaffiliated insurance company under an arrangement that is terminable at
will. If this arrangement is terminated, we may be unable to find a replacement
carrier and would have no ongoing business in the United States.

The Chubb underwriting facility, under which Trenwick America Re is acting as
agent for Chubb, represents virtually all of our ongoing business. The facility
is terminable at will by either party, and there can be no assurance that upon
its expiration it will be renewed, or that we would be able to enter into
similar


                                       50


arrangements with another highly rated carrier were the Chubb facility to
terminate. In addition, the facility is structured in such a way that we will
not derive any profit commissions from it until 2006, if at all.

Our financial strength ratings have been significantly downgraded by Standard &
Poor's, Moody's Investor Services and Fitch.

Our senior debt and other ratings have been downgraded significantly by Standard
& Poor's, Moody's Investor Services and Fitch, to "D", "Ca" and "D",
respectively. These ratings generally reflect the ratings services' views that
our business prospects and financial flexibility are very limited and their
substantial doubt as to our ability to restructure our senior debt. In addition,
these downgrades significantly and negatively affect our ability to raise
capital and to negotiate favorable terms in restructuring our debt.

Our specialty program insurance segment, from which we historically derived a
significant portion of our revenue, has ceased to write substantially all new
business and is in runoff.

We have placed our Specialty program insurance segment, which provided
approximately 50% of our gross premiums written in 2002, into runoff, therefore
little or no new business is being written and, in addition, in order to reduce
operating costs we may be required to put all of our operations in runoff in the
future. Our objective is to maximize the economic value of the runoff through
effective claims settlement, commutation of assumed obligations where
appropriate, collection of reinsurance recoverables and effective cash
management. While it is possible that some positive economic value may result
over time from the runoff of this operation, we do not expect them to contribute
significantly to our revenue or results of operations and there are significant
uncertainties that could if realized adversely affect our ability to continue a
solvent runoff of this operation. Trenwick has historically not operated in
runoff and may not have internal expertise, or may not be able to retain
external support such as experienced consultants, to do so effectively.

Our ability to attract and retain key management personnel has been negatively
affected.

We have experienced the loss of several senior executive officers in the last
nine months. A number of executives positions at Trenwick and its subsidiaries,
including Trenwick's Acting Chief Executive Officer and its Chief Actuary, are
now being filled by consultants under short term arrangements. Our ability to
operate our business has been, and will continue to be, dependent on our ability
to retain the services of our existing key senior executive officers and to
attract and retain additional qualified personnel in the future as employees and
consultants. The loss of the services of any of our key executive officers or
the inability to hire and retain other highly qualified personnel in the future
could adversely affect our ability to conduct our business. Our financial
situation and that of our subsidiaries has made it and likely will continue to
make it difficult to retain key employees.

Our reinsurers may not satisfy their obligations to us.

Our business model relied to a large extent on reinsurance to reduce our
underwriting risk. As of December 31, 2002, our reinsurance recoverable balance
was approximately $641.2 million. Our subsidiaries are subject to credit risk
with respect to their reinsurers because the transfer of risk to a reinsurer
does not relieve the insurers of their liability to the insureds. In addition,
reinsurers may be unwilling to pay our insurance company subsidiaries even
though they have the financial resources and are contractually obligated to do
so. Unfavorable arbitration decisions or the failure of one or more of the
reinsurers to honor their obligations or make timely payments would impact our
subsidiaries' cash flow and could cause us to incur significant losses. In the
event of the rehabilitation, supervision, conservation or liquidation of any of
our insurance company subsidiaries, we may not be able to influence the outcome
of the collectibility of reinsurance recoverables, in that it will be the
responsibility of the regulators supervising such proceedings.


                                       51


If actual claims exceed our loss reserves, our financial results could be
significantly adversely affected.

In the fourth quarter of 2002 we increased our loss reserves for unpaid claims
and claims expenses by $100 million, which followed other reserve increases
earlier in 2002. The reserve increases reflect a reassessment of our reserves in
light of recent reported loss activity trends across our major business groups.
Our results of operations and financial condition depend upon our ability to
assess accurately the potential losses associated with the risks that we insure
and reinsure. To the extent actual claims continue to exceed our expectations,
we will be required to immediately recognize the less favorable experience. This
could cause a material increase in our liabilities and a reduction in our
profitability, including an operating loss and reduction of capital.

We establish loss reserves to cover our estimated liability for the payment of
all losses and loss expenses incurred with respect to premiums earned on the
policies that we write. We utilize actuarial models as well as historical
insurance industry loss development patterns to establish appropriate loss
reserves, as well as estimates of future trends in claims severity, frequency
and other factors. Establishing an appropriate level of loss reserves is an
inherently uncertain process. Accordingly, actual claims and claim expenses paid
will likely deviate, perhaps substantially, from the reserve estimates reflected
in our consolidated financial statements.

If our loss reserves are determined to be inadequate, we will be required to
increase loss reserves at the time of such determination with a corresponding
reduction in our net income or increase our net loss in the period in which the
deficiency is rectified. It is possible that claims in respect of events that
have occurred could exceed our loss reserves and have a material adverse effect
on our results of operations or our financial condition in general.

The effects of emerging claim and coverage issues on our business are uncertain.

As industry practices and legal, judicial, social and other environmental
conditions change, unexpected and unintended issues related to claims and
coverage may emerge. These issues may adversely affect our business by either
extending coverage beyond our underwriting intent or by increasing the number or
size of claims. In some instances, these changes may not become apparent until
some time after we have issued insurance or reinsurance contracts that are
affected by the changes. As a result, the full extent of liability under our
insurance or reinsurance contracts may not be known for many years after a
contract is issued.

The regulatory system under which we operate, and potential changes thereto,
could have a material adverse effect on our business.

Our insurance and reinsurance subsidiaries may not be able to obtain or maintain
necessary licenses, permits, authorizations or accreditations in locales where
we currently engage in business, or may be able to do so only at significant
cost. In addition, we may not be able to comply fully with, or obtain
appropriate exemptions from, the wide variety of laws and regulations applicable
to insurance or reinsurance companies or holding companies. As a result of the
events of the past several months, we are presently in discussions with, or
subject to orders issued by, insurance regulators in all of the jurisdictions in
which we and our insurance company subsidiaries are domiciled. Our inability to
comply with or to obtain appropriate authorizations and/or exemptions under any
applicable laws, regulations or orders could result in further restrictions on
our ability to do business and could subject us to fines and other sanctions
including the ceasing of our ongoing operations.

Recent events may result in political, regulatory and industry initiatives which
could adversely affect our business.


                                       52


The supply of insurance and reinsurance coverage has decreased due to withdrawal
of capacity and substantial reductions in capital resulting from, among other
things, the terrorist attacks of September 11, 2001. This tightening of supply
may result in governmental intervention in the insurance and reinsurance
markets, both in the United States and worldwide. For example, on November 26,
2002, the Terrorism Risk Insurance Act was enacted to ensure the availability of
insurance coverage for terrorist acts in the United States. This law requires
insurers writing certain lines of property and casualty insurance to offer
coverage against certain acts of terrorism causing damage within the United
States or to U.S. flagged vessels or aircraft. In return, the law requires the
federal government to indemnify such insurers for 90% of insured losses
resulting from covered acts of terrorism, subject to a premium-based deductible.
The law expires automatically at the end of 2005. Currently there is a great
deal of uncertainty as to what effect the law will have on the insurance
industry. We are currently unable to predict the extent to which the foregoing
and other new initiatives may affect the demand for our products or the risks
which may be available for us to consider underwriting. At the same time,
threats of further terrorist attacks and the military initiatives and political
unrest in the Middle East and Asia have adversely affected general economic,
market and political conditions, increasing many of the risks associated with
the insurance markets worldwide.

The insurance and reinsurance business is historically cyclical, and we expect
to experience periods with excess underwriting capacity and unfavorable premium
rates.

Historically, insurers and reinsurers have experienced significant fluctuations
in operating results due to competition, frequency of occurrence or severity of
catastrophic events, levels of capacity, general economic conditions and other
factors. The supply of insurance and reinsurance is related to prevailing
prices, the level of insured losses and the level of industry surplus which, in
turn, may fluctuate in response to changes in rates of return on investments
being earned in the insurance and reinsurance industry. As a result, the
insurance and reinsurance business historically has been a cyclical industry
characterized by periods of intense price competition due to excessive
underwriting capacity as well as periods when shortages of capacity permitted
favorable premium levels. Although premium levels for many products have
increased in recent months, the supply of insurance and reinsurance may
increase, either by capital provided by new entrants or by the commitment of
additional capital by existing insurers or reinsurers, which may cause prices to
decrease. Any of these factors could lead to a significant reduction in premium
rates, less favorable policy terms and fewer submissions for our underwriting
services. In addition to these considerations, changes in the frequency and
severity of losses suffered by insureds and insurers may affect the cycles of
the insurance and reinsurance business significantly, and we expect to
experience the effects of such cyclicality.

Applicable insurance laws may make it difficult to effect a change of control of
our company.

Before a person can acquire control of a U.S. insurance company, prior written
approval must be obtained from the insurance commissioner of the state where the
domestic insurer is domiciled. Prior to granting approval of an application to
acquire control of a domestic insurer, the state insurance commissioner will
consider such factors as the financial strength of the applicant, the integrity
and management of the applicant's board of directors and executive officers, the
acquiror's plans for the management of the applicant's board of directors and
executive officers, the acquiror's plans for the future operations of the
domestic insurer and any anti-competitive results that may arise from the
consummation of the acquisition of control. Generally, state statutes provide
that control over a domestic insurer is presumed to exist if any person,
directly or indirectly, owns, controls, holds with the power to vote, or holds
proxies representing, 10% or more of the voting securities of the domestic
insurer. Because a person acquiring 10% or more of our common shares would
indirectly control the same percentage of the stock of our U.S. insurance
company, the insurance change of control laws of Connecticut, New York and North
Dakota would likely apply to such a transaction.


                                       53


Item 7a. Quantitative and Qualitative Disclosures About Market Risk

This information called for by this item can be found under the caption
"Quantitative and Qualitative Disclosure About Market Risk" in Management's
Discussion and Analysis of Financial Condition and Results of Operations above
and is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

See the Consolidated Financial Statements and Notes thereto and the Schedules on
pages F-1 through F-28 and S-1 through S-6 included in Part IV, Item 14.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

PART III

Items 10-13. Information required by Items 10 through 13 has been omitted
because Trenwick America meets the conditions set forth in General Instruction I
(1)(a) and (b) of Form 10-K and is therefore filing this Annual Report on Form
10-K in the reduced disclosure format.

Item 14.  Controls and Procedures

Within the 90 days prior to the filing date of this report, Trenwick America
carried out an evaluation, under the supervision and with the participation of
our management, including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Rule 13a-15 promulgated under the Securities
and Exchange Act of 1934. Based on that evaluation, our management, including
the Chief Executive Officer and Chief Financial Officer, concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information required to be included in our periodic reports to be filed
with the Securities and Exchange Commission. In addition, there have been no
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies or
material weaknesses. It should be noted that the design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions, regardless of
how remote.

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)   The following documents are filed as part of this report:

      1.    Financial statements:

            Report of Independent Accountants - (Page F-1).

            Consolidated Balance Sheet at December 31, 2002 and 2001.
            (Page F-2).


                                       54


            Consolidated Statements of Operations, Comprehensive Income and
            Changes in Common Stockholder's Equity for the years ended December
            31, 2002, 2001 and 2000. (Page F-3).

            Consolidated Statement of Cash Flows for the years ended December
            31, 2002, 2001 and 2000. (Page F-4).

            Notes to Consolidated Financial Statements. (Pages F-5 through
            F-28).

      2.    Financial statement schedules required to be filed by Item 8 of this
            Form:

                  Schedule
           Page   Number
           ----   ------

           S-1    II             Condensed Financial Information of Registrant.

           S-4    III            Supplementary Insurance Information.

           S-5    V              Valuation and Qualifying Accounts.

(b)   Exhibits

      3.1   Certificate of Incorporation of Trenwick America. Incorporated by
            reference to Exhibit 3.1 to Trenwick America's Current Report on
            Form 8-K filed on November 16, 2000 (File No. 0-31967).

      3.2   By-Laws of Trenwick America. Incorporated by reference to Exhibit
            3.2 to Trenwick America's Current Report on Form 8-K (File
            No.0-31967).

      4.1   (a)   Indenture dated as of January 31, 1997, between The Chase
                  Manhattan Bank and Trenwick Group Inc. Incorporated by
                  reference to Exhibit 4.2(a) to Trenwick Group Inc.'s Annual
                  Report on Form 10-K for the year ended December 31, 1996 (File
                  No. 0-14737).

            (b)   Amended and Restated Declaration of Trust of Trenwick Capital
                  Trust I dated as of January 31, 1997. Incorporated by
                  reference to Exhibit 4.2(b) to Trenwick Group Inc.'s Annual
                  Report on Form 10-K for the year ended December 31, 1996 (File
                  No. 0-14737).

            (c)   Exchange Capital Securities Guarantee Agreement dated as of
                  July 25, 1997, between Trenwick Group Inc. and The Chase
                  Manhattan Bank, as Trustee. Incorporated by reference to
                  Exhibit 4.7 to Trenwick Group Inc.'s Registration Statement on
                  Form S-4 (File No. 333-28707).

      4.2   First Supplemental Indenture, dated as of September 27, 2000, among
            Trenwick Group Inc., Trenwick America and The Chase Manhattan Bank,
            as Trustee, with respect to the 8.82% Junior Subordinated Deferrable
            Interest Debentures. Incorporated by reference to Exhibit 4.2 to
            Trenwick America's Current Report on Form 8-K, filed on November 16,
            2000 (File No. 0-31967).

      4.3   Indenture dated as of March 27, 1998 between Trenwick and The First
            National Bank of Chicago, as Trustee, with respect to Trenwick Group
            Inc.'s $75 million principal amount of


                                       55


            6.7% Senior Notes due April 1, 2003. Incorporated by reference to
            Exhibit 4.2 to Trenwick Group Inc.'s Quarterly Report on Form 10-Q
            for the quarter ended March 31, 1998 (File No. 1-15389).

      4.4   First Supplemental Indenture, dated as of September 27, 2000, among
            Trenwick Group Inc., Trenwick America, and Bank One Trust Company,
            N.A., as successor to First National Bank of Chicago, as Trustee,
            with respect to the $75 million principal amount of 6.7% Senior
            Notes due April 1, 2003. Incorporated by reference to Exhibit 4.4 to
            Trenwick America's Current Report on Form 8-K, filed on November 16,
            2000 (File No. 0-31967).

      4.5   Indenture, dated as of December 1, 1995, between Chartwell Re
            Corporation, as the successor to Piedmont Management Company Inc.,
            and Fleet Bank, as Trustee, for the Contingent Interest Notes due
            June 30, 2006. Incorporated by reference to Exhibit 4.5 to Chartwell
            Re Corporation's Registration Statement on Form S-1 (File No.
            333-678).

      4.6   First Supplemental Indenture, dated as of December 13, 1995, among
            Piedmont Management Company, Chartwell Re Corporation and Fleet
            Bank, as Trustee under the Contingent Interest Notes due June 30,
            2006. Incorporated by reference to Exhibit 4.6 to Chartwell Re
            Corporation's Registration Statement on Form S-1 (File No. 333-678).

      4.7   Second Supplemental Indenture, dated as of October 27, 1999, among
            Chartwell Re Corporation, Trenwick Group Inc. and State Street Bank
            and Trust Company, as successor to Fleet Bank, as Trustee, with
            respect to the Contingent Interest Notes due June 30, 2006.
            Incorporated by reference to Exhibit 4.7 to Trenwick America's
            Current Report on Form 8-K, filed on November 16, 2000 (File No.
            0-31967).

      4.8   Third Supplemental Indenture, dated as of September 27, 2000, among
            Trenwick Group Inc., Trenwick America and State Street Bank and
            Trust Company, as successor to Fleet Bank, as Trustee under the
            contingent Interest Notes due June 30, 2006. Incorporated by
            reference to Exhibit 4.8 to Trenwick America's Current Report on
            Form 8-K, filed on November 16, 2000 (File No. 0-31967).

      10.1  Amended and Restated Credit Agreement, dated as of November 24, 1999
            and Amended and Restated as of September 27, 2000, among Trenwick
            America, Trenwick Holdings Limited, various lending institutions,
            First Union National Bank, as Syndication Agent, Fleet National
            Bank, as Documentation Agent, and Chase Manhattan Bank, as
            Administrative Agent. Incorporated by reference to Exhibit 10.1 to
            Trenwick Group Ltd,'s Quarterly Report on Form 10-Q for the quarter
            ended September 30, 2000 (File No. 1-16089).

      10.2  First Amendment and Waiver to the Credit Agreement, dated as of June
            13, 2001, among Trenwick America, Trenwick Holdings Limited, the
            lending institutions from time to time party thereto, First Union
            National Bank, as Syndication Agent, Fleet National Bank, as
            Documentation Agent, and The Chase Manhattan Bank, as Administrative
            Agent. Incorporated by reference to Exhibit 10.1 to Trenwick
            America's First Amendment to Quarterly Report on Form 10-Q, filed on
            January 11, 2002 (File No. 0-31967).

      10.3  First Amendment to the Holdings Guaranty, dated as of June 13, 2001,
            among Trenwick Group Ltd. and the lending institutions from time to
            time party to the Credit Agreement. Incorporated by reference to
            Exhibit 10.2 to Trenwick America's First Amendment to Quarterly
            Report on Form 10-Q, filed on January 11, 2002 (File No. 0-31967).


                                       56


      10.4  Second Amendment and Waiver to the Credit Agreement, dated as of
            November 13, 2001, among Trenwick America, Trenwick Holdings
            Limited, the lending institutions from time to time party thereto,
            First Union National Bank, as Syndication Agent, Fleet National
            Bank, as Documentation Agent, and JP Morgan Chase Bank, as
            Administrative Agent. Incorporated by reference to Exhibit 10.3 to
            Trenwick America's First Amendment to Quarterly Report on Form 10-Q,
            filed on January 11, 2002 (File No. 0-31967).

      10.5  Second Amendment to the Holdings Guaranty, dated as of November 13,
            2001, among Trenwick Group Ltd. and the lending institutions from
            time to time party to the Credit Agreement. Incorporated by
            reference to Exhibit 10.4 to Trenwick America's First Amendment to
            Quarterly Report on Form 10-Q, filed on January 11, 2002 (File No.
            0-31967).

      10.6  Office lease between Trenwick America and EOP-Canterbury Green,
            L.L.C. dated as of January 29, 1998, with respect to office space in
            Stamford, Connecticut. Incorporated by reference to Exhibit 10.16 to
            Trenwick Group Inc.'s Annual Report on Form 10-K for the year ended
            December 31, 1997 (File No. 1-15389).

      10.7  First Amendment dated as of March 31, 1998, to office lease between
            Trenwick America and EOP-Canterbury Green L.L.C. dated January 29,
            1998. Incorporated by reference to Exhibit 10.11 to Trenwick Group
            Inc.'s Annual Report on Form 10-K for the year ended December 31,
            1998 (File No. 1-15389).

      10.8  Coinsured Aggregate Excess of Loss Reinsurance Agreement between
            Trenwick America Reinsurance Corporation and Centre Reinsurance
            Company of New York. Incorporated by reference to Exhibit 10.28 to
            Trenwick Group Inc.'s Annual Report on Form 10-K for the year ended
            December 31, 1994 (File No. 0-14737).

      10.9  Aggregate Excess of Loss Ratio Cover between Trenwick America
            Reinsurance Corporation and Continental Casualty Company.
            Incorporated by reference to Exhibit 10.22 to Trenwick Group Inc.'s
            Annual Report on Form 10-K for the year ended December 31, 1995
            (File No. 0-14737).

      10.10 1996 Coinsured Aggregate Excess of Loss Reinsurance Agreement
            between Trenwick America Reinsurance Corporation and Centre
            Reinsurance Company of New York and CNA Re. Incorporated by
            reference to Exhibit 10.33 to Trenwick Group Inc.'s Annual Report on
            Form 10-K for the year ended December 31, 1996 (File No. 0-14737).

      10.11 First and Second Coinsured Aggregate Excess of Loss Reinsurance
            Agreement between Trenwick America Reinsurance Corporation and
            Centre Reinsurance Company of New York and CNA Re. Incorporated by
            reference to Exhibit 10.31 to Trenwick Group Inc.'s Annual Report on
            Form 10-K for the year ended December 31, 1997 (File No. 1-15389).

      10.12 1998 Coinsured Aggregate Excess of Loss Reinsurance Agreement
            between Trenwick America Reinsurance Corporation and Centre
            Reinsurance Company of New York and National Union. Incorporated by
            reference to Exhibit 10.27 to Trenwick Group Inc.'s Annual Report on
            Form 10-K for the year ended December 31, 1998 (File No. 1-15389).

      10.13 1999 Coinsured Aggregate Excess of Loss Reinsurance Agreement
            between Trenwick America Reinsurance Corporation and Centre
            Insurance Company and National Union. Incorporated by reference to
            Exhibit 10.39 to Trenwick Group Inc.'s Annual Report on Form 10-K
            for the year ended December 31, 1999 (File No. 1-15389).


                                       57


      10.14 Aggregate Excess of Loss Reinsurance Agreement, dated as of October
            27, 1999, by and between Chartwell Reinsurance Company, Dakota
            Specialty Insurance Company, The Insurance Corporation of New York
            and Drayton Company Limited, inclusive of corporate capital support
            of London underwriting operations, and London Life and Casualty
            Reinsurance Corporation and Scandinavian Reinsurance Company, Ltd.
            Incorporated by reference to Exhibit 10.40 to Trenwick Group Inc.'s
            Annual Report on Form 10-K for the year ended December 31, 1999
            (File No. 1-15389).

      10.15 Third Amendment to the Credit Agreement, dated as of April 12, 2002,
            among Trenwick America Corporation, Trenwick Holdings Limited, the
            lending institutions from time to time party to the Credit
            Agreement, Wachovia Bank, National Association, Fleet National Bank,
            and JPMorgan Chase Bank. Incorporated by reference to Exhibit 10.1
            to Trenwick America Corporation's Quarterly Report on Form 10-Q for
            the quarter ended March 31, 2002, filed on May 15, 2002 (file no.
            0-31967).

      10.16 Third Amendment to the Holdings Guaranty, dated as of April 12,
            2002, among Trenwick Group Ltd. and the lending institutions from
            time to time party to the Credit Agreement. Incorporated by
            reference to Exhibit 10.2 to Trenwick America Corporation's
            Quarterly Report on Form 10-Q for the quarter ended March 31, 2002,
            filed on May 15, 2002 (file no. 0-31967).

      10.17 Forbearance Agreement, dated as of November 11, 2002, among Trenwick
            America Corporation, Trenwick Holdings Limited, the lending
            institutions party to the Credit Agreement, and JPMorgan Chase Bank.
            Incorporated by reference to Exhibit 10.1 to Trenwick America
            Corporation's Quarterly Report on Form 10-Q for the quarter ended
            September 30, 2002, filed on November 14, 2002 (File No. 0-31967).

      10.18 Amendment to Forbearance Agreement, dated as of November 21, 2002,
            among Trenwick America Corporation, Trenwick Holdings Limited,
            Trenwick Group Ltd., LaSalle Re Holdings Limited, the lending
            institutions party to the Credit Agreement, and JPMorgan Chase Bank.
            Incorporated by reference to Exhibit 99.1 to Trenwick America
            Corporation's Current Report on Form 8-K, filed on December 3, 2002
            (File No. 0-31967).

      10.19 Second Amendment to the Forbearance Agreement, dated as of December
            6, 2002, among Trenwick America Corporation, Trenwick Holdings
            Limited, Trenwick Group Ltd., LaSalle Re Holdings Limited, the
            lending institutions party to the Credit Agreement, and JPMorgan
            Chase Bank. Incorporated by reference to Exhibit 99.1 to Trenwick
            America Corporation's Current Report on Form 8-K, filed on December
            12, 2002 (File No. 0-31967).

      10.20 Third Amendment and Consent to the Forbearance Agreement, dated as
            of December 9, 2002, among Trenwick America Corporation, Trenwick
            Holdings Limited, Trenwick Group Ltd., LaSalle Re Holdings Limited,
            the lending institutions party to the Credit Agreement, and JPMorgan
            Chase Bank. Incorporated by reference to Exhibit 99.2 to Trenwick
            America Corporation's Current Report on Form 8-K, filed on December
            12, 2002 (File No. 0-31967).

      10.21 Trenwick Group Ltd. Term Sheet LOC Facility, dated as December 3,
            2002. Incorporated by reference to Exhibit 99.3 to Trenwick America
            Corporation's Current Report on Form 8-K, filed on December 12, 2002
            (File No. 0-31967).

      10.22 Fourth Amendment and Waiver to the Credit Agreement, dated as of
            December 24, 2002, among Trenwick America Corporation, Trenwick
            Holdings Limited, Trenwick UK Holdings Limited, the lending
            institutions from time to time party to the Credit Agreement,
            Wachovia Bank, National Association and JPMorgan Chase Bank.
            Incorporated by reference to Exhibit


                                       58


            99.1 to Trenwick America Corporation's Current Report on Form 8-K,
            filed on December 26, 2002 (File No. 0-31967).

      10.23 Fourth Amendment to the Holdings Guaranty, dated as of December 24,
            2002, among Trenwick Group Ltd. and the lending institutions from
            time to time party to the Credit Agreement. Incorporated by
            reference to Exhibit 99.2 to Trenwick America Corporation's Current
            Report on Form 8-K, filed on December 26, 2002 (File No. 0-31967).

      10.24 Fifth Amendment to the Credit Agreement, dated as of January 16,
            2003, among Trenwick America Corporation, Trenwick Holdings Limited,
            Trenwick UK Holdings Limited, the lending institutions from time to
            time party to the Credit Agreement, Wachovia Bank, National
            Association and JPMorgan Chase Bank. Incorporated by reference to
            Exhibit 99.1 to Trenwick America Corporation's Current Report on
            Form 8-K, filed on March 18, 2003 (File No. 0-31967).

      10.25 Fifth Amendment and Consent to the Holdings Guaranty, dated as of
            January 16, 2003, among Trenwick Group, Ltd. and the lending
            institutions from time to time party to the Credit Agreement.
            Incorporated by reference to Exhibit 99.2 to Trenwick America
            Corporation's Current Report on Form 8-K, filed on March 18, 2003
            (File No. 0-31967).

      10.26 Sixth Amendment and Waiver to the Credit Agreement, dated as of
            January 27, 2003, among Trenwick America Corporation, Trenwick
            Holdings Limited, Trenwick UK Holdings Limited, the lending
            institutions from time to time party to the Credit Agreement,
            Wachovia Bank, National Association and JPMorgan Chase Bank.
            Incorporated by reference to Exhibit 99.4 to Trenwick America
            Corporation's Current Report on Form 8-K, filed on March 18, 2003
            (File No. 0-31967).

      10.27 Sixth Amendment and Consent to the Holdings Guaranty, dated as of
            January 27, 2003, among Trenwick Group Ltd. and the lending
            institutions form time to time party to the Credit Agreement.
            Incorporated by reference to Exhibit 99.5 to Trenwick America
            Corporation's Current Report on Form 8-K, filed on March 18, 2003
            (File No. 0-31967).

      10.28 Seventh Amendment and Waiver to the Credit Agreement, dated as of
            March 7, 2003, among Trenwick America Corporation, Trenwick Holdings
            Limited, Trenwick UK Holdings Limited, the lending institutions from
            time to time party to the Credit Agreement, Wachovia Bank, National
            Association and JPMorgan Chase Bank. Incorporated by reference to
            Exhibit 99.6 to Trenwick America Corporation's Current Report on
            Form 8-K, filed on March 18, 2003 (File No. 0-31967).

      10.29 Seventh Amendment to the Holdings Guaranty, dated as of March 7,
            2003, among Trenwick Group Ltd. and the lending institutions form
            time to time party to the Credit Agreement. Incorporated by
            reference to Exhibit 99.7 to Trenwick America Corporation's Current
            Report on Form 8-K, filed on March 18, 2003 (File No. 0-31967).

      10.30 Fourth Waiver to the Credit Agreement, dated as of March 14, 2003,
            among Trenwick America Corporation, Trenwick Holdings Limited,
            Trenwick UK Holdings Limited, the lending institutions from time to
            time party to the Credit Agreement, Wachovia Bank, National
            Association and JPMorgan Chase Bank. Incorporated by reference to
            Exhibit 99.8 to Trenwick America Corporation's Current Report on
            Form 8-K, filed on March 18, 2003 (File No. 0-31967).


                                       59


      10.31 Agreement, between the Connecticut Insurance Department and Trenwick
            America Reinsurance Corporation, dated December 3, 2002.
            Incorporated by reference to Exhibit 99.9 to Trenwick America
            Corporation's Current Report on Form 8-K, filed on March 18, 2003
            (File No. 0-31967).

      10.32 Demand Promissory note from Trenwick America Corporation to The
            Insurance Corporation of New York dated December 31, 2002*

      10.33 Demand Promissory note from Trenwick America Corporation to Trenwick
            America Reinsurance Corporation dated December 31, 2002*

      12.1  Computation of Ratios.*

      23.1  Consent of PricewaterhouseCoopers LLP. *

      99.1  Certification of Acting Chief Executive Officer *

      99.2  Certification of Chief Financial Officer *

*     Filed herewith


                                       60


(c)   Reports on Form 8-K

      Trenwick America filed Current Reports on Form 8-K on the following dates
      during the fourth quarter of 2002:

      October 28, 2002, reporting the lowering by A.M. Best Company on October
      18, 2002 of the financial strength ratings of the operating subsidiaries
      of Trenwick, and the existence of an event of default under the Credit
      Agreement among Trenwick America Corporation, Trenwick Holdings Limited
      and various financial institutions.

      October 29, 2002, reporting (a) the entry by Trenwick America Reinsurance
      Corporation into an underwriting facility with a subsidiary of Chubb
      Corporation on October 25, 2002 and (b) Trenwick's announcement on October
      25, 2002 that it had engaged independent actuaries to conduct a review of
      Trenwick's reserves for unpaid claims and claims expenses at each of its
      operating subsidiaries.

      October 31, 2002, reporting the immediate cessation of underwriting of
      Trenwick's United States specialty program insurance business, effective
      as of October 30, 2002.

      November 5, 2002, reporting the execution by Trenwick Managing Agents
      Limited of a letter agreement with National Indemnity Company on November
      4, 2002 pursuant to which National Indemnity Company agreed to provide to
      Trenwick's Lloyd's Syndicate 839 $150 million in capital and a $45 million
      quota share reinsurance facility for the 2003 year of account.

      November 15, 2002, reporting the entry on November 13, 2002 by Trenwick,
      Trenwick America Corporation, Trenwick Holdings Limited and LaSalle Re
      Holdings Limited into a Forbearance Agreement dated as of November 11,
      2002 with certain lending institutions party to the Credit Agreement dated
      as of November 24, 1999 and amended and restated as of September 27, 2000,
      and JP Morgan Chase Bank, as administrative agent.

      December 3, 2002, reporting the entry on November 21, 2002 by Trenwick,
      Trenwick America Corporation, Trenwick Holdings Limited and LaSalle Re
      Holdings Limited into an extension of the Forbearance Agreement, and the
      suspension of dividends and distributions payable on the outstanding
      Trenwick Series B Cumulative Convertible Perpetual Preferred Shares,
      LaSalle Re Holdings Limited Series A Preferred Shares and Trenwick Capital
      Trust I 8.82% Exchange Subordinated Capital Income Securities.

      December 12, 2002, reporting (a) the entry on December 8, 2002 by
      Trenwick, Trenwick America Corporation, Trenwick Holdings Limited and
      LaSalle Re Holdings Limited into an agreement in principle with its letter
      of credit providers, (b) the entry by Trenwick, Trenwick America
      Corporation, Trenwick Holdings Limited and LaSalle Re Holdings Limited
      into amendments to the Forbearance Agreement on December 6, 2002 and
      December 9, 2002, extending the forbearance period until December 31,
      2002, (c) the hiring of Greenhill & Co. as a financial advisor and (d) the
      cessation of underwriting at Trenwick International Limited.

      December 26, 2002, reporting the entry on December 24, 2002 by Trenwick,
      Trenwick America Corporation, Trenwick Holdings Limited and Trenwick UK
      Holdings Limited into a Fourth Amendment and Waiver to the Credit
      Agreement, extending for an additional year $182 million of letters of
      credit utilized by Trenwick to support its underwriting operations at
      Lloyd's., and a Fourth Amendment to the Holdings Guaranty, dated as of
      December 24, 2002, providing for Trenwick to pledge all of its equity
      interests, assets and property as collateral for the renewing letter of
      credit providers.


                                       61


                                   SIGNATURES

Pursuant to the Requirements of Section 13 or 15(d) of Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                 TRENWICK AMERICA CORPORATION
                                         (Registrant)


                                 By  /s/ Stephen H. Binet
                                    -----------------------------------------
                                        Stephen H. Binet
                                        President, Chief Executive Officer,
                                        and Director

Dated: April 9, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Signature                       Title                                 Date
- ---------                       -----                                 ----

 /s/Stephen H. Binet            President, Chief Executive       April 9, 2003
- ----------------------------    Officer, and Director
     Stephen H. Binet


 /s/Alan L. Hunte               Executive Vice President,        April 9, 2003
- ----------------------------    Chief Financial Officer,
    Alan L. Hunte               and Director



                                       62


                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Stephen H. Binet, certify that:

      1. I have reviewed this annual report on Form 10-K of Trenwick America
      Corporation (the "Registrant");

      2. Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

      3. Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the Registrant as of, and for, the periods presented in this annual
      report;

      4. The Registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
      have:

            a.    designed such disclosure controls and procedures to ensure
                  that material information relating to the Registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

            b.    evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

            c.    presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

      5. The Registrant's other certifying officer and I have disclosed, based
      on our most recent evaluation, to the Registrant's auditors and the audit
      committee of Registrant's board of directors (or persons performing the
      equivalent function):

            a.    all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial data and have identified for the Registrant's
                  auditors any material weaknesses in internal controls; and

            b.    any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal controls; and

      6. The Registrant's other certifying officer and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date: April 9, 2003


      /s/ Stephen H. Binet
      ---------------------------------
          Stephen H. Binet
          President and Chief Executive Officer
          (Principal Executive Officer)


                                       63


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Alan L. Hunte, certify that:

      1. I have reviewed this annual report on Form 10-K of Trenwick America
      Corporation (the "Registrant");

      2. Based on my knowledge, this annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

      3. Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the Registrant as of, and for, the periods presented in this annual
      report;

      4. The Registrant's other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
      have:

            a.    designed such disclosure controls and procedures to ensure
                  that material information relating to the Registrant,
                  including its consolidated subsidiaries, is made known to us
                  by others within those entities, particularly during the
                  period in which this annual report is being prepared;

            b.    evaluated the effectiveness of the Registrant's disclosure
                  controls and procedures as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and

            c.    presented in this annual report our conclusions about the
                  effectiveness of the disclosure controls and procedures based
                  on our evaluation as of the Evaluation Date;

      5. The Registrant's other certifying officer and I have disclosed, based
      on our most recent evaluation, to the Registrant's auditors and the audit
      committee of Registrant's board of directors (or persons performing the
      equivalent function):

            a.    all significant deficiencies in the design or operation of
                  internal controls which could adversely affect the
                  Registrant's ability to record, process, summarize and report
                  financial data and have identified for the Registrant's
                  auditors any material weaknesses in internal controls; and

            b.    any fraud, whether or not material, that involves management
                  or other employees who have a significant role in the
                  Registrant's internal controls; and

      6. The Registrant's other certifying officer and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date: April 9, 2003


       /s/ Alan L. Hunte
       ----------------------------------
        Alan L. Hunte
        Executive Vice President and
        Chief Financial Officer


                                       64


                        Report of Independent Accountants

To the Board of Directors and
Shareholder of Trenwick America Corporation:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15 (a) 1 on page 54, present fairly, in all material
respects, the financial position of Trenwick America Corporation (a subsidiary
of Trenwick Group Ltd.) and its subsidiaries at December 31, 2002 and December
31, 2001, and the results of their operations and cash flows for each of the
three years in the period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the financial statement schedules listed in the index appearing under Item 15
(a) 2 on page 54, present fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedules are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 7 to the financial
statements, the Company is currently required to repay certain senior notes by
August 1, 2003. At this time, the Company does not have sufficient available
liquidity to repay the senior notes. As discussed in Note 11 to the financial
statements, certain insurance subsidiaries of the Company do not meet risk based
capital levels or levels of surplus required by various insurance regulations to
which they are subject. These matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans and other
circumstances in regard to these matters are also described in Notes 7 to the
financial statements. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

As discussed in Note 12 to the financial statements, the Company changed its
method of accounting for goodwill in 2002.

PricewaterhouseCoopers LLP
New York, New York
March 31, 2003 except for Note 7
to the financial statements as to
which the date is April 9, 2003


                                      F-1


                          Trenwick America Corporation
                           Consolidated Balance Sheet
            (Amounts expressed in thousands of United States dollars)
                           December 31, 2002 and 2001

                                                           2002           2001
                                                       -----------    ----------

ASSETS:
Debt securities available for sale, at fair value      $   636,660    $1,054,518
Equity securities, at fair value                             8,849        24,164
Cash and cash equivalents                                  450,340       128,522
Accrued investment income                                    8,436        12,685
Premiums receivable                                        190,617       159,721
Reinsurance recoverable balances, net                      641,176       544,202
Prepaid reinsurance premiums                                97,647        83,980
Deferred policy acquisition costs                           63,167        45,403
Due from parent and affiliates                              62,828        68,260
Net deferred income taxes                                       --        65,757
Goodwill                                                        --        52,119
Security deposit held by Chubb Re                           50,207            --
Other assets                                               130,575        89,774
                                                       -----------    ----------
Total assets                                           $ 2,340,502    $2,329,105
                                                       ===========    ==========

LIABILITIES:
Unpaid claims and claims expenses                      $ 1,640,063    $1,412,104
Unearned premium income                                    324,718       239,004
Reinsurance balances payable                                48,213        42,424
Indebtedness                                                76,498       288,878
Due to affiliates                                           21,435        50,434
Other liabilities                                           46,790        33,939
                                                      -----------    ----------
Total liabilities                                        2,157,717     2,066,783
                                                       -----------    ----------

MINORITY INTEREST:
Mandatorily redeemable preferred capital securities
  of subsidiary trust holding solely junior
  subordinated debentures of Trenwick
  America Corporation                                       87,032        86,973
                                                       -----------    ----------

COMMON STOCKHOLDER'S EQUITY
Common stock and additional paid in capital                298,877        99,353
Retained earnings                                         (218,892)       57,104
Accumulated other comprehensive income                      15,768        18,892
                                                       -----------    ----------
Total common stockholder's equity                           95,753       175,349
                                                       -----------    ----------
Total liabilities, minority interest
   and common stockholder's equity                     $ 2,340,502    $2,329,105
                                                       ===========    ==========

        The accompanying notes are an integral part of these statements.


                                      F-2


                          Trenwick America Corporation
           Consolidated Statement of Operations, Comprehensive Income
                   and Changes in Common Stockholder's Equity
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000



                                                    2002         2001         2000
                                                 ---------    ---------    ---------
                                                                  
Revenues:
Net premiums earned                              $ 489,671    $ 380,288    $ 310,791
Net investment income                               53,629       68,041       66,601
Net realized investment gains (losses)              24,769       (1,866)       6,768
Other income                                         2,948        2,819        2,823
                                                 ---------    ---------    ---------
Total revenues                                     571,017      449,282      386,983
                                                 ---------    ---------    ---------

Expenses:
Claims and claims expenses incurred                528,216      305,488      276,043
Policy acquisition costs                           143,642      122,213       92,980
Underwriting expenses                               30,982       18,890       20,730
General and administrative expenses                  2,663        4,074       19,131
Interest expense and subsidiary
 preferred share dividends                          22,551       31,336       35,769
Foreign currency losses                              5,534        1,434        1,831
                                                 ---------    ---------    ---------
Total expenses                                     733,588      483,435      446,484
                                                 ---------    ---------    ---------

Loss before income taxes and cumulative
  effect of change in accounting principle        (162,571)     (34,153)     (59,501)
Income taxes (benefit)                              61,304      (14,628)     (22,529)
                                                 ---------    ---------    ---------
Loss before cumulative effect of change
  in accounting principle                         (223,875)     (19,525)     (36,972)
Cumulative effect of change in accounting
  principle                                        (52,119)          --           --
                                                 ---------    ---------    ---------
Net loss                                         $(275,994)   $ (19,525)   $ (36,972)
                                                 =========    =========    =========

Comprehensive income (loss)
Net loss                                          (275,994)     (19,525)     (36,972)
Other Comprehensive income (loss):
Net unrealized investment gains (losses)            (3,274)      11,043       14,713
Foreign currency translation adjustments               149       (1,582)       1,466
                                                 ---------    ---------    ---------
Comprehensive loss                               $(279,119)   $ (10,064)   $ (20,793)
                                                 =========    =========    =========

Changes in common stockholder's equity:
Common stockholder's equity, beginning of year   $ 175,349    $ 200,907    $ 214,482
Net capital transactions with affiliates           199,523      (13,486)     (21,076)
Adjustments related to business combination             --       (2,008)      37,794
Comprehensive loss                                (279,119)     (10,064)     (20,793)
Common share dividends                                  --           --       (9,500)
                                                 ---------    ---------    ---------

Common stockholder's equity, end of year         $  95,753    $ 175,349    $ 200,907
                                                 =========    =========    =========


        The accompanying notes are an integral part of these statements.


                                      F-3


                          Trenwick America Corporation
                      Consolidated Statement of Cash Flows
            (Amounts expressed in thousands of United States dollars)
                  Years ended December 31, 2002, 2001 and 2000



                                                            2002         2001         2000
                                                         ---------    ---------    ---------
                                                                          
Net income (loss)                                        $(275,994)   $ (19,525)   $ (36,972)
Adjustments to reconcile net income (loss) to net
 Cash for operating activities:
 Contingent interest note adjustments                      (18,203)      (8,700)      (4,675)
 Investment premium amortization                             1,371          389          633
 Deferred income taxes                                      65,757      (25,753)        (289)
 Net realized investment (gains) losses                    (24,769)       1,866       (6,768)
 Unrealized loss (gain) on foreign exchange                   (379)      (1,040)       1,883
 Uncollectable accounts provision                            1,191        3,320       11,666
 Other fair value adjustment accretion                       5,065          458          365
 Loss sharing agreement reallocation                            --      (28,570)      17,756
 Cumulative effect of change in  accounting principles      52,119           --           --
 Other                                                       4,443          760       (6,859)
 Changes in assets and liabilities:
 Accrued investment income                                   4,248        1,321        3,847
 Premiums receivable                                       (30,896)      (1,611)      (4,398)
 Deferred policy acquisition costs                         (17,764)      (9,136)       1,704
 Other assets                                              (39,943)      18,806       37,901
 Unpaid claims and claims expenses, net of
  reinsurance recoverable balances                         130,985      (17,440)     (76,962)
 Unearned premium income, net of prepaid
  reinsurance premiums                                      72,047       41,730      (10,351)
 Other liabilities                                          22,768       13,143      (26,704)
                                                         ---------    ---------    ---------
Cash for operating activities                              (47,954)     (29,982)     (98,223)
                                                         ---------    ---------    ---------
Investing activities:
 Debt and equity securities sales and maturities           790,524      646,048      481,853
 Debt and equity securities purchases                     (347,185)    (599,566)    (327,491)
 Security deposit to Chubb Re                              (50,000)          --           --
 Other investing activities                                 (6,048)      (5,320)      (1,552)
                                                         ---------    ---------    ---------
 Cash from investing activities                            387,291       41,162      152,810
                                                         ---------    ---------    ---------
Financing activities:
 Indebtedness proceeds                                          --       14,000       24,000
 Indebtedness costs                                         (1,217)      (1,475)      (1,834)
 Indebtedness repayments                                  (197,841)          --      (41,101)
 Affiliate loan proceeds (repayments)                      (17,984)     (33,677)      57,288
 Affiliate capital transactions, net                       199,523        5,099      (47,901)
 Dividend payments                                              --           --       (9,500)
                                                         ---------    ---------    ---------
Cash for financing activities                              (17,519)     (16,053)     (19,048)
                                                         ---------    ---------    ---------
Change in cash and cash equivalents                        321,818       (4,873)      35,539
Cash and cash equivalents, beginning of year               128,522      133,395       97,856
                                                         ---------    ---------    ---------
Cash and cash equivalents, end of year                   $ 450,340    $ 128,522    $ 133,395
                                                         =========    =========    =========



                                      F-4


                          TRENWICK AMERICA CORPORATION
                   Notes to Consolidated Financial Statements
                   (Amounts expressed in thousands of United
                        States dollars except share data)
                  Years Ended December 31, 2002, 2001 and 2000

Note 1 Organization and Basis of Presentation

Organization

Trenwick America Corporation ("Trenwick America") is a United States holding
company whose principal subsidiaries underwrote specialty insurance and
reinsurance. Trenwick America Corporation's ultimate parent is Trenwick Group
Ltd. ("Trenwick"), which is a publicly traded Bermuda holding company. Prior to
September 27, 2000, Trenwick America's parent was Trenwick Group Inc.

Trenwick Group Ltd. ("Trenwick") was formed as a holding company in Bermuda to
acquire two publicly held companies and the minority interest in a subsidiary of
one of those companies. That transaction, in which Trenwick issued common shares
to acquire LaSalle Re Holdings Limited ("LaSalle Re Holdings"), Trenwick Group
Inc. and the minority interest in LaSalle Re Limited ("LaSalle Re"), was
completed on September 27, 2000. Trenwick Group Inc. had earlier acquired
another publicly held company, Chartwell Re Corporation ("Chartwell"), on
October 27, 1999 (the "Trenwick/Chartwell business combination"). More details
of the Trenwick/LaSalle business combination are disclosed in Note 2.

Trenwick America's principal subsidiaries underwrite specialty insurance and
reinsurance. Details on business segments are disclosed in Note 4.

Basis of Presentation

These financial statements include the accounts of Trenwick America and its
subsidiaries after elimination of significant intercompany accounts and
transactions. Certain items in prior year financial statements have been
reclassified to conform to the current presentation.

These financial statements were prepared in conformity with accounting
principles that are generally accepted in the United States of America,
sometimes referred to as United States GAAP. In preparing these financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting periods. Actual
amounts may differ from these estimates.

The accompanying financial statements have been prepared assuming Trenwick
America will continue as a going concern. As discussed in Note 7 to the
financial statements, Trenwick America is currently required to repay certain
senior notes by August 1, 2003. At this time, Trenwick does not have sufficient
available liquidity to collateralize the letters of credit and Trenwick America
does not have sufficient available liquidity to repay the senior notes. As
discussed in Note 11 to the financial statements, certain insurance subsidiaries
of Trenwick America do not meet risk based capital levels or levels of surplus
required by various insurance regulations to which they are subject. These
matters raise substantial doubt about Trenwick America's ability to continue as
a going concern. Management's plans and other circumstances in regard to these
matters are also described in Note 7 to the financial statements. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.


                                      F-5


As discussed in Note 2, the business combination between LaSalle Re Holdings and
Trenwick Group Inc. was accounted for as a purchase by LaSalle Re Holdings of
the minority interest in LaSalle Re and of Trenwick Group Inc. Accordingly, the
assets and liabilities of Trenwick America have been adjusted to reflect their
fair value, after consideration of the purchase price, as of September 27, 2000.
In addition, a portion of the goodwill resulting from the business combination
has been pushed down to Trenwick America and was reflected in the consolidated
balance sheet.

As a result of the reorganization described above, the United Kingdom and
Bermuda subsidiaries of Trenwick Group Inc., were sold to Trenwick, and the
remaining net liabilities of Trenwick Group Inc., consisting primarily of
indebtedness and preferred capital securities, were assumed by Trenwick America.
These financial statements present the reorganization at historical cost in a
manner similar to a pooling of interests business combination. Accordingly, the
accompanying financial statements for the 2000 year have been restated to
reflect the combined operating results, cash flows, and financial position of
the United States operations of Trenwick Group Inc. for all periods in which the
companies were under the common control of Trenwick Group Inc.

Other significant accounting policies are presented in italics within the
appropriate footnotes.

Note 2 Business Combinations

Trenwick/LaSalle Business Combination

On December 19, 1999, LaSalle Re Holdings, LaSalle Re and Trenwick Group Inc.
signed a definitive agreement to combine under a new holding company, Trenwick.
On September 27, 2000, following shareholder and regulatory approval, the newly
formed Trenwick issued 36,668,594 common shares on a one-for-one, tax-free basis
to the former shareholders of LaSalle Re Holdings (15,634,394 shares, including
26,656 restricted shares issued under share award plans) the minority
shareholders of LaSalle Re, then a 77.5% owned subsidiary of LaSalle Re Holdings
(4,797,649 shares), and the former shareholders of Trenwick Group Inc.
(16,236,551 shares, including 224,331 restricted shares issued under share award
plans).

The Trenwick/LaSalle business combination was accounted for as a purchase by
LaSalle Re Holdings of the minority interest in LaSalle Re and of Trenwick Group
Inc. Under the purchase basis of accounting, the purchase price ($346,178) was
allocated to the identifiable assets acquired and liabilities assumed, based on
the estimated fair values at the date of acquisition; the unallocated excess was
recorded as goodwill. A portion of the goodwill resulting from the business
combination was pushed down to Trenwick America and was reflected in the
consolidated balance sheet. During the 2001 year, Trenwick refined the estimates
used in the calculation of the fair value of the net assets acquired in this
business combination, principally for the deferred income tax asset, and
recorded additional goodwill which was pushed down to the consolidated balance
sheet of Trenwick America. Recent changes in accounting for goodwill and its
amortization are described in Note 12.


                                      F-6


Note 3 Chubb Underwriting Facility

On October 25, 2002, Trenwick America's subsidiary Trenwick America Reinsurance
Corporation ("Trenwick America Re") entered into an underwriting facility with
Chubb Re, Inc. and its affiliate Federal Insurance Company (together, "Chubb")
under which Trenwick America Re will cause, subject to Chubb's approval, all of
its new and renewing United States reinsurance business during the term of the
underwriting facility to be underwritten by Trenwick America Re as agent on
behalf of Chubb, which will issue the reinsurance. Chubb's approval will not be
unreasonably withheld. The underwriting facility permits Trenwick America Re to
underwrite up to $400,000 of United States reinsurance business as agent on
behalf of Chubb through January 31, 2004. The underwriting facility does not
preclude Chubb from writing any business outside of the facility. As further
described below, the profit commission to Trenwick America Re, if any, will be
paid by Chubb beginning in the first quarter of 2006.

Pursuant to the underwriting facility, which was effective November 1, 2002, the
parties will jointly adjust and settle any claims arising under the business
underwritten, provided that Chubb will retain final claim settling authority.
Trenwick America Re has agreed that during the term of the underwriting facility
Trenwick America Re will not underwrite on behalf of any other third party
without Chubb's approval. Chubb has entered into a non-competition agreement
with Trenwick America Re restricting Chubb from renewing certain business
underwritten through the facility for one year following the termination of the
underwriting facility. Either party may terminate the underwriting facility
prospectively at any time. Termination of the facility or any modification
thereof that is deemed by Trenwick's letter of credit agreement providers to be
materially adverse constitutes an event of default under the credit agreement
(refer to Note 7 for details of the credit agreement). All premiums collected
from the underwriting facility are required to be paid directly to Chubb.

Chubb will receive as a fronting fee either five percent of gross written
premium on two-thirds of the business to date, underwritten through the
underwriting facility, or $15,000 whichever is greater. Through December 31,
2002, Trenwick America Re had paid $10,000 of this amount to Chubb, and a
payment of $1,250 was made during the first quarter of 2003. Additional payments
of $1,250 are due to be paid by Trenwick America Re at the end of each of the
remaining three calendar quarters of 2003. Trenwick America Re is entitled to
receive a monthly expense reimbursement equal to 2.0% of the gross written
premiums underwritten on behalf of Chubb collected during the applicable month.
The total expense reimbursement payable to Trenwick America Re is subject to a
cap of $6,500. The minimum total expense reimbursement is $5,500 unless the
underwriting facility is terminated prior to the expiration of its term, in
which case it will be prorated based on the amount of time the underwriting
agreement was in effect.

The notional "experience account" established with respect to the underwriting
facility equals premiums collected (net of ceding commission and reinsurance
brokerage), plus investment credit on the experience account balance, plus
recoverable reinsurance payment, less paid claims and claims expenses, expense
reimbursements, Chubb's fronting fee, and reinsurance premiums paid (net of
ceding commission). The experience account will earn an investment credit at a
rate equal to the three-year United States Treasury bill as of the close of
business on the first business day of the applicable time period. The investment
credit will be calculated each March 31, June 30, September 30 and December 31
and will be based upon the average daily balance in the experience account
during the applicable three-month time period.

Trenwick America Re will be entitled to receive two-thirds of a profit
commission equal to two-thirds of the experience account adjusted to include
unpaid claims and claims expenses, and will be paid on the following payment
schedule:


                                      F-7


March 31, 2006          25% of cumulative indicated profit commission

September 30, 2006      50% of cumulative indicated profit commission,
                        less prior profit commission paid

March 31, 2007          75% of cumulative indicated profit commission,
                        less prior profit commission paid

September 30, 2007      100% of cumulative indicated profit commission,
                        less prior profit commission paid

For purposes of calculating the profit commission, the experience account will
be adjusted to account for unpaid claims and claims expenses (case reserves,
incurred but not reported and additional case reserves.)

Trenwick America Re has also agreed to reinsure Chubb for 100% of all losses in
excess of premiums collected less certain expenses. To secure its reinsurance
obligations to Chubb, Trenwick America Re has posted a $50,000 security deposit
with Chubb. Trenwick America Re is required to pay additional amounts to Chubb
for the security deposit, so that the security deposit is equal to the greater
of $50,000 or the amount of Trenwick America Re's reinsurance obligations. Given
the long-term nature of the stop-loss reinsurance agreement, the amount of the
cash deposit may be greater than Trenwick America Re's obligations under the
stop-loss reinsurance agreement. The security deposit will earn an investment
credit at a rate equal to the three-year United States Treasury bill as of the
close of business on the first business day of the applicable time period. The
amount of the security deposit in excess of certain decreasing amounts over time
will be returned to Trenwick America Re on a payment schedule beginning March
31, 2006, provided that at such times Trenwick America Re has an A.M. Best
rating of "A-" or better. On January 12, 2012, regardless of whether Trenwick
America Re has reacquired an "A-" or rating from A.M. Best, that portion of the
security deposit that exceeds the positive difference (if any) of Trenwick
America Re's obligations minus the amount in the experience fund, will be
returned to Trenwick America Re.

An "event of default" by Trenwick America Re under the Chubb facility would
occur if creditors attach or take possession of any material amount of Trenwick
America Re's assets, or if Trenwick America Re voluntarily or involuntarily
enters into rehabilitation, dissolution, winding-up, liquidation, administration
or reorganization proceedings under applicable bankruptcy, insolvency or similar
law. Upon the occurrence of an event of default by Trenwick America Re, no
profit commission will be paid and no reductions in the amount of collateral
will be made until the event of default ceases, or January 1, 2012, which ever
is earlier. At that time, the profit commission payment schedule and collateral
reduction schedules will recommence at the point at which the event of default
occurred.

Since November 1, 2002, the effective date of the Chubb facility, Trenwick
America Re has written approximately $126,890 in gross premiums under the
facility. To date, almost all of the bound premiums have been renewal business.

Note 4 Segment Information

For the years ended December 31, 2002, 2001 and 2000, Trenwick America reported
its specialty property and casualty insurance and reinsurance business in the
following business segments:

o Treaty Reinsurance, which includes treaty reinsurance on United States
property and casualty risks. Treaty reinsurance is written principally through
Trenwick America Re and includes the


                                      F-8


run-off of reinsurance business formerly written by Chartwell Insurance Company
(which merged with and into Trenwick America Re effective December 31, 2002) and
The Insurance Corporation of New York. In addition, the Reinsurance segment
includes the results of the Chubb underwriting facility.

o Specialty program insurance, which was written principally through Trenwick
America's subsidiary, Canterbury Financial Group, Inc. ("Canterbury") and its
operating subsidiaries, The Insurance Corporation of New York, Dakota Specialty
Insurance Company and Chartwell Insurance Company (merged with and into Trenwick
America Re effective December 31, 2002). Trenwick ceased underwriting
substantially all new specialty program insurance effective October 30, 2002.

Excluded from the aforementioned segments is the Excess and Casualty Reinsurance
Association Pool ("ECRA Pool") runoff, which was non-renewed. The ECRA Pool was
a New York state licensed pool that underwrote multi-line property and casualty
business until it ceased underwriting in 1983. The losses incurred by the ECRA
pool included asbestos and environmental risks for those periods. Trenwick
America Re participated in the ECRA Pool during pool years 1978 to 1982, while
The Insurance Corporation of New York participated during pool years 1950 to
1956.

The business segment financial information also excludes affiliate transactions,
the most significant of which are a reinsurance contract with a United Kingdom
affiliate of Trenwick America that wrote international specialty insurance and
reinsurance business and a loss sharing agreement with some of Trenwick
America's United Kingdom affiliates, which provides for the allocation of
recoverables from reinsurance purchased in connection with the 1999
Trenwick/Chartwell business combination.

The following tables present business segment financial information for Trenwick
America as of December 31, 2002 and 2001 and for the years ended December 31,
2002, 2001, and 2000:

                                                            December 31,
                                                  ------------------------------
Total assets:                                        2002                2001
                                                  ----------          ----------
Treaty reinsurance                                $1,550,635          $1,640,154
Specialty insurance                                  776,280             579,254
Unallocated                                           13,587             109,697
                                                  ----------          ----------
Total assets                                      $2,340,502          $2,329,105
                                                  ==========          ==========

                                                   Year Ended December 31,
                                            2002           2001           2000
                                          --------       --------       --------
Total revenues:
Treaty reinsurance                        $402,467       $335,867       $328,478
Specialty insurance                        161,503         97,178         54,758
Affiliate transactions                       6,576         10,879            173
Unallocated                                    471          5,358          3,574
                                          --------       --------       --------
Total revenues                            $571,017       $449,282       $386,983
                                          ========       ========       ========

                                                   Year Ended December 31,
                                            2002           2001           2000
                                          --------       --------       --------
Net income (loss):
Treaty reinsurance                        $(124,431)    $   4,863     $   7,404
Specialty insurance                         (37,478)           44         2,339
Affiliate transactions                      (19,887)        5,417       (14,817)
ECRA pool runoff                             (5,470)       (7,495)           --
Unallocated interest expense and
  subsidiary preferred
  share dividends                           (22,275)      (30,824)      (35,540)
Other unallocated                           (14,334)        8,470         3,642
Change in accounting principle              (52,119)           --            --
                                          ---------     ---------     ---------
Net loss                                  $(275,994)    $ (19,525)    $ (36,972)
                                          =========     =========     =========


                                      F-9


Revenues from transactions between operating segments have been eliminated in
consolidation. Other unallocated consists mainly of general and administrative
expenses and income taxes of Trenwick America.

Note 5 Underwriting Activities

Premiums

Insurance and reinsurance premiums on contracts are accrued on an estimated
basis throughout the term of such contracts. For retrospectively rated and other
experience rated reinsurance contracts, premiums are estimated and accrued based
on the difference between total unpaid claims and claims expenses before and
after the experience under the contract (the with-and-without method). Premium
estimates are made based on statistical and other data and record subsequent
adjustments in the period in which they become known. Short-duration contracts
are accounted for as reinsurance when they provide indemnification against loss
or liability relating to insurance risk and as deposits when they do not.

Insurance and reinsurance premiums recorded (net of reinsurance ceded) are
earned on a pro-rata basis over the related contract period. A liability for
unearned premium income is recorded for the portion of premiums applicable to
the unexpired portion of premium coverage with renewal dates later than the date
of the balance sheet. Premium income for insurance business and excess of loss
reinsurance is computed using pro-rata methods. With respect to proportional
business, our estimates of future coverage and the related premiums are computed
based on reports received from ceding companies. Premium recognition on this
business is matched on a pro-rata basis to the applicable period of coverage
based upon these reports. Reinsurance premiums are recorded as prepaid expenses
amortized over the contract period in proportion to the amount of reinsurance
protection provided. Where the contract provides for return premiums, accruals
are made based on loss experience through the date of the balance sheet.

The components of premiums written and earned follow:

                                               Year ended December 31,
                                      -----------------------------------------
                                         2002            2001            2000
                                      ---------       ---------       ---------

Assumed premiums written              $ 412,341       $ 350,134       $ 338,794
Direct premiums written                 398,322         291,433         187,545
                                      ---------       ---------       ---------
Gross premiums written                  810,663         641,567         526,339
Ceded premiums written                 (249,315)       (210,160)       (221,027)
                                      ---------       ---------       ---------
Net premiums written                  $ 561,348       $ 431,407       $ 305,312
                                      =========       =========       =========

Assumed premiums earned               $ 374,178       $ 321,882       $ 352,607
Direct premiums earned                  348,595         250,047         165,728
                                      ---------       ---------       ---------
Gross premiums earned                   722,773         571,929         518,335
Ceded premiums earned                  (233,102)       (191,641)       (207,544)
                                      ---------       ---------       ---------
Net premiums earned                   $ 489,671       $ 380,288       $ 310,791
                                      =========       =========       =========

Policy acquisition costs

Policy acquisition costs consist primarily of commissions and brokerage expenses
that vary with and are primarily related to the acquisition of business. Policy
acquisition costs are deferred and amortized over the period in which the
related premiums are earned. Deferred policy acquisition costs are reviewed on a
quarterly basis to determine that they do not exceed recoverable amounts after
allowing for anticipated investment income.


                                      F-10


      The components of policy acquisition costs follow:

                                                  Year ended December 31,
                                            -----------------------------------
                                               2002         2001         2000
                                            ---------    ---------    ---------

Gross policy acquisition costs deferred     $ 235,972    $ 194,429    $ 156,910
Ceded policy acquisition costs deferred       (74,566)     (63,080)     (65,634)
                                            ---------    ---------    ---------
Net policy acquisition costs deferred       $ 161,406    $ 131,349    $  91,276
                                            =========    =========    =========

Policy acquisition costs expensed           $ 143,642    $ 122,213    $  92,980
                                            =========    =========    =========

Commissions on cessions to retrocessionaires earned by Trenwick America of
$71,512, $62,484, and $64,883 for the 2002, 2001 and 2000 years, respectively,
were recorded as a reduction to gross policy acquisition costs.

Claims and Claims Expenses

Claims and claims expenses are recorded as incurred, at management's best
estimate, in order to match claims and claims expense costs with premiums over
the contract periods. The amount provided for unpaid claims and claims expenses
consists of any unpaid reported claims and claims expenses and estimates for
incurred but not reported claims and claims expenses, net of estimated salvage
and subrogation. The estimates for claims and claims expenses incurred but not
reported were developed based on historical claims and claims expense experience
and an actuarial evaluation of expected claims and claims expense experience.
Workers' compensation indemnity liabilities that are considered fixed and
determinable are discounted using an interest rate of 3.5% Reserves for unpaid
claims and claims expenses, by their very nature, do not represent an exact
calculation of the liability and, while Trenwick America has established
reserves equal to the current best estimate of ultimate losses, there remains a
high likelihood that further changes in such claim estimates, either upward or
downward, will occur in the future. Adjustments to previously reported reserves
for unpaid claims and claims expenses are considered changes in estimates for
accounting purposes and are reflected in the income statement in the period in
which the adjustment becomes known.

The components of net claims and claims expenses incurred are as follows:

                                                   Year ended December 31,
                                            -----------------------------------
                                               2002         2001         2000
                                            ---------    ---------    ---------

Gross claims and claims expenses incurred   $ 717,566    $ 430,702    $ 455,093
Ceded claims and claims expenses incurred    (189,350)    (125,214)    (179,050)
                                            ---------    ---------    ---------
Net claims and claims expenses incurred     $ 528,216    $ 305,488    $ 276,043
                                            =========    =========    =========

The following table presents a reconciliation of the beginning and ending
balances of net liabilities for unpaid claims and claims expenses. The gross
liabilities for unpaid claims and claims expenses at period ends are as
reflected in the balance sheet. The net liabilities for unpaid claims and claims
expenses reflect deductions for reinsurance recoverable on unpaid claims and
claims expenses, also as reflected in the balance sheet.


                                      F-11




                                                          Year ended December 31,
                                                 -----------------------------------------
                                                     2002           2001           2000
                                                 -----------    -----------    -----------
                                                                      
Net unpaid claims and claims expenses,
  beginning of period                            $   789,376    $   760,071    $   841,381
                                                 -----------    -----------    -----------

Provision, net of reinsurance recoverable:
  Claims incurred in the current period              317,141        292,933        251,139
  Claims incurred prior to the current period        229,395         22,448         32,496
                                                 -----------    -----------    -----------
   Total provision                                   546,536        315,381        283,635
                                                 -----------    -----------    -----------

Payments, net of reinsurance:
  Claims incurred in the current period              (73,176)       (64,085)       (66,574)
  Claims incurred prior to the current period       (289,764)      (250,649)      (279,717)
                                                 -----------    -----------    -----------
   Total payments                                   (362,940)      (314,734)      (346,291)
                                                 -----------    -----------    -----------

Adoption of accounting policy for workers'
   compensation discounting                               --             --         (1,135)
                                                 -----------    -----------    -----------

Effect of loss sharing agreement with
   affiliates                                             --         28,570        (17,756)
                                                 -----------    -----------    -----------
Foreign currency translation adjustment to net
  unpaid claims and claims expenses                      170             88            237
                                                 -----------    -----------    -----------

End of period:
Net unpaid claims and claims expenses                973,142        789,376        760,071
Reinsurance recoverable on unpaid claims
  and claims expenses                                658,236        610,906        611,954
                                                 -----------    -----------    -----------
Gross unpaid claims and claims expenses          $ 1,631,378    $ 1,400,282    $ 1,372,025
                                                 ===========    ===========    ===========


Unpaid claims and claims expense at year end 2002 and 2001 of $1,640,063 and
$1,412,104 respectively, include amounts approved for payment but unpaid at year
end 2002 and 2001 ($8,685 and $11,822, respectively). These amounts are
reflected in the above table as payments within the period when approved for
payment by Trenwick America. Reinsurance recoverables on unpaid claims and
claims expenses at year end 2002 and 2001 of $641,176 and $544,202,
respectively, include amounts recoverable on losses that have been paid by
Trenwick America but for which reimbursements have not been received from ceding
companies at year end 2002 and 2001 ($94,980 and $69,154, respectively). These
amounts are reflected in the above table as receipts within the period when
approved. In addition, the 2002 and 2001 provisions for claims and claims
expenses incurred of $528,216 and $305,488, respectively, include benefits
related to reductions in the liability under Trenwick America's contingent
interest notes ($18,320 and $9,893, respectively). These amounts are not
reflected in the above table. Workers' compensation claims subject to
discounting were $4,678 and $3,998, respectively, at year end 2002 and 2001, and
the related discount was $1,464 and $1,145, respectively.

During the year ended December 31, 2002, Trenwick America recorded increase in
claims and claims expenses related to prior years of $229,395. The loss reserve
increases are a result of the reassessment of reserve levels, a culmination of
work completed by both Trenwick's internal actuaries and independent actuarial
consultants in all of Trenwick America's businesses. Of the reserve increases
recorded, approximately $183,868, or 80.2%, relates to Trenwick America's Treaty
reinsurance operations and principally impacts the most recent accident years,
1998 to 2001, where deterioration has occurred across all lines of business. A
significant portion of the deterioration arose in the general liability and
asbestos and environmental lines of business. Trenwick America's Specialty
program insurance, now in runoff, contributed approximately $45,527, or 19.8% of
the reserve increases


                                      F-12


recorded in 2002. This deterioration was concentrated in a small number of
programs and related primarily to general liability business.

As a result of deterioration in loss reserve indications during the first nine
months of 2002, Trenwick engaged external actuarial consultants during the
fourth quarter to assist management in reviewing reserves for December 31, 2002.
Based on the results of external and internal actuarial studies, reserve
adjustments of $100,400 were made during the fourth quarter of 2002.

The 2002 provision for claims incurred prior to the current period related to
claims occurring between 1998 and 2001 and was spread across multiple lines of
business. The period from 1998 to 2001 represents a period of weak insurance and
reinsurance pricing and the actual loss results for business written during that
period have turned out to be significantly worse than originally estimated by
Trenwick America when it originally wrote the business and subsequently
re-estimated reserves for this business.

In 2001, Trenwick America recorded a net increase $22,448 in estimates for
claims occurring in prior accident years. This reserve strengthening includes
$15,654 related to Treaty reinsurance business, which was underwritten prior to
2001 and $11,530 related to prior participation in the ECRA Pool. In addition,
$13,940 of the loss reserve strengthening related to Specialty program
insurance. The increase in 2000 reflects a deterioration in market conditions
since 1997.

Inflation

Inflation raises the cost of economic losses and non-economic damages covered by
insurance contracts and, therefore is a factor in determining effective rates of
reinsurance and the appropriateness of reserves. The methods used to estimate
individual case reserves and reserves for claims incurred but not yet reported
implicitly incorporate the effects of inflation in the projection of ultimate
losses. Due to the inherent uncertainties of estimating unpaid claims and claims
expenses, actual claims and claims expenses may deviate, perhaps substantially,
from estimates reflected in these financial statements. Management believes that
its claim estimation methods are reasonable and prudent and that its unpaid
claims and claims expenses at year end 2002 are adequate.

Latent Injury and Toxic Tort Claims

The balance of unpaid claims and claims expenses also includes provisions for
latent injury or toxic tort claims such as asbestos that cannot be estimated
with traditional techniques. Due to inconsistent court decisions in federal and
state jurisdictions and the wide variation among insureds with respect to
underlying facts and coverage, uncertainty exists with respect to these claims
as to liabilities of ceding companies and, consequently, reinsurance coverage.
During the year ended December 31, 2002, Trenwick America increased its asbestos
and environmental ("A&E") reserves by $28,997. In making its reserve estimates,
management considered that this addition to A&E reserves resulted in a
three-year survival ratio (calculated as the A&E reserves at year-end divided by
the average annual A&E payments over the previous 3 calendar years and
represents the number of years that existing reserves will last if the current
level of average annual payments for the last three years repeats itself
indefinitely) of 12.9, which is higher than the property and casualty insurance
ratio at December 31, 2001 as reported by A.M. Best and which Trenwick America
believes is consistent with levels of companies that have recorded A&E
adjustments in 2002.

The estimate of net unpaid claims and claims expenses for asbestos and
environmental claims at year end 2002 and 2001 was $112,006 and $91,050,
respectively, comprising gross unpaid claims and claims expenses of $145,048 and
$118,688, net of reinsurance recoverable on unpaid claims and claims expenses of
$33,042 and $27,638. During the years ended December 31, 2002, 2001 and 2000,
payments of A&E related claims and claims expenses were $7,025, $10,110 and
$10,457,


                                      F-13


respectively. The above figures include liabilities emanating from Trenwick
America's participation in the ECRA Pool.

Reinsurance

Reinsurance and retrocessional agreements are entered into to reduce Trewick
America's exposure on individual risks, catastrophic losses and other large
losses in all lines of business. Trenwick America remains primarily liable in
the event that reinsurers fail to meet their obligations, however, Trenwick
America holds collateral under some of these agreements which would serve to
offset a substantial portion of the liability should the reinsurer fail to pay.
Reinsurance contracts which do not meet insurance accounting risk transfer
requirements are classified as deposits. These deposits are treated as financing
transactions and interest income or interest expense are credited or charged to
them according to contract terms.

Trenwick America Re's reinsurance treaties consist principally of property
catastrophe reinsurance treaties. Canterbury purchased specific reinsurance
programs for each of the programs underwritten by its insurance companies.

From 1989 to 1999, Trenwick America Re purchased aggregate excess of loss ratio
treaties from several reinsurers. These facilities provided Trenwick America Re
with a layer of protection against adverse results from its domestic casualty
business in excess of specified loss ratios. Trenwick America Re did not
purchase an aggregate excess of loss ratio treaty after 1999, when its
reinsurance philosophy was modified and it began using specific retrocessional
and property catastrophe protections to manage its underwriting results, and to
eliminate the use of aggregate stop loss coverages to provide capital
enhancement Interest expense on funds held under these facilities is recorded as
an investment expense, and is included in the funds held offset at year end 2002
and 2001.

At the time of the closing of the Trenwick/Chartwell business combination
(October 27, 1999), Chartwell purchased a reinsurance policy from London Life
and Casualty Reinsurance Co., Ltd. and Scandinavian Reinsurance Co. Ltd.
providing for up to $100,000 in coverage in order to indemnify Trenwick Group
Inc. against unanticipated increases in Chartwell's reserves for business
written on or before the date the merger was completed. Amounts recoverable
under the agreement are presented gross in the balance sheet at both year end
2002 and 2001 as reinsurance recoverable on unpaid claims and claims expenses
($91,970) and miscellaneous accounts receivable, included in other assets
($8,030). The related benefit for losses ceded to the agreement reflected as a
reduction to claims and claims expenses incurred and the benefit related to
other underwriting balances was reflected as a reduction to underwriting
expenses in the historical financial statements of Trenwick Group Inc.

Reinsurance Recoverable Balances, Net

The components of reinsurance recoverable balances, net at year end 2002 and
2001 are as follows:

                                                             2002         2001
                                                           --------     --------
Paid claims                                                $ 94,980     $ 69,154
Unpaid claims and claims expenses, net of
  funds held offset of $112,041 and $135,859                546,196      475,048
                                                           --------     --------
Reinsurance recoverable balances, net                      $641,176     $544,202
                                                           ========     ========

Reinsurance recoverable balances at year end 2002 and 2001 are net of allowances
for doubtful accounts of $17,107 and $17,255, respectively, which includes
$12,808 and $12,707 for paid claims and $4,299 and $4,548 for unpaid claims and
claims expenses, respectively.


                                      F-14


Letters of credit, trust accounts and funds withheld in the aggregate amount of
$294,595 (including interest) at December 31, 2002 have been arranged in favor
of Trenwick America collateralizing reinsurance recoverables with respect to
certain retrocessionaires.

Note 6 Investing Activities

Debt and Equity Security Investments

All of Trenwick America's debt securities are classified as "available for
sale." Both debt and equity securities are reported at estimated fair value
principally using quoted market prices or broker dealer quotes. Included in
equity securities are limited partnerships in which Trenwick America holds
greater than a 3% interest, and which are recorded at their equity value.

Fair value and amortized cost or cost of debt and equity securities at December
31, 2002 and 2001 follow:



                                                  2002                         2001
                                        -----------------------      -----------------------
                                        Fair Value      Cost         Fair Value      Cost
                                        ----------   ----------      ----------   ----------
                                                                      
U.S. federal and U.K. government
  securities, including agencies        $  172,102   $  163,052      $  147,827   $  144,580
Other foreign government securities         22,190       21,512          19,485       19,055
U.S. municipal government securities         4,544        3,974             125          125
Mortgage and other asset-backed
  securities                               165,863      158,195         495,799      481,410
Corporate and other debt securities        271,961      263,344         391,282      384,678
                                        ----------   ----------      ----------   ----------
Debt securities fair value and
  amortized cost                        $  636,660   $  610,077      $1,054,518   $1,029,848
                                        ==========   ==========      ==========   ==========
Publicly traded common and
  preferred stock                       $       --   $       --      $   14,619   $    7,865
Limited partnerships                         8,849        8,849(1)        9,545        9,545(1)
                                        ----------   ----------      ----------   ----------
Equity securities fair value and cost   $    8,849   $    8,849      $   24,164   $   17,410
                                        ==========   ==========      ==========   ==========


(1)   Amounts represent cost adjusted for changes in equity of the limited
      partnerships.


                                      F-15


Gross unrealized gains and losses on debt and equity securities at December 31,
2002 and 2001 follow:



                                                    2002                    2001
                                             ---------- --------    --------------------
                                              Gains      Losses      Gains       Losses
                                             --------   --------    --------    --------
                                                                    
U.S. federal and U.K. government
  securities, including agencies             $  9,077   $    (27)   $  4,486    $ (1,239)
Other foreign government securities               678                    663        (233)
U.S. municipal government securities              570         --          --          --
Mortgage and other asset-backed securities      9,019     (1,351)     14,709        (320)
Corporate and other debt securities            15,810     (7,193)     12,449      (5,845)
                                             --------   --------    --------    --------
Debt securities gross gains and losses       $ 35,154   $ (8,571)   $ 32,307    $ (7,637)
                                             ========   ========    ========    ========
Equity securities gross gains and losses     $     --   $     --    $  6,754    $     --
                                             ========   ========    ========    ========


The fair value and amortized cost for debt securities at year end 2002 are shown
below by contractual maturity periods except mortgage-backed and asset-backed
securities, which are included in the table based on expected maturity dates.
Actual maturities will differ from contractual maturities because borrowers
generally have the right to prepay obligations.

                                                                      Amortized
                                                         Fair Value      Cost
                                                         ----------   ----------
Due in one year or less                                  $   57,141   $   56,069
Due after one year through five years                       297,072      282,954
Due after five years through ten years                      199,552      189,500
Due after ten years                                          82,895       81,553
                                                         ----------   ----------
Total maturities of debt securities                      $  636,660   $  610,076
                                                         ==========   ==========

Net Investment Income and Net Investment Gains (Losses)

Investment income, consisting principally of interest and dividends, is
recognized when earned, net of investment expenses. In computing interest
income, premiums are amortized and discounts are accreted on debt securities
utilizing the interest method. The amortization and accretion for
mortgage-backed and other asset-backed securities is adjusted, when sufficient
information exists to estimate the probability and timing of their prepayments,
to the amount that would have existed had the new effective yield been applied
since the acquisition of the security. Imputed interest on the funds held offset
to reinsurance recoverable is included in investment expense.

Trenwick America generally limits investments in debt securities that are rated
below investment grade, as these investments are subject to a higher degree of
credit risk than investment grade securities. Trenwick America also monitors the
creditworthiness of the portfolio, including below investment grade securities,
and writes down investments when fair values decline for reasons other than
changes in interest rates or other perceived temporary conditions. Realized
gains or losses on disposition of investments are determined on the basis of
specific identification.


                                      F-16


Sources of net investment income follow:

                                                    Year ended December 31,
                                                 2002        2001        2000
                                               --------    --------    --------

Debt securities interest                       $ 66,002    $ 71,212    $ 68,264
Equity securities dividends and earnings           (862)      5,255       7,063
Cash and cash equivalents interest                1,414       5,689       6,179
                                               --------    --------    --------
Gross investment income                          66,554      82,156      81,506
Imputed interest expense                         (9,821)    (11,342)    (11,940)
Other investment expenses                        (3,104)     (2,773)     (2,965)
                                               --------    --------    --------
Net investment income                          $ 53,629    $ 68,041    $ 66,601
                                               ========    ========    ========

Net realized gains (losses) on sales of investments and their effect on net
income follow:

                                                   2002        2001        2000
                                               --------    --------    --------

Debt security realized gains                   $ 29,443    $ 11,749    $  2,124
Equity security realized gains                    8,785         997       7,143
Debt security realized losses                   (13,459)     (7,872)     (2,423)
Equity security realized losses                      --      (6,740)        (76)
                                               --------    --------    --------
Net realized investment gains (losses)         $ 24,769    $ (1,866)   $  6,768
                                               ========    ========    ========

During the years ended December 31, 2002 and 2001, Trenwick America wrote down
the fair value of certain debt and equity securities by $1,365 and $3,441,
respectively, and reflected the writedown as realized losses of investments to
recognize declines in value that were other than temporary. No securities were
written down during the year ended December 31, 2000.

Net unrealized gains (losses) on investments and their effect on other
comprehensive income (loss) follow:



                                                       Year ended December 31,
                                                    2002        2001        2000
                                                  --------    --------    --------
                                                                 
Debt securities net gains (losses)                $ 17,836    $ 12,088    $ 27,431
Equity securities net gains                          2,031       3,035       1,972
                                                  --------    --------    --------
Net investment gains (losses) included
  in comprehensive income before income taxes       19,867      15,123      29,403
Applicable income taxes (benefit)                    7,041       5,293      10,291
                                                  --------    --------    --------
Net investment gains (losses) included in
  comprehensive income (loss)                       12,826       9,830      19,112
Less net realized investment gains (losses)
  included in net income (loss)                     16,100      (1,213)      4,399
                                                  --------    --------    --------
Net unrealized investment gains (losses)
  included in other comprehensive income (loss)   $ (3,274)   $ 11,043    $ 14,713
                                                  ========    ========    ========


Net Unrealized Investment Gains (Losses)

Unrealized investment gains and losses are calculated as the difference between
recorded values (fair value) and amortized cost or cost. Net unrealized
investment gains and losses, net of applicable deferred income taxes are
included in common stockholder's equity as accumulated other comprehensive
income.


                                      F-17


Components of net unrealized investment gains (losses) at year end 2002 and 2001
follow:

                                                             2002          2001
                                                           -------       -------

Debt securities net unrealized gains                       $26,583       $24,670
Equity securities net unrealized gains                          --         6,754
                                                           -------       -------
Net unrealized gains before income taxes                    26,583        31,424
Applicable deferred income taxes                             9,391        10,958
                                                           -------       -------
Net unrealized investment gains                            $17,192       $20,466
                                                           =======       =======

Note 7 Financing Activities

Indebtedness and Minority Interest

Indebtedness and other mandatorily redeemable obligations are recorded at their
fair value at the date of the Trenwick/LaSalle business combination or at
principal amounts advanced subsequent thereto. Discount on these obligations is
accreted utilizing the interest method. The principal amount of Trenwick
America's contingent interest notes obligation is adjusted for any adverse
development in the applicable liability for claims and claims expenses.

On November 29, 2002, Trenwick announced that it had elected to suspend, with
immediate effect, and for an indefinite period payment of dividends on the
mandatorily redeemable preferred capital securities.

The carrying values of indebtedness and minority interest at year end 2002 and
2001 follow:

                                                         2002             2001
                                                       -------------------------
                                                            Carrying Value
                                                       -------------------------
Senior notes                                           $ 74,777         $ 73,920
Senior credit facility                                       --          195,035
Contingent interest notes                                 1,721           19,923
                                                       --------         --------
 Total indebtedness                                      76,498          288,878
Mandatorily redeemable
  preferred capital securities                           87,032           86,973
                                                       --------         --------
Total indebtedness and
  minority interest                                    $163,530         $375,851
                                                       ========         ========

Future Minimum Principal Payments on Indebtedness

Future minimum principal payments on indebtedness and minority interest at
December 31, 2002 follow: 2003, $75,000; 2004, $0; 2005, $0; 2006, $1,000, 2007,
$0 and thereafter $110,000. The foregoing amounts include a principal payment of
$75,000 due to the senior note holders on August 1, 2003 (See discussion of
senior notes below). Trenwick America anticipates that it will be unable to make
this payment when due and has been in continuing discussions with the senior
note holders concerning a proposed restructuring or amendment of the senior
notes. There can be no assurance that an agreement relating to this
restructuring will be reached by August 1, 2003. If such an agreement is not
reached, or a waiver thereof obtained, Trenwick America would be in default
under the terms of the senior notes and under Trenwick America's senior credit
facility and contingent interest notes, described below.

Senior Notes

The senior notes, in an outstanding principal amount of $75,000, were initially
due April 1, 2003, and pursuant to an amendment are due August 1, 2003. The
senior notes are not subject to


                                      F-18


redemption prior to maturity. They are unsecured obligations and rank senior in
right of payment to all existing and future subordinated indebtedness of
Trenwick America . Under the terms of the notes, Trenwick America is not
restricted from incurring indebtedness, but may not incur secured indebtedness
for borrowed money unless it provides an equivalent security interest to the
holders of the senior notes. Interest on the notes is payable semi-annually at
an annual rate of 6.7% and is charged to operations at the imputed rate of 7.9%.
In connection with the amendment to extend the maturity date from April 1, 2003
to August 1, 2003, Trenwick America agreed to pay interest accrued through April
1, 2003 in the aggregate amount of $2,512. Trenwick America is engaged in
continuing discussions with holders of the senior notes with respect to a
possible restructuring of these senior notes. Trenwick, Trenwick America and
Trenwick Holdings' agreements entered into in connection with the renewal of its
letter of credit facility in December 2002 and together with subsequent
amendments provided that, Trenwick America would replace, refinance or
restructure these senior notes by July 15, 2003. At this time, Trenwick America
does not have sufficient available liquidity to pay the amount due on August 1,
2003 and is uncertain whether it will be able to complete the restructuring by
that date. If Trenwick America is i) unable to restructure these senior notes by
July 15, 2003 and the banks under the credit facility determine to exercise the
rights available to them or take other action with respect to the assets of
Trenwick, Trenwick America or Trenwick Holdings, or ii) unable to repay the
senior notes by August 1, 2003, and the holders of the senior notes determine to
exercise the rights available to them or take other action with respect to the
assets of Trenwick America, Trenwick America may be forced to seek protection
from creditors through proceedings commenced in Bermuda and other jurisdictions
including the United States. In addition, at any time the insurance regulatory
authorities having jurisdiction over Trenwick's, Trenwick America's and Trenwick
Holdings' insurance company operating subsidiaries may commence voluntary or
involuntary proceedings for the formal supervision, rehabilitation or
liquidation of such subsidiaries, or one or more of the creditors of Trenwick,
Trenwick America and Trenwick Holdings or their subsidiaries may commence
proceedings against Trenwick or its non-reglated subsidiaries including Trenwick
America seeking their liquidation.

Senior Credit Facility

Concurrent with the Trenwick/LaSalle business combination in September of 2000,
Trenwick America and Trenwick Holdings, Trenwick's United States and United
Kingdom holding companies, entered into an amended and restated $490,000 credit
agreement with various lending institutions (the "Banks"), which was guaranteed
by LaSalle Re Holdings. The credit agreement consisted of both a $260,000
revolving credit facility and a $230,000 letter of credit facility. The
revolving credit facility was subsequently converted into a four-year term loan
and repaid in full on June 17, 2002. On December 24, 2002, the credit agreement
was amended to reduce the letter of credit facility, which is utilized by
Trenwick to support its underwriting operations at Lloyd's, to the currently
outstanding $182,500. The letter of credit facility is scheduled to terminate on
December 31, 2003 although the letters of credit issued pursuant to the facility
will not expire until December 31, 2006.

Pursuant to a guaranty agreement entered into concurrently with the credit
agreement, Trenwick has guaranteed the obligations of Trenwick America and
Trenwick Holdings under the credit agreement. In April of 2002, Trenwick pledged
the capital stock of LaSalle Re Holdings, which was the guarantor of the
obligations under the credit agreement, and LaSalle Re as collateral to the
Banks. In December of 2002, Trenwick agreed to provide the Banks additional
security interests as described below.

On October 18, 2002, A.M. Best Company lowered the financial strength ratings of
Trenwick's, Trenwick America's and Trenwick International's operating
subsidiaries below "A-". The lowered A.M. Best Company ratings constituted an
event of default under the credit agreement. In addition,


                                      F-19


Trenwick America's and Trenwick Holdings' increases in reserves for unpaid
claims and claims expenses and the establishment of a Trenwick America deferred
tax asset valuation allowance in the third quarter of 2002 resulted in
violations of the financial covenants in the credit agreement requiring Trenwick
to maintain a minimum tangible net worth and minimum risk-based capital. On
November 13, 2002, Trenwick, Trenwick America, Trenwick International, and the
Banks executed a forbearance agreement with respect to the events of default
arising from the lowered A.M. Best Company ratings and financial covenant
violations.

Subsequently, an amendment and waiver of default under the credit agreement and
amendment to the guaranty agreement were entered into on December 24, 2002 (the
"December Amendments"). The December Amendments extended the letter of credit
facility through December 31, 2003 to support Trenwick's underwriting operation
at Lloyd's for the 2003 year of account. To those Banks extending their letters
of credit, Trenwick, Trenwick America and Trenwick International agreed to pay a
5% per annum cash letter of credit fee, issue pay-in-kind notes bearing interest
at LIBOR plus 2.5% per annum to evidence an additional 3.16% per annum letter of
credit fee, issue warrants equal to 10% of Trenwick's fully diluted equity
capital, and pay 15% of the profits earned by Trenwick's Lloyd's operations for
the 2002 and 2003 Lloyd's years of account. Trenwick, Trenwick America and
Trenwick Holdings agreed to provide the Banks a security interest in all of,
their respective equity interests in, and the assets and property of, their
direct and indirect subsidiaries as additional collateral for the Banks, and to
cause the subsidiaries to provide a guaranty to the Banks, subject to applicable
laws and regulations and certain existing contractual rights of holders of other
indebtedness.

The December Amendments also prohibit Trenwick, Trenwick America and Trenwick
Holdings and their respective subsidiaries from declaring or paying any
dividends (including on Trenwick's common shares, the Series A Preferred Shares
of LaSalle Re Holdings and the capital securities of Trenwick Capital Trust I).
The December Amendments and other amendments and waivers entered into in the
first quarter of 2003 waive certain other defaults, add covenants further
restricting the operation of Trenwick's, Trenwick America's, Trenwick Holdings'
business, prohibit Trenwick, Trenwick America, Trenwick Holdings and their
respective subsidiaries from making certain payments without the Banks'
approval, prohibit Trenwick, Trenwick America, Trenwick Holdings and their
respective subsidiaries from selling or otherwise disposing of any assets or
property, require Trenwick to regularly report certain financial information to
the Banks, and adjust downward certain of the financial covenants.

Pursuant to the December Amendments, Trenwick is required to collateralize with
cash, cash equivalents and marketable securities 60% of the outstanding letters
of credit by August 1, 2003. If it is unable to do so, Trenwick's insurance
company subsidiaries, including those of Trenwick America, will be prohibited
from underwriting any insurance or reinsurance business without the Banks' prior
approval. In addition, Trenwick is required to use its best efforts to terminate
the letters of credit by December 31, 2003. In order to do so, the letters of
credit would need to be replaced with other letters of credit or collateral
acceptable to Lloyd's. In the event Trenwick has not terminated the letters of
credit by December 31, 2003, it is required on such date to collateralize with
cash, cash equivalents and marketable securities the full amount of the
outstanding letters of credit. At this time, Trenwick does not have sufficient
available liquidity to collateralize the letters of credit as required by the
December Amendment. Additionally, Trenwick does not believe that it will be able
to replace the letters of credit with other letters of credit or collateral
acceptable to Lloyd's.

Since December 2002, Trenwick, Trenwick America and Trenwick Holdings have
entered into additional amendments and numerous waivers with the Banks providing
for, among other things,


                                      F-20


waivers of potential covenant defaults, further reductions in certain financial
covenants, additional financial reporting, approval of certain employee and
other payments approval of the extension of Trenwick America's senior notes from
April 1, 2003 to August 1, 2003 and the related payment of interest accrued
through April 1, 2003 to the holders of the senior notes, and extension of
numerous deadlines imposed under the December Amendments.

If there is an event of default under the credit agreement, including as a
result of Trenwick failing to collateralize the letters of credit as described
above, or if there is an event of default under other outstanding indebtedness
of Trenwick or its subsidiaries, including under the senior notes of Trenwick
America, resulting in a cross default under the credit agreement, Trenwick,
Trenwick America and Trenwick Holdings may be required to fully and immediately
collateralize the outstanding letters of credit under the terms of the credit
agreement and the guaranty agreement. No liability for any such amounts has been
reflected in Trenwick America's financial statements for any potential future
event of default. If the potential future events of default are not waived,
there is substantial doubt as to Trenwick America's ability to continue as a
going concern and Trenwick, Trenwick America and Trenwick Holdings and/or one or
more of their subsidiaries may be forced to seek protection from creditors
through proceedings commenced in Bermuda and other jurisdictions including the
United States. In addition, at any time one or more of the insurance regulatory
authorities having jurisdiction over Trenwick's, Trenwick America's or Trenwick
Holdings' insurance company subsidiaries may commence voluntary or involuntary
proceedings for the formal supervision, rehabilitation or liquidation of such
subsidiaries, or one or more of the creditors of Trenwick, Trenwick America and
Trenwick Holdings or their subsidiaries may commence proceedings seeking their
liquidation.

Under the terms of Trenwick's agreements with the Banks, and particularly under
the December Amendments, Trenwick, Trenwick America and Trenwick Holdings and
their subsidiaries are subject to financial and operational restrictions which
limit Trenwick, Trenwick America and Trenwick Holdings' flexibility to pursue
business and strategic alternatives. These restrictions will apply so long as
Trenwick, Trenwick America and Trenwick Holdings and their subsidiaries have
unpaid reimbursement obligations to the Banks with respect to the letters of
credit.

The result of the foregoing is that the future operations of Trenwick America,
at least in the next several years, are likely to consist substantially of the
sale or management in runoff of some or all of its existing insurance and
reinsurance businesses including administration of claims, regulatory reporting,
settlement of reinsurance agreements (including commutations thereof where
appropriate), cash and investment management and related matters. The costs
involved in such operations are likely to differ significantly from those of
prior years, where a significant portion of the operating costs related to
underwriting, marketing and securing reinsurance for new business. The
reimbursement of costs as they relate directly to the insurance entities
themselves will be subject to review by regulatory authorities, which may
challenge these costs or impose other restrictions with respect to the runoff
including the provision of an acceptable runoff plan.

Contingent Interest Notes

The contingent interest notes were issued immediately prior to Chartwell's
acquisition of The Insurance Corporation of New York in 1995 to protect
Chartwell against the possibility of adverse development of that insurer's
liability for claims and claims expenses and long-tail casualty exposures, which
are more fully described in Note 5. Trenwick Group Inc. assumed the obligations
of Chartwell under the contingent interest notes in the Trenwick/Chartwell
business combination, and Trenwick America subsequently assumed the obligations
of Trenwick Group Inc. under the notes in the Trenwick/LaSalle business
combination, described in Note 2. The contingent interest notes were issued in
an aggregate principal amount of $1,000 with principal accruing interest at a


                                      F-21


rate of 8% per annum, compounded annually. The interest will not be payable
until scheduled maturity on June 30, 2006 or earlier redemption of the
contingent interest notes. In addition, the contingent interest notes entitle
the holders thereof to receive at maturity, in proportion to the principal
amount of the contingent interest notes held by them, an aggregate of from $0,
up to $55,000, in contingent interest. The actual amount of contingent interest
paid will depend on the outcome of certain contingencies, the most significant
of which is the development over time of The Insurance Corporation of New York's
reserves for unpaid claims and claims expenses.

During the years ended December 31, 2002 and 2001, Trenwick America recorded
$18,320 and $9,893, respectively, of adverse development related to the subject
business, and as a result, the carrying value of the contingent interest notes
at December 31, 2002 has been reduced to the principal value of $1,000 plus
accrued interest with no contingent interest, which is the present value of the
amount expected to be paid at maturity. The contingent interest notes will
continue to accrue interest at a rate of 8% per year.

The contingent interest notes contain covenants which relate to the maintenance
of certain records and limitations on certain indebtedness. At December 31,
2002, Trenwick America was in compliance with these covenants.

Mandatorily Redeemable Preferred Capital Securities

The mandatorily redeemable preferred capital securities, with a face value of
$110,000, are obligations of a business trust subsidiary of Trenwick America.
The capital securities mature in 2037, require preferential cumulative
semi-annual cash distributions at an annual rate of 8.82% and are guaranteed by
Trenwick America, within certain limits, as to distribution payments and
liquidation or redemption payments. Interest charged to operations on the
capital securities is at the imputed interest rate of 11.2%. On November 29,
2002, Trenwick ceased payment of dividends on the capital securities. Trenwick
America is prohibited from incurring future secured indebtedness without equally
and ratably securing the amounts due under the capital securities. The terms of
the capital securities permit Trenwick America to defer payments of interest at
any time and from time to time for a period not exceeding ten consecutive
semi-annual periods, provided that no extension period may extend beyond the
stated maturity date. Trenwick America continues to record interest expense on
the capital securities is at the imputed interest rate of 11.2%.

The business trust issuing the capital securities holds an investment in
subordinated debentures of Trenwick America that have an aggregate principal
amount of $113,403, and interest from that investment is the source of cash
distributions on the capital securities. The capital securities are subject to
mandatory redemption in certain circumstances pertaining to Trenwick America's
prepayment or repayment of its subordinated debentures held by the trust. In the
event of a default by Trenwick America with respect either to making required
payments on the subordinated debentures or to its guarantee under certain
circumstances, holders of the capital securities may institute a direct action
against Trenwick America. On January 15, 2003, Trenwick America gave notice of
its right to defer payment of interest due by its selection of an extension
period extending the commencement of the next semi-annual interest payment
period to August 1, 2003. In the first quarter of 2001 and the fourth quarter of
2000, a Trenwick subsidiary purchased $10,650 and $13,000, respectively, par
value of the capital securities in the open market for $8,462 and $9,902,
respectively.


                                      F-22


Interest Expense and Subsidiary Preferred Share Dividends

Interest expense and subsidiary preferred share dividends are accrued and
recognized when incurred. Interest expense and dividends on capital securities
are computed by the accretion of discount on certain obligations and is accreted
utilizing the interest method.

Components of interest expense and dividends on preferred capital securities for
the years ended December 31, 2002, 2001 and 2000 follow:

                                                  2002         2001         2000
                                               -------      -------      -------

Indebtedness interest expense                  $11,245      $19,825      $24,890
Capital securities dividends                     9,702        9,702        9,702
Commitment and other fees                        1,604        1,809        1,177
                                               -------      -------      -------
Total                                          $22,551      $31,336      $35,769
                                               =======      =======      =======

Common Shares

Trenwick America has 1,000 shares of $1.00 par value common shares authorized,
100 shares of which are outstanding. All of the outstanding shares of Trenwick
America are held by a subsidiary of Trenwick. Dividends of $9,500 were declared
and paid by Trenwick America to its parent company during 2000. No such
dividends were paid in 2002 or 2001.

Note 8 Income Taxation

Trenwick America and its subsidiaries are incorporated in the United States and
are subject to federal and state income taxes imposed by United States
authorities.

Income taxes are provided based upon amounts reported in the financial
statements and the provisions of currently enacted tax laws. Income taxes are
allocated to operations, other comprehensive income and stockholders' equity, as
applicable.

Current income tax assets and liabilities are provided for estimated income
taxes refundable or payable based on the current year's income tax return.
Deferred income tax assets and liabilities are recognized for the estimated
future income tax effects of temporary differences and carryforwards. Temporary
differences are the differences between the financial statement carrying amounts
of assets and liabilities and their tax bases, as well as the timing of income
or expense recognition for financial reporting and tax purposes of items not
related to assets and liabilities. Valuation allowances are established to
reduce the carrying amount of deferred income tax assets, if necessary, to
amounts that are more likely than not to be realized. Trenwick America
periodically reviews the adequacy of these valuation allowances and records any
changes in allowances through earnings.

In evaluating the realizability of Trenwick America's net deferred tax asset,
during 2002, Trenwick America established a full valuation allowance on its net
deferred tax asset. In prior years, Trenwick America had recorded a valuation
allowance with respect to its foreign tax credits, however, as of December 31,
2002, management concluded that Trenwick America's current circumstances and its
cumulative financial accounting losses do not support a position that Trenwick
America will be able to realize these future tax benefits. Trenwick America will
periodically review the sufficiency of its valuation allowance and record any
future changes in allowances through earnings.


                                      F-23


The components of the provision for income taxes for 2002, 2001 and 2000 are as
follows:

                                                   2002        2001        2000
                                               --------    --------    --------
Current and deferred income taxes:
Current income tax expense (benefit)           $ (6,043)   $ 11,125    $(22,239)
Deferred income tax expense (benefit)            67,347     (25,753)       (290)
                                               --------    --------    --------
Total income tax expense (benefit)             $ 61,304    $(14,628)   $(22,529)
                                               ========    ========    ========

For the years ended December 31, 2002, 2001 and 2000 , the United States federal
effective tax rate of (28.6)%, 42.8% and 37.9% respectively, differs from the
statutory tax rate of 35% as follows:

                                                   2002        2001        2000
                                              ---------    --------    --------
U.S. loss before U.S. federal income taxes    $(214,690)   $(34,153)   $(59,501)
Income tax benefit at 35% statutory rate        (75,142)    (11,954)    (20,826)
Tax-exempt investment income                         (1)       (984)     (5,077)
Non-deductible goodwill and other expenses       18,242         529         387
True-up for prior year returns                     (240)     (3,448)      2,103
Other book-tax differences                       (1,451)       (559)         --
Change in valuation allowance                   118,976         109          --
State income taxes                                  744       1,512         411
Foreign income taxes                                176         167         473
                                              ---------    --------    --------
Total federal income tax expense (benefit)    $  61,304    $(14,628)   $(22,529)
                                              =========    ========    ========

At December 31, 2002, Trenwick America has net operating loss carryforwards of
$258,822 that will be available to offset regular taxable income during the
carryforward periods which expire in 2007 ($9,655) and between 2018 and 2022
($249,167). As a result of the Trenwick/LaSalle business combination, an
ownership change took place on September 27, 2000, and approximately $32,485 of
the total United States net operating loss carryforward became limited to a
cumulative annual utilization of $5,228. The remaining $226,337 in United States
net operating loss carryforwards are not so limited.

In connection with the Trenwick/LaSalle business combination, Trenwick America
recorded a valuation allowance against its deferred income tax asset as
sufficient uncertainty existed regarding the realizability of certain foreign
tax credits. In 2002, as part of evaluating the realizability of its net
deferred tax asset, Trenwick America established a full valuation allowance on
its net deferred tax asset in the third quarter. The valuation allowance was
recorded when Trenwick America determined that its cumulative financial
accounting losses do not currently support a position that Trenwick America will
be able to realize the tax benefits of past losses in the future. Trenwick
America will periodically review the sufficiency of these valuation allowances
and record any future changes in allowances through earnings.

Net income taxes of $2,462, $17,146 and $27,766 were recovered during 2002, 2001
and 2000 respectively.


                                      F-24


Deferred income tax assets (liabilities) are attributable to the following
temporary differences at year-end 2002 and 2001:

                                                           2002          2001
                                                        ---------     ---------
Deferred income tax assets:
Discounting and other loss reserve adjustments          $  51,019     $  37,950
Unearned premium income                                    15,888        10,845
U.S. net operating losses                                  90,588        47,982
Contingent interest note                                       --         6,416
Tax basis difference on investment securities               2,736         1,309
Foreign tax credits                                           575           410
Alternative minimum tax credits                               804         5,859
Unrealized foreign exchange loss                              863           855
Acquisition of indebtedness income                          1,851         1,851
Other deferred tax assets                                   4,090         2,822
                                                        ---------     ---------
Deferred tax asset, gross of valuation allowance          168,414       116,299
Valuation allowance                                      (119,243)         (267)
                                                        ---------     ---------
Deferred tax asset, net of valuation allowance             49,171       116,032
                                                        ---------     ---------

Deferred income tax liabilities:
Deferred policy acquisition costs                         (22,107)      (15,890)
Unrealized appreciation on investments                     (9,391)      (11,020)
Accretion of market discount on debt securities            (2,067)       (2,362)
Equity investment adjustments                              (3,182)       (4,489)
Fair value adjustment of debt obligations                  (8,117)       (8,437)
Deferred intercompany transactions                             --        (7,510)
Other deferred tax liabilities                             (4,307)         (567)
                                                        ---------     ---------
Gross deferred income tax liabilities                     (49,171)      (50,275)
                                                        ---------     ---------
Net deferred income tax asset                           $      --     $  65,757
                                                        =========     =========

Note 9 Employee Benefits and Compensation Arrangements

Retirement and Savings Plans

Expenses for employee retirement and savings plans are recognized as they are
incurred.

Trenwick America has a defined contribution plan for substantially all full-time
employees through which it contributes 8% of an eligible employee's total
compensation to the plan; dependant upon each employee's salary and age. No
employee contributions are made to these plans.

Additionally, Trenwick America maintains a 401(k) savings plan for substantially
all full time employees, through which employees contribute up to the maximum
amount allowable by the Internal Revenue Service. Trenwick America contributes
up to 6% of a participating employee's compensation to the plan.

Trenwick America's provisions for employee retirement and savings plans for the
years ended December 31, 2002, 2001 and 2000 were as follows:

                                                 2002         2001         2000
                                                ------       ------       ------

Defined contribution plans                      $  979       $  737       $  823
401(k) savings plan                                614          606          625
                                                ------       ------       ------
Total                                           $1,593       $1,343       $1,448
                                                ======       ======       ======


                                      F-25


Restricted Common Share Awards

Trenwick America's ultimate parent company, Trenwick, awards its restricted
common shares to key employees of Trenwick America. At the time of the award,
Trenwick records deferred compensation for the fair value of the restricted
common share awards and present deferred compensation as a separate, offsetting
component of shareholders' equity. A portion of compensation expense which is
recognized over the vesting period of the restricted common shares, is allocated
to Trenwick America.

Trenwick America recognized $214, $258 and $3,897, respectively, of compensation
expense with respect to restricted common share awards for the 2002, 2001 and
2000 years.

Share Options

Trenwick grants options for a fixed number of common shares to employees of
Trenwick America. These options have an exercise price equal to the market value
of the shares at the date of grant. The current accounting standard establishes
a fair value based method of accounting for stock-based compensation plans;
however, it permits an entity to continue to apply the accounting provisions of
a previous standard and make pro forma disclosures of net income and earnings
per share, as if the fair market value based method had been applied. Trenwick
continues to account for the share option grants in accordance with the previous
standard. The pro forma disclosures required by the fair value based method are
presented below.

Trenwick has several plans through which it grants options in its common shares
to employees of Trenwick America at the discretion of its board of directors.
Exercise prices are generally fixed at the market value at the date of grant.
Options vest and are exercisable on various terms, usually either over a five
year period or up to a ten year period. All options have an expiration date not
exceeding ten years.

Upon completion of the Trenwick/LaSalle business combination, all of the options
granted to employees of Trenwick America prior to 2000 became fully vested.

Pro Forma Information

All of the outstanding share options of Trenwick that were issued to Trenwick
America employees were issued at an exercise price equal to the fair market
value on the date of grant; therefore no compensation expense has been
recognized for these grants. Had the fair value based method been applied, net
loss would have been $(276,261), $(20,332), and $(37,571) for the 2002, 2001 and
2000 years, respectively.

The pro forma adjustments relate to options granted from 1995 to 2001 are based
on a fair value method using the Black-Scholes option pricing model. No effect
has been given to options granted prior to 1995. Valuation and related
assumption information for options granted in 2001, 2000 and 1999 are as
follows:

                                                  2002        2001        2000
                                                  Year        Year        Year
                                                 ------      ------      ------

Expected volatility                                53.0%       38.0%       30.0%
Risk-free interest rate                             4.0%        4.9%        5.1%
Trenwick common
  share dividend yield                              1.2%        0.9%        0.6%


                                      F-26


The Black-Scholes option valuation model was developed for use in estimating the
fair value of options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected share price volatility. Because
Trenwick's share options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable measure of the fair value of its
share options.

Note 10 Other Comprehensive Income

Other comprehensive income is recorded for the change in the net unrealized
appreciation of investments and the change in foreign currency translation
adjustments, both net of income taxes.

The components of accumulated other comprehensive income at December 31, 2002
and 2001 follow:

                                                               2002      2001
                                                             --------  --------
Unrealized investment gains, net of applicable deferred
  income taxes of $9,391 and $10,958                         $ 17,192  $ 20,466
Foreign currency translation adjustment, net of applicable
  deferred income taxes of $863 and $855                       (1,424)   (1,574)
                                                             --------  --------
Accumulated other comprehensive income                       $ 15,768  $ 18,892
                                                             ========  ========

Note 11 Insurance Regulation

Trenwick America and its insurance and reinsurance company subsidiaries are
subject to regulatory oversight under the insurance statutes and regulations of
the jurisdictions in which they conduct business, including all states of the
United States. These regulations vary from jurisdiction to jurisdiction and are
generally designed to protect ceding insurance companies and policyholders by
regulating Trenwick America's financial integrity and solvency in its business
transactions and operations. Many of the insurance statutes and regulations
applicable to Trenwick America's subsidiaries relate to reporting and enable
regulators to closely monitor Trenwick America's performance. Typical required
reports include information concerning Trenwick America's capital structure,
ownership, financial condition, and general business operations.

Because Trenwick America is a holding company, its principal source of funds
consists of permissible dividends, tax allocation payments and other statutorily
permissible payments from its regulated operating insurance company
subsidiaries, each of which is subject to oversight and regulatory supervision
by insurance regulators in its jurisdiction of domicile. As a result of recent
losses incurred by these insurance company subsidiaries, their cash distribution
capacities have been significantly reduced. Each insurance regulatory body,
including those of New York, Connecticut and North Dakota, may act independently
with respect to the company or companies domiciled in its jurisdiction. To the
extent that any such regulator takes action with respect to an insurance company
domiciled in its jurisdiction, such action could adversely impact the ability of
Trenwick America to continue to function, or could precipitate other actions by
other insurance regulators with respect to the particular Trenwick America
company or companies under their primary jurisdiction. Additionally, although
these financial statements are prepared on a consolidated basis, the actual
assets and liabilities shown in the financial statements which are held by the
insurance company subsidiaries generally will not be available to satisfy the
obligations of other companies within the Trenwick America group of companies.
Insurance regulators may also review certain payments made to Trenwick America
by its insurance company subsidiaries, such as payments for administrative
services, and could attempt to seek return of such payments to the insurance
company subsidiaries.


                                      F-27


Trenwick America's operations are subject to extensive regulation under state
statutes that delegate regulatory, supervisory and administrative powers to
state insurance commissioners. The extent of regulation varies from state to
state, but generally has its source in statutes that delegate regulatory,
supervisory and administrative authority to a department of insurance in each
state. Among other things, state insurance commissioners regulate insurer
solvency standards, insurer licensing, authorized investments, premium rates,
restrictions on the size of risks that may be insured under a single policy,
loss and expense reserves and provisions for unearned premiums, deposits of
securities for the benefit of policyholders, policy form approval, and market
conduct regulation, including the use of credit information in underwriting and
other underwriting and claims practices. State insurance departments also
conduct periodic examinations of the affairs of insurance companies and require
the filing of annual and other reports relating to the financial condition of
companies and other matters. In general, regulated insurers must file all rates
for directly underwritten insurance with the insurance department of each state
in which they operate on an admitted basis; however, reinsurance generally is
not subject to rate regulation.

Each of Trenwick America's insurance subsidiaries is subject to restrictions on
the payment of dividends without prior approval from the state insurance
regulator in its respective state of domicile. These restrictions are based upon
certain measures of statutory surplus and net income. At year end 2002, based
upon these restrictions, Dakota Specialty Insurance Company and ReCor Insurance
Company had $3,091 and $21, respectively, available for the payment of dividends
to their parent, the Insurance Corporation of New York in 2003 without prior
regulatory approval. Trenwick America has received regulatory approval from the
State of North Dakota Department of Insurance to pay an extraordinary dividend
of $20,000 out of Dakota Specialty Insurance Company to its parent The Insurance
Corporation New York. The remainder of Trenwick America's United States
insurance subsidiaries are precluded from paying dividends without prior
regulatory approval based upon these restrictions. Additionally, on November 26,
2002, Trenwick America Re entered into a "letter of understanding" with the
Connecticut Department of Insurance pursuant to which Trenwick America Re
agreed, among other things, that it would not lend any of its funds or make any
ordinary or extraordinary dividends without the prior written approval of the
Connecticut Insurance Department.

Risk Based Capital

The NAIC has adopted Risk-Based Capital, or RBC, requirements for property and
casualty insurance companies to evaluate the adequacy of statutory capital and
surplus in relation to investment and insurance risks such as asset quality,
asset and liability matching, loss reserve adequacy and other business factors.
RBC is generally calculated and reported to the regulatory authorities with an
insurance company's annual regulatory filings on or before March 1 of each year.
The RBC calculation yields a ratio of the total adjusted statutory capital of an
insurance company to the minimum level of statutory required capital as
calculated under the provisions of the RBC model. The RBC calculation takes into
account: (1) asset risk, (2) credit risk, (3) underwriting risk, and (4) all
other relevant risks including the insurance company's current underwriting
activities. The Model Act of the NAIC provides four levels of regulatory
activity if the RBC ratio yielded by the calculation falls below specified
minimums. At each of four successively lower RBC ratios specified by statute,
increasing regulatory action may be required. The four levels are: (1) Company
Action Level Event, (2) Regulatory Action Level Event, (3) Authorized Control
Level Event, and (4) Mandatory Control Level Event.

Under the insurance laws of their respective states of domicile, Trenwick
America's subsidiaries are required to maintain minimum levels of capital and
surplus as regards to policyholders. The failure of an insurer to maintain the
required surplus level can result in the placing of the insurer by the


                                      F-28


insurer's domestic state's insurance department into supervision, rehabilitation
or liquidation proceedings, for the benefit of policyholders and creditors of
the insurer, and the general public.

On December 3, 2002, Trenwick America Re entered into a "letter of
understanding" with the State of Connecticut Insurance Department pursuant to
which Trenwick America Re agreed that it would not take any of the following
actions without the prior written approval of the Connecticut Insurance
Commissioner or her designee:

o     Dispose of, convey or encumber any of its assets or business in force;

o     Withdraw any of its bank accounts except in the ordinary course of
      business;

o     Settle any intercompany balances;

o     Lend any of its funds;

o     Transfer any of its property;

o     Make any new investments other than cash equivalents;

o     Incur any debt, obligation or liability, except liabilities in the
      ordinary course of business;

o     Make any material change in management;

o     Make any material change in its operations;

o     Move any books and records from its office in Stamford, Connecticut;

o     Pay any dividends, ordinary or extraordinary;

o     Enter into any unaffiliated insurance or reinsurance contracts that would
      constitute new or renewal business, or any unaffiliated commutation
      agreements or settlement agreements in excess of $1,000 not in the
      ordinary course of business; or

o     Enter into affiliated transactions of any nature.

Senior management of Trenwick America Re has also agreed to meet with the State
of Connecticut Insurance Department, in person or by conference call, with such
frequency as may be deemed necessary by the Connecticut Insurance Commissioner
or her designee, to provide updates on the status of Trenwick and any changes in
the status of Trenwick America Re. Trenwick America Re is also required to
provide to the State of Connecticut Insurance Department a monthly financial
statement consisting of a balance sheet and income statement on the 15th day of
each month as of the prior month end. The above described terms will remain in
effect until such time as the Connecticut Insurance Commissioner deems that they
are no longer necessary or issues an order that supercedes the letter of
understanding.

On January 24, 2003, Trenwick met with the State of Connecticut Insurance
Department to present preliminary 2002 financial statements of the regulated
entities and provided the Connecticut Department of Insurance with an overview
of Trenwick's proposed restructuring plan. Trenwick also discussed with the
State of Connecticut Insurance Department the reserve charges taken for the
fourth quarter of 2002. Trenwick America Re's significant reserve increases in
the fourth quarter of 2002 had an adverse impact on its RBC rating, which was at
the "Regulatory Action Level Event" at December 31, 2002. Trenwick America Re is
subject to a statutory requirement that it maintain a minimum capital and
surplus to policyholders equal to the "Company Action Level Event." As of
December 31, 2002, Trenwick America Re was not in compliance with this
requirement. At the current level, Trenwick America Re is required to submit a
Comprehensive Plan of Action to the State of Connecticut Insurance Department.
Such a plan was submitted to the State of Connecticut Insurance Department on
January 23, 2003. In addition, the State of Connecticut Insurance Department, at
its discretion, is also able to take any action deemed necessary under the
circumstances.

On January 29, 2003, Trenwick met with the New York Insurance Department (the
"NYID") and had similar discussions to those with the State of Connecticut
Insurance Department on January 24,


                                      F-29


2003 described above with respect to its New York domiciled insurance company
subsidiary, The Insurance Corporation of New York. The Insurance Corporation of
New York's reported RBC was at the "Mandatory Control Level Event" for the year
ended December 31, 2002. New York Insurance Law requires that New York domiciled
insurers report their risk-based capital based on a formula calculated by
applying factors to various asset, premium and reserve items. The NYID uses the
formula as an early warning regulatory tool for purposes of monitoring New York
domiciled insurance companies to identify possibly inadequately capitalized
insurers. The New York Superintendent of Insurance has explicit regulatory
authority to require various actions with respect to New York domiciled insurers
whose capital base or other operations are not satisfactory. The Insurance
Corporation of New York has ceased underwriting new business and is in ongoing
communication with the New York Insurance Department concerning its operations
and continued permitted activities.

Trenwick received a letter from the NYID dated March 11, 2003 in which the NYID
noted that the surplus to policyholders of The Insurance Corporation of New
York, as of December 31, 2002 was $18,300 and therefore was impaired in the
amount of $16,700, based on the statutory requirement that it maintain a minimum
surplus to policyholders of $35,000. In the letter, the NYID notified The
Insurance Corporation of New York that the surplus impairment must be corrected
within 30 days, and directed it to advise the NYID within 30 days as to the
steps management will take to remove the impairment and comply with the minimum
surplus requirement. If the NYID is not satisfied that The Insurance Corporation
of New York has eliminated the impairment by April 10, 2003, the Superintendent
of the NYID may proceed against The Insurance Corporation of New York pursuant
to the provisions of Article 74 of the New York Insurance Law, the statute
authorizing supervision, rehabilitation, conservation, liquidation and
dissolution of insurers, including domestic insurers. Management filed its plan
to correct the capital impairment on April 7, 2003. There can be no assurance
that the plan will be determined to be acceptable by the NYID.

Trenwick has been notified by the NYID that, in the NYID's view, $26,300 in
loans made to Trenwick America by The Insurance Corporation of New York in 2002
were in contravention of New York regulatory requirements. As a result, The
Insurance Corporation of New York and Trenwick may be the subject of regulatory
action brought by the NYID.

To date, the State of Florida has suspended the underwriting authority of The
Insurance Corporation of New York and Trenwick America Re to write any further
business. In addition, the State of Colorado has recently suspended The
Insurance Corporation of New York's underwriting authority. It is anticipated
that other states will suspend the underwriting authority of the various
insurance company subsidiaries of Trenwick America.

Trenwick America's insurance subsidiaries are subject to guaranty fund laws
which can result in assessments, up to prescribed limits, for losses incurred by
policyholders as a result of the impairment or insolvency of unaffiliated
insurance companies. Typically, an insurance company is subject to the guaranty
fund laws of the states in which it conducts insurance business; however,
Trenwick America's insurance subsidiaries that conduct business on a surplus
lines basis in a particular state are generally exempt from that state's
guaranty fund laws.

Trenwick America's insurance subsidiaries file financial statements prepared in
accordance with statutory accounting practices prescribed or permitted by
insurance regulators in each subsidiary's state of domicile. Combined statutory
surplus of Trenwick America's insurance subsidiaries was $125,939 and $374,835
at year end 2002 and 2001; their combined statutory net income (loss) was
$(183,247), $12,438 and $(16,157) for the 2002, 2001 and 2000 years,
respectively.


                                      F-30


The State of Connecticut Insurance Department has permitted Trenwick America Re
to account for the reinsurance agreement purchased in connection with the
Trenwick/Chartwell business combination on a prospective basis in its statutory
basis financial statements. This treatment is consistent with the U.S. GAAP
accounting treatment of the contract. The New York State Insurance Department
has required The Insurance Corporation of New York to account for that
reinsurance agreement on a retroactive basis. The difference in these statutory
accounting practices does not have an effect on the combined statutory surplus
or net income of Trenwick's U.S. insurance subsidiaries. The terms of this
reinsurance agreement are described in Note 7.

National Association of Insurance Commissioners ("NAIC")

The National Association of Insurance Commissioners, or NAIC, is an organization
which assists state insurance supervisory officials in the United States to
achieve insurance regulatory objectives, including the maintenance and
improvement of state regulation. From time to time various regulatory and
legislative changes have been proposed in the insurance industry, some of which
could have an effect on reinsurers. Among the proposals that have in the past
been or are at present being considered are the possible introduction of federal
regulation in addition to, or in lieu of, the current system of state regulation
of insurers, and proposals in various state legislatures (some of which
proposals have been enacted) to conform portions of their insurance laws and
regulations to various model acts adopted by the NAIC. Trenwick America is
unable to predict what effect, if any, these developments may have on its
operations and financial condition.

In March 1998, the NAIC adopted the Codification of Statutory Accounting
Principles ("Codification"), which is intended to standardize regulatory
accounting and reporting for the insurance industry. Codification provides
guidance for areas where statutory accounting has been silent and changes
current statutory accounting in some areas. However, statutory accounting
principles will continue to be established by individual state laws and
permitted practices. Effective January 1, 2001, the states of Connecticut
(domicile of Trenwick America Re), and North Dakota (domicile of Dakota
Specialty Insurance Company) adopted Codification. The cumulative effect of
adoption of Codification was an increase in aggregate statutory surplus of
$14,305 on January 1, 2001, primarily due to the recording of net deferred
income tax assets. New York (domicile of The Insurance Corporation of New York
and ReCor Insurance Company Inc.) adopted codification as well as certain
prescribed accounting practices that differ from codification. Most
significantly deferred tax assets and liabilities were not recorded under New
York law. The effect of differences in accounting practices by the New York
Insurance Department served to decrease surplus by $9,042. In 2002 the New York
Insurance Department adopted regulations to allow deferred tax assets as
admitted assets, although certain prescribed accounting practices still differ
from those found in the codification. The cumulative effect of this change in
accounting in 2002 ($1,663) was recorded as an adjustment to increase statutory
surplus.

Trenwick America is subject to regulation under the insurance holding company
statutes of various states, including Connecticut, New York and North Dakota,
the domicile states of its insurance company subsidiaries. The insurance holding
company laws and regulations vary from state to state, but generally require an
insurance holding company, and insurers and reinsurers that are subsidiaries of
an insurance holding company, to register with the state regulatory authorities
and to file with those authorities certain reports including information
concerning their capital structure, ownership, financial condition, affiliate
transactions and general business operations.

State laws also require prior notice or regulatory agency approval of direct or
indirect changes in control or deemed control of an insurer, reinsurer or its
holding company and of certain significant intercorporate transfers of assets
within the holding company structure. The acquisition of securities representing
or convertible into more than 10% of the voting power of the securities of


                                      F-31


Trenwick or Trenwick America by an investor would be subject to prior approval
by the Connecticut, New York and North Dakota insurance commissioners. Such
investor would also be required to file certain notices and reports with the
insurance commissioners prior to such acquisition.

Debt securities and cash with a carrying value of $84,368 at December 31, 2002
were on deposit with various state or governmental insurance departments in
order to comply with insurance laws. Trenwick America is currently engaged in a
process to reduce redundant statutory deposits resulting from the December 31,
2002 merger of Chartwell Insurance Company with and into Trenwick America Re.

Note 12 Goodwill

Goodwill represents the unamortized excess of purchase price over the fair value
of identifiable net assets of acquired entities. For the years ended December
31, 2001 and 2000, goodwill was amortized on a straight-line basis over
twenty-five years.

Effective January 1, 2002, Trenwick America adopted a new Financial Accounting
Standards Board statement which amended the accounting for goodwill and other
intangible assets. This new statement suspended systematic goodwill amortization
and its implementation required that the goodwill balance of $52,119 at December
31, 2001 be tested for impairment under either market value or cash flow tests.
The market value test was performed using the Income Forecast Model which uses
discounted cash flows. Cash flow tests were also performed and as a result of
these tests, it was determined that the goodwill was impaired and the entire
remaining goodwill balance was charged to operations as of January 1, 2002 as a
cumulative effect of an accounting change.

The goodwill that resulted from the Trenwick/LaSalle business combination which
was pushed down to Trenwick America of $52,119 net of accumulated amortization
of $1,866 is reflected in the consolidated financial statements at December 31,
2001.

Note 13 Other Assets and Other Liabilities

Investments in managing general agencies, through which Trenwick America wrote
primary insurance business and in which Trenwick America holds ownership
interest of between 20% and 30%, are recorded in other assets on the balance
sheet. Based on the ownership interest and Trenwick America's ability to
exercise significant influence on the operating and financial policies of these
managing general agencies, these investments are accounted for under the equity
method.

Premises and equipment, including leasehold improvements and capitalized
software costs are recorded at cost and amortized or depreciated using the
straight-line method over their useful lives.

The components of other assets and other liabilities at December 31, 2002 and
2001 are as follows:

                                                                 2002       2001
                                                             --------   --------
Other assets:
Investments in managing general agencies                     $  1,719   $  9,010
Premises and equipment, net of accumulated
  depreciation of $13,049 and $3,963, respectively             12,360     15,106
Funds held by insurers and other insurance deposits            45,217     34,057
Prepaid expenses and other deposits                             8,701        517
Current income taxes recoverable                                6,889      3,397
Contingent commissions receivable                              10,952      8,666
Other receivables                                              27,110     11,232
Other                                                          17,627      7,789
                                                             --------   --------
Total                                                        $130,575   $ 89,774
                                                             ========   ========


                                      F-32


Other liabilities:
Accounts payable and accrued expenses                       $ 15,532    $ 16,661
Security deposits for insureds                                17,114       9,548
Contingent commissions payable                                 8,483       4,746
Other                                                          5,661       2,984
                                                            --------    --------
Total                                                       $ 46,790    $ 33,939
                                                            ========    ========

During the years ended December 31, 2002, 2001 and 2000, Trenwick America
recorded $5,763, $1,944 and $239, respectively, in equity income related to
investments in managing general agencies. Depreciation and amortization on items
included in other assets charged to operations for the years ended December 31,
2002, 2001 and 2000 was $3,870, $3,075 and $299, respectively. In connection
with Trenwick America's decision to cease underwriting new United States
specialty program insurance business, in December 2002 Trenwick America sold its
investment in one of the managing general agencies.

Operating Lease Agreements

Trenwick America leases office space under non-cancelable operating leases which
expire on various dates through 2008. Trenwick America's future minimum lease
commitments at year end 2002 total $9,405 and are payable as follows: 2003,
$1,858; 2004, $1,800; 2005, $1,682; 2006, $1,682; 2007, $1,682 and thereafter,
$701.

Total office rent expense for the years ended December 31, 2002, 2001 and 2000
was $1,274, $1,282 and $2,060, respectively.

Note 14 Fair Value of Financial Instruments

The fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties.
Fair values are estimated based upon quoted market prices or broker dealer
quotes and may vary in the near term.

The carrying amounts and estimated fair values of financial instruments in
summary form at year end 2002 and 2001 follow:



                                              2002                      2001
                                     -----------------------   -----------------------
                                      Carrying       Fair       Carrying       Fair
                                       Amount       Value        Amount       Value
                                     ----------   ----------   ----------   ----------
                                                                
Assets:
Debt securities (Note 6)             $  610,077   $  636,660   $1,054,518   $1,054,518
Equity securities (Note 6)                8,849        8,849       24,164       24,164
Cash and cash equivalents               450,340      450,340      128,522      128,522
Deposits                                  8,138        8,138        7,800        7,800
Security deposit held
  by Chubb Re                            50,207       50,207           --           --

Liabilities:
Senior notes (Note 7)                    74,777       20,250       73,920       63,750
Senior credit facility (Note 7)              --           --      195,035      195,035
Contingent interest notes (Note 7)        1,721        1,721       19,923       19,923



                                      F-33


Note 15 Commitments, Contingencies, Concentrations, and Related-Party
Transactions

Restrictions on Certain Payments within Trenwick

Because Trenwick America's operations are conducted through its operating
subsidiaries, Trenwick America is dependent upon the ability of its operating
subsidiaries to transfer funds, principally in the form of cash dividends, tax
reimbursements and other statutorily permissible payments. In addition to
general legal restrictions on payments of dividends and other distributions to
shareholders applicable to all corporations, Trenwick America's insurance
subsidiaries are subject to further regulations that, among other things,
restrict the amount of dividends and other distributions that may be paid to
their parent corporations, as more fully described in Note 11.

As previously discussed in Note 7, the December Amendments to Trenwick's letter
of credit facility prohibit Trenwick and its subsidiaries from declaring or
paying any dividends (including on Trenwick's common shares, the perpetual
preferred shares of LaSalle Re Holdings and the capital securities issued by
Trenwick Capital Trust I). The amendments also prohibit Trenwick from making
certain payments without the Banks' approval.

Litigation

Trenwick America is party to various legal proceedings generally arising in the
normal course of its business. Trenwick America does not believe that the
eventual outcome of any such proceeding will have a material effect on its
financial condition or results of operations or cash flows. Trenwick America's
subsidiaries are regularly engaged in the investigation and the defense of
claims arising out of the conduct of their business. Pursuant to Trenwick
America's insurance and reinsurance arrangements, disputes are generally
required to be finally settled by arbitration.

Investments and Cash Held as Collateral or on Deposit

Debt securities and cash with a carrying value of $226,539 at year end 2002 are
being held in trust as collateral for certain reinsurance obligations.

Concentrations

During the year ended December 31, 2002, Trenwick America received 30% of its
gross written premiums from three reinsurance brokers of which Aon Reinsurance
Agency accounted for 16%, Marsh and MacLennan accounted for 9% and Reinsurance
Alternatives accounted for 5%. During 2001, Trenwick America received 33% of its
gross written premiums from three reinsurance brokers, of which Aon Reinsurance
Agency accounted for 19%, Marsh and MacLennan accounted for 8%, and Reinsurance
Alternatives accounted for 6%. During 2000, Aon Reinsurance Agency, Benfield
Blanch and Marsh and MacLennan provided 27%, 11% and 9% of Trenwick America's
gross written premiums, respectively.

During the year ended December 31, 2002, Trenwick America received 25% of its
assumed written premiums from three ceding companies, of which XL America Group
accounted for 9%, Zurich accounted for 9% and Avemco Group accounted for 7%.
During 2001, Trenwick America received 22% of its assumed written premiums from
three ceding companies, of which Travelers Group accounted for 9%, Avemco Group
accounted for 7% and American International Group accounted for 6%. During 2000,
LDG Reinsurance Underwriters provided 21% of Trenwick America's assumed written
premiums and American International Group and Duncanson and Holt Group each
accounted for 5% of assumed written premiums.

Trenwick America wrote approximately 57% of its direct written premiums during
2002 through four managing agencies, of which Florida Intracoastal Underwriters,
Ltd. accounted for 26%, HDR Insurance Services accounted for 13%, Professional
Insurance Underwriters accounted for 10% and Risk Control Services accounted for
8%. During 2001, Florida Intracoastal Underwriters, HDR


                                      F-34


Insurance Services, Inter-Reco, Inc. and Risk Control Services provided 27%,
16%, 14% and 11% of direct written premiums, respectively. During 2000, Trenwick
America wrote approximately 73% of its direct premiums written through four
managing agencies, of which Florida Intracoastal Underwriters, Ltd. accounted
for 30%, HDR Insurance Services accounted for 21%, Inter-Reco, Inc. accounted
for 12% and Risk Control Services accounted for 10%.

At year end 2002, 33% of Trenwick America's reinsurance recoverables on unpaid
claims and claims expenses, net of funds held offsets, are recoverable from five
principal retrocessionaires. These retrocessionaires are London Life and
Casualty Reinsurance Corporation ($64,379), Centre Solutions (United States)
Limited ($43,927), UNUM Life Insurance Company of America ($36,367), American
Re-Insurance Company ($36,053), and Odyssey Reinsurance Corporation ($29,334).
Each of these companies are rated A or better by A.M. Best Company.

Related Party Transactions

Trenwick America Re has entered into a stop loss agreement with Trenwick
International Ltd., one of its United Kingdom affiliates. During 2002, 2001 and
2000, Trenwick International Ltd. ceded premiums of $6,576, $10,879 and $173,
respectively, and ceded claims and claims expenses of $26,463, $31,139 and
$5,039, respectively to Trenwick America under this agreement. In December,
2002, the stop loss agreement was commuted and settled for $45,554 paid by
Trenwick America Re to Trenwick International Ltd. in cash. Unpaid claims and
claims expenses related to this agreement at year end 2001 were $31,544.

Trenwick America Re entered into a multi-layer excess of loss catastrophe
reinsurance treaty with LaSalle Re Limited, a Bermuda affiliate. During 2002,
2001 and 2000, Trenwick America Re ceded $0, $1,088 and $2,175, respectively of
premiums to LaSalle Re Limited. No losses have been ceded under this agreement
and profit commissions receivable from LaSalle Re Limited of $924 was settled
during 2002.

In the first quarter of 2001 and the fourth quarter of 2000, a Bermuda affiliate
of Trenwick America purchased $10,650 and $13,000, respectively, par value of
the mandatorily redeemable capital securities in the open market. During the
2002, 2001 and 2000 years, Trenwick America incurred $1,981, $1,806 and $166,
respectively, of dividends on the preferred capital securities held by its
affiliate.

Included in due from parent and affiliates on Trenwick America's consolidated
balance sheet at December 31, 2002 are recoverable expenses of $13,924 and
non-interest bearing demand loans receivable of $48,904, the majority of which
are receivable from Trenwick International Limited and Trenwick Managing Agents
Limited. Due to affiliates as reflected on Trenwick America's consolidated
balance sheet at December 31, 2002 includes recoverable expenses of $1,700 with
Trenwick and payable to Trenwick (Barbados) Ltd. of $19,735. Interest on unpaid
balances is at a rate equal to that generated by Trenwick's investment
portfolio. During the 2002 and 2001 year, principal repayments amounted to
$1,184 and $26,927 with $117 and $1,108 of interest expense incurred,
respectively. No interest expense was recorded in the 2000 year.

Other Related Party Transactions

Included in other assets are Trenwick America's investments in managing general
agencies through which it wrote primary insurance business, as more fully
described in Note 13. At year end 2002 and 2001, the carrying value of these
investments totaled $1,719 and $9,010. During 2002 and 2001, Trenwick America
incurred $10,807 and $11,655, respectively, of acquisition costs related to


                                      F-35


these managing general agencies. At year end 2002 and 2001, Trenwick America's
balance sheet includes $22,557 and $19,231, respectively, of agents' balances
receivable from these managing general agencies including installment premiums
deferred and not yet due. The current portion of balances due from these
managing general agencies is settled on a monthly basis.

Note 16 Unaudited Quarterly Financial Data

Summarized unaudited quarterly financial data for the years presented follow:



                               Quarter ended       2002            2001         2000
                                                ---------      -----------    ----------
                                                                   
Net premiums earned          Fourth quarter      $139,299        $124,578      $99,381
                             Third quarter        132,523          94,574      114,007
                             Second quarter       118,354          87,214       48,333
                             First quarter         99,495          73,922       49,070

Net investment income        Fourth quarter       $10,934         $16,276      $14,751
                             Third quarter         13,363          16,005       13,838
                             Second quarter        14,476          18,311       27,977
                             First quarter         14,856          17,449       10,035

Net realized investment      Fourth quarter       $29,620           $(33)         $192
   gains (losses)            Third quarter        (3,329)         (4,189)        6,931
                             Second quarter       (1,342)             252        (315)
                             First quarter          (180)           2,104         (40)

Net income (loss)            Fourth quarter     $(92,104)       $(11,939)     $(7,082)
                             Third quarter      (115,647)         (7,069)     (37,835)
                             Second quarter      (13,289)         (7,264)       19,830
                             First quarter       (54,954)           6,747     (11,885)



                                      F-36


                        TRENWICK AMERICA AND SUBSIDIARIES
            SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                                TRENWICK AMERICA
                              (Parent Company Only)
                                  BALANCE SHEET
            (Amounts expressed in thousands of United States dollars)
                           December 31, 2002 and 2001

                                                              2002        2001
                                                            --------    --------
Assets:
    Investments in consolidated subsidiaries
      after minority interest of $87,032 and $86,973        $285,625    $506,452

    Cash and cash equivalents                                  6,304         288
    Due from consolidated subsidiaries                        96,101      70,135
    Net deferred income taxes                                  1,515      20,745
    Other assets                                              18,701      71,117
                                                            --------    --------
    Total assets                                            $408,246    $668,737
                                                            --------    --------

Liabilities:
    Due to consolidated subsidiaries                        $110,318    $ 80,365
    Other liabilities                                         12,274      10,742
    Indebtedness                                             189,901     402,281
                                                            --------    --------
    Total liabilities                                        312,493     493,388

Stockholder's equity                                          95,753     175,349
                                                            --------    --------

    Total liabilities and stockholder's equity              $408,246    $668,737
                                                            ========    ========


                                      S-1


                        TRENWICK AMERICA AND SUBSIDIARIES
           SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                   (continued)

                                TRENWICK AMERICA
                              (Parent Company Only)
                             STATEMENT OF OPERATIONS
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000

                                              2002         2001         2000
                                           ---------    ---------    ---------
Revenues:
Consolidated subsidiary dividends          $  17,400    $  51,300    $  19,269
Net investment income                            315          457        1,290
Other income                                     456          314        1,934
                                           ---------    ---------    ---------
Total revenues                                18,171       52,071       22,493
                                           ---------    ---------    ---------

Expenses:
General and administrative expenses            2,664        4,061       18,686
Interest expense and preferred
  capital securities dividends                 3,509       19,506       26,934
Foreign currency gains                           141         (268)          (3)
                                           ---------    ---------    ---------
Total expenses                                 6,314       23,299       45,617
                                           ---------    ---------    ---------

Income before equity in undistributed
  income of unconsolidated subsidiaries       11,857       28,772      (23,124)
Equity in undistributed income (loss) of   ---------    ---------    ---------
  consolidated subsidiaries                 (217,702)     (56,012)     (26,778)
                                           ---------    ---------    ---------

Net loss before income taxes and
  cumulative effect of change in
   accounting principle                     (205,845)     (27,240)     (49,902)
Income tax expense (benefit)                  18,030       (7,715)     (12,930)
                                           ---------    ---------    ---------
Net loss before cumulative effect
   of change in accounting principle        (223,875)     (19,525)     (36,972)
Cumulative effect of change
  in accounting principle                    (52,119)          --           --
                                           ---------    ---------    ---------
Net loss                                   $(275,994)   $ (19,525)   $ (36,972)
                                           =========    =========    =========


                                      S-2


                        TRENWICK AMERICA AND SUBSIDIARIES
     SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT-(continued)

                                TRENWICK AMERICA
                              (Parent Company Only)
                             STATEMENT OF CASH FLOWS
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000

                                                  2002       2001        2000
                                               ---------   --------    --------
Operating activities:
Interest and operating expenses paid           $ (15,441)  $(26,569)   $ (6,196)
General and administrative expenses paid         (12,776)   (34,729)    (49,027)
Income taxes (paid) recovered                      1,231      2,664     (72,206)
Net investment income received                       319        457         244
Other income, net of expenses                         (4)    (1,944)     42,853
                                               ---------   --------    --------
Cash for operating activities                    (26,671)   (60,121)    (84,332)
                                               ---------   --------    --------

Investing activities:
Sales of debt securities                              --         --         257
Additions to premises and equipment               (3,194)    (4,524)     (1,514)
Investment in subsidiaries                            --         --       3,048
                                               ---------   --------    --------

Cash from (for) investing activities              (3,194)    (4,524)      1,791
                                               ---------   --------    --------

Financing activities:
Issuance of indebtedness                        (199,060)    14,000      24,000
Issuance costs of indebtedness                        --     (1,475)     (1,834)
Net dividends received (paid)                     17,400     51,300       5,100
Capital contributions received                   199,523      5,099          --
Intercompany loans (repayments) advances          18,018    (12,677)     62,361
                                               ---------   --------    --------

Cash from financing activities                    35,881     56,247      89,627
                                               ---------   --------    --------

Change in cash and cash equivalents                6,016     (8,398)      7,086

Cash and cash equivalents, beginning of year         288      8,686       1,600
                                               ---------   --------    --------

Cash and cash equivalents, end of year         $   6,304   $    288    $  8,686
                                               =========   ========    ========


                                      S-3


                        TRENWICK AMERICA AND SUBSIDIARIES
               SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000

                                               2002         2001         2000
                                            ----------   ----------   ----------

Deferred policy acquisition costs
Treaty reinsurance                          $   46,906   $   36,039   $   30,347
Specialty program insurance                     16,261        9,364        5,920
                                            ----------   ----------   ----------
  Total                                         63,167       45,403       36,267

Unpaid claims and claim expenses
Treaty reinsurance                           1,286,219    1,146,975    1,221,071
Specialty program insurance                    353,844      233,585      169,961
Affiliate transactions                              --       31,544        5,472
                                            ----------   ----------   ----------
  Total                                      1,640,063    1,412,104    1,396,504

Unearned premium income
Treaty reinsurance                             146,908      112,085       92,224
Specialty program insurance                    177,810      126,919       84,950
                                            ----------   ----------   ----------
  Total                                        324,718      239,004      177,174

Net premiums earned
Treaty reinsurance                             347,034      288,760      265,934
Specialty program insurance                    136,061       80,649       44,684
Affiliate transactions                           6,576       10,879          173
                                            ----------   ----------   ----------
  Total                                        489,671      380,288      310,791

Net investment income
Treaty reinsurance                              43,161       49,868       55,466
Specialty program insurance                     10,453       13,057        9,493
Unallocated                                         15        5,116        1,642
                                            ----------   ----------   ----------
  Total                                         53,629       68,041       66,601

Claims and claims expenses incurred
Treaty reinsurance                             356,248      224,860      224,250
Specialty program insurance                    140,035       66,530       34,037
ECRA pool runoff                                 5,470       11,530           --
Affiliate transactions                          26,463        2,568       17,756
                                            ----------   ----------   ----------
  Total                                        528,216      305,488      276,043

Policy acquisition costs
Treaty reinsurance                             109,080      101,217       83,134
Specialty program insurance                     34,562       20,996        9,846
                                            ----------   ----------   ----------
  Total                                        143,642      122,213       92,980

Underwriting expenses
Treaty reinsurance                              13,577       11,680       13,718
Specialty program insurance                     17,405        7,210        7,012
                                            ----------   ----------   ----------
  Total                                         30,982       18,890       20,730

Net premiums written
Treaty reinsurance                             385,789      320,820      251,111
Specialty program insurance                    168,984       99,708       54,028
Affiliate transactions                           6,576       10,879          173
                                            ----------   ----------   ----------
  Total                                     $  561,349   $  431,407   $  305,312


                                      S-4


                        TRENWICK AMERICA AND SUBSIDIARIES
                 SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
            (Amounts expressed in thousands of United States dollars)
                  Years Ended December 31, 2002, 2001 and 2000

                                                   Balance at   Balance at
                                                   Beginning     End of
                                                   of Period     Period
                                                   ----------  -----------
Year Ended December 31, 2002
Allowance for uncollectible reinsurance
  recoverable balances and premiums receivable      $13,319      $13,412

Year Ended December 31, 2001
Allowance for uncollectible reinsurance
  recoverable balances and premiums receivable      $10,191      $13,319

Year Ended December 31, 2000
Allowance for uncollectible reinsurance
  recoverable balances and premiums receivable      $ 6,569      $10,191


                                      S-5

EX-10.32

                                                                   Exhibit 10.32

                             DEMAND PROMISSORY NOTE


$26,300,000.00                                                 December 31, 2002

      ON DEMAND, FOR VALUE RECEIVED, the undersigned, Trenwick America
Corporation, a Delaware corporation (the "Borrower"), hereby promises to pay to
the order of The Insurance Corporation of New York, a New York corporation (the
"Lender"), the aggregate principal sum of TWENTY-SIX MILLION THREE HUNDRED
THOUSAND DOLLARS ($26,300,000.00) advanced to the Borrower by the Lender on the
respective dates set forth on Schedule I annexed hereto (each an "Advance", and
collectively the "Advances") and unpaid as of the date hereof, or such lesser
unpaid principal balance as shall be outstanding hereunder, together with
interest on the unpaid principal balance from time to time outstanding from the
date of each Advance at a rate and upon the terms provided in this Note.

      The Borrower shall pay on demand the unpaid principal sum of each Advance
and interest thereon from and including the date each Advance was made as set
forth on Schedule I hereto to but not including the date on which the unpaid
principal sum of such Advance shall be paid in full, at a fluctuating interest
rate equal to the One Year Treasury Rate in effect on the date such Advance was
made, commencing on the date of each Advance. For purposes of this Note, the
"One Year Treasury Rate" means the annual yield rate, on the date to which the
One Year Treasury Rate relates, of actively traded U.S. Treasury securities
having a remaining duration to maturity of one year, as such rate is published
under "Treasury Constant Maturities" in Federal Reserve Statistical Release
H.15(519). Interest on the unpaid principal sum of each Advance shall be
computed on the basis of the actual number of days elapsed over a year of 360
days. If the Borrower shall default in the payment of principal or interest on
any Advance, the Borrower shall on demand pay interest, to the extent permitted
by applicable law, on such defaulted sum at a rate per annum which is 2% above
the rate which would otherwise be applicable as set forth in this Note.

      The Borrower waives presentment, demand for payment, protest and notice of
dishonor of this Note. This Note may not be waived, modified, changed or
discharged orally, but only by an agreement in writing, which is signed by the
party or parties against whom enforcement of any waiver, modification, change or
discharge is sought.

      THIS NOTE SHALL BE GOVERNED BY INTERPRETED AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.


                                       1



      The Borrower agrees to pay all costs and expenses (including court costs
and reasonable attorney's fees and expenses) that may be incurred by the holder
of this Note in connection with the enforcement of this Note.

TRENWICK AMERICA CORPORATION


By: /s/ Alan L. Hunte
   -------------------------------------
   Name:  Alan L. Hunte
   Title: Executive Vice President and
          Chief Financial Officer


                                       2



                              INSCORP due from TAC
                   Intercompany Loans as at December 31, 2002
                  ---------------------------------------------
                          Date                        Loans
                  --------------------          ---------------

                    May 21, 2002                    3,800,000
                    May 24, 2002                    1,500,000
                    June 17, 2002                  10,000,000
                    July 1, 2002                    3,000,000
                    July 31, 2002                   2,000,000
                    August 26, 2002                 2,000,000
                    October 15, 2002                2,000,000
                    November 6, 2002                2,000,000

                                                   ----------
                  Balance @ December 31, 2002      26,300,000
                                                   ==========


                                       3

EX-10.33

                                                                   Exhibit 10.33

                             DEMAND PROMISSORY NOTE

$33,300,000.00                                                 December 31, 2002

      ON DEMAND, FOR VALUE RECEIVED, the undersigned, Trenwick America
Corporation, a Delaware corporation (the "Borrower"), hereby promises to pay to
the order of Trenwick America Reinsurance Corporation, a Connecticut corporation
(the "Lender"), the aggregate principal sum of THIRTY-THREE MILLION THREE
HUNDRED THOUSAND DOLLARS ($33,300,000.00) advanced to the Borrower by the Lender
on the respective dates set forth on Schedule I annexed hereto (each an
"Advance", and collectively the "Advances") and unpaid as of the date hereof, or
such lesser unpaid principal balance as shall be outstanding hereunder, together
with interest on the unpaid principal balance from time to time outstanding from
the date of each Advance at a rate and upon the terms provided in this Note.

      The Borrower shall pay on demand the unpaid principal sum of each Advance
and interest thereon from and including the date each Advance was made as set
forth on Schedule I hereto to but not including the date on which the unpaid
principal sum of such Advance shall be paid in full, at a fluctuating interest
rate equal to the One Year Treasury Rate in effect on the date such Advance was
made, commencing on the date of each Advance. For purposes of this Note, the
"One Year Treasury Rate" means the annual yield rate, on the date to which the
One Year Treasury Rate relates, of actively traded U.S. Treasury securities
having a remaining duration to maturity of one year, as such rate is published
under "Treasury Constant Maturities" in Federal Reserve Statistical Release
H.15(519). Interest on the unpaid principal sum of each Advance shall be
computed on the basis of the actual number of days elapsed over a year of 360
days. If the Borrower shall default in the payment of principal or interest on
any Advance, the Borrower shall on demand pay interest, to the extent permitted
by applicable law, on such defaulted sum at a rate per annum which is 2% above
the rate which would otherwise be applicable as set forth in this Note.

      The Borrower waives presentment, demand for payment, protest and notice of
dishonor of this Note. This Note may not be waived, modified, changed or
discharged orally, but only by an agreement in writing, which is signed by the
party or parties against whom enforcement of any waiver, modification, change or
discharge is sought.

      THIS NOTE SHALL BE GOVERNED BY INTERPRETED AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.


                                       1


      The Borrower agrees to pay all costs and expenses (including court costs
and reasonable attorney's fees and expenses) that may be incurred by the holder
of this Note in connection with the enforcement of this Note.

TRENWICK AMERICA CORPORATION


By: /s/ Alan L. Hunte
   ----------------------------------
      Name:  Alan L. Hunte
      Title: Executive Vice President and
             Chief Financial Officer

                                       2


                               TARCO due from TAC
                   Intercompany Loans as at December 31, 2002
                  -------------------------------------------
                              Date                    Loans
                  ---------------------------      ----------

                    June 4, 2002                    1,300,000
                    June 14, 2002                  14,000,000
                    July 1, 2002                    2,000,000
                    July 16, 2002                   2,000,000
                    July 31, 2002                   2,000,000
                    August 12, 2002                 2,000,000
                    September 10, 2002              2,000,000
                    October 3, 2002                 2,000,000
                    October 15, 2002                2,000,000
                    November 20, 2002               2,000,000
                    December 17, 2002               2,000,000

                                                   ----------
                  Balance @ December 31, 2002      33,300,000
                                                   ==========


                                       3

EX-12.1

                                                                    Exhibit 12.1

                          TRENWICK AMERICA CORPORATION
         COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
                 (Amounts in thousands of United States dollars)



                                                                            Years ended December 31,
                                                        -----------------------------------------------------------------
                                                           2002          2001          2000          1999          1998
                                                        ---------     ---------     ---------     ---------     ---------
                                                                                                 
Earnings
Net income (loss) before cumulative effect of
  change in accounting principle                        $(223,875)    $ (19,525)    $ (36,972)    $  (9,895)    $  25,608
Income taxes expense (benefit)                             61,304       (14,628)      (22,529)      (12,355)        4,762
                                                        ---------     ---------     ---------     ---------     ---------
Income (loss) before income taxes and before
  cumulative effect of change in accounting principle    (162,571)      (34,153)      (59,501)      (22,250)       30,370
Fixed charges (as below)                                   22,551        31,336        35,769        18,550        13,656
                                                        ---------     ---------     ---------     ---------     ---------
Earnings (loss) (for ratio calculation)                  (140,020)   ` $  (2,817)    $ (23,732)    $  (3,700)    $  44,026
                                                        =========     =========     =========     =========     =========

Fixed charges:
Interest expense                                        $  12,849     $  21,634     $  26,067     $   8,848     $   3,954
Dividends on capital securities of
  subsidiary trust                                          9,702         9,702         9,702         9,702         9,702
                                                        ---------     ---------     ---------     ---------     ---------
Total fixed charges                                        22,551     $  31,336     $  35,769     $  18,550     $  13,656
                                                        =========     =========     =========     =========     =========

Ratio of earnings of fixed charges                          (6.21)        (0.09)        (0.66)         (.20)          3.2
                                                        =========     =========     =========     =========     =========

Deficiency                                              $(162,571)    $ (34,153)    $ (59,501)    $ (22,250)
                                                        =========     =========     =========     =========


For purposes of computing the consolidated ratio of earnings to fixed charges,
"earnings" represent income before income taxes and fixed charges. "Fixed
charges" include gross interest expense (other than on deposits), minority
interest and the proportion deemed representative of the interest factor of rent
expense.

EX-23.1

                                                                    EXHIBIT 23.1

                       Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-63402) of Trenwick America Corporation, of our
report dated March 31, 2003 except for Note 7 to the financial statements as to
which the date is April 9, 2003 relating to the consolidated financial
statements of Trenwick America Corporation, which appears in this Annual Report
on Form 10-K.


/s/ PricewaterhouseCoopers LLP

New York, New York
April 9, 2003

EX-99.1

                                                                    Exhibit 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen H. Binet, President and Chief Executive Officer of Trenwick America
Corporation, hereby certify to the best of my knowledge and belief that this
Annual Report on Form 10-K fully complies with the requirements of Section 13(a)
or 15(d) of the Securities and Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d))
and that the information contained in this Annual Report on Form 10-K fairly
represents, in all material respects, the financial condition and results of
operations of Trenwick America Corporation.

Date:  April 9, 2003


/s/ Stephen H. Binet
- --------------------------------------
     Stephen H. Binet
President and Chief Executive Officer

EX-99.2

                                                                    Exhibit 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Alan L. Hunte, Executive Vice President and Chief Financial Officer of
Trenwick America Corporation, hereby certify to the best of my knowledge and
belief that this Annual Report on Form 10-K fully complies with the requirements
of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 (15 U.S.C.
78m(a) or 78o(d)) and that the information contained in this Annual Report on
Form 10-K fairly represents, in all material respects, the financial condition
and results of operations of Trenwick America Corporation.

Date:  April 9, 2003


/s/ Alan L. Hunte
- --------------------------------
Alan L. Hunte
Executive Vice President
and Chief Financial Officer