10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 000-33047

MAX CAPITAL GROUP LTD.

(Exact name of registrant as specified in its charter)

Bermuda	98-0584464
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

Max House

2 Front Street

Hamilton, HM 11

Bermuda

(Address of principal executive offices) (Zip Code)

(441) 295-8800

(Registrant’s telephone number, including area code)

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “small reporting company,” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨    No  x

The number of the registrant’s common shares (par value $1.00 per share) outstanding as of October 30, 2009 was 57,013,063.

MAX CAPITAL GROUP LTD.

INDEX

		PAGE
PART I - FINANCIAL INFORMATION		3
ITEM 1.	Financial Statements	3
	Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and December 31, 2008	3
	Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2009 and 2008 (Unaudited)	4
	Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2009 and 2008 (Unaudited)	5
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008 (Unaudited)	6
	Notes to the Interim Consolidated Financial Statements (Unaudited)	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	47
ITEM 4.	Controls and Procedures	48
PART II – OTHER INFORMATION		49
ITEM 1.	Legal Proceedings	49
ITEM 1A.	Risk Factors	50
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
ITEM 3.	Defaults Upon Senior Securities	49
ITEM 4.	Submission of Matters to a Vote of Security Holders	50
ITEM 5.	Other Information	50
ITEM 6.	Exhibits	50
SIGNATURES		51

2

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

MAX CAPITAL GROUP LTD.

CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of U.S. Dollars, except share amounts)

	September 30, 2009		December 31, 2008
	(Unaudited)
ASSETS
Cash and cash equivalents	$	1,056,011	$	949,404
Fixed maturities, trading at fair value (amortized cost: 2009 - $71,521; 2008 - $60,127)		74,337		61,820
Fixed maturities, available for sale, at fair value (amortized cost: 2009 - $2,822,114; 2008 - $3,607,062)		2,872,146		3,592,039
Fixed maturities, held to maturity at amortized cost (fair value: 2009 - $1,069,245; 2008 - $nil)		1,026,244		—
Other investments, at fair value		389,515		753,658
Accrued interest income		52,145		52,882
Premiums receivable		546,195		554,845
Losses and benefits recoverable from reinsurers		985,614		846,622
Deferred acquisition costs		66,451		51,337
Prepaid reinsurance premiums		206,924		192,889
Trades pending settlement		38,217		85,727
Other assets		114,947		110,772
Total assets	$	7,428,746	$	7,251,995
LIABILITIES
Property and casualty losses	$	3,159,156	$	2,938,171
Life and annuity benefits		1,415,836		1,366,976
Deposit liabilities		152,638		219,260
Funds withheld from reinsurers		142,384		164,157
Unearned property and casualty premiums		676,342		574,134
Reinsurance balances payable		151,615		160,686
Accounts payable and accrued expenses		92,722		81,916
Bank loans		—		375,000
Senior notes		91,379		91,364
Total liabilities		5,882,072		5,971,664
SHAREHOLDERS’ EQUITY
Preferred shares (par value $1.00 per share) 20,000,000 shares authorized; no shares issued or outstanding		—		—
Common shares (par value $1.00 per share) 200,000,000 shares authorized; 57,013,063 shares issued and outstanding (2008 – 55,805,790)		57,013		55,806
Additional paid-in capital		773,923		763,391
Accumulated other comprehensive income (loss)		41,602		(45,399	)
Retained earnings		674,136		506,533
Total shareholders’ equity		1,546,674		1,280,331
Total liabilities and shareholders’ equity	$	7,428,746	$	7,251,995

See accompanying notes to unaudited interim consolidated financial statements.

3

MAX CAPITAL GROUP LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)

(Expressed in thousands of U.S. Dollars, except shares and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
REVENUES
Gross premiums written	$	265,886		$	206,260		$	1,096,668		$	882,186
Reinsurance premiums ceded		(83,290	)		(96,061	)		(377,338	)		(299,851	)
Net premiums written	$	182,596		$	110,199		$	719,330		$	582,335
Earned premiums	$	329,869		$	238,378		$	993,871		$	760,676
Earned premiums ceded		(121,853	)		(96,789	)		(366,788	)		(248,665	)
Net premiums earned		208,016			141,589			627,083			512,011
Net investment income		42,830			45,265			125,073			137,398
Net gains (losses) on other investments		23,275			(158,756	)		62,693			(144,990	)
Net realized gains (losses) on fixed maturities		1,253			(3,793	)		1,747			(1,024	)
Total other-than-temporary impairment losses		—			(13,757	)		(5,190	)		(16,887	)
Portion of loss recognized in other comprehensive income (loss), before taxes		(139	)		—			3,037			—
Net impairment losses recognized in earnings		(139	)		(13,757	)		(2,153	)		(16,887	)
Other income		819			(423	)		3,099			1,001
Total revenues		276,054			10,125			817,542			487,509
LOSSES AND EXPENSES
Net losses and loss expenses		131,778			106,834			378,729			278,585
Claims and policy benefits		14,378			14,000			84,117			137,175
Acquisition costs		27,997			13,896			73,686			35,743
Interest expense		5,971			4,501			14,654			20,547
Net foreign exchange losses (gains)		406			1,971			(6,474	)		1,984
Merger and acquisition expenses		(41,350	)		(500	)		(31,342	)		3,488
General and administrative expenses		40,372			31,837			115,537			90,048
Total losses and expenses		179,552		$	172,539			628,907		$	567,570
INCOME (LOSS) BEFORE TAXES		96,502			(162,414	)		188,635			(80,061	)
Income tax expense		1,176			773			5,012			1,174
NET INCOME (LOSS)		95,326		$	(163,187	)		183,623		$	(81,235	)
Change in net unrealized gains and losses of fixed maturities, net of tax		95,794			(40,127	)		66,629			(108,939	)
Foreign currency translation adjustment		(4,462	)		(9,116	)		20,372			(17,469	)
COMPREHENSIVE INCOME (LOSS)	$	186,658		$	(212,430	)	$	270,624		$	(207,643	)
Basic earnings per share	$	1.67		$	(2.89	)	$	3.22		$	(1.43	)
Diluted earnings per share (1)	$	1.64		$	(2.89	)	$	3.18		$	(1.43	)
Weighted average common shares outstanding—basic		57,233,115			56,385,134			56,978,901			56,660,457
Weighted average common shares outstanding—diluted (1)		58,210,501			56,385,134			57,677,996			56,660,457

(1) Diluted earnings per share calculations use weighted average common shares outstanding-basic, when in a net loss position.

See accompanying notes to unaudited interim consolidated financial statements.

4

MAX CAPITAL GROUP LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

(Expressed in thousands of U.S. Dollars)

	Nine Months Ended September 30,
	2009			2008
Common shares
Balance, beginning of period	$	55,806		$	57,515
Issuance of common shares, net		1,529			2,315
Repurchase of shares		(322	)		(3,860	)
Balance, end of period		57,013			55,970
Additional paid-in capital
Balance, beginning of period		763,391			844,455
Issuance of common shares, net		457			2,677
Stock based compensation expense		16,124			14,726
Repurchase of shares		(6,049	)		(102,380	)
Balance, end of period		773,923			759,478
Accumulated other comprehensive income (loss)
Balance, beginning of period		(45,399	)		(20,341	)
Holding gains (losses) on available for sale securities arising in period, net of tax		66,650			(122,677	)
Net realized losses on available for sale securities included in net income, net of tax		3,016			13,738
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of tax		(3,037	)		—
Foreign currency translation adjustment		20,372			(17,469	)
Balance, end of period		41,602			(146,749	)
Retained earnings
Balance, beginning of period		506,533			702,265
Net income (loss)		183,623			(81,235	)
Dividends paid		(16,020	)		(15,247	)
Balance, end of period		674,136			605,783
Total shareholders’ equity	$	1,546,674		$	1,274,482

See accompanying notes to unaudited interim consolidated financial statements.

5

MAX CAPITAL GROUP LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Expressed in thousands of U.S. Dollars)

	Nine Months Ended September 30,
	2009			2008
OPERATING ACTIVITIES
Net income (loss)	$	183,623		$	(81,235	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock based compensation		16,124			14,726
Amortization of premium on fixed maturities		2,503			3,771
Accretion of deposit liabilities		2,078			3,649
Net (gains) losses on other investments		(62,693	)		144,990
Net realized (gains) losses on fixed maturities		(1,747	)		1,024
Net impairment losses recognized in earnings		2,153			16,887
Changes in:
Accrued interest income		820			1,461
Premiums receivable		12,894			(72,295	)
Losses and benefits recoverable from reinsurers		(130,985	)		(140,869	)
Deferred acquisition costs		(13,645	)		(7,381	)
Prepaid reinsurance premiums		(11,907	)		(51,004	)
Other assets		(2,624	)		17,135
Property and casualty losses		183,163			247,334
Life and annuity benefits		508			55,057
Funds withheld from reinsurers		(21,773	)		(10,306	)
Unearned property and casualty premiums		92,046			121,510
Reinsurance balances payable		(10,515	)		48,358
Accounts payable and accrued expenses		9,828			36,821
Cash provided by operating activities		249,851			349,633
INVESTING ACTIVITIES
Purchases of available for sale securities		(783,451	)		(630,760	)
Sales of available for sale securities		175,465			261,290
Redemptions of available for sale securities		479,310			441,634
Purchases of trading securities		(40,691	)		—
Sales of trading securities		28,887			—
Redemptions of trading securities		5,094			—
Purchases of held to maturity securities		(33,647	)		—
Net sales of other investments		462,501			28,251
Acquisition of subsidiary, net of cash acquired		—			(29,941	)
Cash provided by investing activities		293,468			70,474
FINANCING ACTIVITIES
Net proceeds from issuance of common shares		1,986			4,992
Repurchase of common shares		(6,371	)		(106,240	)
Dividends paid		(16,020	)		(15,247	)
Repayments of bank loans		(375,000	)		(35,000	)
Additions to deposit liabilities		12,422			15,762
Payments of deposit liabilities		(80,748	)		(21,011	)
Cash used in financing activities		(463,731	)		(156,744	)
Effect of exchange rate on foreign currency cash		27,019			(8,090	)
Net increase in cash and cash equivalents		106,607			255,273
Cash and cash equivalents, beginning of period		949,404			397,656
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,056,011		$	652,929

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest paid totaled $4,943 and $14,892 for the nine months ended September 30, 2009 and 2008, respectively.

Corporate taxes paid totaled $310 and $185 for the nine months ended September 30, 2009 and 2008, respectively.

See accompanying notes to unaudited interim consolidated financial statements.

6

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. GENERAL

Max Capital Group Ltd. (“Max Capital” and, collectively with its subsidiaries, the “Company”), is a Bermuda headquartered global provider of specialty insurance and reinsurance products for the property and casualty market, with underwriting operations based in Bermuda, Ireland, the United States and the United Kingdom. The Company underwrites a diversified portfolio of risks and serves clients ranging from Fortune 1000 companies to small owner-operated businesses. The Company also provides reinsurance for the life and annuity market when attractive opportunities arise.

Max Capital was incorporated on July 8, 1999 under the laws of Bermuda. Max Capital’s principal operating subsidiary is Max Bermuda Ltd. (“Max Bermuda”). Max Bermuda is registered as a Class 4 insurer and long-term insurer under the insurance laws of Bermuda.

The Company’s non-Lloyd’s European activities are conducted from Dublin, Ireland through Max Europe Holdings Limited and its two wholly-owned operating subsidiaries, Max Re Europe Limited (“Max Re Europe”) and Max Insurance Europe Limited (“Max Insurance Europe”). In November 2008, Max Capital completed the acquisition of Max UK Holdings Ltd. (“Max UK”) which, through Lloyd’s Syndicates 1400, 2525 and 2526 (the “Syndicates”), underwrites a diverse portfolio of specialty risks. Max UK’s operations are based primarily in London, England.

The Company’s U.S. activities are conducted through Max USA Holdings Ltd. (“Max USA”) and its operating subsidiaries Max Specialty Insurance Company (“Max Specialty”), a Delaware-domiciled excess and surplus insurance company, and Max America Insurance Company (“Max America”), an Indiana-domiciled insurance company. Through Max America and Max Specialty, the Company is able to write both admitted and non-admitted business throughout the United States and Puerto Rico.

This report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

The consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, these unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position and results of operations as at the end of and for the periods presented. All significant intercompany accounts and transactions have been eliminated from these statements.

Certain reclassifications have been made to prior period amounts to conform to the current period presentation. These include the reclassification of other-than-temporary impairment losses to be presented separately from net realized gains and losses on fixed maturities and the reclassification of merger and acquisition expenses to be presented separately from general and administrative expenses in the consolidated statements of income and comprehensive income.

2. RECENT ACCOUNTING PRONOUNCEMENTS

ASU 2009-01 – The FASB Accounting Standards Codification and Hierarchy of Generally Accepted Accounting Principles

On July 1, 2009, the FASB launched its Accounting Standards Codification (the “Codification”). The Codification became the sole source of authoritative U.S. GAAP for interim and annual periods ending after September 15, 2009. Other than resolving certain minor inconsistencies in current U.S. GAAP, the Codification does not change U.S. GAAP, but is intended to make it easier to find and research U.S. GAAP applicable to a particular transaction or specific accounting issue. The Codification did not have a material impact on the Company’s consolidated financial statements.

ASU 2009-05, Fair Value Measurements and Disclosures (820) – Measuring Liabilities at Fair Value

ASU 2009-05 allows companies determining the fair value of a liability to use the perspective of an investor that holds the related obligation as an asset. The guidance is effective for interim and annual periods beginning after August 27, 2009 and applied to all fair value measurements of liabilities. This accounting standards update is not expected to have a material impact on the Company’s consolidated financial statements.

7

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

ASU 2009-12, Fair Value Measurements and Disclosures (820) – Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent)

ASU 2009-12 expands the circumstances in which a practical expedient may be used to estimate fair value to include investments in foreign and other entities that have attributes of investment companies and report net asset value or its equivalent to their investors. The practical expedient cannot be used for investments that have a readily determinable fair value. The ASU sets forth disclosure requirements for investments within its scope. The amendments in ASU 2009-12 are effective for interim and annual periods ending after December 15, 2009 with early adoption permitted. The Company has not early adopted this accounting standards update, however, the Company already makes use of reported net asset value to measure fair value for its other investments and does not expect this standard to have a material impact on the Company’s consolidated financial statements.

3. EARNINGS PER SHARE

Basic earnings per share is based on weighted average common shares outstanding and excludes any dilutive effect of warrants, options and convertible securities. Diluted earnings per share assumes the conversion of dilutive convertible securities and the exercise of all dilutive stock warrants and options.

In the three months ended March 31, 2009 the Company adopted a new accounting standard (in accordance with ASC 260-10-45) which requires share based compensation awards that qualify as participating securities to be included in basic earnings per share using the two-class method. A share based compensation award is considered a participating security if it receives non-forfeitable dividends. The pronouncement became effective for fiscal years beginning after December 15, 2008 and interim periods within those years. All prior-period earnings per share data presented are adjusted retroactively to conform to the pronouncement. The adoption resulted in no change to earnings per share as previously reported for the three month and nine month periods ended September 30, 2008.

4. SEGMENT INFORMATION

The Company operates in five segments: Bermuda/Dublin insurance, Bermuda/Dublin reinsurance, U.S. specialty, Max at Lloyd’s and life and annuity reinsurance. Within the Bermuda/Dublin insurance segment, the Company offers property and casualty excess of loss capacity on specific risks related to individual insureds. In the Bermuda/Dublin reinsurance segment, the Company offers property and casualty quota share and excess of loss capacity providing coverage for a portfolio of underlying risks written by the Company’s clients. The U.S. specialty segment offers property and casualty coverage insurance from offices in the United States on specific risks related to individual insureds. The Max at Lloyd’s segment offers property and property catastrophe reinsurance, accident & health reinsurance, financial institutions insurance and professional liability insurance coverage through the Syndicates. The life and annuity reinsurance segment offers reinsurance products focusing on existing blocks of life and annuity business, which take the form of co-insurance transactions whereby the risks are reinsured on the same basis as the original policies.

The Company also has a corporate function that manages its investing and financing activities.

Each of the U.S. specialty and the Max at Lloyd’s segments has its own portfolio of fixed maturities investments. The investment income earned by each of these segments is reported in the respective segment.

In contrast, invested assets relating to the Bermuda/Dublin insurance, Bermuda/Dublin reinsurance and life and annuity segments are managed on an aggregated basis. Consequently, investment income on this consolidated portfolio and gains on other investments are not directly captured in any one of these segments. However, because of the longer duration of liabilities on casualty insurance and reinsurance business (as compared to property) and life and annuity reinsurance business, investment returns are important in evaluating the profitability of these segments. Accordingly, we allocate investment returns from the consolidated portfolio to each of these three segments. This is based on a notional allocation of invested assets from the consolidated portfolio using durations that are determined based on estimated cash flows into and out of each segment. The balance of investment returns from this consolidated portfolio is allocated to our corporate function for the purposes of segment reporting.

8

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

A summary of operations by segment for the three and nine months ended September 30, 2009 and 2008 follows:

(Expressed in thousands of U.S. Dollars)

	Three Months Ended September 30, 2009
	Property & Casualty															Life & Annuity
	Bermuda/ Dublin Insurance			Bermuda/ Dublin Reinsurance			U.S. Specialty			Max at Lloyd’s			Total			Reinsurance			Corporate			Consolidated
Gross premiums written	$	81,134		$	94,118		$	69,419		$	21,087		$	265,758		$	128		$	—		$	265,886
Reinsurance premiums ceded		(41,884	)		(11,106	)		(26,259	)		(4,015	)		(83,264	)		(26	)		—			(83,290	)
Net premiums written	$	39,250		$	83,012		$	43,160		$	17,072		$	182,494		$	102		$	—		$	182,596
Earned premiums	$	103,961		$	128,458		$	68,175		$	29,147		$	329,741		$	128		$	—		$	329,869
Earned premiums ceded		(54,814	)		(25,367	)		(37,074	)		(4,572	)		(121,827	)		(26	)		—			(121,853	)
Net premiums earned		49,147			103,091			31,101			24,575			207,914			102			—			208,016
Net investment income		5,898			10,404			1,461			1,749			19,512			13,143			10,175			42,830
Net gains on other investments		1,298			3,040			—			—			4,338			11,932			7,005			23,275
Net realized gains (losses) on fixed maturities		—			—			—			1,400			1,400			—			(147	)		1,253
Net impairment losses recognized in earnings		—			—			—			—			—			—			(139	)		(139	)
Other income		91			—			52			(33	)		110			—			709			819
Total revenues		56,434			116,535			32,614			27,691			233,274			25,177			17,603			276,054
Net losses and loss expenses		31,756			68,728			21,266			10,028			131,778			—			—			131,778
Claims and policy benefits		—			—			—			—			—			14,378			—			14,378
Acquisition costs		369			20,299			1,926			5,250			27,844			153			—			27,997
Interest expense		—			1,706			—			—			1,706			2,349			1,916			5,971
Net foreign exchange losses		—			—			—			42			42			—			364			406
Merger and acquisition expenses		—			—			—			—			—			—			(41,350	)		(41,350	)
General and administrative expenses		7,281			8,857			7,804			5,423			29,365			829			10,178			40,372
Total losses and expenses		39,406			99,590			30,996			20,743			190,735			17,709			(28,892	)		179,552
Income before taxes	$	17,028		$	16,945		$	1,618		$	6,948		$	42,539		$	7,468		$	46,495		$	96,502
Loss ratio *		64.6	%		66.7	%		68.4	%		40.8	%		63.4	%		***
Combined ratio **		80.2	%		94.9	%		99.7	%		84.2	%		90.9	%		***

* Loss ratio is calculated by dividing net losses and loss expenses by net premiums earned.

** Combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses by net premiums earned.

*** Loss ratio and combined ratio are not provided for the life and annuity reinsurance segment as the Company believes these ratios are not appropriate measures for life and annuity underwriting.

9

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

(Expressed in thousands of U.S. Dollars)

	Nine Months Ended September 30, 2009
	Property & Casualty															Life & Annuity
	Bermuda/ Dublin Insurance			Bermuda/ Dublin Reinsurance			U.S. Specialty			Max at Lloyd’s			Total			Reinsurance			Corporate			Consolidated
Gross premiums written	$	302,727		$	422,296		$	219,268		$	110,629		$	1,054,920		$	41,748		$	—		$	1,096,668
Reinsurance premiums ceded		(146,076	)		(80,574	)		(118,579	)		(31,963	)		(377,192	)		(146	)		—			(377,338	)
Net premiums written	$	156,651		$	341,722		$	100,689		$	78,666		$	677,728		$	41,602		$	—		$	719,330
Earned premiums	$	307,709		$	364,994		$	185,609		$	93,811		$	952,123		$	41,748		$	—		$	993,871
Earned premiums ceded		(157,710	)		(74,711	)		(111,682	)		(22,539	)		(366,642	)		(146	)		—			(366,788	)
Net premiums earned		149,999			290,283			73,927			71,272			585,481			41,602			—			627,083
Net investment income		16,861			29,607			4,549			3,216			54,233			37,626			33,214			125,073
Net gains on other investments		3,537			8,467			—			—			12,004			29,146			21,543			62,693
Net realized gains (losses) on fixed maturities		—			—			148			2,587			2,735			—			(988	)		1,747
Net impairment losses recognized in earnings		—			—			—			—			—			—			(2,153	)		(2,153	)
Other income		1,238			12			272			475			1,997			—			1,102			3,099
Total revenues		171,635			328,369			78,896			77,550			656,450			108,374			52,718			817,542
Net losses and loss expenses		106,029			192,756			46,500			33,444			378,729			—			—			378,729
Claims and policy benefits		—			—			—			—			—			84,117			—			84,117
Acquisition costs		(1,503	)		53,496			5,873			14,797			72,663			1,023			—			73,686
Interest expense		—			2,400			—			—			2,400			2,803			9,451			14,654
Net foreign exchange gains		—			—			—			(5,124	)		(5,124	)		—			(1,350	)		(6,474	)
Merger and acquisition expenses		—			—			—			—			—			—			(31,342	)		(31,342	)
General and administrative expenses		17,825			23,604			21,195			15,856			78,480			2,180			34,877			115,537
Total losses and expenses		122,351			272,256			73,568			58,973			527,148			90,123			11,636			628,907
Income before taxes	$	49,284		$	56,113		$	5,328		$	18,577		$	129,302		$	18,251		$	41,082		$	188,635
Loss ratio *		70.7	%		66.4	%		62.9	%		46.9	%		64.7	%		***
Combined ratio **		81.6	%		93.0	%		99.5	%		89.9	%		90.5	%		***

* Loss ratio is calculated by dividing net losses and loss expenses by net premiums earned.

** Combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses by net premiums earned.

*** Loss ratio and combined ratio are not provided for the life and annuity reinsurance segment as the Company believes these ratios are not appropriate measures for life and annuity underwriting.

10

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

(Expressed in thousands of U.S. Dollars)

	Three Months Ended September 30, 2008
	Property & Casualty														Life & Annuity
	Bermuda/ Dublin Insurance			Bermuda/ Dublin Reinsurance			U.S. Specialty			Max at Lloyd’s (a)		Total			Reinsurance			Corporate			Consolidated
Gross premiums written	$	80,908		$	72,458		$	52,894		$	—	$	206,260		$	—		$	—		$	206,260
Reinsurance premiums ceded		(38,316	)		(27,210	)		(30,535	)		—		(96,061	)		—			—			(96,061	)
Net premiums written	$	42,592		$	45,248		$	22,359		$	—	$	110,199		$	—		$	—		$	110,199
Earned premiums	$	93,264		$	110,132		$	34,982		$	—	$	238,378		$	—		$	—		$	238,378
Earned premiums ceded		(47,013	)		(28,054	)		(21,722	)		—		(96,789	)		—			—			(96,789	)
Net premiums earned		46,251			82,078			13,260			—		141,589			—			—			141,589
Net investment income		4,933			8,360			1,753			—		15,046			9,347			20,872			45,265
Net losses on other investments		(14,937	)		(32,637	)		—			—		(47,574	)		(65,286	)		(45,896	)		(158,756	)
Net realized losses on fixed maturities		—			—			(523	)		—		(523	)		—			(3,270	)		(3,793	)
Net impairment losses recognized in earnings		—			—			—			—		—			—			(13,757	)		(13,757	)
Other income		—			—			140			—		140			—			(563	)		(423	)
Total revenues		36,247			57,801			14,630			—		108,678			(55,939	)		(42,614	)		10,125
Net losses and loss expenses		39,014			58,990			8,830			—		106,834			—			—			106,834
Claims and policy benefits		—			—			—			—		—			14,000			—			14,000
Acquisition costs		(743	)		12,668			1,773			—		13,698			198			—			13,896
Interest expense		—			(63	)		—			—		(63	)		(148	)		4,712			4,501
Net foreign exchange losses		—			—			—			—		—			—			1,971			1,971
Merger and acquisition expenses		—			—			—			—		—			—			(500	)		(500	)
General and administrative expenses		5,200			6,186			8,323			—		19,709			782			11,346			31,837
Total losses and expenses		43,471			77,781			18,926			—		140,178			14,832			17,529			172,539
Loss before taxes	$	(7,224	)	$	(19,980	)	$	(4,296	)	$	—	$	(31,500	)	$	(70,771	)	$	(60,143	)	$	(162,414	)
Loss ratio *		84.4	%		71.9	%		66.6	%		—		75.5	%		***
Combined ratio **		94.0	%		94.8	%		142.7	%		—		99.0	%		***

* Loss ratio is calculated by dividing net losses and loss expenses by net premiums earned.

** Combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses by net premiums earned.

*** Loss ratio and combined ratio are not provided for the life and annuity reinsurance segment as the Company believes these ratios are not appropriate measures for life and annuity underwriting.

(a) The results of operations for the Max at Lloyd’s segment are consolidated only from November 6, 2008, the date Max at Lloyd’s was acquired.

11

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

(Expressed in thousands of U.S. Dollars)

	Nine Months Ended September 30, 2008
	Property & Casualty														Life & Annuity
	Bermuda/ Dublin Insurance			Bermuda/ Dublin Reinsurance			U.S. Specialty			Max at Lloyd’s (a)		Total			Reinsurance			Corporate			Consolidated
Gross premiums written	$	276,288		$	377,485		$	134,162		$	—	$	787,935		$	94,251		$	—		$	882,186
Reinsurance premiums ceded		(133,099	)		(85,133	)		(81,334	)		—		(299,566	)		(285	)		—			(299,851	)
Net premiums written	$	143,189		$	292,352		$	52,828		$	—	$	488,369		$	93,966		$	—		$	582,335
Earned premiums	$	278,092		$	310,663		$	77,670		$	—	$	666,425		$	94,251		$	—		$	760,676
Earned premiums ceded		(140,991	)		(57,817	)		(49,571	)		—		(248,379	)		(286	)		—			(248,665	)
Net premiums earned		137,101			252,846			28,099			—		418,046			93,965			—			512,011
Net investment income		13,313			27,797			5,563			—		46,673			29,932			60,793			137,398
Net losses on other investments		(13,576	)		(29,638	)		—			—		(43,214	)		(58,751	)		(43,025	)		(144,990	)
Net realized losses on fixed maturities		—			—			(523	)		—		(523	)		—			(501	)		(1,024	)
Net impairment losses recognized in earnings		—			—			—			—		—			—			(16,887	)		(16,887	)
Other income		1,112			—			140			—		1,252			—			(251	)		1,001
Total revenues		137,950			251,005			33,279			—		422,234			65,146			129			487,509
Net losses and loss expenses		108,819			150,326			19,440			—		278,585			—			—			278,585
Claims and policy benefits		—			—			—			—		—			137,175			—			137,175
Acquisition costs		(1,945	)		35,174			2,058			—		35,287			456			—			35,743
Interest expense		—			2,382			—			—		2,382			2,096			16,069			20,547
Net foreign exchange losses		—			—			—			—		—			—			1,984			1,984
Merger and acquisition expenses		—			—			—			—		—			—			3,488			3,488
General and administrative expenses		16,052			21,981			20,599			—		58,632			2,273			29,143			90,048
Total losses and expenses		122,926			209,863			42,097			—		374,886			142,000			50,684			567,570
Income (loss) before taxes	$	15,024		$	41,142		$	(8,818	)	$	—	$	47,348		$	(76,854	)	$	(50,555	)	$	(80,061	)
Loss ratio *		79.4	%		59.5	%		69.2	%		—		66.6	%		***
Combined ratio **		89.7	%		82.1	%		149.8	%		—		89.1	%		***

* Loss ratio is calculated by dividing net losses and loss expenses by net premiums earned.

** Combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses by net premiums earned.

*** Loss ratio and combined ratio are not provided for the life and annuity reinsurance segment as the Company believes these ratios are not appropriate measures for life and annuity underwriting.

(a) The results of operations for the Max at Lloyd’s segment are consolidated only from November 6, 2008, the date Max at Lloyd’s was acquired.

The Company’s clients are located in three geographic regions: North America, Europe and the rest of the world.

12

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

Financial information related to property and casualty gross premiums written and reinsurance premiums ceded by geographic region for the nine months ended September 30, 2009 and 2008 were:

	Nine Months Ended September 30,
	2009			2008
	(Expressed in thousands of U.S. Dollars)
Gross premiums written - North America	$	844,638		$	651,681
Gross premiums written - Europe		128,722			103,405
Gross premiums written - Rest of the world		81,560			32,849
Reinsurance ceded - North America		(300,087	)		(263,617	)
Reinsurance ceded - Europe		(64,289	)		(25,530	)
Reinsurance ceded - Rest of the world		(12,816	)		(10,419	)
	$	677,728		$	488,369

The largest client in each of the nine month periods ended September 30, 2009 and 2008 accounted for 5.4% and 9.3% of the Company’s property and casualty gross premiums written, respectively.

Financial information related to life and annuity gross premiums written and reinsurance premiums ceded by geographic region for the nine months ended September 30, 2009 and 2008 were:

	Nine Months Ended September 30,
	2009			2008
	(Expressed in thousands of U.S. Dollars)
Gross premiums written - North America	$	41,748		$	1,430
Gross premiums written - Europe		—			92,821
Reinsurance ceded - North America		(146	)		(285	)
Reinsurance ceded - Europe		—			—
	$	41,602		$	93,966

The largest client in each of the nine month periods ended September 30, 2009 and 2008 accounted for 97.9% and 98.5% of the Company’s life and annuity gross premiums written, respectively. One reinsurance transaction was written in each period, with the remainder of the gross premiums written comprising adjustment premiums on prior transactions.

5. INVESTMENTS

Transfer of Available for Sale Securities to Held to Maturity

The Company implemented a strategy in the three months ended September 30, 2009 to hold certain fixed income securities to maturity. Because the Company has the intent to hold such securities to maturity, they have been reclassified from available for sale to held to maturity in the consolidated financial statements. As a result of this classification, the held to maturity portfolio is recorded at amortized cost in the consolidated balance sheet and is no longer recorded at fair value. The held to maturity portfolio is comprised principally of long duration government and corporate debt securities. The Company believes this held to maturity strategy is achievable due to the relatively stable and predictable cash flows of the Company’s long-term liabilities. The fair value of those securities transferred was $952.7 million on the date of reclassification, and this became the new cost base. The unrealized appreciation at the date of the transfer continues to be reported as a separate component of shareholders’ equity and is being amortized over the remaining lives of the securities as an adjustment to yield in a manner consistent with the amortization of any premium or discount. The unrealized appreciation on the date of transfer was $17.7 million and $17.4 million of this balance remains unamortized at September 30, 2009.

13

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

Fixed Maturities – Available for Sale

The fair values and amortized cost of available for sale fixed maturities at September 30, 2009 and December 31, 2008 were:

			Included in Accumulated Other Comprehensive Income (“AOCI”)
					Gross Unrealized Losses
September 30, 2009 (Expressed in thousands of U.S. Dollars)	Amortized Cost		Unrealized Gain		Non-OTTI Unrealized Loss			OTTI Unrealized Loss			Fair Value
U.S. Government and Agencies	$	397,988	$	19,378	$	(738	)	$	—		$	416,628
Non-U.S. Government		97,649		3,697		(983	)		—			100,363
Corporate Securities		1,136,165		42,088		(12,953	)		—			1,165,300
Municipal Securities		66,411		2,430		(211	)		—			68,630
Asset-Backed Securities		167,555		1,195		(16,478	)		(1,466	)		150,806
Residential Mortgage-Backed Securities(1)		676,654		24,018		(10,950	)		(581	)		689,141
Commercial Mortgage-Backed Securities		279,692		14,240		(12,654	)		—			281,278
	$	2,822,114	$	107,046	$	(54,967	)	$	(2,047	)	$	2,872,146

December 31, 2008 (Expressed in thousands of U.S. Dollars)	Amortized Cost		Unrealized Gain		Unrealized Loss			Fair Value
U.S. Government and Agencies	$	362,391	$	43,664	$	—		$	406,055
Non-U.S. Government		610,057		52,648		(1,912	)		660,793
Corporate Securities		1,464,566		20,908		(59,037	)		1,426,437
Municipal Securities		47,842		1,232		(477	)		48,597
Asset-Backed Securities		216,991		84		(38,521	)		178,554
Residential Mortgage-Backed Securities(1)		717,531		13,575		(31,719	)		699,387
Commercial Mortgage-Backed Securities		187,684		538		(16,006	)		172,216
	$	3,607,062	$	132,649	$	(147,672	)	$	3,592,039

⁽¹⁾ Included within Residential Mortgage-Backed Securities are securities issued by U.S. Agencies with a fair value of $610,001 (2008—$573,745).

The following table sets forth certain information regarding the investment ratings (provided by major rating agencies) of the Company’s available for sale fixed maturities at September 30, 2009 and December 31, 2008.

	September 30, 2009			December 31, 2008
(Expressed in thousands of U.S. Dollars)	Fair Value		%	Fair Value		%
U.S. Government and Agencies(1)	$	1,026,629	35.8	$	979,800	27.3
AAA		651,448	22.7		1,524,501	42.4
AA		293,207	10.2		396,229	11.0
A		637,822	22.2		621,996	17.3
BBB		141,751	4.9		59,432	1.7
BB		32,607	1.1		4,161	0.1
B or lower		88,682	3.1		5,920	0.2
	$	2,872,146	100.0	$	3,592,039	100.0

⁽¹⁾ Included within U.S. Government and Agencies are Residential Mortgage-Backed Securities issued by U.S. Agencies with a fair value of $610,001 (2008—$573,745).

The maturity distribution for available for sale fixed maturities held at September 30, 2009 was as follows:

	Amortized Cost		Fair Value
Within one year	$	294,921	$	298,850
After one year through five years		899,038		929,088
After five years through ten years		407,551		422,930
More than ten years		1,220,604		1,221,278
	$	2,822,114	$	2,872,146

14

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

Actual maturities could differ from expected contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties.

Fixed Maturities – Held to Maturity

The fair values and amortized cost of held to maturity fixed maturities at September 30, 2009 were:

					Gross Unrealized Losses
September 30, 2009 (Expressed in thousands of U.S. Dollars)	Amortized Cost		Unrealized Gain		Non-OTTI Unrealized Loss		OTTI Unrealized Loss		Fair Value
U.S. Government and Agencies	$	14,041	$	534	$	—	$	—	$	14,575
Non-U.S. Government		585,906		22,892		—		—		608,798
Corporate Securities		426,297		19,575		—		—		445,872
	$	1,026,244	$	43,001	$	—	$	—	$	1,069,245

The following table sets forth certain information regarding the investment ratings (provided by major rating agencies) of the Company’s held to maturity fixed maturities at September 30, 2009.

	September 30, 2009
(Expressed in thousands of U.S. Dollars)	Fair Value		%
U.S. Government and Agencies	$	14,575	1.4
AAA		762,815	71.3
AA		110,348	10.3
A		166,412	15.6
BBB		13,582	1.3
BB		—	—
B or lower		1,513	0.1
	$	1,069,245	100.0

The maturity distribution for held to maturity fixed maturities held at September 30, 2009 was as follows:

	Amortized Cost		Fair Value
Within one year	$	25,792	$	25,955
After one year through five years		130,925		133,912
After five years through ten years		138,890		145,481
More than ten years		730,637		763,897
	$	1,026,244	$	1,069,245

Actual maturities could differ from expected contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties.

Investment Income

Investment income earned for the nine months ended September 30, 2009 and 2008 was:

	Nine Months Ended September 30,
	2009			2008
	(Expressed in thousands of U.S. Dollars)
Interest earned on fixed maturities, cash and cash equivalents	$	130,058		$	143,199
Interest earned on funds withheld		516			650
Amortization of premium on fixed maturities		(2,503	)		(3,771	)
Investment expenses		(2,998	)		(2,680	)
	$	125,073		$	137,398

15

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

Net Realized Gains and Losses

The net realized gains and losses and the change in net unrealized gains and losses on fixed maturities for the nine months ended September 30, 2009 and 2008 were:

	Nine Months Ended September 30,
	2009			2008
	(Expressed in thousands of U.S. Dollars)
Net realized gains and losses:
Gross realized gains on available for sale securities	$	6,550		$	7,070
Gross realized losses on available for sale securities		(7,898	)		(8,094	)
Net realized and unrealized gains and losses on trading securities		2,587			—
Change in fair value of derivatives		508			—
Net realized gains (losses) on fixed maturities	$	1,747		$	(1,024	)
Net other-than-temporary impairment losses recognized in earnings	$	(2,153	)	$	(16,887	)
Change in net unrealized gains and losses on available for sale fixed maturities, before tax	$	65,055		$	(109,720	)

For the nine month period ended September 30, 2009, the change in fair value of derivatives of $0.5 million relates to equity call options embedded in certain convertible bonds. For the nine month period ended September 30, 2008, included in net realized losses on fixed maturities is a realized loss of $3.8 million on a futures transaction that was initiated and fully settled in September 2008. This transaction was initiated as an economic hedge on a portion of the Company’s holdings of U.S. government securities.

Other-Than-Temporary Impairment

The Company endeavors to tailor the maturities of its fixed maturities portfolio to the expected timing of its loss and benefit payments. Due to fluctuations in interest rates, it is likely that over the period a security is held there will be periods, perhaps greater than twelve months, when the investment’s fair value is less than its cost, resulting in unrealized losses.

Any other-than-temporary impairment (“OTTI”) related to a credit loss is recognized in earnings, and the amount of the OTTI related to other factors (e.g. interest rates, market conditions, etc.) is recorded as a component of other comprehensive income. If no credit loss exists but either: (a) an entity has the intent to sell the debt security or (b) it is more likely than not that the entity will be required to sell the debt security before its anticipated recovery, the entire unrealized loss is recognized in earnings. In periods after the recognition of an OTTI on debt securities, the Company accounts for such securities as if they had been purchased on the measurement date of the OTTI at an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in earnings. This policy was adopted as at April 1, 2009.

The Company was required to record, as of the beginning of the interim period of adoption, a cumulative effect adjustment to reclassify the non-credit component of a previously recognized OTTI from retained earnings to other comprehensive income (loss). To determine whether a cumulative effect adjustment is required, the Company reviewed OTTI it had recorded through realized losses on securities held at March 31, 2009, and estimated the portion related to credit losses (i.e., where the present value of cash flows expected to be collected are lower than the amortized cost basis of the security) and the portion related to all other non-credit factors. The Company estimated that all of the OTTI previously recorded through earnings related to specific credit losses and therefore no cumulative effect adjustment was required.

The Company has reviewed all debt securities in an unrealized loss position at the end of the period to identify any securities for which there is an intention to sell those securities after the period end. For those securities where there is such an intention, the OTTI charge (being the difference between the amortized cost and the fair value of the security) was recognized in net income. The Company has reviewed debt securities in an unrealized loss position to determine whether it is more likely than not that it will be required to sell those securities. The Company has considered its liquidity and working capital needs and determined that it is not more likely than not that it will be required to sell any of the securities in an unrealized loss position. The Company has also

16

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

performed a review of debt securities which considers various indicators of potential credit losses. These indicators include the length of time and extent of the unrealized loss, any specific adverse conditions, historic and implied volatility of the security, failure of the issuer of the security to make scheduled interest payments, expected cash flow analysis, significant rating changes and recoveries or additional declines in fair value subsequent to the balance sheet date. The consideration of these indicators and the estimation of credit losses involve significant management judgment.

The Company recorded $0.1 million of OTTI in earnings for the three months ended September 30, 2009, all of which related to estimated credit losses. The Company recorded $2.2 million of OTTI in earnings for the nine months ended September 30, 2009, of which $1.9 million related to estimated credit losses.

The following methodology and significant inputs were used to determine the estimated credit losses during the three and nine months ended September 30, 2009:

• Corporate securities ($nil and $1.4 million credit loss recognized for the three and nine months ended September 30, 2009) — the Company reviewed the business prospects, credit ratings and information received from investment managers and rating agencies for each security;

• Mortgage backed securities ($0.1 million and $0.4 million credit loss recognized for the three and nine months ended September 30, 2009) — the Company utilized underlying data for each security provided by its investment managers in order to determine an expected recovery value for each security. The analysis provided by the investment managers includes expected cash flow projections under base case and stress case scenarios which modify expected default expectations, loss severities and prepayment assumptions. The significant inputs in the models include the expected default rates, delinquency rates, foreclosure costs, etc. The Company reviews the process used by each investment manager in developing their analysis, reviews the results of the analysis and then determines what the expected recovery values are for each security, which incorporates both base case and stress case scenarios; and

• Asset backed securities ($nil and $0.1 million credit loss recognized for the three and nine months ended September 30, 2009) — the Company utilized underlying data for each security provided by investment managers in order to determine an expected recovery value for each security. The analysis provided by the investment managers includes expected cash flow projections under base case and stress case scenarios which modify expected default expectations and loss severities and prepayment assumptions. The significant inputs in the models include the expected default rates, delinquency rates, foreclosure costs, etc. The Company reviews the process used by each investment manager in developing its analysis, reviews the results of the analysis and then determines what the expected recovery values are for each security, which incorporates both base case and stress case scenarios.

Fixed maturities with unrealized losses, and the duration of such conditions as of September 30, 2009 and as of December 31, 2008, were:

	Less Than 12 Months				12 Months or Longer				Total
September 30, 2009 (Expressed in thousands of U.S. Dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government and Agencies	$	11,121	$	738	$	—	$	—	$	11,121	$	738
Non-U.S. Government		22,242		983		—		—		22,242		983
Corporate Securities		222,151		12,948		585		5		222,736		12,953
Municipal Securities		6,097		211		—		—		6,097		211
Asset Backed Securities		103,848		17,092		2,064		852		105,912		17,944
Residential Mortgage-Backed Securities		84,742		11,530		1,300		1		86,042		11,531
Commercial Mortgage-Backed Securities		95,118		12,653		1,459		1		96,577		12,654
	$	545,319	$	56,155	$	5,408	$	859	$	550,727	$	57,014
	Less Than 12 Months				12 Months or Longer				Total
December 31, 2008 (Expressed in thousands of U.S. Dollars)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Government and Agencies	$	—	$	—	$	—	$	—	$	—	$	—
Non-U.S. Government		44,103		1,912		—		—		44,103		1,912
Corporate Securities		781,724		58,190		8,097		847		789,821		59,037
Municipal Securities		12,569		477		—		—		12,569		477
Asset-Backed Securities		169,628		38,215		1,540		306		171,168		38,521
Residential Mortgage-Backed Securities		141,774		31,467		1,287		252		143,061		31,719
Commercial Mortgage-Backed Securities		133,571		15,910		1,175		96		134,746		16,006
	$	1,283,369	$	146,171	$	12,099	$	1,501	$	1,295,468	$	147,672

17

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

Of the total holding of 1,403 (2008 – 1,333) available for sale securities, 242 (2008 – 614) had unrealized losses at September 30, 2009.

The following table provides a roll-forward of the amount related to credit losses recognized in earnings for which a portion of an OTTI was recognized in accumulated other comprehensive income for the three months and six months ended September 30, 2009:

Credit losses recognized in earnings on fixed maturity securities held by the Company for which a portion of the OTTI loss was recognized in OCI

(Expressed in thousands of U.S. Dollars)
Beginning balance at July 1, 2009	$	466
Addition for credit loss impairment recognized in the current period on securities previously impaired		139
Ending balance at September 30, 2009	$	605
(Expressed in thousands of U.S. Dollars)
Beginning balance at March 31, 2009	$	—
Credit losses remaining in retained earnings related to accounting standard adoption		—
Addition for credit loss impairment recognized in the current period on securities not previously impaired		605
Ending balance at September 30, 2009	$	605

Other Investments

Other investments comprise the Company’s investment in hedge funds and the Company’s investment in Grand Central Re Limited (“Grand Central Re”), a private equity investment. Together, the hedge funds and the private equity investment are referred to as the Company’s “hedge fund portfolio.”

The distribution of the hedge fund portfolio by investment strategy as at September 30, 2009 and December 31, 2008 was:

	September 30, 2009				December 31, 2008
(Expressed in thousands of U.S. Dollars)	Fair Value		Allocation %		Fair Value		Allocation %
Convertible arbitrage	$	—	—	%	$	10,650	1.4	%
Distressed securities		75,003	19.3	%		115,900	15.4	%
Diversified arbitrage		35,289	9.1	%		46,034	6.1	%
Emerging markets		29,174	7.5	%		39,683	5.3	%
Event-driven arbitrage		56,110	14.4	%		75,205	9.9	%
Fixed income arbitrage		17,029	4.4	%		30,881	4.1	%
Global macro		43,634	11.2	%		87,304	11.6	%
Long/short credit		11,083	2.8	%		38,581	5.1	%
Long/short equity		116,893	30.0	%		290,224	38.5	%
Opportunistic		2,772	0.7	%		14,746	2.0	%
Total hedge funds		386,987	99.4	%		749,208	99.4	%
Reinsurance private equity		2,528	0.6	%		4,450	0.6	%
Total other investments	$	389,515	100.0	%	$	753,658	100.0	%

Cash and cash equivalent balances of $105.6 million and $133.4 million held within the hedge fund portfolio are excluded from the above table and are presented within cash and cash equivalents on the consolidated balance sheets at September 30, 2009 and December 31, 2008, respectively. Redemptions receivable of $62.4 million and $98.1 million held within the hedge fund portfolio are excluded from the above table and are presented within trades pending settlement on the consolidated balance sheets at September 30, 2009 and December 31, 2008, respectively.

18

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

As of September 30, 2009, the hedge fund portfolio employed nine strategies invested in 31 underlying funds. The Company is able to redeem the hedge funds on the same terms that the underlying funds can be redeemed. In general, the funds in which the Company is invested require at least 30 days notice of redemption, and may be redeemed on a monthly, quarterly, semi-annual, annual, or longer basis, depending on the fund.

Certain funds may have a lock-up period. A lock-up period refers to the initial amount of time an investor is contractually required to invest before having the ability to redeem. Funds that do provide for periodic redemptions may, depending on the funds’ governing documents, have the ability to deny or delay a redemption request, called a gate. The fund may implement this restriction because the aggregate amount of redemption requests as of a particular date exceeds a specified level, generally ranging from 15% to 25% of the fund’s net assets. The gate is a method for executing an orderly redemption process which allows for redemption requests to be executed in a timely manner to reduce the possibility of adversely affecting the remaining investors in the fund. Typically, the imposition of a gate delays a portion of the requested redemption, with the remaining portion settled in cash shortly after the redemption date.

Of the Company’s September 30, 2009 outstanding redemptions receivable of $62.4 million, none of which is gated, $37.5 million was received in cash prior to November 6, 2009. The fair value of the Company’s holdings in funds with gates imposed as at September 30, 2009 is $38.8 million (December 31, 2008—$42.7 million).

Certain funds may be allowed to invest a portion of their assets in illiquid securities, such as private equity or convertible debt. In such cases, a common mechanism used is a side-pocket, whereby the illiquid security is assigned to a separate memorandum capital account or designated account. Typically, the investor loses its redemption rights in the designated account. Only when the illiquid security is sold, or otherwise deemed liquid by the fund, may investors redeem their interest. As at September 30, 2009, the fair value of our hedge funds held in side-pockets is $108.3 million (December 31, 2008—$113.4 million).

An increase in market volatility and an increase in volatility of hedge funds in general, as well as a decrease in market liquidity, could lead to a higher risk of a large decline in value of the hedge funds in any given time period.

Restricted cash

As at September 30, 2009, $377.0 million of cash and cash equivalents (December 31, 2008—$ 449.8 million) were deposited, pledged or held in escrow accounts in favor of ceding companies, other counterparties and regulatory authorities. Certain of these deposits can be substituted with fixed maturity securities at the Company’s option, subject to the counter party approval.

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value hierarchy, which is based on the quality of inputs used to measure fair value, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3—Model derived valuations in which one or more significant inputs or significant value drivers are unobservable.

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. Thus, a Level 3 fair value measurement may include inputs that are observable (Level 1 and Level 2) and unobservable (Level 3).

To the extent an entity determines that there has been a significant decrease in the volume and level of activity for the asset or the liability in relation to the normal market activity for the asset or liability (or similar assets or liabilities), then transactions or quoted prices may not accurately reflect fair value. In addition, if there is evidence that the transaction for the asset or liability is not orderly, the entity shall place little, if any weight on that transaction price as an indicator of fair value.

Fair value prices for all securities in our fixed maturities portfolio are independently provided by both our investment custodian and our investment managers, which each utilize nationally recognized independent pricing services. We record the unadjusted price provided by the investment custodian and our validation process includes, but is not limited to: (i) comparison to the price provided by the investment manager, with significant differences investigated; (ii) quantitative analysis (e.g., comparing the quarterly return for each managed portfolio to its target benchmark, with significant differences identified and investigated); (iii) evaluation of methodologies used by external parties to calculate fair value; and (iv) comparing the price to our knowledge of the current investment market.

19

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

The independent pricing services used by our investment custodian and investment managers obtain actual transaction prices for securities that have quoted prices in active markets. Each pricing service has its own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of “matrix pricing” in which the independent pricing service uses observable market inputs including, but not limited to, reported trades, benchmark yields, broker/dealer quotes, interest rates, prepayment speeds, default rates and such other inputs as are available from market sources to determine a reasonable fair value. In addition, pricing services use valuation models, such as an Option Adjusted Spread model, to develop prepayment and interest rate scenarios.

The Option Adjusted Spread model is commonly used to estimate fair value for securities such as mortgage-backed and asset-backed securities. The ability to obtain quoted market prices is reduced in periods of decreasing liquidity, which generally increases the use of matrix pricing methods and generally increases the uncertainty surrounding the fair value estimates. This could result in the reclassification of a security between levels of the fair value hierarchy.

At September 30, 2009, the Company determined that U.S. government securities are classified as Level 1. Securities classified as Level 2 include mortgage-backed and asset-backed securities, corporate debt securities, U.S. government-sponsored agency securities, certain foreign government securities and all other fixed maturity securities.

Investments in hedge funds comprise a portfolio of limited partnerships and stock investments in trading entities, or funds, which invest in a wide range of financial products. Investments in the funds are carried at fair value. The change in fair value is included in net gains on other investments and recognized in net income. The units of account that are valued by the Company are its interests in the funds and not the underlying holdings of such funds. Thus, the inputs used by the Company to value its investments in each of the funds may differ from the inputs used to value the underlying holdings of such funds. These funds are stated at fair value which ordinarily will be the most recently reported net asset value as advised by the fund manager or administrator, where the fund’s underlying holdings can be in various quoted and unquoted investments. The Company believes the reported net asset value represents the fair value market participants would apply to an interest in the fund. These funds are classified as Level 3 in the fair value hierarchy. The fund managers value their underlying investments at fair value in accordance with policies established by each fund, as described in each of their financial statements and offering memoranda.

The Company has ongoing due diligence processes with respect to funds and their managers. These processes are designed to assist the Company in assessing the quality of information provided by, or on behalf of, each fund and in determining whether such information continues to be reliable or whether further review is warranted. Certain funds do not provide full transparency of their underlying holdings; however, the Company obtains the audited financial statements for every fund annually, and regularly reviews and discusses the fund performance with the fund managers to corroborate the reasonableness of the reported net asset values. While reported net asset value is the primary input to the review, when the net asset value is deemed not to be indicative of fair value, the Company may incorporate adjustments to the reported net asset value. Such adjustments may involve significant management judgment.

Certain of the Company’s funds have either imposed a gate on redemptions, or have segregated a portion of the underlying assets into a side-pocket. Based on the review process applied by management, a reduction of $0.7 million was made to the net asset values reported by the fund managers as at September 30, 2009 (December 31, 2008—$2.0 million) to adjust the carrying value of the funds to the Company’s best estimate of fair value.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets and liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur.

20

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

The following table presents the Company’s fair value hierarchy for those assets or liabilities measured at fair value on a recurring basis as of September 30, 2009 and December 31, 2008. The Company has no assets or liabilities measured at fair value on a non-recurring basis as of September 30, 2009.

September 30, 2009 (Expressed in thousands of U.S. Dollars)	Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Other Unobservable Inputs Level 3		Total
U.S. Government and Agencies	$	153,461	$	284,506	$	—	$	437,967
Non-U.S. Government		—		100,363		—		100,363
Corporate Securities		—		1,210,951		—		1,210,951
Municipal Securities		—		68,630		—		68,630
Asset-Backed Securities		—		151,299		—		151,299
Residential Mortgage-Backed Securities		—		689,497		—		689,497
Commercial Mortgage-Backed Securities		—		287,776		—		287,776
Total fixed maturities		153,461		2,793,022		—		2,946,483
Other investments		—		—		386,987		386,987
Derivative asset		—		1,457		—		1,457
	$	153,461	$	2,794,479	$	386,987	$	3,334,927
December 31, 2008 (Expressed in thousands of U.S. Dollars)	Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Other Unobservable Inputs Level 3		Total
U.S. Government and Agencies	$	129,147	$	277,981	$	—	$	407,128
Non-U.S. Government		—		662,566		—		662,566
Corporate Securities		—		1,471,379		—		1,471,379
Municipal Securities		—		48,597		—		48,597
Asset-Backed Securities		—		178,554		—		178,554
Residential Mortgage-Backed Securities		—		713,419		—		713,419
Commercial Mortgage-Backed Securities		—		172,216		—		172,216
Total fixed maturities		129,147		3,524,712		—		3,653,859
Other investments		—		—		749,208		749,208
	$	129,147	$	3,524,712	$	749,208	$	4,403,067

The other investments above do not include a private equity investment of $2.5 million and $4.5 million at September 30, 2009 and December 31, 2008, respectively, in which the Company is deemed to have significant influence and as such is accounted for under the equity method.

The following table provides a summary of the changes in fair value of the Company’s Level 3 financial assets (and liabilities) for the three and nine months ended September 30, 2009 and 2008.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(Expressed in thousands of U.S. Dollars)	Fixed Maturities		Other Investments			Other Assets		Total
Beginning balance at July 1, 2009	$	—	$	434,149		$	—	$	434,149
Total gains or losses (realized/unrealized)
Included in net income		—		23,307			—		23,307
Included in other comprehensive income		—		—			—		—
Purchases, issuances and settlements		—		(70,469	)		—		(70,469	)
Transfers in and/or out of Level 3		—		—			—		—
Ending balance at September 30, 2009	$	—	$	386,987		$	—	$	386,987
The amount of total gains or losses for the three months ended September 30, 2009 included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2009	$	—	$	23,223		$	—	$	23,223
	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(Expressed in thousands of U.S. Dollars)	Fixed Maturities		Other Investments			Other Assets		Total
Beginning balance at January 1, 2009	$	—	$	749,208		$	—	$	749,208
Total gains or losses (realized/unrealized)
Included in net income		—		62,178			—		62,178
Included in other comprehensive income		—		—			—		—
Purchases, issuances and settlements		—		(424,399	)		—		(424,399	)
Transfers in and/or out of Level 3		—		—			—		—
Ending balance at September 30, 2009	$	—	$	386,987		$	—	$	386,987
The amount of total gains or losses for the nine months ended September 30, 2009 included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2009	$	—	$	55,129		$	—	$	55,129

21

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(Expressed in thousands of U.S. Dollars)	Fixed Maturities		Other Investments			Other Assets			Total
Beginning balance at July 1, 2008	$	—	$	19,178		$	552		$	19,730
Total gains or losses (realized/unrealized)
Included in net income		—		(1,282	)		(664	)		(1,946	)
Included in other comprehensive income		—		—			—			—
Purchases, issuances and settlements		—		—			—			—
Transfers in and/or out of Level 3		—		5,375			—			5,375
Ending balance at September 30, 2008	$	—	$	23,271		$	(112	)	$	23,159
The amount of total gains or losses for the three months ended September 30, 2008 included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2008	$	—	$	(1,225	)	$	(664	)	$	(1,889	)
	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
(Expressed in thousands of U.S. Dollars)	Fixed Maturities		Other Investments			Other Assets			Total
Beginning balance at January 1, 2008	$	—	$	17,743		$	—		$	17,743
Total gains or losses (realized/unrealized)
Included in net income		—		(772	)		(664	)		(1,436	)
Included in other comprehensive income		—		—			—			—
Purchases, issuances and settlements		—		—			552			552
Transfers in and/or out of Level 3		—		6,300			—			6,300
Ending balance at September 30, 2008	$	—	$	23,271		$	(112	)	$	23,159
The amount of total gains or losses for the nine months ended September 30, 2008 included in earnings attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2008	$	—	$	685		$	(679	)	$	6

7. DERIVATIVE INSTRUMENTS

The Company recognizes all derivative instruments as either assets or liabilities in the consolidated balance sheets and measures them at the fair value of the instrument. The Company participates from time to time in equity index derivative instruments to mitigate financial risks, principally arising from investment holdings. The Company also holds convertible bond securities within its available for sale fixed maturity portfolio.

As at September 30, 2009, the Company held $14.6 million in fair value of convertible bond securities, including the fair value of the equity call options embedded within. A convertible bond is a debt instrument that can be converted into a predetermined amount of the issuer’s equity at certain times prior to the bond maturity. The Company purchases convertible bond securities for their total return potential not the specific call option feature. The equity call option is an embedded derivative which is recorded at fair value with changes in fair value recognized in net realized gains (losses) on fixed maturities in the consolidated statements of income and

22

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

comprehensive income. These derivative instruments were not designated as hedging instruments. The fair value of the convertible options is estimated using an option adjusted spread model using observable market inputs for similar securities. The host instrument is classified within available for sale fixed maturity investments and the derivative asset within other assets in the consolidated balance sheets.

On April 23, 2009, the Company closed the derivative positions it had previously held in equity futures contracts denominated in U.S. dollars, Japanese yen, and Canadian dollars, for which the primary purpose was to manage the Company’s economic exposure to changes in the fair value of hedge fund redemptions requested but not yet received. These derivative instruments were not designated as hedging instruments. The Company records changes in the fair value of these instruments within net gains on other investments in the consolidated statements of income and comprehensive income. These derivatives were exchange-traded and the fair value was measured based on the later of the final traded price or the mid-point of the last bid-ask spread on the measurement date. The fair value of these derivatives was included within other investments in the consolidated balance sheets.

The fair values of derivative instruments at September 30, 2009 were:

	Asset Derivatives			Liability Derivatives
Derivatives not designated as hedging instruments (Expressed in thousands of U.S. Dollars)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair     Value
Convertible bond equity call options	Other assets	$	1,457	—	$	—
Total derivatives		$	1,457		$	—

The fair values of derivative instruments at December 31, 2008 were:

	Asset Derivatives			Liability Derivatives
Derivatives not designated as hedging instruments (Expressed in thousands of U.S. Dollars)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair     Value
Equity futures contracts	Other investments	$	15,770	—	$	—
Total derivatives		$	15,770		$	—

The impact of derivative instruments on the consolidated statement of income and comprehensive income for the three months ended September 30 was:

Derivatives not designated as hedging instruments (Expressed in thousands of U.S. Dollars)	Location of Gain or (Loss) Recognized in Income on Derivative	2009 Amount of Gain or (Loss) Recognized in Income on Derivative		2008 Amount of Gain or (Loss) Recognized in Income on Derivative
Convertible bond equity call options	Net realized gains on fixed maturities	$	508	$	—
Hurricane index-linked contracts	Other income		—		(664	)
Total derivatives		$	508	$	(664	)

The impact of derivative instruments on the consolidated statement of income and comprehensive income for the nine months ended September 30 was:

Derivatives not designated as hedging instruments (Expressed in thousands of U.S. Dollars)	Location of Gain or (Loss) Recognized in Income on Derivative	2009 Amount of Gain or (Loss) Recognized in Income on Derivative		2008 Amount of Gain or (Loss) Recognized in Income on Derivative
Convertible bond equity call options	Net realized gains on fixed maturities	$	508	$	—
Equity futures contracts	Net gains on other investments		8,112		—
Hurricane index-linked contracts	Other income		—		(664	)
Total derivatives		$	8,620	$	(664	)

23

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

8. BANK LOANS

In February 2003, the Company sold shares of its subsidiary, Max Diversified Strategies Ltd. (“Max Diversified”) to a third party financial institution (the “Bank”) for a fair value of $150.0 million (the “notional amount”). Simultaneous with the sale, the Company entered into a total return swap with the Bank whereby the Company received the return earned on the Max Diversified shares in exchange for the payment of a variable rate of interest based on LIBOR plus a spread. The non-controlling interest in Max Diversified and the total return swap were recorded on a combined basis and accounted for as a financing transaction. The effect of combining the transactions resulted in the notional amount being presented as a bank loan (the “swap loan”).

The swap transaction contained provisions for earlier termination at the Company’s option or in the event that the Company failed to comply with certain covenants, including maintaining a minimum financial strength rating and a minimum Max Diversified net asset value.

On August 31, 2009, the Company entered into a termination agreement with the Bank in connection with the total return swap and the sale of Max Diversified shares to the Bank. On termination of the swap, the Company repurchased all of the remaining shares held by the Bank. The balance of the swap loan was $225.0 million at December 31, 2008, $120.0 million of which was repaid during the three months ended March 31, 2009 and the remaining $105.0 million was repaid during the three months ended September 30, 2009.

At December 31, 2008 the net amount payable included in accounts payable under the total return swap was $14.9 million. Interest expense on the notional amount is included within interest expense on the consolidated statements of income and comprehensive income. For the three months ended September 30, 2009 and 2008, the interest expense on the swap loan was $0.3 million and $2.5 million, respectively. For the nine months ended September 30, 2009 and 2008, the interest expense on the swap loan was $2.4 million and $9.1 million respectively. Investment income earned on the invested proceeds of the swap loan for the three months ended September 30, 2009 and 2008 was approximately $0.5 million and $2.9 million respectively. Investment income earned on the invested proceeds of the swap loan for the nine months ended September 30, 2009 and 2008 was approximately $3.2 million and $9.0 million, respectively.

On April 3, 2007, the Company borrowed $50.0 million under its revolving loan facility for the capitalization of Max USA. This loan renewed at intervals of one to six months at the Company’s option, at which time the interest rate was reset to LIBOR plus a premium based on the Company’s current debt rating. On April 9, 2009, this loan was repaid in full. On October 20, 2008, the Company borrowed an additional $100.0 million under the revolving loan facility, at an interest rate of 4.63%. Proceeds of this loan were used in connection with the acquisition and capitalization of Max UK. This loan was repaid in full on April 20, 2009.

Interest expense in connection with these loans was $nil and $0.4 million for the three months ended September 30, 2009 and 2008, respectively, and $2.0 million and $1.5 million for the nine months ended September 30, 2009 and 2008, respectively.

9. SENIOR NOTES

On April 16, 2007, Max USA privately issued $100.0 million principal amount of 7.20% senior notes due April 14, 2017 with interest payable on April 16 and October 16 of each year. The senior notes are Max USA’s senior unsecured obligations and rank equally in right of payment with all existing and future senior unsecured indebtedness of Max USA. The senior notes are fully and unconditionally guaranteed by Max Capital. The effective interest rate related to the senior notes, based on the net proceeds received, was approximately 7.27%. The net proceeds from the sale of the senior notes were $99.5 million, and they were used to repay a bank loan used to acquire and capitalize Max Specialty. On December 30, 2008, Max USA repurchased $8.5 million principal amount of its senior notes for $6.2 million, recognizing a gain of $2.2 million, net of deferred issuance costs. The fair value of the senior notes was $80.7 million as of September 30, 2009, measured based on an independent pricing service using a matrix pricing methodology. Interest expense in connection with these senior notes was $1.7 million and $1.8 million for the three months ended September 30, 2009 and 2008, respectively, and $5.0 million and $5.4 million for the nine months ended September 30, 2009 and 2008, respectively.

10. INCOME TAXES

Max Capital and Max Bermuda are incorporated in Bermuda, and pursuant to Bermuda law are not taxed on either income or capital gains. They have each received an assurance from the Bermuda Minister of Finance under the Exempted Undertaking Tax Protection Act, 1966 of Bermuda that if there is enacted in Bermuda any legislation imposing tax computed on profits or income, or computed on any capital asset, gain or appreciation, then the imposition of any such tax will not be applicable until March 2016. The Company’s subsidiaries that are based in the United States, Ireland and the United Kingdom are subject to the tax laws of those jurisdictions and the jurisdictions in which they operate.

The Company records income taxes during the quarter on the estimated effective annual rates for each of the years ended December 31, 2009 and 2008. Interest and penalties related to uncertain tax positions, of which there has been none, would be recognized in income tax expense.

24

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

11. EQUITY CAPITAL

Max Capital’s board of directors declared a dividend of $0.10 per share on each of August 4, 2009 and November 3, 2009 payable on September 1, 2009 and November 30, 2009, respectively, to shareholders of record on August 18, 2009 and November 16, 2009, respectively. On each of February 10, 2009 and May 4, 2009, the board of directors declared a dividend of $0.09 payable on March 10, 2009 and June 1, 2009, respectively, to shareholders of record on February 24, 2009 and May 18, 2009, respectively.

During the nine months ended September 30, 2009, under the Board-approved share repurchase authorization, the Company repurchased 322,400 common shares at an average price of $19.76 per common share for a total amount of $6.4 million, including the costs incurred to effect the repurchases. As at September 30, 2009, the remaining authorization under the Company’s share repurchase program was $63.4 million.

12. RELATED PARTIES

Grand Central Re Limited

In May 2001, the Company made an equity investment in Grand Central Re, a Bermuda domiciled reinsurance company managed by Max Managers Ltd. (“Max Managers”). The Company owns 7.5% of the ordinary shares of Grand Central Re. Max Bermuda entered into a quota share retrocession agreement with Grand Central Re, effective January 1, 2002, amending the quota share arrangement with Grand Central Re that commenced January 1, 2001. The 2002 quota share reinsurance agreement with Grand Central Re requires each of the Company and Grand Central Re to retrocede a portion of their respective gross premiums written from certain transactions to the other party in order to participate on a quota share basis. Max Bermuda did not cede any new business to Grand Central Re in the nine months ended September 30, 2009.

The accompanying consolidated balance sheets and consolidated statements of income and comprehensive income include, or are net of, the following amounts related to the quota share retrocession agreement with Grand Central Re:

	September 30, 2009			December 31, 2008
	(Expressed in thousands of U.S. Dollars)
Balance Sheet
Losses and benefits recoverable from reinsurers	$	101,691		$	106,203
Deposit liabilities		15,519			26,273
Funds withheld from reinsurers		111,071			137,014
Reinsurance balances payable		26,192			24,603
	Nine Months Ended September 30,
	2009			2008
	(Expressed in thousands of U.S. Dollars)
Income Statement
Reinsurance premiums ceded	$	1,198		$	1,337
Earned premiums ceded		1,198			1,337
Other income		600			600
Net losses and loss expenses		(383	)		(1,307	)
Claims and policy benefits		3,008			802
Interest (benefit) expense		2,265			664

The variable quota share retrocession agreement with Grand Central Re is principally collateralized on a funds withheld basis. The rate of return on funds withheld is based on the average of two total return fixed maturity indices. The interest expense recognized by the Company will vary from period to period due to changes in the indices. The Company records the change in interest expense through the statement of income and comprehensive income on a monthly basis.

The Company believes that the terms of the insurance management and quota share retrocession agreements are comparable to the terms that the Company would expect to negotiate in similar transactions with unrelated parties.

Hedge Fund Managers

Alstra Capital Management, LLC (“Alstra”), an affiliate of Mr. Zack H. Bacon III, one of our directors until November 2, 2009, served as the investment advisor for Max Diversified from April 1, 2004 until January 31, 2009. For the nine months ended September 30, 2009 and 2008, Alstra received investment advisor fees of $0.7 million and $6.2 million, respectively. During the three months ended March 31, 2009, the Company terminated its investment advisor agreement with Alstra, resulting in a termination fee of $2.0 million. The Company believes that the terms of its terminated investment advisor agreement were comparable to the terms that the Company would expect to negotiate in similar transactions with unrelated parties.

25

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

In addition, Moore Capital Management, LLC (“Moore Capital”), an affiliate of one of our significant shareholders, received aggregate management and incentive fees of $1.9 million and $2.0 million, respectively, in respect of Max Diversified’s assets invested in an underlying fund managed by Moore Capital for the nine months ended September 30, 2009 and 2008.

All investment fees incurred on the Company’s hedge funds are included in net gains or losses on other investments in the consolidated statements of income and comprehensive income.

13. COMMITMENTS AND CONTINGENCIES

Credit Facilities

The Company has three credit facilities as of September 30, 2009. The Company entered into its primary credit facility on August 7, 2007 with Bank of America and various other financial institutions. The primary credit facility provides for a $450.0 million five-year senior secured credit facility for letters of credit to be issued for the account of Max Bermuda and certain of its insurance subsidiaries and a $150.0 million five-year unsecured senior credit facility for letters of credit to be issued for the account of Max Bermuda and certain of its insurance subsidiaries and loans to Max Bermuda and Max Capital. Subject to certain conditions and at the request of Max Bermuda, the aggregate commitments of the lenders under the primary credit facility may be increased up to a total of $800.0 million, provided that the unsecured commitments may not exceed 25% of the aggregate commitments under the primary credit facility.

On October 13, 2008, Max Capital entered into a credit facility agreement with ING Bank N.V., London Branch (“ING”). This credit facility was entered into as part of the Company’s acquisition of Max UK. This credit facility provides up to GBP 90.0 million for the issuance of letters of credit to provide capital (“Funds at Lloyd’s” or “FAL”) to support Lloyd’s syndicate commitments of Max UK and its subsidiaries. The facility may be terminated by ING at any time after January 1, 2010, subject to a four year notice requirement for any outstanding letters of credit. Effective December 5, 2008, Max UK was substituted as account party under the facility with Max Capital acting as guarantor.

The third facility is Max Bermuda’s $75.0 million letter of credit facility with The Bank of Nova Scotia. Absent renewal, this facility expires on December 17, 2009.

Max Bermuda’s $20.0 million ING facility was terminated on July 21, 2009.

The following table provides a summary of the credit facilities and the amounts pledged as collateral for the issued and outstanding letters of credit as of September 30, 2009 and December 31, 2008:

	Credit Facilities (expressed in thousands of U.S. Dollars or Great Britain Pounds, as applicable)
	Bank of America Syndicate		The Bank of Nova Scotia		ING Bank N.V.		Total		ING Bank N.V. - FAL facility
Letter of credit facility capacity at September 30, 2009(1)	$	600,000	$	75,000	$	—	$	675,000	GBP	90,000
Letter of credit facility capacity at December 31, 2008(1)	$	600,000	$	75,000	$	20,000	$	695,000	GBP	90,000
Unsecured loan outstanding at September 30, 2009	$	—	$	—	$	—	$	—	GBP	—
Unsecured loan outstanding at December 31, 2008	$	150,000	$	—	$	—	$	150,000	GBP	—
Letters of credit issued and outstanding at September 30, 2009	$	388,142	$	50,103	$	—	$	438,245	GBP	63,614
Letters of credit issued and outstanding at December 31, 2008	$	437,211	$	43,133	$	10,000	$	490,344	GBP	63,614
Cash and fixed maturities at fair value pledged as collateral at September 30, 2009	$	537,533	$	75,883	$	—	$	613,416	GBP	3,614
Cash and fixed maturities at fair value pledged as collateral at December 31, 2008	$	481,750	$	51,717	$	18,791	$	552,258	GBP	3,614

⁽¹⁾ Letter of credit capacity is reduced by the amount of unsecured loans outstanding.

Each of the credit facilities requires that the Company and/or certain of its subsidiaries comply with covenants, including a minimum consolidated tangible net worth and restrictions on the payment of dividends. The Company was in compliance with all the covenants of each of its letter of credit facilities at September 30, 2009.

26

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

14. STOCK INCENTIVE PLANS

At the May 5, 2008 Annual General Meeting of shareholders, Max Capital’s shareholders approved the adoption of the 2008 Stock Incentive Plan (the “2008 Plan”) under which the Company may award, subject to certain restrictions, Incentive Stock Options, Non-Qualified Stock Options, restricted stock, restricted stock units, share awards or other awards. The 2008 Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”).

Prior to adoption of the 2008 Plan, the Company made awards of equity compensation under a Stock Incentive Plan approved by the shareholders in June 2000, and amended in each of May 2002 and April 2005 (the “2000 Plan”, and together with the 2008 Plan, the “Plans”). Effective upon the adoption of the 2008 Plan, unused shares from the 2000 Plan became unavailable for future awards and instead are used only to fulfill obligations from outstanding option, restricted stock unit awards or reload obligations pursuant to grants originally made under the 2000 Plan.

Warrants

The Company has issued warrants to purchase the Company’s common shares. The warrants may be exercised at any time up to their expiration dates, which range from December 22, 2009 to August 17, 2011. Warrants are issued with exercise prices approximating their fair value on the date of issuance.

Warrant related activity is as follows:

	Warrants Outstanding		Warrants Exercisable	Weighted Average Exercise Price		Weighted Average Fair Value		Range of Exercise Prices
Balance, December 31, 2008	4,735,125		4,735,125	$	15.33	$	5.75	$15.00-$18.00
Warrants exercised	(2,277,634	)		$	15.01	$	5.93	$15.00-$16.00
Warrants forfeited	—
Balance, September 30, 2009	2,457,491		2,457,491	$	15.62	$	5.58	$15.00-$18.00

The warrants contain a “cashless exercise” provision which allows the warrant holder to surrender the warrants with notice of cashless exercise and receive a number of shares based on the market value of the Company’s shares. The cashless exercise provision results in a lower number of shares being issued than the number of warrants exercised. The warrants exercised during 2009 were exercised pursuant to the cashless exercise provision, which resulted in 566,346 shares being issued for the exercise of 2,277,634 warrants.

Stock Option Awards

Options that have been granted under the Plans have an exercise price equal to or greater than the fair market value of Max Capital’s common shares on the date of grant and have a maximum ten-year term. The fair value of awards granted under the Plans are measured as of the grant date and expensed ratably over the vesting period of the award. All awards provide for accelerated vesting upon a change in control of Max Capital. Shares issued under the Plans are made available from authorized but unissued shares.

The fair value of options granted during the nine months ended September 30, 2009 and 2008 was estimated on the date of grant using the Black-Scholes option pricing method with the following weighted average assumptions:

	2009		2008
Option valuation assumptions:
Expected option life	7.0 years		3.0 years
Expected dividend yield	2.32	%	1.78	%
Expected volatility	34.3	%	21.9	%
Risk-free interest rate	2.99	%	4.31	%
Forfeiture rate	0.00	%	0.00	%

The Company recognized $0.2 million and $0.1 million of stock-based compensation expense related to stock option awards for the three months ended September 30, 2009 and 2008, respectively. Stock-based compensation expense related to stock option awards for the nine months ended September 30, 2009 and 2008 was $0.5 million and $0.5 million, respectively. The Company did not capitalize any cost of stock-based option award compensation. As of September 30, 2009, the total compensation cost related to non-vested stock option awards not yet recognized was $0.8 million, which is expected to be recognized over a weighted average period of 1.25 years.

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MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

The total intrinsic value of stock options exercised during the nine month period ended September 30, 2009 was $0.6 million, and was $2.0 million during the nine months ended September 30, 2008.

A summary of the 2000 Plan related activity follows:

	Options Outstanding		Options Exercisable	Weighted Average Exercise Price		Fair Value of Options		Range of Exercise Prices
Balance, December 31, 2008	1,843,263		1,413,346	$	22.24	$	6.13	$10.95 - 36.26
Options exercised	(107,125	)			14.68		4.94	11.50 - 16.00
Options forfeited	(110,333	)			24.47		7.14	23.25 - 24.49
Balance, September 30, 2009	1,625,805		1,314,138	$	22.58	$	6.13	$10.95 - 36.26

A summary of the 2008 Plan related activity follows:

	Awards Available for Grant		Options Outstanding	Options Exercisable	Weighted Average Exercise Price		Fair Value of Options		Range of Exercise Prices
Balance, December 31, 2008	4,350,909		—	—	$	—	$	—	$	—
Options granted	(108,333	)	108,333			18.25		6.01		18.25
Options exercised	—		—			—		—		—
Options forfeited	—		—			—		—		—
Restricted stock granted	(707,048	)	—
Restricted stock forfeited	12,135		—
Restricted stock units granted	(134,604	)	—
Balance, September 30, 2009	3,413,059		108,333	—	$	18.25	$	6.01	$	18.25

Restricted Stock Awards

Restricted stock and restricted stock units (RSUs) issued under the Incentive Plans have terms set by the Committee. These shares and RSUs contain certain restrictions relating to, among other things, vesting, forfeiture in the event of termination of employment and transferability. Restricted stock awards are valued equal to the market price of the Company’s common stock on the date of grant. At the time of grant, the fair value of the shares and RSUs awarded is recorded as unearned stock grant compensation. The unearned compensation is charged to income over the vesting period. Generally, restricted stock awards vest after three or four years. Total compensation cost recognized for restricted stock awards recorded in general and administrative expenses was $5.2 million and $4.4 million for the three months ended September 30, 2009 and 2008, respectively, and $15.4 million and $14.2 million for the nine months ended September 30, 2009 and 2008, respectively.

A summary of the Company’s non-vested restricted stock awards as of December 31, 2008 and changes during the nine months ended September 30, 2009 follow:

	Non-vested Restricted Stock		Weighted - Average Grant – Date Fair Value		Non-vested RSUs		Weighted - Average Grant – Date Fair Value
Balance, December 31, 2008	2,121,067		$	25.59	347,759		$	26.32
Awards Granted	707,048			18.27	134,604			18.25
Awards Vested	(401,894	)		25.32	(83,849	)		25.30
Awards Forfeited (1)	(62,112	)		23.89	—			—
Balance, September 30, 2009	2,364,109		$	23.42	398,514		$	23.81

⁽¹⁾ Restricted stock forfeitures include 49,977 related to the 2000 Plan and do not increase the awards available for grant.

Employee Stock Purchase Plan

On July 1, 2008, the Company introduced an employee stock purchase plan (“ESPP”). The ESPP gives participating employees the right to purchase common shares through payroll deductions during consecutive “Subscription Periods.” The Subscription Periods run from January 1 to June 30 and from July 1 to December 31 each year. The Company recorded an expense for ESPP of $0.1 million and $0.3 million for the three months and nine months ended September 30, 2009, respectively.

28

MAX CAPITAL GROUP LTD.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)—(Continued)

15. TERMINATED AMALGAMATION

On June 12, 2009, the Company announced it had terminated the Agreement and Plan of Amalgamation (as amended, the “Max Amalgamation Agreement”) previously entered into among Max Capital, IPC Holdings, Ltd. (“IPC”), and IPC Limited on March 1, 2009. On July 9, 2009, IPC entered into an Agreement and Plan of Amalgamation with another company and as a result, IPC was required to pay a termination fee of $50.0 million to the Company which was received on July 9, 2009. The fee is included within merger and acquisition expenses in the interim consolidated statements of income and comprehensive income net of $8.6 million of expenses.

On April 28, 2009, Validus Holdings, Ltd. commenced a lawsuit in the Supreme Court of Bermuda against IPC, IPC’s wholly owned subsidiary, IPC Limited, and Max Capital. Subsequent to September 30, 2009 the parties have settled the dispute and agreed to discontinue the proceedings.

16. SUBSEQUENT EVENTS

Subsequent events have been evaluated up to and including November 6, 2009, the date of issuance of these unaudited interim consolidated financial statements.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise indicated or unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “we,” “us,” “our” and similar expressions are references to Max Capital and its consolidated subsidiaries.

The following is a discussion and analysis of our results of operations for the three and nine month periods ended September 30, 2009 compared to the three and nine month periods ended September 30, 2008 and our financial condition as of September 30, 2009. This discussion and analysis should be read in conjunction with the attached unaudited interim consolidated financial statements and related notes and the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2008.

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”). We intend that the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 apply to these forward-looking statements. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events.

These statements may use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project” and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on management’s beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions. Factors that could cause such forward-looking statements not to be realized (which are described in more detail included or incorporated by reference herein and in documents filed by us with the Securities and Exchange Commission (“SEC”) include, but are not limited to:

• claims development;

• cyclical trends, general economic conditions and conditions specific to the reinsurance and insurance markets in which we operate;

• pricing competition;

• rating agency policies and practices;

• catastrophic events;

• the amount of underwriting capacity from time to time in the market;

• material fluctuations in interest rates;

• unexpected volatility associated with investments;

• tax and regulatory changes and conditions; and

• loss of key executives.

Other factors such as changes in U.S. and global equity and debt markets resulting from general economic conditions, market disruptions and significant interest rate fluctuations, foreign exchange rate fluctuations and changes in credit spreads may adversely impact our business or impede our access to, or increase the cost of, financing our operations. We caution that the foregoing list of important factors is not intended to be, and is not, exhaustive. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. If one or more risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any

29

forward-looking statements in this Form 10-Q reflect our current view 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 safe harbor disclosure.

Generally, our policy is to communicate events that we believe may have a material adverse impact on our operations or financial position, including property and casualty catastrophic events and material losses in our investment portfolio, in a timely manner through a public announcement. It is also our policy not to make public announcements regarding events that we believe have no material impact on our operations or financial position based on management’s current estimates and available information, other than through regularly scheduled calls, press releases or filings.

Overview

We are a Bermuda headquartered global provider of specialty insurance and reinsurance products for the property and casualty market, with underwriting operations based in Bermuda, Ireland, the United States and the United Kingdom. We underwrite a diversified portfolio of risks and serve clients ranging from Fortune 1000 companies to small owner-operated businesses. We also provide reinsurance for the life and annuity market when opportunities arise.

We have approximately $1,546.7 million in consolidated shareholders’ equity as of September 30, 2009. Our principal operating subsidiary is Max Bermuda. We conduct our non-Lloyd’s European activities through Max Europe Holdings and its operating subsidiaries, Max Re Europe and Max Insurance Europe. We conduct our U.S. operations through Max USA and its operating subsidiaries, Max Specialty and Max America. Our United Kingdom Lloyd’s operations are conducted through Max UK and its operating subsidiary Max at Lloyd’s Ltd. (“Max at Lloyd’s”). We hold all hedge funds in Max Diversified. We house certain personnel and assets within our global service companies which we believe improves the efficiency of certain corporate services across the group. The global service companies are incorporated in Ireland, Bermuda, the United Kingdom and the United States.

To manage our insurance and reinsurance liability exposure, make our investment decisions and assess our overall enterprise risk, we model our underwriting and investing activities on an integrated basis for all of our non-Lloyd’s operations, and this integration is currently being extended to include our Max at Lloyd’s platform. Our integrated risk management, as well as terms and conditions of our products, provides flexibility in making decisions regarding investments. Our investments comprise three high grade fixed maturities securities portfolios (one held for trading, one held as available for sale, the other being held to maturity) and a diversified hedge fund portfolio. Our investment portfolio is designed to provide diversification and to generate positive returns while attempting to reduce the frequency and severity of credit losses. Based on carrying values at September 30, 2009, the allocation of invested assets was 92.8% in cash and fixed maturities and 7.2% in other investments.

Executive Summary

Net income for the nine months ended September 30, 2009 was $183.6 million, an increase of $264.8 million from a loss of $81.2 million for the same period in 2008. Diluted book value per share has increased 18.2% to $26.54 at September 30, 2009 compared to December 31, 2008. Our property and casualty underwriting business is producing gross premium volumes ahead of plan for the year to date. Gross premiums written for our property and casualty segments for the nine months ended September 30, 2009 have increased 33.9% over the same period in 2008, with net premiums earned increasing by 40.1%. This growth reflects the continued build out of our U.S specialty segment, with an increase in gross premiums written of $85.1 million over the comparable prior year-to-date period, and the addition of our Max at Lloyd’s segment at the end of 2008 which has contributed $110.6 million of gross premiums written for the year-to-date period. We’ve seen attractive rates in certain casualty and short tail lines during 2009, and our diversified underwriting platforms enables us to take advantage of opportunities where market conditions are favorable.

Our four property and casualty segments produced an aggregate combined ratio for the nine months ended September 30, 2009 of 90.5%, compared to a combined ratio of 89.1% for the nine months ended September 30, 2008. Net losses incurred in the nine months ended September 30, 2009 related to property catastrophe events were $3.4 million, compared to $50.0 million, net of reinstatement premiums of $7.4 million, in the same period in 2008. We recognized net favorable development on prior year loss reserves of $47.5 million for the nine months ended September 30, 2009, compared to $88.6 million for the same period in 2008. The favorable development in the 2009 period relates principally to our property and professional liability lines of business, offset by adverse development in the marine and energy lines. Absent the net favorable loss development our combined ratios for the nine months ended September 30, 2009 and 2008 were 98.6% and 110.3%, respectively. Favorable loss reserve development is primarily due to lower than expected claims emergence on prior year contracts.

The current year to date has have seen some stabilization of the investment markets in comparison to the market disruption and significant interest rate fluctuations experienced in 2008. Net investment income for the nine months ended September 30, 2009 was $125.1 million, a decrease of 9.0% compared to the same period in 2008. The reduction in net investment income is principally

30

attributable to our maintenance of a significant allocation to cash and cash equivalents during the nine months ended September 30, 2009, averaging approximately 18.6% of invested assets, compared to approximately 10.4% on average during the nine month period ended September 30, 2008. We anticipate this ratio will decrease as we deploy cash in more attractive investment opportunities. The credit quality of our fixed maturities investments remains high, with 62.2% of our fixed maturities at September 30, 2009, by carrying value, being held in U.S. government, agency, or AAA-rated securities.

We implemented a strategy in the three months ended September 30, 2009 to hold certain fixed income securities to maturity. As a result of this classification, the held to maturity portfolio is recorded at amortized cost in the consolidated balance sheet and is no longer recorded at fair value. As the movements in fair value of these securities are no longer reflected within accumulated other comprehensive income this reclassification will eliminate the impact to shareholders’ equity of volatility in fair values. The held to maturity portfolio is comprised principally of long duration government and corporate debt securities. We believe this held to maturity strategy is achievable due to the relatively stable and predictable cash flows of our long-term liabilities. The fair value of those securities reclassified as held to maturity was $952.7 million on the date of reclassification, which became the new cost base.

The return on our hedge fund portfolio was 9.38% for the nine month period ended September 30, 2009, compared to a return of 9.80% for the HFRI Fund of Funds Composite Index, which we believe to be the most comparable benchmark. As of September 30, 2009, our allocation of invested assets to the hedge fund portfolio was 7.2%, compared to 18.6% as of September 30, 2008. We believe our reduced allocation to hedge funds and the rebalancing of our portfolio has significantly reduced the potential volatility of our investment returns.

Over the nine months ended September 30, 2009 we have significantly reduced our external borrowings. We have repaid $150.0 million in bank loans and $225.0 million on our swap loan, reducing both balances to zero. These actions have reduced our total debt from $466.4 million at December 31, 2008 to $91.4 million at September 30, 2009.

Our underwriting and investment performance resulted in an annualized return on average shareholders’ equity of 17.3% for the nine months ended September 30, 2009, compared to negative 7.6% for the same period in 2008. Diluted book value per common share increased 18.2% from $22.46 at December 31, 2008 to $26.54 at September 30, 2009. Diluted book value per common share is computed using the treasury stock method, which assumes that in-the-money options and warrants are exercised and the proceeds received are used to purchase common shares in the market. Under this method diluted common shares outstanding were 58,272,865 and 57,017,157 at September 30, 2009 and December 31, 2008, respectively.

Following the termination of the amalgamation agreement with IPC on June 12, 2009, and as a result of IPC entering into an Agreement and Plan of Amalgamation with another company on July 9, 2009, the Company received a termination fee of $50.0 million from IPC. This fee was received on July 9, 2009 and is reflected in our results for the three months ended September 30, 2009, net of $8.6 million of expenses.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles, which require management to make estimates and assumptions. We have performed a current assessment of our critical accounting policies in connection with preparing our interim unaudited consolidated financial statements as of and for the nine months ended September 30, 2009. We believe that the critical accounting policies set forth in our Form 10-K for the year ended December 31, 2008 continue to describe the more significant judgments and estimates used in the preparation of our consolidated financial statements. These accounting policies pertain to revenue recognition, loss and benefit expenses and investment valuation. If actual events differ significantly from the underlying judgments or estimates used by management in the application of these accounting policies, there could be a material adverse effect on our results of operations and financial condition.

Other-Than-Temporary Impairment

Our critical accounting policy pertaining to the assessment of other-than-temporary impairments was updated as at April 1, 2009 in accordance with new accounting standards. Our updated policy requires that an other-than-temporary impairment, or OTTI, related to a credit loss is recognized in earnings, and the amount of the OTTI related to other factors (e.g. interest rates, market conditions, etc.) is recorded as a component of other comprehensive income. If no credit loss exists but either: (a) an entity has the intent to sell the debt security or (b) it is more likely than not that the entity will be required to sell the debt security before its anticipated recovery, the entire unrealized loss is recognized in earnings. In periods after the recognition of an OTTI on debt securities, we account for such securities as if they had been purchased on the measurement date of the OTTI at an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in earnings.

The Company reviews all securities at the end of the period and identifies those which it either has the intention to sell or it is more likely than not that the Company will be required to sell. All such securities identified which are also in an unrealized loss position will have an OTTI charge (being the difference between the amortized cost and the fair value of the security) recognized in net income. The Company considers its liquidity and working capital needs in the determination whether it is not more likely than not

31

that it will be required to sell any securities. The Company also performs a review of debt securities which considers various indicators of potential credit losses. These indicators include the length of time and extent of the unrealized loss, any specific adverse conditions, historic and implied volatility of the security, failure of the issuer of the security to make scheduled interest payments, expected cash flow analysis, significant rating changes and recoveries or additional declines in fair value subsequent to the balance sheet date. The consideration of these indicators and the estimation of credit losses involve significant management judgment.

Results of Operations

We monitor the performance of our underwriting operations in five segments:

• Bermuda/Dublin insurance – This segment offers property and casualty excess of loss capacity from our Bermuda and Dublin offices on specific risks related to individual insureds.

• Bermuda/Dublin reinsurance – This segment offers property and casualty quota share and excess of loss capacity from our Bermuda and Dublin offices, providing coverage for underlying risks written by our clients.

• U.S. specialty – This segment offers property and casualty coverage from offices in the United States on specific risks related to individual insureds.

• Max at Lloyd’s – This segment offers property and casualty quota share and excess of loss capacity from our London and Copenhagen offices. This segment comprises our proportionate share of the underwriting results of the Syndicates, and the results of our managing agent, Max at Lloyd’s.

• Life and annuity reinsurance – This segment operates out of Bermuda only and offers reinsurance products focusing on existing blocks of life and annuity business, which take the form of co-insurance transactions whereby the risks are reinsured on the same basis as the original policies.

We also have a corporate function that manages our investing and financing activities.

Each of the U.S. specialty and the Max at Lloyd’s segments has its own portfolio of fixed maturities investments. The investment income earned by each of these segments is reported in their respective segments.

In contrast, invested assets relating to the Bermuda/Dublin reinsurance, Bermuda/Dublin insurance and life and annuity segments are managed on an aggregated basis. Consequently, investment income on this consolidated portfolio and gains on the hedge fund portfolio are not directly captured in any one of these segments. However, because of the longer duration of liabilities on casualty insurance and reinsurance business (as compared to property), and life and annuity reinsurance business, investment returns are important in evaluating the profitability of these segments. Accordingly, we allocate investment returns from the consolidated portfolio to each of these three segments. This is based on a notional allocation of invested assets from the consolidated portfolio using durations that are determined based on estimated cash flows into and out of each segment. The balance of investment returns from this consolidated portfolio is allocated to our corporate function for the purposes of segment reporting. The overall performance of our fixed maturities portfolio and hedge fund portfolio is discussed within the corporate function results of operations.

Three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008

Results of Underwriting Operations

Bermuda/Dublin Insurance Segment

	Three Months Ended September 30, 2009			% change		Three Months Ended September 30, 2008			Nine Months Ended September 30, 2009			% change		Nine Months Ended September 30, 2008
Gross premiums written	$	81.1		0.2	%	$	80.9		$	302.7		9.6	%	$	276.3
Reinsurance premiums ceded		(41.9	)	9.4	%		(38.3	)		(146.1	)	9.8	%		(133.1	)
Net premiums written	$	39.2		(8.0	)%	$	42.6		$	156.6		9.4	%	$	143.2
Net premiums earned(a)	$	49.1		6.0	%	$	46.3		$	150.0		9.4	%	$	137.1
Net investment income		5.9		20.4	%		4.9			16.9		27.1	%		13.3
Net gains (losses) on other investments		1.3		N/A			(14.9	)		3.5		N/A			(13.5	)
Other income		0.1		N/A			—			1.2		9.1	%		1.1
Total revenues		56.4		55.4	%		36.3			171.6		24.3	%		138.0
Net losses and loss expenses(b)(c)		31.7		(18.7	)%		39.0			106.0		(2.6	)%		108.8
Acquisition costs(c)		0.4		N/A			(0.7	)		(1.5	)	(21.1	)%		(1.9	)
General and administrative expenses(c)		7.3		40.4	%		5.2			17.8		10.6	%		16.1
Total losses and expenses		39.4		(9.4	)%		43.5			122.3		(0.6	)%		123.0
Income (loss) before taxes	$	17.0		N/A		$	(7.2	)	$	49.3		228.7	%	$	15.0
Loss ratio(b)/(a)		64.6	%				84.4	%		70.7	%				79.4	%
Combined ratio(c)/(a)		80.2	%				94.0	%		81.6	%				89.7	%

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The loss ratio is calculated by dividing net losses and loss expenses (shown as (b)) by net premiums earned (shown as (a)). The combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses (shown as (c)) by net premiums earned (shown as (a)).

	Three Months Ended September 30, 2009		% of Premium Written		Three Months Ended September 30, 2008		% of Premium Written		Nine Months Ended September 30, 2009		% of Premium Written		Nine Months Ended September 30, 2008		% of Premium Written
Gross Premiums Written by Type of Risk:
Aviation		13.5	16.6	%		9.1	11.2	%		30.3	10.0	%		21.9	7.9	%
Excess liability		19.1	23.6	%		20.8	25.7	%		87.1	28.8	%		96.5	34.9	%
Professional liability		39.1	48.2	%		42.8	53.0	%		134.8	44.5	%		116.6	42.2	%
Property		9.4	11.6	%		8.2	10.1	%		50.5	16.7	%		41.3	15.0	%
	$	81.1	100.0	%	$	80.9	100.0	%	$	302.7	100.0	%	$	276.3	100.0	%

The combined ratio was 80.2% and 81.6%, respectively for the three and nine months ended September 30, 2009 compared to 94.0% and 89.7% respectively for the same periods in 2008. The combined ratio for both the three and nine months ended September 30, 2009 decreased primarily due to decreases in the loss ratio.

The loss ratio decreased over the comparative periods by 19.8 and 8.7 percentage points for the three and nine months ended September 30, 2009, respectively. Significant items impacting the loss ratio were:

• Net favorable loss development of prior year reserves in the three and nine month periods ended September 30, 2009 of $11.0 million and $26.4 million, respectively, compared to $8.3 million and $10.0 million in the comparable prior year periods.

• Excluding the net favorable loss development, the loss ratio is 87.0% and 88.3% for the current year three and nine month periods and 102.3% and 86.6% for the 2008 comparable periods.

• The development in the three and nine months ended September 30, 2009 was evenly spread across our professional liability, aviation and excess liability lines of business.

• The three and nine months ended September 30, 2008 included $11.5 million in catastrophe-related and property per-risk losses compared to no significant catastrophe losses in the corresponding 2009 periods.

Gross premiums written for the three and nine months ended September 30, 2009 increased by 0.2% and 9.6% respectively compared to the same periods in 2008. Our gross premium written volume is ahead of plan for the nine months ended September 30, 2009. The increase in premiums has principally been in our professional liability, aviation and property lines, where we have seen favorable market pricing and reduced market capacity, particularly in professional liability. In the excess liability line of business we are seeing a more competitive pricing environment with additional capacity entering the market place. As a result we have been more selective in our excess liability renewals, focusing on business that meets our rate of return requirements.

The ratio of reinsurance premiums ceded to gross premiums written for the three and nine month periods ended September 30, 2009 was 51.6% and 48.3% respectively as compared to 47.3% and 48.2% respectively in the comparable prior year periods. Reinsurance premiums ceded are principally related to our quota share treaties and tend to fluctuate in line with gross premiums written. The increase in the percentage of reinsurance premiums ceded is principally due to changes in the mix of business, specifically the increase in professional liability business written in comparison to prior periods.

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General and administration expenses for the three and nine months ended September 30, 2009 increased $2.1 million and $1.7 million compared to the same periods in 2008. The improvement in the segment’s income before taxes for both 2009 periods compared to the corresponding 2008 periods resulted in increased incentive based compensation for the 2009 periods. The nine months ended September 30, 2009 also includes a higher level of infrastructure and maintenance costs related to information technology, compared to the comparable 2008 period.

Net investment income and net gains on other investments are discussed within the corporate function results of operations as we manage investments for this segment on a consolidated basis with the Bermuda/Dublin reinsurance and life and annuity reinsurance segments.

Bermuda/Dublin Reinsurance Segment

	Three Months Ended September 30, 2009			% change		Three Months Ended September 30, 2008			Nine Months Ended September 30, 2009			% change		Nine Months Ended September 30, 2008
Gross premiums written	$	94.1		29.8	%	$	72.5		$	422.3		11.9	%	$	377.5
Reinsurance premiums ceded		(11.1	)	(59.2	)%		(27.2	)		(80.6	)	(5.3	)%		(85.1	)
Net premiums written	$	83.0		83.2	%	$	45.3		$	341.7		16.9	%	$	292.4
Net premiums earned(a)	$	103.1		25.6	%	$	82.1		$	290.3		14.8	%	$	252.8
Net investment income		10.4		25.3	%		8.3			29.6		6.5	%		27.8
Net gains (losses) on other investments		3.0		N/A			(32.6	)		8.5		N/A			(29.6	)
Total revenues		116.5		101.6	%		57.8			328.4		30.8	%		251.0
Net losses and loss expenses(b)(c)		68.7		16.4	%		59.0			192.8		28.3	%		150.3
Acquisition costs(c)		20.3		59.8	%		12.7			53.5		52.0	%		35.2
Interest expense		1.7		N/A			(0.1	)		2.4		—			2.4
General and administrative expenses(c)		8.9		43.5	%		6.2			23.6		7.3	%		22.0
Total losses and expenses		99.6		28.0	%		77.8			272.3		29.7	%		209.9
Income (loss) before taxes	$	16.9		N/A		$	(20.0	)	$	56.1		36.5	%	$	41.1
Loss ratio(b)/(a)		66.7	%				71.9	%		66.4	%				59.5	%
Combined ratio(c)/(a)		94.9	%				94.8	%		93.0	%				82.1	%

The loss ratio is calculated by dividing net losses and loss expenses (shown as (b)) by net premiums earned (shown as (a)). The combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses (shown as (c)) by net premiums earned (shown as (a)).

	Three Months Ended September 30, 2009			% of Premium Written		Three Months Ended September 30, 2008			% of Premium Written		Nine Months Ended September 30, 2009		% of Premium Written		Nine Months Ended September 30, 2008		% of Premium Written
Gross Premiums Written by Type of Risk:
Agriculture	$	(0.1	)	(0.1	)%	$	(4.8	)	(6.7	)%	$	87.4	20.7	%	$	80.2	21.2	%
Aviation		10.5		11.2	%		4.3		5.8	%		25.3	6.0	%		27.8	7.4	%
General casualty		7.3		7.8	%		0.9		1.2	%		23.4	5.5	%		8.2	2.2	%
Marine & energy		6.0		6.4	%		2.6		3.6	%		14.7	3.5	%		7.9	2.1	%
Medical malpractice		2.6		2.8	%		7.7		10.6	%		56.4	13.4	%		64.6	17.1	%
Other		—		—	%		(1.2	)	(1.6	)%		2.3	0.5	%		2.8	0.7	%
Professional liability		21.0		22.3	%		5.5		7.6	%		45.9	10.9	%		29.3	7.8	%
Property and property catastrophe		13.5		14.3	%		18.5		25.6	%		89.4	21.2	%		97.8	25.9	%
Whole account		2.5		2.6	%		2.6		3.6	%		8.5	2.0	%		10.5	2.8	%
Workers compensation		30.8		32.7	%		36.4		50.3	%		69.0	16.3	%		48.4	12.8	%
	$	94.1		100.0	%	$	72.5		100.0	%	$	422.3	100.0	%	$	377.5	100.0	%

34

The combined ratio was 94.9% and 93.0%, respectively for the three and nine months ended September 30, 2009 compared to 94.8% and 82.1% respectively for the same periods in 2008. In the three month period a decrease in the loss ratio was offset by an increase in the acquisition and general and administrative expense ratio. The combined ratio for the nine month period increased principally due to an increase in both the loss ratio and the ratio of acquisition costs to net premiums earned.

The loss ratio decreased over the comparative periods by 5.2 percentage points for the three months ended September 30, 2009 and increased by 6.9 percentage points for the nine months ended September 30, 2009. Significant items impacting the loss ratio were:

• Net favorable loss development of prior year reserves in the three and nine month periods ended September 30, 2009 was $3.3 million and $20.1 million, respectively, compared to $44.0 million and $78.6 million in the comparable prior year periods.

• Excluding the net favorable loss development, the loss ratio is 69.8% and 73.3% for the current year three and nine month periods and 125.5% and 90.6% for the 2008 comparable periods.

• The development in the three and nine months ended September 30, 2009 was principally on our property and professional liability lines and was partially offset by adverse development on our marine & energy line of business.

• The three and nine months ended September 30, 2008 included $47.0 million in catastrophe-related and property per-risk losses compared to no significant catastrophe losses in the current three month period and $2.0 million in the current nine month period.

Gross premiums written for the three and nine months ended September 30, 2009 increased by 29.8% and 11.9%, respectively, compared to the same periods in 2008. Our gross premium written volume is ahead of plan for the nine months ended September 30, 2009. The increase in premiums is principally in our professional liability, workers compensation and general casualty lines of business. We have increased our professional liability business to take advantage of favorable market pricing and reduced market capacity. The increase in workers compensation premiums for the nine month period is principally due to a significant non-recurring increase in a quota share treaty written in 2009. Our general casualty premium volume is generally flat year-over-year, the comparative 2008 periods include negative premium adjustments which have not recurred in 2009. The market for property and property catastrophe was favorable and our renewals benefited from an increase in rates. With the 59.0% growth in our Max Specialty property business in the United States, we have kept our reinsurance premium volumes stable year-over-year as part of our strategy to limit aggregate property exposures. The three and nine month periods ended September 30, 2009 include reductions in premium estimates on prior year contracts of $1.1 million and $8.6 million compared to reductions of $11.9 million and $35.2 million for same periods in 2008.

The ratio of reinsurance premiums ceded to gross premiums written for the three and nine month periods ended September 30, 2009 was 11.8% and 19.1% respectively as compared to 37.5% and 22.5% respectively in the comparable prior year periods. The decrease in the percentage of reinsurance premiums ceded in the three and nine months ended September 30, 2009 as compared to the comparable prior periods was due to a significant quota share contract incepting in the third quarter of 2008. In addition, reinstatement premiums ceded triggered by property catastrophe losses during the three months ended September 30, 2008 were $2.5 million.

The ratio of acquisition costs to net premiums earned has increased 4.3 percentage points (19.7% from 15.4%) and 4.5 percentage points (18.4% from 13.9%) for the three and nine month periods ended September 30, 2009 respectively compared to the same periods in 2008. This is principally as a result of changes in the mix of business written, in particular the significant growth in workers compensation business which has raised the average ceding commission.

General and administration expenses for the three and nine months ended September 30, 2009 increased $2.7 million and $1.6 million compared to the same periods in 2008. The improvement in the segment’s income before taxes for both 2009 periods compared to the corresponding 2008 periods resulted in increased incentive based compensation for the 2009 periods. The nine months ended September 30, 2009 also includes a higher level of infrastructure and maintenance costs related to information technology, compared to the comparable 2008 periods.

Net investment income and net gains on other investments are discussed within the corporate function results of operations as we manage investments for this segment on a consolidated basis with the Bermuda/Dublin insurance and life and annuity reinsurance segments.

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U.S. Specialty Segment

	Three Months Ended September 30, 2009			% change		Three Months Ended September 30, 2008			Nine Months Ended September 30, 2009			% change		Nine Months Ended September 30, 2008
	(In millions of U.S.Dollars)
Gross premiums written	$	69.4		31.2	%	$	52.9		$	219.3		63.5	%	$	134.1
Reinsurance premiums ceded		(26.2	)	(14.1	)%		(30.5	)		(118.6	)	45.9	%		(81.3	)
Net premiums written	$	43.2		92.9	%	$	22.4		$	100.7		90.7	%	$	52.8
Net premiums earned(a)	$	31.1		133.8	%	$	13.3		$	73.9		163.0	%	$	28.1
Net investment income		1.5		(11.8	)%		1.7			4.6		(17.9	)%		5.6
Net (losses) gains on fixed maturities		—		N/A			(0.5	)		0.1		N/ A	%		(0.5	)
Other income		—		N/A			0.1			0.3		200.0	%		0.1
Total revenues		32.6		123.3	%		14.6			78.9		136.9	%		33.3
Net losses and loss expenses(b)(c)		21.3		142.0	%		8.8			46.5		139.7	%		19.4
Acquisition costs(c)		1.9		5.6	%		1.8			5.9		181.0	%		2.1
General and administrative expenses(c)		7.8		(6.0	)%		8.3			21.2		2.9	%		20.6
Total losses and expenses		31.0		64.0	%		18.9			73.6		74.8	%		42.1
Income (loss) before taxes	$	1.6		N/A		$	(4.3	)	$	5.3		N/A		$	(8.8	)
Loss ratio(b)/(a)		68.4	%				66.6	%		62.9	%				69.2	%
Combined ratio(c)/(a)		99.7	%				142.7	%		99.5	%				149.8	%

The loss ratio is calculated by dividing net losses and loss expenses (shown as (b)) by net premiums earned (shown as (a)). The combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses (shown as (c)) by net premiums earned (shown as (a)).

	Three Months Ended September 30, 2009		% of Premium Written		Three Months Ended September 30, 2008		% of Premium Written		Nine Months Ended September 30, 2009		% of Premium Written		Nine Months Ended September 30, 2008		% of Premium Written
	(In millions of U.S.Dollars)
Gross Premiums Written by Type of Risk:
General casualty	$	27.3	39.3	%	$	22.4	42.3	%	$	69.1	31.5	%	$	42.8	31.9	%
Marine		16.2	23.3	%		11.3	21.4	%		45.9	20.9	%		25.7	19.2	%
Property		26.0	37.4	%		19.2	36.3	%		104.3	47.6	%		65.6	48.9	%
	$	69.5	100.0	%	$	52.9	100.0	%	$	219.3	100.0	%	$	134.1	100.0	%

The combined ratio was 99.7% and 99.5%, respectively for the three and nine months ended September 30, 2009 compared to 142.7% and 149.8% respectively for the same periods in 2008. The significant improvement in the combined ratio for both periods is principally due to the higher rate of growth in net premiums earned versus general and administrative expenses.

Gross premiums written for the three and nine months ended September 30, 2009 are ahead of plan for all lines of business, reflecting the continued expansion of the U.S. platform including the writing of business in the full suite of licensed states during 2009. This build out of business resulted in a 63.5% increase in gross premiums written for 2009 over 2008, which may not be indicative of future growth rates. Reinsurance premiums ceded for the U.S. specialty segment reflect the purchase of quota share and excess of loss reinsurance coverage to manage our retained exposure for risks underwritten. We continue to purchase substantial reinsurance protection, however the ratio of premiums ceded to premiums written has trended downwards over the last few quarters and we expect this to continue and then stabilize as our capital base increases.

The loss ratio for the nine months ended September 30, 2009 has improved 6.3 percentage points compared to the same period in 2008. As gross premiums written volume increases, creating a broader client base, we expect to see improvement in the net loss ratio. Our planned increase in the mix of general casualty business and our planned addition of professional liability business may temper the reduction in the loss ratio in future periods as those lines tend to have a higher loss ratio than property lines. Net losses and loss expenses in this segment typically comprise a larger volume of smaller dollar value losses compared to our Bermuda/Dublin insurance and reinsurance segments. The three and nine months ended September 30, 2008 included $5.0 million of losses related to hurricane events, net of reinsurance recoveries, these were substantially offset by favorable development of loss reserves from previous quarters. For the three months ended September 30, 2009 and 2008 net unfavorable development on prior year reserves was $2.7 million and $nil, respectively. For the nine months ended September 30, 2009 and 2008 net unfavorable development on prior year reserves was $1.8 million and $nil, respectively.

36

General and administrative expenses principally comprise personnel and infrastructure costs. With the increasing scale of this segment, general and administrative expenses continue to decrease as a percentage of net premiums earned. Compared to our other segments, we expect this segment to have a higher volume of smaller-sized transactions. Due to the greater number of personnel required to generate and process the high volume of transactions we expect a higher general and administrative expense ratio in this segment compared to our other segments.

Net investment income relating to the U.S. specialty segment, which excludes realized and unrealized gains and losses, is comprised principally of interest on cash and fixed maturities investments held by Max Specialty and Max America. The average annualized investment yield on cash and fixed maturities for the three and nine months ended September 30, 2009 was 3.86% and 3.95%, respectively, compared to 4.47% and 4.66% for the comparable 2008 periods.

Max at Lloyd’s Segment

Our Max at Lloyd’s segment comprises all of our UK-based operating businesses acquired on November 6, 2008. This includes the underwriting operations of the Syndicates for which we record our proportionate share.

	Three Months Ended September 30, 2009			Nine Months Ended September 30, 2009
	(In millions of U.S.Dollars)
Gross premiums written	$	21.1		$	110.6
Reinsurance premiums ceded		(4.0	)		(31.9	)
Net premiums written	$	17.1		$	78.7
Net premiums earned(a)	$	24.6		$	71.3
Net investment income		1.7			3.2
Net realized gains on fixed maturities		1.4			2.6
Other income		—			0.5
Total revenues		27.7			77.6
Net losses and loss expenses(b)(c)		10.0			33.4
Acquisition costs(c)		5.3			14.8
Net foreign exchange (gains)		—			(5.1	)
General and administrative expenses(c)		5.4			15.9
Total losses and expenses		20.7			59.0
Income before taxes	$	7.0		$	18.6
Loss ratio(b)/(a)		40.8	%		46.9	%
Combined ratio(c)/(a)		84.2	%		89.9	%

The loss ratio is calculated by dividing losses (shown as (b)) by net premiums earned (shown as (a)). The combined ratio is calculated by dividing the sum of net losses and loss expenses, acquisition costs and general and administrative expenses (shown as (c)) by net premiums earned (shown as (a)).

	Three months ended September 30, 2009		% of Premium Written		Nine months ended September 30, 2009		% of Premium Written
	(In millions of U.S. Dollars)
Gross Premiums Written by Type of Risk:
Accident & health	$	3.7	17.5	%	$	21.3	19.3	%
Financial institutions		6.9	32.7	%		18.4	16.6	%
Professional liability		5.3	25.1	%		14.6	13.2	%
Property and property catastrophe		5.2	24.7	%		56.3	50.9	%
	$	21.1	100.0	%	$	110.6	100.0	%

The combined ratio was 84.2% and 89.9%, respectively for the three and nine months ended September 30, 2009. Our combined ratio decreased from 99.0% in the second quarter to 84.2% in the third quarter of 2009. The decrease in the combined ratio quarter-over-quarter was principally due to a lower loss ratio.

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The loss ratio for the nine months ended September 30, 2009 continues to be in line with our expectations for this segment. The 11.3 point decrease in the loss ratio for the three months ended September 30, 2009 compared to the previous quarter was principally attributable to net favorable development of prior year loss reserves in the current quarter of $3.6 million whereas the previous quarter had $1.3 million of net unfavorable development. Net favorable loss development for the nine months ended September 30, 2009 was $2.8 million. Net losses from property catastrophe events for the three months ended September 30, 2009 were not significant and were $1.4 million for the nine months ended September 30, 2009. In the absence of catastrophe losses, our property line of business, which is principally property catastrophe risks, and our accident & health lines of business, will tend to have lower loss ratios than our financial institutions and professional liability lines of business. In this segment the higher proportion of property and accident & health premiums compared to financial institutions and professional liability premiums generally results in a lower loss ratio than our other segments.

Gross premiums written for the three and nine months ended September 30, 2009 are in line with our plan for the existing lines of business. Gross premiums written decreased from $45.3 million in the second quarter of 2009 to $21.1 million in the third quarter of 2009, principally due to property catastrophe renewal business concentrated in the second quarter. During the fourth quarter of 2009 and into 2010 we expect to expand our product offering in this segment with the addition of international casualty reinsurance and aviation which will be written by Syndicate 1400.

The ratio of acquisition costs to net premiums earned has remained consistent at 21.4% and 20.8% for the three and nine months ended September 30, 2009.

General and administrative expenses principally comprise personnel and infrastructure costs and have remained consistent throughout the year to date. The ratio of general and administration expenses to net premiums earned was 22.0% and 22.2% for the three and nine months ended September 30, 2009.

Net investment income, which excludes realized and unrealized gains and losses on Max at Lloyd’s trading portfolio, is comprised principally of interest on cash and fixed maturities investments held by the Syndicates. The average annualized investment yield on cash and fixed maturities for the three and nine months ended September 30, 2009 was 2.29% and 1.49%, respectively. This segment currently holds a higher ratio of cash and cash equivalents to fixed maturity securities than the rest of our group, resulting in a lower investment yield than our other segments. We intend to reduce the ratio of cash to fixed maturities over time and this is expected to improve the investment yield for this segment.

Life and Annuity Reinsurance Segment

	Three Months Ended September 30, 2009		% change		Three Months Ended September 30, 2008			Nine Months Ended September 30, 2009			% change		Nine Months Ended September 30, 2008
	(In millions of U.S. Dollars)
Gross premiums written	$	0.1	N/A		$	—		$	41.7		(55.8	)%	$	94.3
Reinsurance premiums ceded		—	—			—			(0.1	)	(66.7	)%		(0.3	)
Net premiums written	$	0.1	N/A		$	—		$	41.6		(55.7	)%	$	94.0
Net premiums earned	$	0.1	N/A		$	—		$	41.6		(55.7	)%	$	94.0
Net investment income		13.1	40.9	%		9.3			37.6		25.8	%		29.9
Net gains (losses) on other investments		11.9	N/A			(65.3	)		29.1		N/A			(58.8	)
Total revenues		25.1	N/A			(56.0	)		108.3		66.4	%		65.1
Claims and policy benefit		14.4	2.9	%		14.0			84.1		(38.7	)%		137.2
Acquisition costs		0.2	—			0.2			1.0		150.0	%		0.4
Interest expense		2.3	N/A			(0.2	)		2.8		33.3	%		2.1
General and administrative expenses		0.8	—			0.8			2.2		(4.3	)%		2.3
Total losses and expenses		17.7	19.6	%		14.8			90.1		(36.5	)%		142.0
Income (loss) before taxes	$	7.4	N/A		$	(70.8	)	$	18.2		N/A		$	(76.9	)

We write life and annuity reinsurance transactions when attractive opportunities arise. The nature of life and annuity reinsurance transactions that we consider results in a limited number of transactions actually bound with potentially large variations in quarterly and annual premium volume. Consequently, components of our underwriting results, such as premiums written, premiums earned and benefits can be volatile and, accordingly, period-to-period comparisons are not necessarily representative of future trends. Income before taxes is primarily driven by the spread between the actual rate of return on our investments and the rate of return assumption used when pricing the business that we have written, together with any material changes in our estimates of life and annuity benefit reserves.

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No new life and annuity contracts were written during either of the three month periods ended September 30, 2009 and 2008. One new life and annuity contract was written during each of the nine month periods ended September 30, 2009 and 2008. Gross premiums written on the new contracts for the nine months ended September 30, 2009 and 2008 were $40.9 million and $92.8 million, respectively. The new 2009 contract covers a closed block of traditional life insurance for a new client. Apart from the components related to contracts commencing during a period, gross premiums written, reinsurance premiums ceded, net premiums earned, acquisition costs and general and administrative expenses represent ongoing premium receipts or adjustments and related administration expenses on existing contracts. Interest expense relates to interest on funds withheld on the variable quota share retrocession agreement with Grand Central Re and on certain deposit liabilities. The interest expense on funds withheld from Grand Central Re is based on the average of two total return fixed maturity indices, which varies from period to period.

Claims and policy benefits were $14.4 million and $84.1 million for the three and nine months ended September 30, 2009 compared to $14.0 million and $137.2 million for the same period in 2008. Excluding the new contracts incepting during each nine month period, benefits were $43.0 million and $44.4 million respectively. Claims and policy benefits in each period represent reinsured policy claims payments net of the change in policy and claim liabilities.

Net investment income and net gains on other investments are discussed within the corporate function results of operations as we manage investments for this segment on a consolidated basis with the Bermuda/Dublin insurance and Bermuda/Dublin reinsurance segments.

Corporate Function

The results of operations for the corporate function discussed below include the net investment income, net gains and losses on other investments, net realized gains and losses on fixed maturities, and net impairment losses recognized in earnings for all of our segments, including amounts which are allocated to the segments and included in the segment discussions above. These investment results are presented below on a consolidated basis for purposes of ease of discussion.

All other items represent the portion not allocated or discussed in the results of operations of our other segments.

	Three Months Ended September 30, 2009			% change		Three Months Ended September 30, 2008			Nine Months Ended September 30, 2009			% change		Nine Months Ended September 30, 2008
	(In millions of U.S. Dollars)
Net Investment income	$	42.8		(5.5	)%	$	45.3		$	125.1		(9.0	)%	$	137.4
Net gains (losses) on other investments		23.3		N/A			(158.8	)		62.7		N/A			(145.0	)
Net realized gains (losses) on fixed maturities		1.3		N/A			(3.8	)		1.7		N/A			(1.0	)
Net impairment losses recognized in earnings		(0.1	)	(99.3	)%		(13.8	)		(2.2	)	(87.0	)%		(16.9	)
Other income (expense)	$	0.7		N/A		$	(0.6	)	$	1.1		N/A		$	(0.2	)
Interest expense		1.9		(59.6	)%		4.7			9.5		(41.0	)%		16.1
Net foreign exchange losses (gains)		0.4		(80.0	)%		2.0			(1.4	)	N/A			2.0
Merger and acquisition expense (income)		(41.4	)	N/A			(0.5	)		(31.3	)	N/A			3.5
General and administrative expenses		10.2		(9.7	)%		11.3			34.9		19.9	%		29.1

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Net investment income. The decrease in net investment income, which excludes realized and unrealized gains and losses, was principally attributable to the increase in the proportion of cash held as at September 30, 2009 compared to September 30, 2008 and the lower returns on cash and cash equivalents. The average annualized investment yield on cash, fixed maturities and funds withheld by clients was 3.53% compared to 4.40% for the three months ended September 30, 2009 and 2008, respectively. The yield for the nine month periods ended September 30, 2009 and 2008 was 3.59% and 4.43% respectively. Our ratio of cash to invested assets has increased from 13.1% at September 30, 2008 to 19.5% at September 30, 2009. This increase is principally attributable to significant cash redemptions received during the period from the hedge fund portfolio and the growth in gross premiums written, which has been partially offset by the repayment of debt during the period. We anticipate this ratio to decrease as we seek to deploy cash in more attractive investment opportunities.

Net gains on other investments. Net gains on the hedge fund portfolio were $23.3 million, or a 3.94% rate of return, for the three months ended September 30, 2009, compared to net losses of $158.8 million, or a negative 12.99% rate of return, for the three months ended September 30, 2008. The three month rate of return of 3.94% compares to the HFRI Fund of Funds Composite Index returning 4.37%. The three months ended September 30, 2009 experienced improvement in the equity markets and indications of easing in credit conditions. The S&P 500 Index had a return of 15.61% and the Merrill Lynch Master Bond Index had a return of 3.56% for the three months ended September 30, 2009.

Net gains on the hedge fund portfolio were $62.7 million, or a 9.38% rate of return, for the nine months ended September 30, 2009, compared to net losses of $145.0 million, or a negative 11.98% rate of return, for the nine months ended September 30, 2008. The nine month rate of return of 9.38% compares to the HFRI Fund of Funds Composite Index returning 9.80%. The nine months ended September 30, 2009 experienced improvement in the equity markets and indications of easing in credit conditions. The S&P 500 Index had a return of 19.26% and the Merrill Lynch Master Bond Index had a return of 5.21% for the nine months ended September 30, 2009.

Eight out of the nine hedge fund strategies we employed experienced positive returns during the three months ended September 30, 2009, and nine out of the ten strategies we employed earned positive returns during the nine months ended September 30, 2009. The largest contributors by investment strategy to the net gain for the current quarter were the distressed securities and the long/short equity strategies. As of September 30, 2009, 19.3% and 30.0% of our hedge fund portfolio was allocated to the distressed securities and the long/short equity strategies, respectively.

We have reduced the allocation to our hedge fund portfolio from 14.1% as of December 31, 2008 to 7.2% as of September 30, 2009 and we plan to reduce our allocation to our hedge fund portfolio to a target range of 5% to 7% by the end of 2009. Our hedge fund portfolio objective is to achieve a market neutral/absolute return strategy, with diversification by strategy and underlying fund. A market neutral strategy strives to generate consistent returns in both up and down markets by selecting long and short positions with a total net exposure of zero. Returns are derived from the long/short spread, or the amount by which long positions outperform short positions. The objective of an absolute return strategy is to provide stable performance regardless of market conditions, with minimal correlation to market benchmarks.

Net realized gains on fixed maturities and net impairment losses recognized in earnings. Our total fixed maturities portfolio is split into three portfolios:

• an available for sale portfolio;

• a held to maturity portfolio; and

• a trading portfolio that was acquired as part of our Max UK acquisition.

Our available for sale portfolio is recorded at fair value with unrealized gains and losses recorded in other comprehensive income as part of total shareholders’ equity. Our available for sale fixed maturities investment strategy is not intended to generate significant realized gains and losses as more fully discussed below in the Financial Condition section. Our held to maturity portfolio includes securities for which the Company has the ability and intent to hold to maturity or redemption and is recorded at amortized cost. There should be no realized gains or losses related to this portfolio unless there is an other than temporary impairment loss. Our trading portfolio is recorded at fair value with unrealized gains and losses recorded in net income as net realized gains or losses, all of which are reported within our Max at Lloyd’s segment.

As a result of our review of securities in an unrealized loss position, which is performed every quarter, we recorded other-than-temporary impairment losses through earnings of $0.1 million and $13.8 million for the three months ended September 30, 2009 and 2008, respectively, and $2.2 million and $16.9 million for the nine months ended September 30, 2009 and 2008, respectively. These impairment losses are presented separately from all other net realized gains and losses on fixed maturities. A discussion of our process for estimating other-than-temporary impairments is included in Note 5 of our unaudited interim consolidated financial statements included herein.

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Interest expense. Interest expense principally reflects interest on our bank loans and senior notes outstanding. The 59.6% decrease in interest expense for the three months ended September 30, 2009 compared to the same period in 2008, and the 41.0% decrease for the nine months ended September 30, 2009 compared to the same period in 2008, is principally attributable to the repayment of $150.0 million in bank loans in April 2009 and the $225.0 million repayment of the swap loan. The remaining debt at September 30, 2009 comprises $91.4 million in senior notes outstanding that bear interest at 7.20%.

Merger and acquisition expenses. Merger and acquisition expenses in 2009 comprise the professional and legal fees related to the proposed amalgamation with IPC, which was terminated in June 2009. A $50.0 million termination fee received from IPC is included in our results for the three months and nine months ended September 30, 2009. Merger and acquisition expenses in 2008 comprise the professional and legal fees related to the acquisition of Max UK and the creation of our Max at Lloyd’s segment.

General and administrative expenses. General and administrative expenses for the nine months ended September 30, 2009 increased 19.9% compared to 2008, principally due to a higher level of infrastructure and maintenance costs related to information technology.

Financial Condition

Cash and invested assets. Aggregate invested assets, comprising cash and cash equivalents, fixed maturities and other investments, were $5,418.3 million at September 30, 2009 compared to $5,356.9 million at December 31, 2008, an increase of 1.1%. The increase in cash and invested assets resulted principally from the settlement of losses and the repayment of bank loans during the period.

We own an available for sale portfolio, a held to maturity portfolio and a trading portfolio of fixed maturities securities. We record the available for sale and trading investment portfolios at fair value on our balance sheet. On our trading portfolio, the unrealized gain or loss associated with the difference between the fair value and the amortized cost of the investments is recorded in net income as a net realized gain or loss. On our available for sale portfolio, the unrealized gain or loss (absent credit losses) associated with the difference between the fair value and the amortized cost of the investments is recorded in other comprehensive income in the shareholders’ equity section of our consolidated balance sheet.

To match the more predictable cash flow requirements of our long term liabilities we invest in a long duration investment portfolio. In order to reduce the impact on shareholders’ equity of fluctuations in fair value of those investments we implemented a strategy in the three months ended September 30, 2009 to hold certain fixed income securities to maturity. This held to maturity portfolio is recorded at amortized cost rather than at fair value.

Fixed maturities are subject to fluctuations in fair value due to changes in interest rates, changes in issuer specific circumstances, such as credit rating changes, and changes in industry specific circumstances, such as movements in credit spreads based on the market’s perception of industry risks. As a result of these potential fluctuations, it is possible to have significant unrealized gains or losses on a security. Our strategy for our fixed maturities portfolios is to tailor the maturities of the portfolios to the timing of expected loss and benefit payments. At maturity, absent any credit loss, a fixed maturity’s amortized cost will equal its fair value and no realized gain or loss will be recognized in income. If, due to an unforeseen change in loss payment patterns, we need to sell available for sale fixed maturity securities before maturity, we could realize significant gains or losses in any period, which could result in a meaningful effect on reported net income for such period.

In order to reduce the likelihood of needing to sell investments before maturity, especially given the unpredictable and potentially significant cash flow requirements of our property catastrophe business, we maintain significant cash and cash equivalent balances. We believe it is more likely than not that we will not be required to sell those fixed maturities securities in an unrealized loss position until such time as they reach maturity or the fair value increases.

We perform regular reviews of our available for sale and held to maturity portfolios and utilize a process that considers numerous indicators in order to identify investments that are showing signs of potential other-than-temporary impairments. The indicators include the issuer’s financial condition and ability to make future scheduled interest and principal payments, benchmark yield spreads, the nature of collateral or other credit support and significant economic events that have occurred that affect the industry in which the issuer participates. As a result of this process, we recognized write-downs for other-than-temporary impairments through earnings of $0.1 million and $13.8 million for the three months ended September 30, 2009 and 2008, respectively, and $2.2 million and $16.9 million for the nine months ended September 30, 2009 and 2008, respectively.

Our portfolio of investment grade fixed maturities includes mortgage-backed and asset-backed securities and collateralized mortgage obligations. These types of securities have cash flows that are backed by the principal and interest payments of a group of underlying mortgages or other receivables. During the twelve months ended September 30, 2009, delinquency and default rates have increased on these types of securities, and particularly on securities backed by sub-prime mortgages. Generally, sub-prime mortgages are considered to be those made to borrowers who do not qualify for market interest rates for one or more possible reasons, such as a low credit score, a limited or lack of credit history or a lack of earnings documentation. As a result of the increasing default rates of sub-prime borrowers, there is a greater risk of defaults on mortgage-backed and asset-backed securities and collateralized mortgage

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obligations, especially those that are non-investment grade. Therefore, fixed maturities securities backed by sub-prime mortgages have exhibited significant declines in fair value and liquidity. These factors combined with the contraction in liquidity in the principal markets for these securities makes the estimate of fair value increasingly uncertain. The fair values of our holdings in securities exposed to sub-prime borrowers are generally not based on quoted prices for identical securities, but are based on model-derived valuations from independent pricing sources as described below. We obtain fair value estimates from multiple independent pricing sources in an effort to mitigate some of the uncertainty surrounding the fair value estimates. If we need to liquidate these securities within a short period of time, the actual realized proceeds may be significantly different from the fair values estimated at September 30, 2009. We believe our investment exposure to sub-prime credit risk is limited although there can be no assurance that events in the sub-prime mortgage sector will not adversely affect the value of our investments. At September 30, 2009, securities with significant exposure to sub-prime borrowers totaled $25.8 million in fair value, $38.6 million in amortized cost and $38.9 million in par value for a net unrealized loss of $12.8 million. By fair value, 18.6% of these securities are AAA-rated, 6.9% are AA-rated, 31.6% are A-rated and 42.9% are rated BBB+ or lower. The weighted average life of these securities is 2.6 years. As of September 30, 2009, we have determined that a writedown for other-than-temporary impairment of these securities is not warranted based on a consideration of relevant factors, including prepayment rates, subordination levels, default rates, credit ratings, weighted average life and cash flow testing. Together with our investment managers, we continue to monitor our potential exposure to sub-prime borrowers, and we will make adjustments to the investment portfolio, if and when deemed necessary.

Generally, Alt-A mortgages are considered to be those made to borrowers who do not qualify for market interest rates but who are considered to have less credit risk than sub-prime borrowers.

The following table summarizes the amortized cost and fair value of our fixed maturities securities with exposure to sub-prime or Alt-A mortgages as of September 30, 2009.

By Vintage Year	Weighted Average Life in Years	Credit Rating AAA Senior Tranche		AA		A		BBB+ or lower		Amortized Cost		Fair Value
	(In millions of U.S. Dollars)
Fixed maturities with sub-prime mortgage exposure
Pre-2005	4.7	$	2.0	$	2.4	$	0.1	$	1.5	$	6.0	$	4.7
2005	3.6		1.4		0.3		3.0		—		4.7		3.0
2006	4.0		2.0		—		9.1		14.3		25.4		16.7
2007	2.2		—		—		—		2.5		2.5		1.4
Total	2.6		5.4		2.7		12.2		18.3		38.6		25.8
Fixed maturities with Alt-A mortgage exposure
Pre-2005	4.0		2.4		0.8		1.6		—		4.8		4.2
2005	2.6		—		0.8		—		13.5		14.3		10.8
2006	1.7		—		0.7		—		1.7		2.4		2.4
Total	2.8		2.4		2.3		1.6		15.2		21.5		17.4
Total	2.7	$	7.8	$	5.0	$	13.8	$	33.5	$	60.1	$	43.2

As described in Note 6 of our unaudited interim consolidated financial statements, our fixed maturities investments and our other investments are carried at fair value.

Fair value prices for all securities in our fixed maturities portfolio are independently provided by both our investment custodian and our investment managers, which each utilize nationally recognized independent pricing services. We record the unadjusted price provided by the investment custodian and our validation process includes, but is not limited to: (i) comparison to the price provided by the investment manager, with significant differences investigated; (ii) quantitative analysis (e.g., comparing the quarterly return for each managed portfolio to its target benchmark, with significant differences identified and investigated); (iii) evaluation of methodologies used by external parties to calculate fair value; and (iv) comparing the price to our knowledge of the current investment market.

The independent pricing services used by our investment custodian and investment managers obtain actual transaction prices for securities that have quoted prices in active markets. Each pricing service has its own proprietary method for determining the fair value of securities that are not actively traded. In general, these methods involve the use of “matrix pricing” in which the independent pricing service uses observable market inputs including, but not limited to, reported trades, benchmark yields, broker/dealer quotes, interest rates, prepayment speeds, default rates and such other inputs as are available from market sources to determine a reasonable

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fair value. In addition, pricing services use valuation models, such as an Option Adjusted Spread model, to develop prepayment and interest rate scenarios. The Option Adjusted Spread model is commonly used to estimate fair value for securities such as mortgage-backed and asset-backed securities. The ability to obtain quoted market prices is reduced in periods of decreasing liquidity, which generally increases the use of matrix pricing methods and increases the uncertainty surrounding the fair value estimates.

Investments in hedge funds comprise a portfolio of limited partnerships and stock investments in trading entities, or funds, which invest in a wide range of financial products. The units of account that we value are our interests in the funds and not the underlying holdings of such funds. Thus, the inputs we use to value our investments in each of the funds may differ from the inputs used to value the underlying holdings of such funds. These funds are stated at fair value which ordinarily will be the most recently reported net asset value as advised by the fund manager or administrator, where the fund’s underlying holdings can be in various quoted and unquoted investments. We believe the reported net asset value represents the fair value market participants would apply to an interest in the fund. The fund managers value their underlying investments at fair value in accordance with policies established by each fund, as described in each of their financial statements and offering memoranda.

We have ongoing due diligence processes with respect to funds and their managers. These processes are designed to assist us in assessing the quality of information provided by, or on behalf of, each fund and in determining whether such information continues to be reliable or whether further review is warranted. While reported net asset value is the primary input to the review, when the net asset value is deemed not to be indicative of fair value, we may incorporate adjustments to the reported net asset value. Such adjustments may involve significant judgment. We obtain the audited financial statements for every fund annually, and regularly review and discuss the fund performance with the fund managers to corroborate the reasonableness of the reported net asset values.

We are able to redeem the hedge fund portfolio held through Max Diversified on the same terms that the underlying funds can be liquidated. In general, the funds in which Max Diversified is invested require at least 30 days notice of redemption, and may be redeemed on a monthly, quarterly, semi-annual, annual, or longer basis, depending on the fund.

Certain funds may have a lock-up period. A lock-up period refers to the initial amount of time an investor is contractually required to invest before having the ability to redeem. Funds that do provide for periodic redemptions may, depending on the funds’ governing documents, have the ability to deny or delay a redemption request, called a gate. The fund may implement this restriction because the aggregate amount of redemption requests as of a particular date exceeds a specified level, generally ranging from 15% to 25% of the fund’s net assets. The gate is a method for executing an orderly redemption process which allows for redemption requests to be executed in a timely manner to reduce the possibility of adversely affecting the remaining investors in the fund. In the current financial market environment, we have experienced an increase in the number of funds which have imposed gates, and we believe it is likely that this trend will continue.

The majority of our hedge fund portfolio remains highly liquid and the imposition of gates by certain funds is not expected to significantly impact our cash flow needs or change our timetable for reducing our allocation to hedge funds. Based upon information provided by the fund managers, as of September 30, 2009, we estimate that over 78.0% of the underlying assets held by our hedge funds are traded securities or have broker quotes available. Typically, the imposition of a gate delays a portion of the requested redemption, with the remaining portion settled in cash shortly after the redemption date. Of our September 30, 2009 outstanding redemptions receivable of $62.4 million, none of which is gated, $37.5 million was received in cash prior to November 6, 2009. The fair value of our holdings in funds with gates imposed as at September 30, 2009 was $38.8 million.

Certain funds may be allowed to invest a portion of their assets in illiquid securities, such as private equity and convertible debt. In such cases, a common mechanism used is a side-pocket, whereby the illiquid security is assigned to a separate memorandum capital account or designated account. Typically, the investor loses its redemption rights in the designated account. Only when the illiquid security is sold, or otherwise deemed liquid by the fund, may investors redeem their interest. As at September 30, 2009, the fair value of our hedge funds held in side-pockets is $108.3 million. Due to the uncertainty surrounding the timing of the sale of the underlying assets within side-pockets, the estimated timing of liquidity presented in the table below is subject to change. Our holdings in side-pockets are included in the greater than 270 days section of the table below.

Had we requested full redemptions for all of our holdings in the funds, the table below indicates our best estimate of the earliest date from September 30, 2009 on which such redemptions might be received. This estimate is based on available information from the funds and is subject to significant change, particularly in the current economic environment.

	As at September 30, 2009
Liquidity:	Fair Value		% of Hedge Funds
	(in thousands of U.S. Dollars)
Within 90 days	$	21,311	5.5	%
Between 91 to 120 days		15,112	3.9	%
Between 121 to 180 days		156,900	40.5	%
Between 181 to 270 days		9,992	2.6	%
Greater than 270 days		183,672	47.5	%
Total(1)	$	386,987	100.0	%

⁽¹⁾ Total excludes our reinsurance private equity investment.

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Although we believe that our significant cash balances, fixed maturities investments and credit facilities provide sufficient liquidity to satisfy the claims of insureds and ceding clients, in the event that we are required to access assets invested in the hedge fund portfolio, our ability to do so may be impaired by these liquidity constraints. See “Risk Factors—Unexpected volatility or illiquidity associated with our alternative investment portfolio or in the financial markets could significantly and negatively affect our ability to conduct business” in our Annual Report on Form 10-K for the year ended December 31, 2008.

Additional information about the hedge fund portfolio can be found in Notes 5 and 6 to our unaudited interim consolidated financial statements included herein.

Losses and benefits recoverable from reinsurers. Losses and benefits recoverable from reinsurers totaled $985.6 million at September 30, 2009 compared to $846.6 million at December 31, 2008, an increase of 16.4%, principally reflecting losses ceded under our reinsurance and retrocessional agreements resulting from net earned premiums during the nine months ended September 30, 2009.

Losses recoverable from reinsurers on property and casualty business was $948.8 million and $810.1 million at September 30, 2009 and December 31, 2008, respectively. Benefits recoverable from reinsurers on life and annuity business was $36.8 million and $36.5 million at September 30, 2009 and December 31, 2008.

At September 30, 2009, 83.9% of our losses and benefits recoverable were with reinsurers rated “A” or above by A.M. Best Company and 5.3% are rated “A-”. Grand Central Re, a Bermuda domiciled reinsurance company in which Max Bermuda has a 7.5% equity investment, is our largest “NR—not rated” retrocessionaire and accounted for 10.3% of our losses and benefits recoverable at September 30, 2009. As security for outstanding loss obligations, we retain funds from Grand Central Re amounting to 109.2% of its loss recoverable obligations. The remaining 0.5% of losses and benefits recoverable are with “B+” rated or lower reinsurers.

Liabilities for property and casualty losses. Property and casualty losses totaled $3,159.2 million at September 30, 2009 compared to $2,938.2 million at December 31, 2008, an increase of 7.5%. The increase in property and casualty losses was principally attributable to estimated losses associated with premiums earned during the nine months ended September 30, 2009, partially offset by amounts paid on property and casualty losses and releases of reserves on prior period contracts. During the nine months ended September 30, 2009, we paid $367.1 million in property and casualty losses and recorded gross favorable development on prior period reserves of $56.9 million.

Liabilities for life and annuity benefits. Life and annuity benefits totaled $1,415.8 million at September 30, 2009 compared to $1,367.0 million at December 31, 2008. The increase was principally attributable to movements in foreign exchange rates. We endeavor to match these liabilities with assets of similar currency and duration in order to limit the net impact to shareholders’ equity of movements in foreign exchange rates. During the nine months ended September 30, 2009, we paid $86.4 million of benefit payments.

Bank loans. As described in Note 8 to our unaudited interim consolidated financial statements included herein, the non-controlling interest in Max Diversified and the related total return swap were recorded on a combined basis and accounted for as a financing transaction. The effect of combining the transactions resulted in the notional amount being presented as a bank loan, with changes in the fair value of the Max Diversified shares increasing or decreasing this notional amount. On August 31, 2009, we entered into a termination agreement with the Bank in connection with the total return swap and non-controlling interest. On termination of the swap, we repurchased all of the remaining Max Diversified shares held by the Bank. The swap loan, which had a balance of $225.0 million at December 31, 2008 has been repaid in full during the nine months ended September 30, 2009.

On April 3, 2007, Max Capital borrowed $50.0 million under our revolving credit facility in connection with the acquisition and capitalization of Max Specialty. On April 9, 2009, this loan was repaid in full.

On October 20, 2008, Max Capital borrowed $100.0 million under our revolving credit facility in connection with the acquisition and capitalization of Max UK. On April 20, 2009, this loan was repaid in full.

44

Senior notes. On April 16, 2007, Max USA privately issued $100.0 million principal amount of 7.20% senior notes, due April 14, 2017 with interest payable on April 16 and October 16 of each year. The senior notes are Max USA’s senior unsecured obligations and rank equally in right of payment with all existing and future senior unsecured indebtedness of Max USA. The senior notes are fully and unconditionally guaranteed by Max Capital. The effective interest rate related to the senior notes, based on the net proceeds received, was approximately 7.27%. The net proceeds from the sale of the senior notes were $99.5 million, and they were used to repay the $100.0 million short-term borrowing of Max USA under the revolving credit facility. On December 30, 2008, Max USA repurchased $8.5 million principal amount of these notes, leaving a principal amount of $91.5 million outstanding.

Shareholders’ equity. Our shareholders’ equity increased to $1,546.7 million at September 30, 2009 from $1,280.3 million at December 31, 2008, an increase of 20.8%, principally due to net income of $183.6 million and an $87.0 million increase in accumulated other comprehensive income, offset by the payment of dividends of $16.0 million during the nine months ended September 30, 2009.

Liquidity. We generated $249.9 million of cash from operations during the nine months ended September 30, 2009 compared to generating $349.6 million for the nine months ended September 30, 2008. The decrease in cash from operations is principally due to the timing of the payment of property and casualty losses, the payment of reinsurance premiums ceded, and the decrease in life and annuity premiums written. The two principal factors that impact our operating cash flow are premium collections and timing of loss and benefit payments.

The casualty business we write generally has a long claim-tail, and we expect that we will generate significant operating cash flow as we accumulate property and casualty loss reserves and life and annuity benefit reserves on our balance sheet. As we continue to diversify into property and property catastrophe business, which generally has a short claim-tail, and as losses are incurred, we expect potential volatility in our operating cash flow levels. We believe that our property and casualty loss reserves and life and annuity benefit reserves currently have an average duration of approximately 4.8 years and we expect to see increases in the amount of expected loss payments in future periods with a resulting decrease in operating cash flow. We do not expect loss payments to exceed the premiums generated and therefore expect to have continued positive cash flow. However, actual premiums written and collected and losses and loss expenses paid in any period could vary from our expectations and could have a significant and adverse effect on operating cash flow.

While we endeavor to tailor our fixed maturities portfolios to match the duration of expected loss and benefit payments, increased loss amounts or settlement of losses and benefits earlier than anticipated can result in greater cash needs. We maintain a significant working cash balance and have generated positive cash flow from operations in each of our last eight years of operating history. In recent quarters our cash balance has increased as we have elected to maintain a larger cash position in the current investment environment. Our cash and cash equivalents balance is $1,056.0 million at September 30, 2009. We believe that we currently maintain sufficient liquidity to cover existing requirements and provide for contingent liquidity. Nonetheless, it is possible that significant deviations in expected loss and benefit payments can occur, potentially requiring us to liquidate a portion of our fixed maturities portfolios. If we need to liquidate our fixed maturities securities within a short period of time, the actual realized proceeds may be significantly different from the fair values estimated at September 30, 2009. We believe that most of our portfolio has sufficient liquidity to mitigate this risk, and we believe that we can continue to hold any potentially illiquid position until we can initiate an appropriately priced transaction.

As a holding company, Max Capital’s principal assets are its investments in the common shares of its principal subsidiary, Max Bermuda, and its other subsidiaries. Max Capital’s principal source of funds is from interest income on cash balances and cash dividends from its subsidiaries, including Max Bermuda. The payment of dividends is limited under Bermuda insurance laws. In particular, Max Bermuda may not declare or pay any dividends if it is in breach of its minimum solvency or liquidity levels under Bermuda law or if the declaration or payment of the dividends would cause it to fail to meet the minimum solvency or liquidity levels under Bermuda law. At September 30, 2009, Max Bermuda had approximately $1,385.0 million in statutory capital and surplus and met all minimum solvency and liquidity requirements.

In the ordinary course of business, we are required to provide letters of credit or other regulatory approved security to certain of our clients to meet contractual and regulatory requirements. As of September 30, 2009, we have two letter of credit facilities totaling $675.0 million with an additional $200.0 million available subject to certain conditions, plus a third facility of GBP 90.0 million for our Funds at Lloyd’s commitments. As of September 30, 2009 we had $438.2 million in letters of credit utilized under these facilities. Under our Funds at Lloyd’s facility, GBP 63.6 million is utilized as of September 30, 2009. A $20.0 million credit facility with ING was terminated in July 2009. Each of our credit facilities requires that we comply with certain covenants, which may include a minimum consolidated tangible net worth, a minimum insurer financial strength rating and restrictions on the payment of dividends. We were in compliance with all the covenants of each of our credit facilities at September 30, 2009.

The amount which Max Capital provides as Funds at Lloyd’s is not available for distribution for the payment of dividends. Our corporate members may also be required to maintain funds under the control of Lloyd’s in excess of their capital requirements and such funds also may not be available for distribution of the payment of dividends.

45

Capital resources. At September 30, 2009, our capital structure consisted of common equity. Total shareholders’ equity amounted to $1,546.7 million as compared to $1,280.3 million at December 31, 2008, an increase of 20.8%. On August 20, 2007, we filed an automatic shelf registration statement on Form S-3 with the SEC indicating that we may periodically issue up to $500.0 million in debt securities, common shares, preferred shares, depository shares, warrants, share-purchase contracts and share purchase units. The shelf registration statement also covers debt securities of Max USA and trust preferred securities of Max Capital Trust I. No securities have been issued under the shelf registration statement. We believe that we have sufficient capital to meet our financial obligations.

In April 2007, Max USA sold $100.0 million aggregate principal amount of 7.20% senior notes due April 14, 2017, of which $91.5 million remains outstanding at September 30, 2009. The senior notes are guaranteed by Max Capital. As of September 30, 2009, the senior notes were assigned a senior unsecured debt rating by Standard & Poor’s Ratings Services, or S&P, A.M. Best Company, or A.M. Best, Fitch, Inc., or Fitch, and Moody’s Investors Service, Inc., or Moody’s (see table below). The senior unsecured debt ratings assigned by rating agencies to reinsurance and insurance companies are based upon factors and criteria established independently by each rating agency. They are not an evaluation directed to investors in our senior notes, and are not a recommendation to buy, sell or hold our senior notes. These ratings are subject to periodic review by the rating agencies or may be revised downward or revoked at the sole discretion of the rating agencies.

Ratings are an important factor in establishing the competitive position of reinsurance and insurance companies and are important to our ability to market our products. We have a financial strength rating for our non-Lloyd’s reinsurance and insurance subsidiaries from each of A.M. Best, Fitch, Moody’s and S&P (see table below). These ratings reflect each rating agency’s opinion of our financial strength, operating performance and ability to meet obligations. They are not evaluations directed toward the protection of investors in securities issued by Max Capital. The Syndicates share the Lloyd’s market ratings (see table below).

At September 30, 2009, we were rated as follows:

	A.M. Best	Fitch	Moody’s	S&P
Financial strength rating for non-Lloyd’s reinsurance and insurance subsidiaries	A-(excellent)(1)	A (strong)(1)	A3(2)	A- (1)
Outlook on financial strength rating	Positive(1)	Negative(1)	Negative(2)	Stable (1)
Senior notes senior unsecured debt rating(3)	bbb-	BBB+	Baa2	BBB
Outlook on debt rating(3)	Positive	Negative	Negative	Stable
Lloyd’s financial strength rating applicable to the Syndicates(4)	A (excellent)	A+ (strong)	Not applicable	A+ (strong)

(1) Applicable to Max Bermuda, Max Specialty, Max America, Max Re Europe and Max Insurance Europe.

(2) Applicable to Max Bermuda.

(3) Applicable to Max USA.

(4) Applicable to the Syndicates.

46

Max Capital’s board of directors declared a dividend of $0.10 per share on each of August 4, 2009 and November 3, 2009 payable on September 1, 2009 and November 30, 2009, respectively, to shareholders of record on August 18, 2009 and November 16, 2009, respectively. On each of February 10, 2009 and May 4, 2009, the board of directors declared a dividend of $0.09 payable on March 10, 2009 and June 1, 2009, respectively, to shareholders of record on February 24, 2009 and May 18, 2009, respectively. Continuation of cash dividends in the future will be at the discretion of the board of directors and will be dependent upon our results of operations and cash flows, and our financial position and capital requirements, general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends and other factors the board of directors deems relevant.

Off-balance sheet arrangements

We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Contractual Obligations

	Payment due by period (in thousands of U.S. Dollars)
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Senior notes		142,626		6,591		13,182		13,182		109,671
Operating lease obligations		23,939		6,385		10,323		5,090		2,141
Property and casualty losses		3,159,156		933,651		723,464		498,103		1,003,938
Life and annuity benefits		2,548,229		119,558		227,846		211,716		1,989,109
Deposit liabilities		200,567		41,671		89,177		10,952		58,767
Total	$	6,074,517	$	1,107,856	$	1,063,992	$	739,043	$	3,163,626

The reserves for losses and benefits together with deposit liabilities represent management’s estimate of the ultimate cost of settling losses, benefits and deposit liabilities. As more fully discussed in our “Critical Accounting Policies—Losses and Benefits” in our Annual Report on Form 10-K for the year ended December 31, 2008, the estimation of losses and benefits is based on various complex and subjective judgments. Actual losses and benefits paid may differ, perhaps significantly, from the reserve estimates reflected in our financial statements. Similarly, the timing of payment of our estimated losses and benefits is not fixed and there may be significant changes in actual payment activity. The assumptions used in estimating the likely payments due by period are based on our historical claims payment experience and industry payment patterns, but due to the inherent uncertainty in the process of estimating the timing of such payments, there is a risk that the amounts paid in any such period can be significantly different from the amounts disclosed above.

The amounts in this table represent our gross estimates of known liabilities as of September 30, 2009 and do not include any allowance for claims for future events within the time period specified. Accordingly, it is highly likely that the total amounts paid out in the time periods shown will be greater than those indicated in the table.

Furthermore, life and annuity benefits and deposit liabilities recorded in the unaudited interim consolidated financial statements at September 30, 2009 are computed on a net present value basis, whereas the expected payments by period in the table above are the estimated payments at a future time and do not reflect a discount of the amount payable.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

We engage in an investment strategy that combines a fixed maturities investment portfolio and a hedge fund portfolio that employ strategies to manage investment risk. We attempt to maintain adequate liquidity in our cash and fixed maturities investment portfolio to fund operations, pay reinsurance and insurance liabilities and claims and provide funding for unexpected events. We seek to manage our credit risk through industry and issuer diversification, and interest rate risk by monitoring the duration and structure of our investment portfolio relative to the duration and structure of our liability portfolio. We are exposed to potential loss from various market risks, primarily changes in interest rates, credit spreads and equity prices. Accordingly, earnings would be affected by these changes. We manage our market risk based on board-approved investment policies. With respect to our fixed maturities investment portfolio, our risk management strategy and investment policy is to invest in debt instruments of investment grade issuers and to limit

47

the amount of credit exposure with respect to particular ratings categories and any one issuer. We select investments with characteristics such as duration, yield, currency and liquidity that are tailored to the cash flow characteristics of our property and casualty and life and annuity liabilities.

As of September 30, 2009, 96.9% of the securities held in our fixed maturities portfolios were rated BBB-/Baa3 or above. Our current policy is not to purchase securities rated lower than BBB-/Baa3 and to maintain a minimum weighted average credit rating quality of AA/Aa2. At September 30, 2009, the impact on the fixed maturities investment portfolio from an immediate 100 basis point increase in market interest rates would have resulted in an estimated decrease in fair value of 3.1% or approximately $124.3 million, and the impact on the fixed maturities investment portfolio from an immediate 100 basis point decrease in market interest rates would have resulted in an estimated increase in fair value of 3.7% or approximately $147.8 million.

With respect to our hedge fund portfolio, we consistently and systematically monitor the strategies and funds in which we are invested. We focus on risk, as opposed to return, in the selection of each of our hedge funds. This causes us to select individual hedge funds that have exhibited attractive risk/reward characteristics and low correlation to other investments in the portfolio, as opposed to individual investments that have shown the highest return, but also higher volatility of return. We then combine the selected individual hedge funds into a portfolio of hedge funds. By combining investments that we believe have moderate volatility and low correlations, we aim to achieve a hedge fund portfolio within Max Diversified that has overall lower volatility relative to investing in a common stock portfolio or a typical fund of hedge funds portfolio.

At September 30, 2009, the estimated impact on the hedge fund portfolio from an immediate 100 basis point increase in market interest rates would have resulted in an estimated decrease in fair value of 1.1%, or approximately $4.1 million, and the impact on the hedge fund portfolio from an immediate 100 basis point decrease in market interest rates would have resulted in an estimated increase in fair value of 1.1%, or approximately $4.1 million. Another method that attempts to measure portfolio risk is Value-at-Risk, or VaR. VaR is a statistical risk measure, calculating the level of potential losses that could be expected to be exceeded, over a specified holding period and at a given level of confidence, in normal market conditions, and is expressed as a percentage of the portfolio’s initial value. Since the VaR approach is based on historical positions and market data, VaR results should not be viewed as an absolute and predictive gauge of future financial performance or as a way for us to predict risk. At September 30, 2009, our hedge fund portfolio’s VaR was estimated to be 12.0% at the 99.0% level of confidence and with a three-month time horizon.

ITEM 4. Controls and Procedures

Part A—Evaluation of Disclosure Controls and Procedures.

Our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act, which we refer to as disclosure controls, are controls and procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any control system. A control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are met. No evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

As of September 30, 2009, an evaluation was carried out under the supervision and with the participation of the company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls were effective to ensure that material information relating to our company is made known to management, including the Chief Executive Officer and Chief Financial Officer, particularly during the periods when our periodic reports are being prepared.

Part B—Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our company’s internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. There are inherent limitations to the effectiveness of any control system. A control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are met. No evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

Management evaluated whether there was a change in our company’s internal control over financial reporting during the three months ended September 30, 2009 that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting. Based on our evaluation, we believe that there was no such change during the three months ended September 30, 2009.

48

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

We are, from time to time, a party to litigation and/or arbitration that arises in the normal course of our business operations. We are also subject to other potential litigation, disputes and regulatory or governmental inquiry.

Antitrust. Two lawsuits filed in the United States District Court for The Northern District of Georgia name Max Bermuda, along with approximately 100 other insurance companies and brokers. The claims in each case are that the defendants conspired to manipulate bidding practices for insurance policies in certain insurance lines and failed to disclose certain commission arrangements. The first of these cases was filed on April 4, 2006 by New Cingular Wireless Headquarter LLC and 16 other corporations. The complaint asserts statutory claims under the Sherman Antitrust Act, the Racketeer Influenced and Corrupt Organization Act, the antitrust laws of several states, as well as common law claims alleging breach of fiduciary duty and fraud. On October 16, 2006, the Judicial Panel on Multidistrict Litigation transferred the case to the U.S. District Court for the District of New Jersey for pretrial proceedings on a consolidated basis with other lawsuits raising smaller claims. The second action was filed October 12, 2007 by Sears, Roebuck & Co. and two affiliated corporations. The complaint in this suit charges Max Bermuda and certain other insurance company defendants with violations of the antitrust and consumer fraud laws of Georgia and other states and common law claims of inducement of breach of fiduciary duties, tortuous interference with contract, unjust enrichment, and aiding and abetting fraud. The Judicial Panel on Multidistrict Litigation transferred this case to the U.S. District Court for the District of New Jersey for consolidated pretrial proceedings in November 2007. We intend to defend ourselves vigorously in this suit but cannot at this time predict the outcome of the matters described above or estimate the potential costs related to defending the action. No liability has been established in our unaudited interim consolidated financial statements as of September 30, 2009.

Validus Litigation. On April 28, 2009, Validus Holdings, Ltd. commenced a lawsuit in the Supreme Court of Bermuda against IPC, IPC’s wholly owned subsidiary, IPC Limited, and Max Capital. Subsequent to September 30, 2009 the parties have settled the dispute and agreed to discontinue the proceedings.

While any proceeding contains an element of uncertainty, we currently do not believe that the ultimate outcome of all outstanding litigation, arbitrations and inquiries will have a material adverse effect on our consolidated financial condition, future operating results and/or liquidity, although an adverse resolution of a number of these items could have a material adverse effect on our results of operations in a particular fiscal quarter or year.

ITEM 1A. Risk Factors

Reference is made to the Risk Factors set forth in Part I, Item 1A of our 2008 Annual Report on Form 10-K for the year ended December 31, 2008 filed on February 19, 2009 and updated in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ending March 31, 2009 filed on May 11, 2009.

The risk factors appearing in the above referenced Form 10-Q under the headings “Risks Related to the Amalgamation” and “Risks Related to the Combined Entity Following the Amalgamation” should be deleted in their entirety.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

On September 17, 2001, our board of directors approved a share-repurchase program providing for repurchases of up to $15.0 million of Max Capital’s common shares. The repurchase program has been increased from time to time at the election of our board of directors. In December 2007 and February 2008, our board of directors authorized increases to the repurchase program permitting for aggregate repurchases of up to $75.3 million and $100.0 million, respectively. The repurchase program may be conducted from time to time through the market or privately negotiated transactions. During the three months ended September 30, 2009, $4.3 million had been expended to repurchase 211,400 shares.

The table below sets forth the information with respect to purchases made by or on behalf of Max Capital or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act), of our common shares during the three months ended September 30, 2009.

49

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
(July 1, 2009 to July 31, 2009)	—	$	—	—	$	67.7 million
(August 1, 2009 to August 31, 2009)(1)	211,400		20.27	211,400	$	63.4 million
(September 1, 2009 to September 30, 2009)(1)	—		—	—	$	63.4 million
Total (July 1, 2009 to September 30, 2009)(1)	211,400	$	20.27	211,400	$	63.4 million

⁽¹⁾ Max Capital’s share repurchase policy permits repurchases only during the period commencing three business days following the earnings release for the prior quarter and lasting until 10 days prior to quarter-end.

ITEM 3. Defaults Upon Senior Securities

None.

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

None.

ITEM 5. Other Information

None.

ITEM 6. Exhibits

Exhibit	Description
3.2	Bye-laws
10.1	Termination Agreement, dated August 31, 2009 among Canadian Imperial Bank of Commerce, Max Bermuda Ltd. And Max Diversified Strategies Ltd. (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on September 6, 2009).
10.2	Form of Director Restricted Stock Unit Agreement under the 2008 Stock Incentive Plan.
12.1	Computation of Ratio of Earnings to Fixed Charges.
31.1	Certification of the Chief Executive Officer filed herewith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer filed herewith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer furnished herewith pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer furnished herewith pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

Max Capital Group Ltd.
	/s/    W. MARSTON BECKER
Name:	W. Marston Becker
Title:	Chief Executive Officer
Date:	November 6, 2009
	/s/    JOSEPH W. ROBERTS
Name:	Joseph W. Roberts
Title:	Executive Vice President and Chief Financial Officer
Date:	November 6, 2009

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EX-3.2

Exhibit 3.2

AMENDED AND RESTATED BYE-LAWS

of

Max Capital Group Ltd.

TABLE OF CONTENTS

		Page No.
INTERPRETATION		1
1.	Interpretation	1
BOARD OF DIRECTORS		5
2.	Board of Directors	5
3.	Management of the Company	5
4.	Power to appoint managing director or chief executive officer	5
5.	Power to appoint manager	5
6.	Power to authorise specific actions	5
7.	Power to appoint attorney	6
8.	Power to delegate to a committee	6
9.	Power to appoint and dismiss employees	7
10.	Power to borrow and charge property	7
11.	Exercise of power to purchase shares of or discontinue the Company	7
12.	Election of Directors	8
13.	Defects in appointment of Directors	10
14.	Alternate Directors/Observer	10
15.	Removal of Directors	10
16.	Other Vacancies on the Board	10
17.	Notice of meetings of the Board	11
18.	Quorum at meetings of the Board	11
19.	Meetings of the Board	11
20.	Unanimous written resolutions	12
21.	Contracts and disclosure of Directors’ interests	12
22.	Remuneration of Directors	12
23.	Other interests of Directors	13
OFFICERS		13
24.	Officers of the Company	13
25.	Appointment of Officers	13
26.	Remuneration of Officers	13
27.	Duties of Officers	14
28.	Chairman of meetings	14
29.	Register of Directors and Officers	14
MINUTES		14
30.	Obligations of Board to keep minutes	14

i

		Page No.
INDEMNITY		15
31.	Indemnification of Directors and Officers of the Company	15
32.	Waiver of claim by Member	16
MEETINGS		16
33.	Notice of annual general meeting	16
34.	Notice of special general meeting	16
35.	Accidental omission of notice of general meeting; Business to be conducted	17
36.	Meeting called on requisition of Members	17
37.	Short notice	17
38.	Postponement of meetings	17
39.	Quorum for general meeting	18
40.	Adjournment of meetings	18
41.	Attendance at meetings	18
42.	Written resolutions	18
43.	Attendance of Directors	19
44.	Voting at meetings	19
45.	Voting on show of hands	19
46.	Decision of chairman	20
47.	Demand for a poll	20
48.	Seniority of joint holders voting	21
49.	Instrument of proxy	21
50.	Representation of corporations at meetings	22
SHARE CAPITAL AND SHARES		23
51.	Rights of shares	23
52.	Limitation on voting rights of Controlled Shares	25
53.	Power to issue shares	27
54.	Variation of rights and alteration of share capital	29
55.	Registered holder of shares	29
56.	Death of a joint holder	29
57.	Share certificates	29
58.	Calls on shares	30
59.	Forfeiture of shares	30
REGISTER OF MEMBERS		30
60.	Contents of Register of Members	30
61.	Inspection of Register of Members	31
62.	Determination of record dates	31
TRANSFER OF SHARES		31
63.	Instrument of transfer	31

		Page No.
64.	Restriction on transfer	31
65.	Transfers by joint holders	33
66.	Lien on shares	33
TRANSMISSION OF SHARES		34
67.	Representative of deceased Member	34
68.	Registration on death or bankruptcy	34
DIVIDENDS AND OTHER DISTRIBUTIONS		34
69.	Declaration of dividends by the Board	34
70.	Other distributions	34
71.	Reserve fund	34
72.	Deduction of amounts due to the Company	34
73.	Unclaimed dividends	35
74.	Interest on dividend	35
CAPITALIZATION		35
75.	Issue of bonus shares	35
ACCOUNTS AND FINANCIAL STATEMENTS		35
76.	Records of account	35
77.	Financial year end	36
78.	Financial statements	36
AUDIT		36
79.	Appointment of Auditor	36
80.	Remuneration of Auditor	36
81.	Vacation of office of Auditor	36
82.	Access to books of the Company	36
83.	Report of the Auditor	36
NOTICES		37
84.	Notices to Members of the Company	37
85.	Notices to joint Members	37
86.	Service and delivery of notice	37
SEAL OF THE COMPANY		37
87.	The seal	37
88.	Manner in which seal is to be affixed	37
BENEFITS, PENSIONS AND INSURANCE		38

		Page No.
89.	Benefits	38
90.	Insurance	38
91.	Limitation on Accountability	38
UNTRACED MEMBERS		39
92.	Sale of Shares	39
93.	Instrument of Transfer	39
94.	Proceeds of Sale	40
WINDING UP		40
95.	Determination to liquidate	40
96.	Winding up/distribution by liquidator	40
ALTERATION OF BYE-LAWS		40
97.	Alteration of Bye-laws	40
CERTAIN SUBSIDIARIES		41
98.	Voting of subsidiary shares	41
99.	Bye-laws or Articles of Association of certain subsidiaries	41
AMALGAMATION VOTING		41
100.	Member Vote to Approve an Amalgamation	41

Schedule – Form A (Bye-law 59)

Schedule – Form B (Bye-law 63)

Schedule – Form C (Bye-law 68)

INTERPRETATION

1. Interpretation

(1) In these Bye-laws the following words and expressions shall, where not inconsistent with the context, have the following meanings respectively:-

(a) “Act” means the Companies Act 1981 as amended and replaced from time to time;

(b) “Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person, provided that no Member of the Company shall be deemed an Affiliate of another Member solely by reason of an investment in the Company. For purposes of this definition, the term “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities, by contract or otherwise.

(c) “Auditor” includes any individual or partnership;

(d) “Board” means the Board of Directors appointed or elected pursuant to these Bye-laws and acting by resolution in accordance with the Act and these Bye-laws or the Directors present at a meeting of Directors at which there is a quorum;

(e) “Business Day” means any day, other than a Saturday, a Sunday or any day on which banks in Hamilton, Bermuda or The City of New York, United States, are authorised or obligated by law or executive or other order to close;

(f) “Cause” means shall mean (i) habitual drug or alcohol use which impairs the ability of the Director to perform his/her duties hereunder; (ii) Director’s conviction by a court of competent jurisdiction, or a pleading of “no contest” or guilty to a felony or the equivalent if outside the United States; (iii) Director’s engaging in fraud, embezzlement or any other illegal conduct with respect to the Company which acts are materially harmful to, either financially, or to the business reputation of, the Company; (iv) Director’s wilful failure or refusal to perform his duties as a director, or (vi) the Director otherwise breaches any material written Company policy regarding the conduct of its directors and such breach results in material economic or reputational harm to the Company.

(g) “Code” means the United States Internal Revenue Code of 1986, as amended from time to time, or any federal statute from time to time in effect that has replaced such statute, and any reference in these Bye-laws to a provision of the Code or a rule or regulation promulgated thereunder means such provision, rule or regulation as amended from time to time or any provision of a federal law, or any federal rule or regulation, from time to time in effect that has replaced such provision, rule or regulation;

(h) “Common Shares” means the common shares of the Company, initially having a par value of US$1.00 per share, and includes a fraction of a Common Share;

(i) “Company” means the company for which these Bye-laws are approved and confirmed;

(j) “Director” means a director of the Company;

(k) “Dividend” includes a bonus or capitalisation issue of shares;

(l) “Exchange Act” means the United States Securities Exchange Act of 1934, as amended from time to time, or any federal statute from time to time in effect that has replaced such statute, and any reference in these Bye-laws to a provision of the Exchange Act or a rule or regulation promulgated thereunder means such provision, rule or regulation as amended from time to time or any provision of a federal law, or any federal rule or regulation, from time to time in effect that has replaced such provision, rule or regulation;

(m) “Fair Market Value” means, with respect to a repurchase of any shares of the Company in accordance with these Bye-laws, (i) if such shares are listed on a securities exchange (or quoted in a securities quotation system), the average closing sale price of such shares on such exchange (or in such quotation system), or, if such shares are listed on (or quoted in) more than one exchange (or quotation system), the average closing sale price of the shares on the principal securities exchange (or quotation system) on which such shares are then traded, or, if such shares are not then listed on a securities exchange (or quotation system) but are traded in the over-the-counter market, the average of the latest bid and asked quotations for such shares in such market, in each case for the last five trading days immediately preceding the day on which notice of the repurchase of such shares is sent pursuant to these Bye-laws or (ii) if no such closing sales prices or quotations are available because such shares are not publicly traded or otherwise, the fair value of such shares as determined by one independent nationally recognised investment banking firm chosen by the Board and reasonably satisfactory to the Member whose shares are to be so repurchased by the Company, provided that the calculation of the Fair Market Value of the shares made by such appointed investment banking firm (i) shall not include any discount relating to the absence of a public trading market for, or any transfer restrictions on, such shares, and (ii) such calculation shall be final and the fees and expenses stemming from such calculation shall be borne by the Company or its assignee, as the case may be;

(n) “general meeting,” “general meeting of the Company,” “Special general meeting” and “special general meeting of the Company” each means a meeting of the Members of the Company having the right to attend and vote thereat;

(o) “Member” means the Person registered in the Register of Members as the holder of shares in the Company and, when two or more Persons are so registered as joint holders of shares, means the Person whose name stands first in the Register of Members as one of such joint holders or all of such Persons as the context so requires;

(p) “Notice” means written notice as further defined in these Bye-laws unless otherwise specifically stated;

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(q) “Officer” means any Person appointed by the Board to hold an office in the Company;

(r) “Person” means any individual, company, corporation, firm, partnership, trust or any other business, enterprise, entity or person, whether or not recognised as constituting a separate legal entity;

(s) “Preferred Shares” means the preferred shares of the Company and includes a fraction of a Preferred Share;

(t) “Register of Directors and Officers” means the Register of Directors and Officers referred to in these Bye-laws;

(u) “Register of Members” means the Register of Members referred to in these Bye-laws;

(v) “Resident Representative” means any Person appointed to act as resident representative and includes any deputy or assistant resident representative;

(w) “Secretary” means the person appointed to perform any or all the duties of secretary of the Company and includes any deputy or assistant secretary;

(x) “Securities Act” means the United States Securities Act of 1933, as amended from time to time, or any federal statute from time to time in effect which has replaced such statute, and any reference in these Bye-laws to a provision of the Securities Act or a rule or regulation promulgated thereunder means such provision, rule or regulation as amended from time to time or any provision of a federal law, or any federal rule or regulation, from time to time in effect that has replaced such provision, rule or regulation;

(y) “share” means any share or any class or series of shares in the share capital of the Company, whether issued and outstanding or not, and includes a fraction of a share;

(z) “Subsidiary”, with respect to any Person, means a company, more than fifty percent (50%) (or, in the case of a wholly owned subsidiary, one hundred percent (100%)) of the outstanding Voting Shares of which are owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person, or any such Person and one or more other Subsidiaries;

(aa) “Treasury Share” means a share of the Company that was or is treated as having been acquired and held by the Company and has been held continuously by the Company since it was so acquired and has not been cancelled;

(bb) “Unadjusted Basis”, when used with respect to the aggregate voting rights held by any Member, refers to the determination of such rights without reference to the provisions relating to the adjustment of voting rights contained in Bye-law 52;

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(cc) “United States” and “U.S.” each means the United States of America and any territory and political subdivision thereof;

(dd) “U.S. Person” means a “United States Person” as defined in Section 7701(a)(30) of the Code;

(ee) “Voting Share” of any Person means any share in such Person conferring voting rights on the holder thereof (other than such voting rights as would exist solely in relation to a proposal to alter or vary the rights attaching to such shares solely upon the future occurrence of a contingency or voting rights attaching solely by virtue of the provisions of the Act).

(2) In these Bye-laws, where not inconsistent with the context:

(a) words denoting the plural number include the singular number and vice versa;

(b) words denoting the masculine gender include the feminine gender;

(c) words importing persons include companies, associations or bodies of persons whether corporate or not;

(d) the word:

(i) “may” shall be construed as permissive;

(ii) “shall” shall be construed as imperative; and

(e) unless otherwise provided herein words or expressions defined in the Act shall bear the same meaning in these Bye-laws.

(3) Expressions referring to writing or written shall, unless the contrary intention appears, include facsimile, printing, lithography, photography, electronic mail and other modes of representing words in a visible form.

(4) Headings used in these Bye-laws are for convenience only and are not to be used or relied upon in the construction hereof.

(5) In these Bye-laws, (i) powers of delegation shall not be restrictively construed but the widest interpretation shall be given thereto, (ii) the word “Board” in the context of the exercise of any power contained in these Bye-laws includes any committee consisting of one or more individuals appointed by the Board, any Director holding executive office and any local or divisional Board, manager or agent of the Company to which or, as the case may be, to whom the power in question has been delegated in accordance with these Bye-laws, (iii) no power of delegation shall be limited by the existence of any other power of delegation and (iv) except where expressly provided by the terms of delegation, the delegation of a power shall not exclude the concurrent exercise of that power by any Person who is for the time being authorised to exercise it under Bye-laws or under another delegation of the powers.

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BOARD OF DIRECTORS

2. Board of Directors

The business of the Company shall be managed and conducted by the Board.

3. Management of the Company

(1) In managing the business of the Company, the Board may exercise all such powers of the Company as are not, by statute or by these Bye-laws, required to be exercised by the Company in general meeting and the business and affairs of the Company shall be so controlled by the Board. The Board also may present any petition and make any application in connection with the winding up or liquidation of the Company.

(2) No regulation or alteration to these Bye-laws made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation or alteration had not been made.

(3) The Board may procure that the Company pays all expenses incurred in promoting and incorporating the Company.

4. Power to appoint managing director or chief executive officer

The Board may from time to time appoint one or more Directors to the office of managing director or chief executive officer of the Company who shall, subject to the control of the Board, supervise and administer all of the general business and affairs of the Company.

5. Power to appoint manager

The Board may appoint a Person or a body of Persons to act as manager of the Company’s day to day business and may entrust to and confer upon such manager such powers and duties as it deems appropriate for the transaction or conduct of such business.

6. Power to authorise specific actions

The Board may from time to time and at any time authorise any company, firm, person or body of persons to act on behalf of the Company for any specific purpose and in connection therewith to execute any agreement, document or instrument in the name and on behalf of the Company.

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7. Power to appoint attorney

The Board may from time to time and at any time by power of attorney appoint any Person or body of Persons, whether nominated directly or indirectly by the Board, to be an attorney of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board) and for such period (or for unspecified length of time) and subject to such conditions as it may think fit and any such power of attorney may contain such provisions for the protection and convenience of Persons dealing with any such attorney as the Board may think fit and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions so vested in the attorney. Such attorney may, if so authorised under the seal of the Company, execute any deed or instrument under such attorney’s personal seal with the same effect as the affixation of the seal of the Company.

8. Power to delegate to a committee

The Board may delegate any of its powers to a committee appointed by the Board (and the Board may appoint alternative committee members or authorise the committee members to appoint their own alternates), which may consist partly or entirely of non-Directors. Without limiting the foregoing, such committees may include:

(a) an Executive Committee, which shall have all of the powers of the Board between meetings of the Board;

(b) a Finance Committee, which shall, among other things, establish, review and monitor the investment policies of the Company and the Company’s Subsidiaries or other companies associated with the Company, review investment decisions and review and monitor any provider of investment services;

(c) an Audit and Risk Management Committee, which shall, among other things, have direct authority to: (i) appoint the independent Auditors of the Company and the Company’s subsidiaries on behalf of the Board, subject to the powers of the Members; (ii) set compensation for, subject to Bye-law 80, and oversee the work of independent Auditors of the Company and the Company’s subsidiaries; (iii) adopt procedures for receiving accounting complaints and anonymous submissions from the employees of the Company or the Company’s subsidiaries regarding questionable accounting practices; (iv) establish pre-approval procedures for all audit and non-audit services provided by the independent Auditors, or any of their Affiliates, to the Company or the Company’s subsidiaries; and (v) establish an internal audit function of the Company and the Company’s subsidiaries;

(d) a Compensation Committee, which shall, among other things, establish and review the compensation policies and procedures of the Company and the Company’s Subsidiaries or other companies associated with the Company and make recommendations to the Board with respect to compensation of Officers;

(e) a Nominating Committee, which shall, among other things, propose to the Members or to continuing Directors, before any election of Directors by Members or the filling of any vacancy by the Board, a slate of director candidates equal in number to the vacancies to be filled;

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(f) an Investment Committee, which shall, among other things, review the opening of bank accounts for the Company, agree investment funding agreements and enter into any loan or borrowing arrangements with certain financial institutions as they see fit; and

(g) an Underwriting Committee, which shall, among other things, establish, review and monitor the underwriting policies of the Company’s Subsidiaries or other companies associated with the Company, review underwriting decisions, monitor any appointed underwriting services provider, advise the Board with respect to actuarial services, review actuarial decisions, monitor any provider of actuarial services and otherwise monitor the risks insured or reinsured by the Company’s Subsidiaries or other companies associated with the Company.

All Board committees shall conform to such directions as the Board shall impose on them; provided, that each member shall have one vote, and each committee shall have the right as it deems appropriate to retain outside advisors and experts. Each committee may adopt rules for the conduct of its affairs, including rules governing the adoption of resolutions by unanimous written consent, and the place, time, and notice of meetings, as shall be advisable and as shall not be inconsistent with these Bye-laws regarding Board meetings or with any applicable resolution adopted by the Board. Notwithstanding the foregoing, no committee may hold a meeting within the United States. Each committee shall cause minutes to be made of all meetings of such committee and of the attendance thereat and shall cause such minutes and copies of resolutions adopted by unanimous consent to be promptly inscribed or incorporated by the Secretary in the minute book.

9. Power to appoint and dismiss employees

The Board may appoint, suspend or remove any officer, manager, secretary, clerk, agent or employee of the Company and may fix their remuneration and determine their duties.

10. Power to borrow and charge property

The Board may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and may issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or any third party.

11. Exercise of power to purchase shares of or discontinue the Company

(1) Purchase of Common Shares

(a) The Company shall have the power to purchase its own shares for cancellation or acquire them as Treasury Shares in accordance with the Act. The Board may exercise all the powers of the Company to purchase or acquire all or any part of its own shares pursuant to the Act. Subject to Section 42A of the Act, if the Board in its absolute and unfettered discretion, on behalf of the Company, determines that ownership of shares of the Company by any Person may result in adverse tax, regulatory or legal consequences to the Company, any of its Subsidiaries or any of the Members, the Company will have the option, but not the obligation, to purchase all or part of the shares of the Company held by such Person (to the extent the Board,

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in the reasonable exercise of its discretion, determines it is necessary to avoid or cure such adverse consequences) for immediately available funds in an amount equal to the Fair Market Value of such shares on the date the Company sends the Repurchase Notice referred to below (the “Repurchase Price”); provided, that the Board will use reasonable efforts to exercise this option equally among similarly situated Persons (to the extent possible under the circumstances). In that event, the Company will also be entitled to assign its purchase right to a third party or parties including one or more of the other Persons, with the consent of such assignee. Each Person shall be bound by the determination by the Company to purchase or assign its right to purchase such Person’s shares and, if so required by the Company, shall sell the number of shares of the Company that the Company requires it to sell.

(b) In the event that the Company or its assignee(s) determines to purchase any such shares, the Company shall provide each Person concerned with written notice of such determination (a “Repurchase Notice”) at least seven (7) calendar days prior to such purchase or such shorter period as each such Person may authorise, specifying the date on which any such shares are to be purchased and the Repurchase Price. The Company may revoke the Repurchase Notice at any time before it (or its assignee(s)) pays for the shares. Neither the Company nor its assignee(s) shall be obliged to give general notice to the Members of any intention to purchase or the conclusion of any purchase of shares of the Company. Payment of the Repurchase Price by the Company or its assignee(s) shall be by wire transfer or certified check and made at a closing to be held no less than seven (7) calendar days, unless such Person agrees to a shorter period, after receipt of the Repurchase Notice by the Member.

(2) Power to discontinue the Company

The Board may exercise all the powers of the Company to discontinue the Company to a named country or jurisdiction outside Bermuda pursuant to Section 132G of the Act.

(3) Restrictions on repurchases and exchanges

If the Company redeems, purchases, acquires or exchanges shares pursuant to this Bye-law 11, it shall do so only in a manner that the Board believes would not result, upon consummation of such redemption or purchase, in the number of total Common Shares of any Person, as a percentage of the shares of the Company, increasing to 9.5% or more on an Unadjusted Basis. Notwithstanding the foregoing, the Board, in its sole discretion and by unanimous consent of all of the Directors then in office, may waive the applicability of subparagraph (3) of this Bye-law.

12. Election of Directors

(1) The Board shall consist of at least six (6) and no more than twenty-one (21) Directors, the exact number to be determined from time to time by resolution adopted by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the Directors then in office; provided, however, that if no such resolution shall be in effect the number of Directors shall be eleven (11) Directors. Any increase in the size of the Board pursuant to this Bye-law 12(1) shall be deemed to be a vacancy and may be filled in accordance with Bye-law 16 hereof. Directors shall be elected, except in the case of a vacancy (as provided for in Bye-law 15 or 16,

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as the case may be), by the Members in the manner set forth in paragraph (2) of this Bye-law 12 at an annual general meeting or any special general meeting called for the purpose and who shall hold office for the term set forth in paragraph (3) of this Bye-law 12.

(2) Subject to the terms of any class or series of shares issued by the Company, no Person other than a Director retiring at the meeting shall, unless recommended by the Board or a committee thereof for election, be eligible for election as a Director at any general meeting unless not less than 120 days before the date appointed for the meeting there shall have been lodged at the Company notice in writing signed by Members holding at least 70% of the issued and outstanding shares entitled to vote at the meeting for which such notice is given of their intention to propose such person for election and also notice in writing signed by the person to be proposed of his or her willingness to be elected. Each such notice shall also include (i) the names and addresses, as they appear in the Register of Members, of the Members who intend to make the nomination and of the person or persons to be nominated, (ii) a representation that the Members are holders of record of shares entitled to vote at such meeting and intend to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (iii) the class and number of shares which are beneficially owned by the Members, (iv) a description of all arrangements or understandings between the Members and each nominee and any other person or persons nominations are to be made by the Members and (v) such other information regarding each nominee proposed by such Members as would be required to be included in a proxy statement filed pursuant to Regulation 14A under the Exchange Act, whether or not the Company is then subject to such regulation.

(3) At the first annual general meeting following the adoption of these Bye-laws, the Board shall be divided into three classes of Directors, namely Class 1, Class 2 and Class 3, each class to have approximately the same number of Directors as determined by the Board or any Nominating Committee of the Board. The initial term of the Class 1 Directors shall expire at the second annual general meeting following the adoption of these Bye-laws. The initial term of the Class 2 Directors shall expire at the third annual general meeting following the adoption of these Bye-laws. The initial term of the Class 3 Directors shall expire at the fourth annual general meeting following adoption of these Bye-laws. Following their initial terms, all classes of Directors shall be elected to three-year terms. Each Director shall serve until the expiration of such Director’s term or until such Director’s successor shall have been duly elected or appointed or until such Director’s office is otherwise vacated.

(4) No Member of the Company shall be permitted to vote any shares for or against Directors of the Company or directors of any subsidiary of the Company that is treated as a corporation for U.S. federal tax purposes if the vote of such shares would cause any Person to be a 9.5% U.S. Shareholder (as defined in Bye-law 52) of the Company or such subsidiary. All votes referred to the Company’s Members pursuant to Bye-law 98 shall be subject to this Bye-law 12(4).

(5) Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Shares issued by the Company shall have the right, voting separately by class or series, to elect Directors at an annual or special general meeting, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Board resolution creating such classes or series of Preferred Shares, and such Directors so elected shall not be divided into classes pursuant to this Bye-law 12 unless expressly provided by such terms.

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13. Defects in appointment of Directors

All acts done bona fide by any meeting of the Board or by a committee of the Board or by any person acting as a Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and was qualified to be a Director.

14. Alternate Directors/Observer

There shall be no Alternate Directors and no Member or Director shall have the right to designate any person to attend meetings of the Board or Board Committees as a non-voting observer.

15. Removal of Directors

(1) Subject to any provision to the contrary in these Bye-laws, Members holding a majority of the issued and outstanding shares entitled to vote at a general meeting or special meeting or conferring the right to vote on a resolution to remove a or such Director may, at any special general meeting convened and held in accordance with these Bye-laws, remove a Director provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention so to do and be served on such Director not less than 14 days before the meeting and at such meeting such Director shall be entitled to be heard on the motion for such Director’s removal. A Director may only be removed pursuant to this Bye-law 15 for Cause.

(2) A vacancy on the Board created by the removal of a Director under the provisions of subparagraph (1) of this Bye-law may be filled by the Members holding at least 70% of the issued and outstanding shares entitled to vote at a general meeting or special meeting or conferring the right to vote on such resolution and, in the absence of such election or appointment, the Board may fill the vacancy in accordance with Bye-law 16. A Director so appointed shall hold office for the balance of the term of such vacant Board position, or until such Director’s successor is elected or appointed or such Director’s office is otherwise vacated.

16. Other Vacancies on the Board

(1) The Board shall have the power from time to time and at any time to appoint any person as a Director to fill a vacancy on the Board occurring as the result of an increase in the size of the Board pursuant to Bye-law 12(1), the death, disability, disqualification, resignation or removal of any Director or if such Director’s office is otherwise vacated. A Director so appointed shall hold office for the balance of the term of such vacant Board position, or until such Director’s successor is elected or appointed or such Director’s office is otherwise vacated.

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(2) The Board may act notwithstanding any vacancy in its number but, if and so long as its number is reduced below the number fixed by these Bye-laws as the quorum necessary for the transaction of business at meetings of the Board, the continuing Directors or Director may, notwithstanding that the number of Directors is below the number fixed by or in accordance with these Bye-laws as the quorum or that there is only one continuing Director, act for the purpose of (i) filling vacancies on the Board, (ii) summoning a general meeting of the Company or circulating a proposed written resolution of the Members or (iii) preserving the assets of the Company.

(3) The office of Director shall be deemed to be vacated if the Director:

(a) is removed from office pursuant to these Bye-laws or is prohibited from being a Director by law;

(b) is or becomes bankrupt or makes any arrangement or composition with his creditors generally;

(c) is or becomes of unsound mind or dies;

(d) resigns his or her office by notice in writing to the Company.

17. Notice of meetings of the Board

(1) A Director may, and the Secretary on the requisition of a Director shall, at any time summon a meeting of the Board. Notice of a meeting of the Board must be provided at least five (5) days in advance of such meeting, and must state the date, time, place (which shall not be in the United States) and the general nature of the business to be considered at the meeting unless the Directors unanimously agree to waive notice of such meeting. Notwithstanding the foregoing, shorter notice shall be valid if it is reasonable under the circumstances.

(2) Notice of a meeting of the Board shall be deemed to be duly given to a Director if it is given to such Director verbally in person or by telephone or otherwise communicated or sent to such Director by post, cable, telex, telecopier, electronic mail, facsimile or other mode of representing words in a visible form at such Director’s last known address or any other address given by such Director to the Company for this purpose.

18. Quorum at meetings of the Board

The quorum necessary for the transaction of business at a meeting of the Board shall be a majority of the Directors then in office, present in person.

19. Meetings of the Board

(1) The Board may meet for the transaction of business, adjourn and otherwise regulate its meetings as it sees fit.

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(2) Directors may participate in any meeting of the Board by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting; provided, however, that no Director may participate in any meeting of the Board while physically present in the United States.

(3) A resolution put to the vote at a meeting of the Board shall be carried by the affirmative votes of a majority of the votes cast and in the case of an equality of votes the resolution shall fail.

20. Unanimous written resolutions

A resolution in writing signed by all the Directors which may be in counterparts, shall be as valid as if it had been passed at a meeting of the Board duly called and constituted, such resolution to be effective on the date on which the last Director signs the resolution, provided that no such resolution shall be valid unless the last signature of a Director is affixed outside the United States (but, notwithstanding Bye-law 19(2) hereof, a Director who is not the last Director to sign may sign a resolution in writing even though he or she is in the United States). Such resolution shall be deemed to be adopted as an act of the Board, at the place where, and at the time when, the last signature of a Director is affixed thereto.

21. Contracts and disclosure of Directors’ interests

(1) Any Director, or any Person associated, related or affiliated with whom any Director is associated, may act in a professional capacity for the Company and such Director or such Person shall be entitled to remuneration for professional services as if such Director were not a Director, provided that nothing herein contained shall authorise a Director or Director’s firm, partner or such company to act as Auditor of the Company.

(2) A Director who is directly or indirectly interested in a contract or proposed contract or arrangement with the Company shall declare the nature of such interest as required by the Act.

(3) Following a declaration being made pursuant to this Bye-law, and unless disqualified by the chairman of the relevant Board meeting, a Director may vote in respect of any contract or proposed contract or arrangement in which such Director is interested and may be counted in the quorum at such meeting.

22. Remuneration of Directors

(1) The remuneration and benefits (if any) of the Directors, including without limitation, participation in any share option or incentive plan and loans (with the general or specific consent required by Section 96 of the Act) in connection therewith, shall be determined by the Board and shall be deemed to accrue from day to day. The Directors may also be paid all travel, hotel and other expenses properly incurred by them in attending and returning from meetings of the Board, any committee appointed by the Board, general meetings of the Company, or in connection with the business of the Company or their duties as Directors generally.

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(2) A Director may hold any other office or place of profit under the Company (other than the office of Auditor) in conjunction with his or her office of Director for such period on such terms as to remuneration and otherwise as the Board may determine.

(3) The Board may award special remuneration and benefits to any Director undertaking any special work or services for, or undertaking any special mission on behalf of, the Company other than his or her ordinary routine work as a Director. Any fees paid to a Director who is also counsel or attorney to the Company, or otherwise serves it in a professional capacity, shall be in addition to his or her remuneration as a Director.

23. Other interests of Directors

A Director may be or become a director or other officer of or otherwise interested in any company or Person promoted by the Company or in which the Company may be interested as member or otherwise, and no such Director shall be accountable to the Company for any remuneration or other benefits received by him or her as a director or officer of, or from his or her interest in, such other company or Person. The Board may also cause the voting power conferred by the shares in any other company or Person held or owned by the Company to be exercised in such manner in all respects as the Board thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company or Person, or voting or providing for the payment of remuneration to the directors or officers of such other company or Person.

OFFICERS

24. Officers of the Company

The Officers of the Company shall consist of a President and a Vice President or a Chairman and a Deputy Chairman, a Secretary and such additional Officers, as the Board may from time to time determine all of whom shall be deemed to be Officers for the purposes of these Bye-laws. Subject to compliance with any requirement of the Act, the same individual may hold two (2) or more offices in the Company.

25. Appointment of Officers

(1) The Board shall, as soon as possible after the statutory meeting of Members and after each annual general meeting, appoint a President and a Vice President or a Chairman and a Deputy Chairman who shall be Directors.

(2) The Secretary and additional Officers, if any, shall be appointed by the Board from time to time.

26. Remuneration of Officers

The Officers shall receive such remuneration and benefits, including, without limitation, participation in any share option or incentive plan and loans (with the general or specific consent required by Section 96 of the Act) in connection therewith as the Board may from time to time determine.

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27. Duties of Officers

The Officers shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Board from time to time.

28. Chairman of meetings

Unless otherwise agreed by a majority of those attending and entitled to attend and vote thereat, the Chairman, if there be one, and, if not, the President shall act as chairman at all meetings of the Members and of the Board at which such person is present. In their absence the Deputy Chairman or Vice President, if present, shall act as chairman and in the absence of all of them a chairman shall be appointed or elected by those present at the meeting and entitled to vote.

29. Register of Directors and Officers

The Board shall cause to be kept in one or more books at the registered office of the Company a Register of Directors and Officers and shall enter therein the particulars required by the Act.

MINUTES

30. Obligations of Board to keep minutes

(1) The Board shall cause minutes to be duly entered in books provided for the purpose:

(a) of all elections and appointments of Officers;

(b) of the names of the Directors present at each meeting of the Board and of any committee appointed by the Board; and

(c) of all resolutions and proceedings of general meetings of the Members, meetings of the Board, and meetings of committees appointed by the Board.

(2) Minutes prepared in accordance with the Act and these Bye-laws shall be kept by the Secretary at the registered office of the Company.

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INDEMNITY

31. Indemnification of Directors and Officers of the Company

(1) The Directors, Secretary and other Officers (such term to include, for the purposes of Bye-laws 31 and 32, any person appointed to any committee by the Board) and employees and agents of the Company who has acted or is acting in relation to any of the affairs of the Company and the liquidator or trustees (if any) who has acted or is acting in relation to any of the affairs of the Company, and every one of them, and their heirs, executors and administrators, shall be indemnified and secured harmless out of the assets of the Company from and against all actions, costs, charges, losses, damages and expenses which they or any of them, their heirs, executors or administrators, shall or may incur or sustain by or by reason of any act done, concurred in or omitted (actual or alleged) in or about the execution of their duty, or supposed duty, or in their respective offices or trusts, and none of them shall be answerable for the acts, receipts, neglects or defaults of the others of them or for joining in any receipts for the sake of conformity, or for any bankers or other persons with whom any moneys or effects belonging to the Company shall or may be lodged or deposited for safe custody, or for insufficiency or deficiency of any security upon which any moneys of or belonging to the Company shall be placed out on or invested, or for any other loss, misfortune or damage which may happen in the execution of their respective offices or trusts, or in relation thereto, provided, that, this indemnity shall not extend to any matter prohibited by the Act.

(2) Any indemnification under this Bye-law 31, unless ordered by a court, shall be made by the Company only as authorised in the specific case upon a determination that indemnification of such Person is proper in the circumstances because such Person has met the applicable standard of conduct set forth in paragraph (1) of this Bye-law 31. Such determination shall be made (i) by the Board by a majority vote of disinterested Directors or (ii) if a majority of the disinterested Directors so directs, by independent legal counsel in a written opinion or (iii) by the Members. The Company may purchase and maintain insurance to protect itself and any Director, Officer or other Person entitled to indemnification pursuant to this Bye-law 31, to the fullest extent permitted by law.

(3) Expenses (including, without limitation, attorneys’ fees) actually and reasonably incurred by any Director, Secretary, other Officer or employee of the Company in defending any civil, criminal, administrative or investigative action, suit or proceeding or threat thereof for which indemnification is sought pursuant to paragraph (a) of this Bye-law 31 shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Person to repay such amount if it shall be ultimately determined that such Person is not entitled to be indemnified by the Company as authorised in these Bye-laws or otherwise pursuant to applicable law; provided, that if it is determined by either (i) a majority vote of Directors who were not parties to such action, suit or proceeding or (ii) if a majority of the disinterested Directors so directs, by independent legal counsel in a written opinion, that there is no reasonable basis to believe that such Person is entitled to be indemnified by the Company as authorised in these Bye-laws or otherwise pursuant to applicable law, then no expense shall be advanced in accordance with this paragraph (c) of this Bye-law 31. Such expenses (including attorneys’ fees) incurred by agents of the Company may be paid upon the receipt of the aforesaid undertaking and such terms and conditions, if any, as the Board deems appropriate.

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(4) The indemnification and advancement of expenses provided in these Bye-laws shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may now or hereafter be entitled under any statute, agreement, vote of Members or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office.

(5) The indemnification and advancement of expenses provided by, or granted pursuant to, this Bye-law 31 shall, unless otherwise provided when authorised or ratified, continue as to a Person who has ceased to hold the position for which such Person is entitled to be indemnified or advanced expenses and shall inure to the benefit of the heirs, executors and administrators of such a Person.

(6) No amendment or repeal of any provision of this Bye-law 31 shall alter, to the detriment of any Person, the right of such Person to the indemnification or advancement of expenses related to a claim based on an act or failure to act which took place prior to such amendment, repeal or termination.

32. Waiver of claim by Member

The Company and each Member agrees to waive any claim or right of action it might have, whether individually or by or in the right of the Company, against any Director or Officer on account of any action taken by such Director or Officer, or the failure of such Director or Officer to take any action in the performance of his duties with or for the Company, provided, that, such waiver shall not extend to any matter in respect of any fraud or dishonesty which may attach to such Director or Officer.

MEETINGS

33. Notice of annual general meeting

The annual general meeting of the Company shall be held in each year (including within the first year of incorporation) at such time and place (which shall not be in the United States) as the President or the Chairman or any two Directors or any Director and the Secretary or the Board shall appoint. At least five (5) days’ notice of such meeting shall be given to each Member entitled to vote thereat as at the relevant record date determined pursuant to Bye-law 62 stating the date, place (which shall not be in the United States) and time at which the meeting is to be held, that the election of Directors will take place thereat, and as far as practicable, the other business to be conducted at the meeting.

34. Notice of special general meeting

The President or the Chairman or any two Directors or any Director and the Secretary or the Board may convene a special general meeting of the Company whenever in their judgment such a meeting is necessary, upon not less than five (5) days’ notice to each Member entitled to vote thereat as at the relevant record date determined pursuant to Bye-law 62 which shall state the date, time, place (which shall not be in the United States) and the general nature of the business to be considered at the meeting.

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35. Accidental omission of notice of general meeting; Business to be conducted

(1) The accidental omission to give notice of a general meeting to, or the non-receipt of notice of a general meeting by, any Person entitled to receive notice shall not invalidate the proceedings at that meeting.

(2) Subject to the Act, business to be brought before a general meeting of the Company must be specified in the notice of the meeting. Only business that the Board has determined can be properly brought before a general meeting in accordance with these Bye-laws and applicable law shall be conducted at any general meeting, and the chairman of the general meeting may refuse to permit any business to be brought before such meeting that has not been properly brought before it in accordance with these Bye-laws and applicable law.

36. Meeting called on requisition of Members

Subject to the terms of any class or series of shares issued by the Company and notwithstanding anything herein, the Board shall, on the requisition of Members holding at the date of the deposit of the requisition not less than one-tenth of such of the paid-up share capital of the Company as at the date of the deposit carries the right to vote at general meetings of the Company, forthwith proceed to convene a special general meeting of the Company and the provisions of Section 74 of the Act shall apply.

37. Short notice

Subject to the terms of any class or series of shares issued by the Company, a general meeting of the Company shall, notwithstanding that it is called by shorter notice than that specified in these Bye-laws, be deemed to have been properly called if it is so agreed by (i) all the Members entitled to attend and vote thereat in the case of an annual general meeting; and (ii) by a majority in number of the Members having the right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares giving a right to attend and vote thereat in the case of a special general meeting.

38. Postponement of meetings

The Secretary or any Director may postpone any general meeting called in accordance with the provisions of these Bye-laws (other than a meeting requisitioned under these Bye-laws) provided that notice of postponement is given to each Member entitled to vote thereat as at the relevant record date determined pursuant to Bye-law 62 before the time for such meeting. Fresh notice of the date, time and place for the postponed meeting shall be given to each Member entitled to vote thereat as at the relevant record date determined pursuant to Bye-law 62 in accordance with the provisions of these Bye-laws.

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39. Quorum for general meeting

At any general meeting of the Company two or more persons present in person and representing in person or by proxy in excess of 50% of the total issued and outstanding voting shares in the Company as at the relevant record date determined pursuant to Bye-law 62 throughout the meeting shall form a quorum for the transaction of business, provided, however, that if the Company shall at any time have only one Member, one Member present in person or by proxy shall form a quorum for the transaction of business at any general meeting of the Company held during such time. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day one week later, at the same time and place or to such other day, time or place as the Secretary may determine. Unless the meeting is so adjourned to a specific date and time, fresh notice of the date, time and place for the resumption of the adjourned meeting shall be given to each Member in accordance with the provisions of these Bye-laws. No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business and continues throughout the meeting, but the absence of a quorum shall not preclude the appointment, choice or election of a chairman of the meeting which shall not be treated as part of the business of the meeting.

40. Adjournment of meetings

The chairman of a general meeting may, with the consent of 50% of the Members present in person or by proxy at any general meeting whether or not a quorum is present (and shall if so directed), adjourn the meeting. Unless the meeting is adjourned to a specific date and time, fresh notice of the date, time and place for the resumption of the adjourned meeting shall be given to each Member in accordance with the provisions of these Bye-laws with respect to a special general meeting of the Company.

41. Attendance at meetings

Members may participate in any general meeting by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting, provided, however, that no Member may participate in any general meeting while that Member (or, if any Member is an entity, its representative) is physically present in the United States.

42. Written resolutions

(1) Subject to subparagraph (6), anything which may be done by resolution of the Company in general meeting or by resolution of a meeting of any class of the Members of the Company, may, without a meeting and without any previous notice being required, be done by resolution in writing signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, all the Members who at the date of the resolution or the record date determined pursuant to Bye-law 62 (if earlier) would be entitled to attend the meeting and vote on the resolution.

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(2) A resolution in writing may be signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, all the Members, or any class thereof, in as many counterparts as may be necessary.

(3) For the purposes of this Bye-law, the date of the resolution is the date when the resolution is signed by, or, in the case of a Member that is a corporation whether or not a company within the meaning of the Act, on behalf of, the last Member to sign and any reference in any Bye-law to the date of passing of a resolution is, in relation to a resolution made in accordance with this Bye-law, a reference to such date. Any resolution in writing may be signed within or outside the United States; provided, that the last Member to sign the resolution must sign such resolution outside of the United States.

(4) A resolution in writing made in accordance with this Bye-law is as valid as if it had been passed by the Company in general meeting or by a meeting of the relevant class of Members, as the case may be, provided that no such resolution shall be valid unless the last signature of a Member is offered outside the United States, and any reference in any Bye-law to a meeting at which a resolution is passed or to Members voting in favour of a resolution shall be construed accordingly.

(5) A resolution in writing made in accordance with this Bye-law shall constitute minutes for the purposes of Sections 81 and 82 of the Act.

(6) This Bye-law shall not apply to:-

(a) a resolution passed pursuant to Section 89(5) of the Act; or

(b) a resolution passed for the purpose of removing a Director before the expiration of his term of office under these Bye-laws.

43. Attendance of Directors

The Directors of the Company shall be entitled to receive notice of and to attend and be heard at any general meeting.

44. Voting at meetings

(1) Subject to the provisions of the Act and these Bye-laws, any question proposed for the consideration of the Members at any general meeting shall be decided by the affirmative votes of a majority of the votes cast in accordance with the provisions of these Bye-laws and in the case of an equality of votes the resolution shall fail.

(2) No Member shall be entitled to vote at any general meeting unless such Member has paid all the calls on all shares held by such Member.

45. Voting on show of hands

At any general meeting a resolution put to the vote of the meeting shall, in the first instance, be voted upon by a show of hands and, subject to any rights or restrictions for the time being lawfully attached to any class of shares and subject to the provisions of these Bye-laws, every Member present in person and every person holding a valid proxy at such meeting shall be entitled to one vote and shall cast such vote by raising his or her hand.

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46. Decision of chairman

At any general meeting a declaration by the chairman of the meeting that a question proposed for consideration has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in a book containing the minutes of the proceedings of the Company shall, subject to the provisions of these Bye-laws, be conclusive evidence of that fact.

47. Demand for a poll

(1) Notwithstanding the provisions of the immediately preceding two Bye-laws, at any general meeting of the Company, in respect of any question proposed for the consideration of the Members (whether before or on the declaration of the result of a show of hands as provided for in these Bye-laws), a poll may be demanded by any of the following persons:-

(a) the chairman of such meeting; or

(b) at least three Members present in person or represented by proxy; or

(c) any Member or Members present in person or represented by proxy and holding between them not less than one-tenth of the total voting rights of all the Members having the right to vote at such meeting; or

(d) any Member or Members present in person or represented by proxy holding shares in the Company conferring the right to vote at such meeting, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all such shares conferring such right.

(2) Where, in accordance with the provisions of subparagraph (1) of this Bye-law, a poll is demanded, subject to any rights or restrictions for the time being lawfully attached to any class of shares, every person present at such meeting shall have one vote for each share of which such person is the holder or for which such person holds a proxy and such vote shall be counted in the manner set out in subparagraph (4) of this Bye-law or in the case of a general meeting at which one or more Members are present by telephone in such manner as the chairman of the meeting may direct and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded and shall replace any previous resolution upon the same matter which has been the subject of a show of hands.

(3) A poll demanded in accordance with the provisions of subparagraph (1) of this Bye-law, for the purpose of electing a chairman of the meeting or on a question of adjournment, shall be taken forthwith and a poll demanded on any other question shall be taken in such manner and at such time and place as the Chairman (or acting chairman) may direct and any business other than that upon which a poll has been demanded may be proceeded with pending the taking of the poll.

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(4) Where a vote is taken by poll, each Person present and entitled to vote shall be furnished with a ballot paper on which such person shall record his or her vote in such manner as shall be determined at the meeting having regard to the nature of the question on which the vote is taken, and each ballot paper shall be signed or initialled or otherwise marked so as to identify the voter and the registered holder in the case of a proxy. The Board may appoint one or more inspectors to act at any general meeting where a vote is taken by a poll. Each inspector shall take and sign an oath faithfully to exercise the duties of inspector at such meeting with strict impartiality and according to the best of his, her or its ability. The inspectors shall determine the number of shares issued and outstanding and the voting power of each, by reference to the Register of Members as at the relevant record date determined pursuant to Bye-law 62, the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies and examine and count all ballots and determine the results of any vote. The inspector shall also hear and determine challenges and questions arising in connection with the right to vote. No Director or candidate for the office of Director shall act as an inspector. The determination and decision of the inspectors shall be final and binding.

48. Seniority of joint holders voting

In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.

49. Instrument of proxy

(1) Every Member entitled to vote has the right to do so either in person or by one or more Persons authorised by a written proxy executed and delivered in accordance with these Bye-laws. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his or her attorney authorised by him or her in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.

(2) Any Member may appoint one or more Persons a standing proxy or (if a corporation) a standing representative by depositing at the registered office, or at such place or places as the Board may otherwise specify for the purpose, a proxy or (if a corporation) a written authorisation. Such proxy or authorisation shall be valid for all general meetings and adjournments thereof or, resolutions in writing, as the case may be, until notice of revocation is received at the registered office, or at such place or places as the Board may otherwise specify for the purpose. Where a standing proxy or authorisation exists, its operation shall be deemed to have been suspended at any general meeting or adjournment thereof at which the Member is present or in respect to which the Member has specially appointed a proxy or representative. The Board may from time to time require such evidence as it shall deem necessary as to the due execution and continuing validity of any such standing proxy or authorisation and the operation of any such standing proxy or authorisation shall be deemed to be suspended until such time as the Board determines that it has received the requested evidence or other evidence satisfactory to it. A Person so authorised as a representative of a corporation shall be entitled to exercise the same power on behalf of the grantor of the authority as the grantor could exercise if it were an individual Member and the grantor shall for the purposes of these Bye-laws be deemed to be present in person at any such meeting if the Person so authorised is present at the meeting.

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(3) Subject to paragraph (2) of this Bye-law 49, the instrument appointing a proxy together with such other evidence as to its due execution as the Board may from time to time require shall be delivered at the registered office (or at such place or places as may be specified in the notice convening the meeting or in any notice of any adjournment or, in either case or the case of a written resolution, in any document sent therewith) not less than 24 hours or such other period as the Board may determine, prior to the holding of the relevant meeting or adjourned meeting at which the individual named in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, before the time appointed for the taking of the poll, or, in the case of a written resolution, prior to the effective date of the written resolution and in default the instrument of proxy shall not be treated as valid.

(4) Instruments of proxy shall be in any common form or other form as the Board may approve and the Board may, if it thinks fit, send out with the notice of any meeting or any written resolution forms of instruments of proxy for use at that meeting or in connection with that written resolution. The instrument of proxy shall be deemed to confer authority to demand or join in demanding a poll and to vote on any amendment of a written resolution or amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall unless the contrary is stated therein be valid as well for any adjournment of the meeting as for the meeting to which it relates.

(5) A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or unsoundness of mind of the principal, or revocation of the instrument of proxy or of the authority under which it was executed, provided, that no intimation in writing of such death, insanity or revocation shall have been received by the Company at the registered office (or such other place as may be specified for the delivery of instruments of proxy in the notice convening the meeting or other documents sent therewith) at least one hour before the commencement of the meeting or adjourned meeting, or the taking of the poll, or the day before the effective date of any written resolution at which the instrument of proxy is used.

(6) Subject to the Act, the Board may, or the chairman of the relevant meeting may at his or her discretion (with respect to such meeting only) waive any of the provisions of these Bye-laws related to proxies or authorisations and, in particular, may accept such verbal or other assurances as it thinks fit as to the right of any person to attend and vote on behalf of any Member at general meetings or to sign written resolutions.

50. Representation of corporations at meetings

A corporation which is a Member may, by written instrument, authorise one or more Persons as it thinks fit to act as its representative at any meeting of the Members and the Person or Persons so authorised shall be entitled to exercise the same powers on behalf of the corporation which such Person or Persons represent as that corporation could exercise if it were an individual Member. Such corporation shall for the purposes of these Bye-laws be deemed to be present in person at any such meeting if a Person so authorised is present at the meeting. Notwithstanding the foregoing, the chairman of the meeting may accept such assurances as he or she thinks fit as to the right of any Person to attend and vote at general meetings on behalf of a corporation which is a Member.

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SHARE CAPITAL AND SHARES

51. Rights of shares

(1) Upon adoption of these Bye-laws, the share capital of the Company shall initially be divided into two classes of shares consisting of (i) 200,000,000 Common Shares, and (ii) 20,000,000 Preferred Shares. The Board may create classes and series of shares and may increase or decrease the number of shares of any class or series as it sees fit. The Board also may, subject to the Act and to any rights attaching to the issued and outstanding shares, cancel, redeem or purchase any shares and shares of any class or series and further terminate any class or series of shares.

(2) The holders of Common Shares shall be entitled to one vote per Common Share, or in the case of Controlled Shares, if applicable, a fraction of a vote per Controlled Share as determined pursuant to Bye-Law 52. However, the Board may issue non-voting Common Shares which will not entitle the holders thereof to such voting rights. The Common Shares shall entitle the holders thereof, subject to the provisions of these Bye-laws:

(a) to share equally share for share in dividends (whether payable in cash, property or securities of the Company) as the Board may from time to time declare;

(b) in the event of a liquidation, winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of an amalgamation, reorganisation or otherwise or upon any distribution of share capital and surplus, be entitled to share equally and ratably in the assets of the Company, if any, remaining after the payment of all debts and liabilities of the Company and the liquidation preference of any issued and outstanding Preferred Shares; and

(c) generally be entitled to enjoy all of the rights attaching to shares.

(3) The Board is authorised, subject to limitations prescribed by law, to issue the Preferred Shares in classes or series, to establish from time to time the number of Preferred Shares to be included in each such class or series, and to fix the designation, powers, preferences redemption provisions, restrictions and rights to the Preferred Shares of each such class or series and the qualifications, limitations or restrictions thereof. The terms of any class or series of Preferred Shares shall be set forth in a Certificate of Designation in the minutes of the Board authorising the issuance of such Preferred Shares and such Certificate of Designations shall be attached as an exhibit to these Bye-laws, but shall not form part of these Bye-laws, and may be examined by any Member on request. The rights attaching to any Common Share or other share shall be deemed not to be altered by the allotment of any Preferred Share even if such Preferred Share does or will rank in priority for payment of a dividend or in respect of capital or surplus or which confer on the holder thereof voting rights more favourable than those conferred by such Common Share and shall not otherwise be deemed to be altered by the creation or issue of further shares ranking pari passu therewith.

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(4) The authority of the Board with respect to each class or series of Preferred Shares shall include, but not be limited to, determination of the following:

(a) the number of Preferred Shares constituting that class or series and the distinctive designation of that class or series;

(b) the rate of dividend, and whether (and if so, on what terms and conditions) dividends shall be cumulative (and if so, whether unpaid dividends shall compound or accrue interest) or shall be payable in preference or in any other relation to the dividends payable on any other class or classes of shares or any other class or series of the Preferred Shares;

(c) whether that class or series shall have voting rights in addition to the voting rights provided by law and, if so, the terms and extent of such voting rights, provided that if the Preferred Shares shall have voting rights, such Preferred Shares shall be included in the number of Voting Shares of the Company held by any Person for the purposes of Bye-law 52(2) hereof;

(d) the par value of such Preferred Shares;

(e) whether such Preferred Shares may be redeemed and, if so, the terms and conditions on which they may be redeemed (including, without limitation, the dates upon or after which they may be redeemed and the price or prices at which they may be redeemed, which price or prices may be different in different circumstances or at different redemption dates);

(f) whether such Preferred Shares shall be issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange (including, without limitation the price or prices or the rate or rates of conversion or exchange or any terms for adjustment thereof);

(g) the amounts, if any, payable upon such Preferred Shares in the event of voluntary liquidation, dissolution or winding up of the Company in preference of shares of any other class or series and whether such Preferred Shares shall be entitled to participate generally in distributions on the Common Shares under such circumstances;

(h) the amounts, if any, payable upon such Preferred Shares in the event of involuntary liquidation, dissolution or winding up of the Company in preference of shares of any other class or series and whether the Preferred Shares shall be entitled to participate generally in distributions on the Common Shares under such circumstances;

(i) sinking and fund provisions, if any, for the redemption or purchase of the Preferred Shares (the term “sinking fund” being understood to include any similar fund, however designated); and

(j) any other relative rights, preferences, limitations and powers of that class or series.

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(5) The rights attaching to any Preferred Shares, or any class or series of Preferred Shares, shall be deemed not to be altered by the allotment of any other class or series of Preferred Shares even if such class or series does or will rank in priority for payment of a dividend or in respect of capital or surplus or which confer on the holder thereof voting rights more favorable than those conferred by such existing Preferred Shares or class or series of Preferred Shares and shall not otherwise be deemed to be altered by the creation or issue of further shares ranking pari passu therewith.

(6) All the rights attaching to a Treasury Share shall be suspended and shall not be exercised by the Company while it holds such Treasury Share and, except where required by the Act, all Treasury Shares shall be excluded from the calculation of any percentage or fraction of the share capital, or shares, of the Company.

52. Limitation on voting rights of Controlled Shares.

(1) General. Subject to the provisions of Bye-laws 12(4) and 52(2)-(4) below, and subject to any rights and restrictions for the time being attached to any class or classes of shares, every Member and every person representing a Member by proxy shall have one vote for each share carrying the right to vote on the matter in question of which he or the person represented by proxy is the holder. Notwithstanding any other provisions of these Bye-laws, all determinations in these Bye-laws that are made by or subject to a vote or approval of Members shall be based upon the voting power of such Members’ shares as determined pursuant to Bye-laws 12(4) and 52(2)-(4).

(2) Adjustment of Voting Power. The voting power of all shares is hereby adjusted (and shall be automatically adjusted in the future) to the extent necessary so that there is no 9.5% U.S. Shareholder. This Bye-law 52(2) shall be applied prior to the application of Bye-law 12(4). The Board of Directors shall implement the foregoing in the manner provided herein.

The Board shall from time to time, including prior to any time at which a vote of Members is taken, take all reasonable steps necessary to ascertain through communications with Members or otherwise, whether there exists, or will exist at the time any vote of Members is taken, a Tentative 9.5% U.S. Shareholder.

In the event that a Tentative 9.5% U.S. Shareholder exists, the aggregate votes conferred by shares held by a Member and treated as Controlled Shares of that Tentative 9.5% U.S. Shareholder shall be reduced to the extent necessary such that the Controlled Shares of the Tentative 9.5% U.S. Shareholder will constitute less than 9.5% of the voting power of all shares. In applying the previous sentence where shares held by more than one Member are treated as Controlled Shares of such Tentative 9.5% U.S. Shareholder, the reduction in votes shall apply to such Members in descending order according to their respective Attribution Percentages, provided that, in the event of a tie, the reduction shall apply first to the Member whose shares are Controlled Shares of the Tentative 9.5% U.S. Shareholder by virtue of the Tentative 9.5% U.S. Shareholder’s economic interest in (as opposed to voting control with respect to) such shares. The votes of Members owning no shares treated as Controlled Shares of any Tentative 9.5% U.S. Shareholder shall, in the aggregate, be increased by the same number of votes subject to reduction as described above. Such increase shall apply to all such Members in proportion to

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their voting power at that time, provided that such increase shall be limited to the extent necessary to avoid causing any person to be a 9.5% U.S. Shareholder. The adjustments of voting power described in this Bye-law shall apply repeatedly until there would be no 9.5% U.S. Shareholder. The Board of Directors may deviate from any of the principles described in this Bye-law and determine that shares held by a Member shall carry different voting rights as it determines appropriate (1) to avoid the existence of any 9.5% U.S. Shareholder or (2) to avoid adverse tax, legal or regulatory consequences to the Company, any subsidiary of the Company, or any other Member or its affiliates. For the avoidance of doubt, in applying the provisions of Bye-laws 12(4) and 52(2)-(4), a share may carry a fraction of a vote.

“Controlled Shares” in reference to any Person means all Common Shares of the Company directly, indirectly or constructively owned by such Person as determined pursuant to Section 958 of the Code. Solely for purposes of this Bye-law 52, when determining the number of Controlled Shares of a Person who is a member of a Group (as defined below), all of the Controlled Shares of each other member of such Group (other than any Controlled Shares otherwise owned by such Person pursuant to Section 958 of the Code), shall be treated as Controlled Shares of such Person. For purposes of these Bye-laws, the Groups shall be: (x) any group of Members who are U.S. Persons if the members of such group notify the Company in writing at least 10 days prior to a vote or approval of the Members that such group irrevocably elects to be treated as a Group; and (y) Moore Holdings, LLC, Moore Global Investments, Ltd. and Remington Investment Strategies L.P.; it being understood that the designation of a Group under the foregoing clauses (x) or (y) shall not prohibit the Company or the Board of Directors from taking any action required or permitted under these Bye-laws.

“9.5% U.S. Shareholder” means a “United States person” as defined in the Code (a “U.S. Person”) whose Controlled Shares constitute nine and one-half percent (9.5%) or more of the voting power of all shares of the Company and who would be generally required to recognize income with respect to the Company under Section 951(a)(1) of the Code, if the Company were a controlled foreign corporation as defined in Section 957 of the Code and if the ownership threshold under Section 951(b) of the Code were 9.5%.

“Tentative 9.5% U.S. Shareholder” means a Person that, but for adjustments to the voting rights of shares pursuant to Bye-law 52(2)-(4), would be a 9.5% U.S. Shareholder.

“Attribution Percentage” shall mean, with respect to a Member and a Tentative 9.5% Shareholder, the percentage of the Member’s shares that are treated as Controlled Shares of such Tentative 9.5% Shareholder.

(3) Other Adjustments of Voting Power. In addition to the provisions of Bye-law 52(2), any shares shall not carry any right to vote to the extent that the Board of Directors determines, in its sole discretion, that it is necessary that such shares should not carry the right to vote in order to avoid adverse tax, legal or regulatory consequences to the Company, any subsidiary of the Company, or any other Member or its affiliates, provided that no adjustment pursuant to this sentence shall cause any person to become a 9.5% U.S. Shareholder.

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(4) Requirement to Provide Information and Notice.

(a) The Directors shall have the authority to request from any holder of shares, and such holder of shares shall provide, such information as the Directors may reasonably request for the purpose of determining whether any holder’s voting rights are to be adjusted. If such holder fails to respond to such a request, or submits incomplete or inaccurate information in response to such a request, the Directors may in their sole discretion determine that such holder’s shares shall carry no voting rights in which case such shares shall not carry any voting rights until otherwise determined by the Directors in their absolute discretion.

(b) Any holder of shares shall give notice to the Company within ten days following the date that such holder acquires actual knowledge that it is a Tentative 9.5% U.S. Shareholder.

(c) Notwithstanding the foregoing, no Member shall be liable to any other Member or the Company for any losses or damages resulting from such Member’s failure to respond to, or submission of incomplete or inaccurate information in response to, a request under paragraph (4)(a) or from such Member’s failure to give notice under paragraph (4)(b) of this Bye-law.

(d) The Board may rely on the information provided by a Member under this Bye-law 52(4) in the satisfaction of its obligations under Bye-law 12(4) and this Bye-law 52.

(e) The Company shall have no obligation to provide notice to any Member of any adjustment to its voting power that may result from the application of Bye-law 12(4) and/or this Bye-law 52.

53. Power to issue shares

(1) Subject to the provisions of these Bye-laws and to any rights attaching to issued and outstanding shares, the unissued shares (whether forming part of the original share capital or any increased share capital) shall be at the disposal of the Board, which may issue, offer, allot, exchange or otherwise dispose of shares or options, warrants or other rights to purchase shares or securities convertible into or exchangeable for shares (including any employee benefit plan providing for the issuance of shares or options, warrants or other rights in respect thereof), at such times, for such consideration and on such terms and conditions as it may determine (including, without limitation, such preferred or other special rights or restrictions with respect to dividend, voting, liquidation or other rights of the shares as may be determined by the Board). The Board may issue shares as a new or existing class or series of shares.

(2) At the discretion of the Board, the Company shall not issue any shares in a manner that the Board believes would cause, by reason of such issuance, the total Common Shares of any Person to equal or exceed nine and five tenths percent (9.5%) of the total shares of Common Shares of the Company then issued and outstanding. Notwithstanding the foregoing, the Board in its sole discretion by unanimous consent of all Directors then in office, may waive the applicability of subparagraph (2) of this Bye-law.

Notwithstanding the foregoing provisions of this Bye-law, the restrictions of this Bye-law 53(2) shall not apply to any issuance of shares to a person acting as an underwriter in the ordinary course of its business, purchasing such shares pursuant to a purchase agreement to which the Company is a party, for resale.

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(3) The Board shall, in connection with the issue of any share, have the power to pay such commission and brokerage as may be permitted by law.

(4) The Company shall not give, whether directly or indirectly, whether by means of loan, guarantee, provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made by any Person of or for any shares in the Company, but nothing in this Bye-law shall prohibit transactions permitted pursuant to Sections 39A, 39B, and 39C of the Act.

(5) The Company may from time to time do any one or more of the following things:

(i) make arrangements on the issue of shares for a difference between the Members in the amounts and times of payments of calls on their shares;

(ii) accept from any Member the whole or a part of the amount remaining unpaid on any shares held by such Member, although no part of that amount has been called up;

(iii) pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others; and

(iv) issue its shares in fractional denominations and deal with such fractions to the same extent as its whole shares and shares in fractional denominations shall have in proportion to the respective fractions represented thereby all of the rights of whole shares including (but without limiting the generality of the foregoing) the right to vote, to receive dividends and distributions and to participate in a winding up.

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54. Variation of rights and alteration of share capital

(1) While the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of three-fourths of the issued and outstanding shares of that class or with the sanction of a resolution passed by a majority of the votes cast at a separate general meeting of the holders of the shares of the class in accordance with Section 47(7) of the Act. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

(2) The Company may from time to time by resolution of the Company in general meeting alter the conditions of its Memorandum of Association by all or any of those actions listed in Section 45(1) of the Act and accordingly may change the currency denomination of, increase, alter or reduce its share capital in accordance with the provisions of Sections 45 and 46 of the Act. Where, on any alteration of share capital, fractions of shares or some other difficulty would arise, the Board may deal with or resolve the same in such manner as it thinks fit including, without limiting the generality of the foregoing, the issue to Members, as appropriate, of fractions of shares and/or arranging for the sale or transfer of the fractions of shares of Members.

55. Registered holder of shares

(1) The Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not be bound to recognise any equitable or other claim to, or interest in, such share on the part of any other person.

(2) Any dividend, interest or other moneys payable in cash in respect of shares may be paid by cheque or draft sent through the post directed to the Member at such Member’s address in the Register of Members or, in the case of joint holders, to such address of the holder first named in the Register of Members, or to such person and to such address as the holder or joint holders may in writing direct. If two or more persons are registered as joint holders of any shares any one can give an effectual receipt for any dividend paid in respect of such shares.

56. Death of a joint holder

Where two or more persons are registered as joint holders of a share or shares then in the event of the death of any joint holder or holders the remaining joint holder or holders shall be absolutely entitled to the said share or shares and the Company shall recognise no claim in respect of the estate of any joint holder except in the case of the last survivor of such joint holders.

57. Share certificates

(1) Every Member shall be entitled to a share certificate under the seal of the Company (or a facsimile or representation thereof as the Board may determine) specifying the number and, where appropriate, the class of shares held by such Member and whether the same

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are fully paid up and, if not, how much has been paid thereon. The Board may by resolution determine, either generally or in a particular case, that any or all signatures on certificates may be printed thereon or affixed by mechanical means. Notwithstanding the foregoing and the provisions of Bye-law 88 (Manner in which seal is affixed), the Board may determine that a share certificate need not be signed on behalf of the Company.

(2) The Company shall be under no obligation to complete and deliver a share certificate unless specifically called upon to do so by the person to whom such shares have been allotted.

(3) If any such certificate shall be proved to the satisfaction of the Board to have been worn out, lost, mislaid or destroyed the Board may cause a new certificate to be issued and request an indemnity for the lost certificate it sees fit.

58. Calls on shares

The Board may from time to time make such calls as it thinks fit upon the Members in respect of any monies unpaid on the shares allotted to or held by such Members.

59. Forfeiture of shares

(1) If any Member fails to pay, on the day appointed for payment thereof, any call in respect of any share allotted to or held by such Member, the Board may, at any time thereafter during such time as the call remains unpaid, direct the Secretary to forward to such Member a notice in the form, or as near thereto as circumstances admit, of Form “A” in the Schedule hereto.

(2) If the requirements of such notice are not complied with, any such share may at any time thereafter before the payment of such call and the interest due in respect thereof be forfeited by a resolution of the Board to that effect, and such share shall thereupon become the property of the Company and may be disposed of as the Board shall determine.

(3) A Member whose share or shares have been forfeited as aforesaid shall, notwithstanding such forfeiture, be liable to pay to the Company all calls owing on such share or shares at the time of the forfeiture and all interest due thereon.

REGISTER OF MEMBERS

60. Contents of Register of Members

The Board shall cause to be kept in one or more books a Register of Members and shall enter therein the particulars required by the Act.

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61. Inspection of Register of Members

(1) The Register of Members shall be open to inspection at the registered office of the Company on every business day, subject to such reasonable restrictions as the Board may impose, so that not less than two hours in each business day be allowed for inspection. The Register of Members may, after notice has been given by advertisement in an appointed newspaper to that effect, be closed for any time or times not exceeding in the whole thirty days in each year.

(2) Subject to the provisions of the Act, the Company may keep one or more overseas or branch registers in any place, and the Board may make, amend and revoke any such regulations as it may think fit respecting the keeping of such registers and the contents thereof.

62. Determination of record dates

Notwithstanding any other provision of these Bye-laws, the Board may fix any date as the record date for:-

(a) determining the Members entitled to receive any dividend;

(b) determining the Members entitled to receive notice of and to vote at any general meeting of the Company (and the Board may determine a different record date for any adjournment or postponement thereof);

(c) determining the Members entitled to execute a resolution in writing; and

(d) determining the number of issued and outstanding shares for or in connection with any purpose.

TRANSFER OF SHARES

63. Instrument of transfer

(1) An instrument of transfer shall be in the form or as near thereto as circumstances admit of Form “B” in the Schedule hereto or in such other common form as the Board may accept. Such instrument of transfer shall be signed by or on behalf of the transferor and transferee provided that, in the case of a fully paid share, the Board may accept the instrument signed by or on behalf of the transferor alone. The transferor shall be deemed to remain the holder of such share until the same has been transferred to the transferee in the Register of Members.

(2) The Board may refuse to recognise any instrument of transfer unless it is accompanied by the certificate in respect of the shares to which it relates and by such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer.

64. Restriction on transfer

(1) Subject to the Act, this Bye-law 64 and such other of the restrictions contained in these Bye-laws and elsewhere as may be applicable, and except, in the case of any shares other than the Common Shares, as may otherwise be provided by the terms of issuance thereof, any

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Member may sell, assign, transfer or otherwise dispose of shares of the Company at the time owned by it and, upon receipt of a duly executed form of transfer in writing, the Directors shall procure the timely registration of the same. If the Directors refuse to register a transfer for any reason they shall notify the proposed transferor and transferee within thirty days of such refusal.

(2) At the sole discretion of the Board, the Company may decline to register a transfer of shares if the Board has reason to believe that the effect of such transfer would be to increase the number of total Controlled Shares of any Person to nine and five-tenths percent (9.5%) or any higher percentage of the shares of the Company on an Unadjusted Basis.

(3) The Board may, in its absolute and unfettered discretion, decline to register the transfer of any shares if the Board has reason to believe (i) that such transfer may expose the Company, any subsidiary thereof, any Member or any Person ceding insurance to the Company or any such Subsidiary to adverse tax or regulatory treatment in any jurisdiction or (ii) that registration of such transfer under the Securities Act or under any blue sky or other United States state securities laws or under the laws of any other jurisdiction is required and such registration has not been duly effected (provided, however, that in this case (ii) the Board shall be entitled to request and rely on an opinion of counsel to the transferor or the transferee, in form and substance satisfactory to the Board, that no such approval or consent is required and no such violation would occur, and the Board shall not be obligated to register any transfer absent the receipt of such an opinion).

(4) Without limiting the foregoing, the Board shall decline to approve or register a transfer of shares unless all applicable consents, authorisations, permissions or approvals of any governmental body or agency in Bermuda, the United States or any other applicable jurisdiction required to be obtained prior to such transfer shall have been obtained.

(5) The registration of transfers may be suspended at such time and for such periods as the Board may from time to time determine; provided, however, that such registration shall not be suspended for more than forty-five (45) days in any period of three hundred and sixty five (365) consecutive days.

(6) The Board may require any Member, or any Person proposing to acquire shares, to certify or otherwise provide information in writing as to such matters as the Board may request for the purpose of giving effect to Bye-laws 11(2), 11(3), 52(2), 64(2) and 64(3), including as to such Person’s status, its Controlled Shares and other matters of the kind contemplated by Bye-law 52. Such request shall be made by written notice and the certification or other information requested shall be provided to such place and within such period (not less than ten (10) Business Days after such notice is given unless the Board and such Member or proposed acquiror otherwise agree) as the Board may designate in such request. If any Member or proposed acquiror does not respond to any such request by the Board as requested, or if the Board has reason to believe that any certification or other information provided pursuant to any such request is inaccurate or incomplete, the Board may decline to register any transfer or to effect any issuance or purchase of shares to which such request relates.

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65. Transfers by joint holders

The joint holders of any share or shares may transfer such share or shares to one or more of such joint holders, and the surviving holder or holders of any share or shares previously held by them jointly with a deceased Member may transfer any such share to the executors or administrators of such deceased Member.

66. Lien on shares

(1) The Company shall have a first and paramount lien and charge on all shares (whether fully paid-up or not or whether subject to a condition or contingency) registered in the name of a Member (whether solely or jointly with others) for all debts, liabilities or engagements to or with the Company (whether presently payable or not or whether subject to a condition or contingency) by such Member or his or her estate, either alone or jointly with any other Person, whether a Member or not, but the Board may at any time declare any share to be wholly or in part exempt from the provisions of this Bye-law. The registration of a transfer of any such share shall operate as a waiver of the Company’s lien (if any) thereon. The Company’s lien (if any) on a share shall extend to all dividends or other monies payable in respect thereof.

(2) The Company may sell or purchase, in such manner and on such terms (including price) as the Board think fit, any shares on which the Company has a lien, but no sale or purchase shall be made unless a sum in respect of which the lien exists is then presently payable, nor until the expiration of fourteen days after a notice in writing stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the relevant Member, or the Person, of which the Company has notice, entitled thereto by reason of such Member’s death or bankruptcy. Effective upon such sale or purchase, any certificate representing such shares prior to such sale shall become null and void, whether or not it was actually delivered to the Company.

(3) To give effect to any such sale the Board may authorise some Person to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares comprised in any such transfer, and he shall not be bound to see to the application of the purchase money, nor shall his or her title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.

(4) The proceeds of such sale or purchase shall be received by the Company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the shares before the sale) be paid to the relevant Member or the Person entitled to the shares at the date of the sale.

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TRANSMISSION OF SHARES

67. Representative of deceased Member

In the case of the death of a Member, the survivor or survivors where the deceased Member was a joint holder, and the legal personal representatives of the deceased Member where the deceased Member was a sole holder, shall be the only persons recognised by the Company as having any title to the deceased Member’s interest in the shares. Nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by such deceased Member with other persons. Subject to the provisions of Section 52 of the Act, for the purpose of this Bye-law, legal personal representative means the executor or administrator of a deceased Member or such other person as the Board may in its absolute discretion decide as being properly authorised to deal with the shares of a deceased Member.

68. Registration on death or bankruptcy

Any person becoming entitled to a share in consequence of the death or bankruptcy of any Member may be registered as a Member upon such evidence as the Board may deem sufficient or may elect to nominate some person to be registered as a transferee of such share, and in such case the person becoming entitled shall execute in favour of such nominee an instrument of transfer in the form, or as near thereto as circumstances admit, of Form “D” in the Schedule hereto. On the presentation thereof to the Board, accompanied by such evidence as the Board may require to prove the title of the transferor, the transferee shall be registered as a Member but the Board shall, in either case, have the same right to decline or suspend registration as it would have had in the case of a transfer of the share by that Member before such Member’s death or bankruptcy, as the case may be.

DIVIDENDS AND OTHER DISTRIBUTIONS

69. Declaration of dividends by the Board

The Board may, subject to any rights or restrictions at the time lawfully attached to any class or series of shares and subject to these Bye-laws and in accordance with Section 54 of the Act, declare a dividend to be paid to the Members, in proportion to the number of shares held by them, and such dividend may be paid in cash or wholly or partly in specie in which case the Board may fix the value for distribution in specie of any assets.

70. Other distributions

The Board may declare and make such other distributions (in cash or in specie) to the Members as may be lawfully made out of the assets of the Company.

71. Reserve fund

The Board may from time to time before declaring a dividend set aside, out of the surplus or profits of the Company, such sum as it thinks proper as a reserve to be used to meet contingencies or for equalising dividends or for any other special or general purpose.

72. Deduction of amounts due to the Company

The Board may deduct from the dividends or distributions payable to any Member all monies due from such Member to the Company on account of calls or otherwise.

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73. Unclaimed dividends

Any dividend or distribution unclaimed for a period of six years from the date of declaration of such dividend or distribution shall be forfeited and shall revert and belong to the Company and the payment by the Board of any unclaimed dividend or distribution, interest or other sum payable on or in respect of the share into a separate account shall not constitute the Company a trustee in respect thereof.

74. Interest on dividend

No dividend or distribution shall bear interest against the Company.

CAPITALIZATION

75. Issue of bonus shares

(1) The Board may resolve to capitalise any part of the amount for the time being standing to the credit of any of the Company’s share premium or other reserve accounts or funds or to the credit of the profit and loss account or otherwise available for distribution by applying such sum in paying up unissued shares to be allotted as fully paid bonus shares pro rata to the Members.

(2) The Company may capitalise any sum standing to the credit of a reserve account or fund or sums otherwise available for dividend or distribution by applying such amounts in paying up in full partly paid shares of those Members who would have been entitled to such sums if they were distributed by way of dividend or distribution.

ACCOUNTS AND FINANCIAL STATEMENTS

76. Records of account

The Board shall cause to be kept proper records of account with respect to all transactions of the Company and in particular with respect to:-

(a) all sums of money received and expended by the Company and the matters in respect of which the receipt and expenditure relates;

(b) all sales and purchases of goods by the Company; and

(c) the assets and liabilities of the Company.

Such records of account shall be kept at the registered office of the Company or, subject to Section 83 (2) of the Act, at such other place as the Board thinks fit and shall be available for inspection by the Directors during normal business hours. No Member in its capacity as a Member shall have any right to inspect any accounting record or book or document of the Company except as conferred by the Act or as authorised by the Board.

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77. Financial year end

The financial year end of the Company may be determined by the Board and failing such resolution shall be 31st December in each year.

78. Financial statements

Subject to any rights to waive laying of accounts pursuant to Section 88 of the Act, financial statements as required by the Act shall be laid before the Members in general meeting.

AUDIT

79. Appointment of Auditor

Subject to Section 88 of the Act, at the annual general meeting or at a subsequent special general meeting in each year, an independent representative of the Members shall be appointed by them as Auditor of the accounts of the Company. Such Auditor may be a Member but no Director, Officer or employee of the Company shall, during his or her continuance in office, be eligible to act as an Auditor of the Company.

80. Remuneration of Auditor

The remuneration of the Auditor shall be fixed by the Company in general meeting or in such manner as the Members may determine.

81. Vacation of office of Auditor

If the office of Auditor becomes vacant by the resignation or death of the Auditor, or by the Auditor becoming incapable of acting by reason of illness or other disability at a time when the Auditor’s services are required, the Board may fill the vacancy thereby created.

82. Access to books of the Company

The Auditor shall at all reasonable times have access to all books kept by the Company and to all accounts and vouchers relating thereto, and the Auditor may call on the Directors or Officers of the Company for any information in their possession relating to the books or affairs of the Company.

83. Report of the Auditor

(1) Subject to any rights to waive laying of accounts or appointment of an Auditor pursuant to Section 88 of the Act, the accounts of the Company shall be audited at least once in every year.

(2) The financial statements provided for by these Bye-laws shall be audited by the Auditor in accordance with generally accepted auditing standards. The Auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the Auditor shall be submitted to the Members in general meeting.

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(3) The generally accepted auditing standards referred to in subparagraph (2) of this Bye-law may be those of a country or jurisdiction other than Bermuda. If so, the financial statements and the report of the Auditor must disclose this fact and name such country or jurisdiction.

NOTICES

84. Notices to Members of the Company

A notice may be given by the Company to any Member either by delivering it to such Member in person or by sending it to such Member’s address in the Register of Members or to such other address given for the purpose. For the purposes of this Bye-law, a notice may be sent by mail, courier service, cable, telex, telecopier, facsimile, electronic mail or other mode of representing words in a legible and non-transitory form. If such notice is sent by next-day courier, cable, telex, telecopier, facsimile or electronic-mail, it shall be deemed to have been given the Business Day following the sending thereof and, if by registered mail, three Business Days following the sending thereof.

85. Notices to joint Members

Any notice required to be given to a Member shall, with respect to any shares held jointly by two or more persons, be given to whichever of such persons is named first in the Register of Members and notice so given shall be sufficient notice to all the holders of such shares.

86. Service and delivery of notice

Subject to Bye-law 85 any notice shall be deemed to have been served at the time when the same would be delivered in the ordinary course of transmission and, in proving such service, it shall be sufficient to prove that the notice was properly addressed and prepaid, if posted, and the time when it was posted, delivered to the courier or to the cable company or transmitted by telex, facsimile or other method as the case may be.

SEAL OF THE COMPANY

87. The seal

The seal of the Company shall be in such form as the Board may from time to time determine. The Board may adopt one or more duplicate seals for use outside Bermuda.

88. Manner in which seal is to be affixed

Subject to Bye-law 57 (Share certificates), the seal of the Company shall not be affixed to any instrument except attested by the signature of a Director and the Secretary or any two Directors, or any person appointed by the Board for the purpose, provided that any Director, Officer or Resident Representative, may affix the seal of the Company attested by such Director, Officer or Resident Representative’s signature to any authenticated copies of these Bye-laws, the incorporating documents of the Company, the minutes of any meetings or any other

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documents required to be authenticated by such Director, Officer or Resident Representative. Any such signature may be printed or affixed by mechanical means on any share certificate, debenture, stock certificate or other security certificate.

BENEFITS, PENSIONS AND INSURANCE

89. Benefits

The Board may (by establishment of or maintenance of schemes or otherwise) provide benefits, whether by share options or incentive plans and loans to acquire shares (subject to obtaining any general or specific consent under the provision of Section 96 of the Act), the payment of gratuities or pensions or by insurance or otherwise, for any past or present Director, Officer or employee of the Company or any of its Subsidiaries or Affiliates and for any member of his or her family (including a spouse and a former spouse) or any individual who is or was dependent on him or her, and may (as well before as after he ceases to hold such office or employment) contribute to any fund and pay premiums for the purchase or provision of any such benefit.

90. Insurance

Without prejudice to the provisions of Bye-laws 31 and 32, the Board shall have the power to purchase and maintain insurance for or for the benefit of any individuals who are or were at any time Directors, Officers or employees of the Company, or of any of its Subsidiaries or Affiliates, or who are or were at any time trustees of any pension fund in which Directors, Officers or employees of the Company or any such Subsidiary or Affiliate are interested, including (without prejudice to the generality of the foregoing) insurance against any liability incurred by such individuals in respect of any act or omission in the actual or purported execution or discharge of their duties or in the exercise or purported exercise of their powers or otherwise in relation to their duties, powers or offices in relation to the Company or any such other company, Subsidiary, Affiliate or pension fund.

91. Limitation on Accountability

No Director or former Director shall be accountable to the Company or the Members for any remuneration or benefit provided pursuant to Bye-laws 22, 89 or 90 and the receipt of any such benefit shall not disqualify any individual from being or becoming a Director of the Company.

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UNTRACED MEMBERS

92. Sale of Shares

The Company shall be entitled to sell at the best price reasonably obtainable, or if the shares are listed on a stock exchange to purchase at the trading price on the date of purchase, the shares of a Member or the shares to which a Person is entitled by virtue of transmission on death, bankruptcy or otherwise by operation of law; provided, that:

i. during the period of 12 years prior to the date of the publication of the advertisements referred to in paragraph (b) of this Bye-law 92 (or, if published on different dates, the first thereof) at least three dividends in respect of the shares in question have been declared and all dividends, warrants and checks (cheques) that have been sent in the manner authorised by these Bye-laws in respect of the shares in question have remained uncashed;

ii. the Company shall as soon as practicable after expiry of the said period of 12 years have inserted advertisements both in a national daily newspaper and in a newspaper circulating in the area of the last known address of such Member or other Person giving notice of its intention to sell or purchase the shares;

iii. during the said period of 12 years and the period of three months following the publication of the said advertisements the Company shall have received no indication either of the whereabouts or of the existence of such Member or Person; and

iv. if the shares are listed on a stock exchange, notice shall have been given to the relevant department of such stock exchange of the Company’s intention to make such sale or purchase prior to the publication of advertisements.

If during any 12-year period referred to above, further shares have been issued in right of those held at the beginning of such period or of any previously issued during such period and all the other requirements of this Bye-law 92 (other than the requirement that they be in issue for 12 years) have been satisfied in regard to the further shares, the Company may also sell or purchase the further shares.

93. Instrument of Transfer

To give effect to any such sale or purchase under Bye-law 92, the Board may authorise some person to execute an instrument of transfer of the shares sold or purchased to, or in accordance with the directions of, the purchaser and an instrument of transfer executed by that person shall be as effective as if it had been executed by the holder of, or person entitled by transmission to, the shares. The transferee of any shares sold shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity in, or invalidity of, the proceedings relating to the sale.

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94. Proceeds of Sale

The net proceeds of sale or purchase of shares pursuant to Bye-law 92 shall belong to the Company which, for the period of six years after the transfer or purchase, shall be obliged to account to the former Member or other Person previously entitled as aforesaid for an amount equal to such proceeds and shall enter the name of such former Member or other Person in the books of the Company as a creditor for such amount. No trust shall be created in respect of the debt, no interest shall be payable in respect of the same and the Company shall not be required to account for any money earned on the net proceeds, which may be employed in the business of the Company or invested in such investments as the Board from time to time thinks fit. After the said six-year period has passed, the net proceeds of share shall become the property of the Company, absolutely, and any rights of the former Member or other Person previously entitled as aforesaid shall terminate completely.

WINDING UP

95. Determination to liquidate

Subject to the Act, the Company may be wound up voluntarily by resolution of the Members. However, the Board shall have the power to present any petition and make any application in connection with the winding up or liquidation of the Company.

96. Winding up/distribution by liquidator

If the Company shall be wound up the liquidator may, with the sanction of a resolution of the Members, divide amongst the Members in specie or in kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as he or she deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the Members as the liquidator shall think fit, but so that no Member shall be compelled to accept any shares or other securities or assets whereon there is any liability.

ALTERATION OF BYE-LAWS

97. Alteration of Bye-laws

No Bye-law shall be rescinded, altered or amended and no new Bye-law shall be made until the same has been approved by a resolution of the Board and by a resolution of the Members.

40

CERTAIN SUBSIDIARIES

98. Voting of subsidiary shares

Notwithstanding any other provision of these Bye-laws to the contrary, if the Company is required or entitled to vote at a general or special meeting of (i) Max Bermuda Ltd., a Bermuda reinsurance company and a subsidiary of the Company, or (ii) any Designated Subsidiary (as defined in Bye-law 99), the Directors shall refer the subject matter of the vote to the Members on a poll and seek authority from the Members for the Company’s corporate representative or proxy to vote in favour of the resolution proposed by Max Bermuda Ltd. and/or such Designated Subsidiary. The Directors shall cause the Company’s corporate representative or proxy to vote the Company’s shares in Max Bermuda Ltd. and/or such Designated Subsidiary pro rata to the votes received at the general meeting of the Company, with votes for or against the directing resolution being taken, respectively, as an instruction for the Company’s corporate representative or proxy to vote the appropriate proportion of its shares for and the appropriate proportion of its shares against the resolution proposed by Max Bermuda Ltd. and/or such Designated Subsidiary. All votes referred to the Company’s Members pursuant to this Bye-law 98 shall be subject to the voting power restrictions of Bye-laws 12(4) and 52.

99. Bye-laws or Articles of Association of certain subsidiaries

The Board shall require that the Bye-laws of Max Bermuda Ltd., and may require that the Bye-laws or Articles of Association of each other subsidiary of the Company organized under the laws of a jurisdiction outside the United States of America that is treated as a corporation for U.S. federal tax purposes and designated by the Board, contain provisions substantially similar to Bye-law 98, herein (any such subsidiary so designated by the Board is referred to herein as a “Designated Subsidiary”). If the Board designates any indirect subsidiary of the Company as a Designated Subsidiary, the Board shall also designate each intermediate subsidiary between such Designated Subsidiary and the Company (other than Max Bermuda Ltd.) as a Designated Subsidiary hereunder. The Company in its discretion may enter into agreements with each Designated Subsidiary, as reasonably necessary, to effectuate or implement this Bye-law.

AMALGAMATION VOTING

100. Member Vote to Approve an Amalgamation

A resolution proposed for consideration at a general meeting to approve the amalgamation of the Company with any other company shall require the affirmative vote of a majority of the votes cast by Members present or represented by proxy and voting at such general meeting and the quorum for such general meeting shall be as set out in Bye-Law 39.

******

***

*

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SCHEDULE – FORM A (Bye-law 59)

NOTICE OF LIABILITY TO FORFEITURE FOR NON PAYMENT OF CALL

You have failed to pay the call of [amount of call] made on the _________ day of __________, 20__ last, in respect of the [number] share(s) [numbers in figures] standing in your name in the Register of Members of the Company, on the __________ day of __________, 20__ last, the day appointed for payment of such call. You are hereby notified that unless you pay such call together with interest thereon at the rate of ____ per annum computed from the said _________ day of _________, 20__ last, on or before the _________ day of ______, 20__ next at the place of business of the Company the share(s) will be liable to be forfeited.

Dated this ______________ day of __________, 20__

[Signature of Secretary]

By order of the Board

SCHEDULE – FORM B (BYE-LAW 63)

TRANSFER OF A SHARE OR SHARES

FOR VALUE RECEIVED _______________________________________________________________________ [amount]

_____________________________________________________________________________________________

[transferor]

hereby sell assign and transfer unto _______________________________________________________________ [transferee]

of ____________________________________________________________________________________________ [address]

______________________________________________________________________________________ [number of shares]

shares of ______________________________________________________________________________ [name of Company]

Dated __________________

(Transferor)

In the presence of:

(Witness)

(Transferee)

In the presence of:

(Witness)

SCHEDULE – FORM C (Bye-law 68)

TRANSFER BY A PERSON BECOMING ENTITLED ON DEATH/BANKRUPTCY

OF A MEMBER

I/We having become entitled in consequence of the [death/bankruptcy] of [name of the deceased Member] to [number] share(s) standing in the register of members of [Company] in the name of the said [name of deceased Member] instead of being registered myself/ourselves elect to have [name of transferee] (the “Transferee”) registered as a transferee of such share(s) and I/we do hereby accordingly transfer the said share(s) to the Transferee to hold the same unto the Transferee his or her executors administrators and assigns subject to the conditions on which the same were held at the time of the execution thereof; and the Transferee does hereby agree to take the said share(s) subject to the same conditions.

WITNESS our hands this ________ day of _______, 20__

Signed by the above-named	)
[person or persons entitled]	)
in the presence of:	)
Signed by the above-named	)
[transferee]	)
in the presence of:	)

EX-10.2

Exhibit 10.2

MAX CAPITAL GROUP LTD.

2008 STOCK INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

This Restricted Stock Unit Agreement (the “Agreement”), effective as of the          day of                     , 2       (the “Grant Date”) by and between Max Capital Group Ltd. (the “Company”), and                              (the “Grantee”), evidences the grant by the Company of restricted Common Share units (the “Award”) to the Grantee on such date and the Grantee’s acceptance of the Award in accordance with the provisions of the Company’s 2008 Stock Incentive Plan, as amended, (the “Plan”). The Company and the Grantee agree as follows:

1. Basis for Award. This Award is made under the Plan pursuant to Section 9 thereof.

2. Restricted Stock Units Awarded.

(a) The Company hereby awards to the Grantee, in the aggregate,              restricted Common Share units (“Restricted Stock Units”), which shall be subject to the terms of the Plan and this Agreement.

(b) The Restricted Stock Units shall be credited to a separate account maintained for the Grantee on the books of the Company (the “Account”). On any given date, the value of each Restricted Stock Unit comprising the Award shall equal the Fair Market Value of one Common Share. The Award shall vest and settle in accordance with Section 3 hereof.

3. Vesting and Settlement.

(a) Except as otherwise provided in the Plan and this Agreement, the Restricted Stock Units shall vest and become non-forfeitable with respect to [100% of such Restricted Stock Units on the third anniversary]¹ of the Grant Date (the “Vesting Date”); provided, that, the Grantee is then serving as a director on the Board. If the Grantee’s service as a director on the Board is terminated at any time prior to the Vesting Date, the unvested Restricted Stock Units subject to the Award shall automatically be forfeited upon such cessation of services, unless otherwise provided in Section 3(b) or Section 3(c). On the Vesting Date, the Company shall settle the Restricted Stock Units and as a result thereof (i) issue and deliver to the Grantee one Common Share for each such Restricted Stock Unit (the “RSU Shares”) (and upon such settlement, the Restricted Stock Units shall cease to be credited to the Account) and (ii) enter the Grantee’s name as a shareholder of record with respect to the RSU Shares on the books of the Company; provided, however, that the Committee may elect, in its discretion, to pay cash or part cash and part Common Shares in lieu of delivering only Common Shares in respect of such Restricted Stock Units. If a cash payment is made in lieu of delivery of

¹ The Compensation Committee (the “Committee”) of the Company’s Board of Directors may include a different vesting period or a pro rata vesting provision in certain awards.

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Common Shares, the amount of such payment shall be equal to the fair market value of the Common Shares as of the Vesting Date, less an amount equal to any federal, state, local and non-U.S. income and employment taxes required to be withheld.

(b) Death, Disability. In the event of the Grantee’s death or upon the Grantee’s removal from the Board on account of Disability (as defined below), a pro rata portion of the Restricted Stock Units shall vest and be settled in accordance with the third sentence of Section 3(a) as of the date of such termination, and all other unvested Restricted Stock Units shall immediately terminate and be forfeited. The pro rata portion of the Restricted Stock Units that vests shall be calculated by multiplying the number of Restricted Stock Units by a fraction, the numerator of which shall equal the number of consecutive days the Grantee has served as a director on the Board from the Grant Date to the date of removal, and the denominator of which shall equal             (rounded to the nearest whole number).

For purposes of this Agreement, “Disability” shall mean the removal of the Grantee as a director on the Board upon 30 days’ notice in the event that the Grantee suffers a mental or physical disability that shall have prevented him/her from performing his/her material duties for a period of at least 120 consecutive days or 180 non-consecutive days within any 365 day period; provided, that, the Grantee shall not have returned to full-time performance of his/her duties within 30 days following receipt of such notice.

(c) Retirement. Upon the Grantee’s Retirement (as defined below), vesting (and settlement) shall continue according to the schedule set forth in Section 3(a) as if the Grantee continued to serve as a director on the Board;

For purposes of this Agreement, “Retirement” shall be defined as the Grantee’s termination of service as a director on the Board on account of his/her voluntary resignation, death or Disability if the sum of the Grantee’s age and years of service as a director on the Board equals at least 55.

(d) Change in Control. Upon the occurrence of a Change in Control (as defined in the Plan), all unvested Restricted Stock Units shall automatically become vested and shall be settled in accordance with the third sentence of Section 3(a).

4. Dividend Equivalents. If the Company pays a cash dividend on its outstanding Common Shares for which the Record Date (for purposes of this Agreement, the “Record Date” is the date on which shareholders of record are determined for purposes of paying the cash dividend on Common Shares) occurs after the Grant Date, the Grantee shall receive a cash payment equal to the amount of the ordinary cash dividend paid by the Company on a single Common Share multiplied by the number of Restricted Stock Units awarded under this Agreement that are unvested and unpaid as of such Record Date.

5. Restrictions. The Award granted hereunder may not be sold, pledged or otherwise transferred (other than by will or the laws of descent and distribution or as otherwise

2

permitted by the Committee) and may not be subject to lien, garnishment, attachment or other legal process. The Grantee acknowledges and agrees that, with respect to each Restricted Stock Unit credited to his/her Account, the Grantee has no voting rights with respect to the Company unless and until such Restricted Stock Unit is settled in RSU Shares pursuant to Section 3(a) hereof.

6. Compliance with Laws and Regulations. The issuance and transfer of RSU Shares shall be subject to compliance by the Company and the Grantee with all applicable requirements of securities laws and with all applicable requirements of any stock exchange on which the Company’s Common Shares may be listed at the time of such issuance or transfer. Prior to the issuance of any RSU Shares, the Company may require that the Grantee (or the Grantee’s legal representative upon the Grantee’s death or Disability) enter into such written representations, warranties and agreements as the Company may reasonably request in order to comply with applicable securities laws or with this Agreement.

7. No Right to Continued Service. Nothing in this Agreement shall confer upon the Grantee any right to continue to serve the Company or shall affect the right of the Company to terminate the Grantee’s service as a director.

8. General Assets. All amounts credited to the Grantee’s Account under this Agreement shall continue for all purposes to be part of the general assets of the Company. The Grantee’s interest in the Account shall make the Grantee only a general, unsecured creditor of the Company.

9. Rights as Shareholder. Upon and following the Vesting Date, the Grantee shall be the record owner of the RSU Shares (if the Restricted Stock Units are settled in RSU Shares) unless and until such shares are sold or otherwise disposed of, and as record owner shall be entitled to all rights of a shareholder of the Company (including voting rights). Prior to the Vesting Date, the Grantee shall not be deemed for any purpose to be the owner of the Common Shares underlying the Restricted Stock Units subject to the Award.

10. Governing Law; Modification. This Agreement shall be governed by the laws of the state of New York without regard to conflict of law principles. The Agreement may not be modified except in writing signed by both parties.

11. Plan. Except as otherwise provided herein, or unless the context clearly indicates otherwise, capitalized terms herein which are defined in the Plan have the same definitions as provided in the Plan. The terms and provisions of the Plan are incorporated herein by reference, and the Grantee hereby acknowledges receiving a copy of the Plan and has had an opportunity to review the Plan and agrees to be bound by all of the terms and provisions of the Plan. In the event of a conflict or inconsistency between the terms and provisions of the Plan and the provisions of this Agreement, the Plan shall govern and control.

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12. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Grantee or the Company to the Committee for review. The resolution of such a dispute by the Committee shall be binding on the Company and the Grantee.

13. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision shall be severable and enforceable to the extent permitted by law.

14. Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be delivered by registered or certified first class mail, return receipt requested, telecopier, courier service or personal delivery:

If to the Company:

Max Capital Group Ltd.

Max House

2 Front Street

Hamilton HM 11

Bermuda

If to the Grantee, at the Grantee’s last known address on file with the Company.

All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five (5) business days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied.

15. Beneficiary. The Grantee may file with the Committee a written designation of a beneficiary on such form as may be prescribed by the Committee and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Grantee, the executor or administrator of the Grantee’s estate shall be deemed to be the Grantee’s beneficiary.

16. Successors. The terms of this Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and on the Grantee and the beneficiaries, executors and administrators, heirs and successors of the Grantee.

17. Amendment of Award. Subject to Section 10 of this Agreement, the Committee at any time and from time to time may amend the terms of this Award; provided, however, the Grantee’s rights under this Award shall not be materially and adversely affected by any such amendment without the Grantee’s consent.

18. Adjustments. This Award is subject to adjustment pursuant to Section 12 of the Plan.

19. Headings. The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation of construction, and shall not constitute a part of this Agreement.

4

20. Entire Agreement. This Agreement and the Plan contain the entire agreement between the parties hereto with respect to the subject matter contained herein and supersede all prior communications, representations and negotiations in respect thereto. No change, modification or waiver of any provision of this Agreement shall be valid unless in writing and signed by the parties hereto.

21. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[SIGNATURE PAGE FOLLOWS]

5

IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the date set forth below.

MAX CAPITAL GROUP LTD.
By:
	Name:
	Title:
	Date:
GRANTEE
By:
	Name:
	Date:

6

EX-12.1

Exhibit 12.1

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(in thousands of U.S. dollars, except ratios)	Nine Months Ended September 30, 2009		Year End December 31, 2008			Year End December 31, 2007		Year End December 31, 2006		Year End December 31, 2005		Year End December 31, 2004
Earnings:
Pre-tax income (loss)	$	188,635	$	(174,086	)	$	302,827	$	217,988	$	10,477	$	141,754
Fixed charges		16,021		37,462			43,562		14,503		23,235		21,190
Total Earnings (Loss)	$	204,656	$	(136,624	)	$	346,389	$	232,491	$	33,712	$	162,944
Fixed Charges:
Interest and amortization on indebtedness	$	14,741	$	36,143		$	42,702	$	13,832	$	22,764	$	20,644
Rental expense at 33.3% (1)		1,280		1,319			860		671		471		546
Total Fixed Charges	$	16,021	$	37,462		$	43,562	$	14,503	$	23,235	$	21,190
Ratio of Earnings to Fixed Charges		12.77		(3.7	)		8.0		16.0		1.5		7.7
Deficiency		N/A	$	174,086			N/A		N/A		N/A		N/A

(1) 33.3% represents a reasonable approximation of the interest factor

EX-31.1

Exhibit 31.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

OF MAX CAPITAL GROUP LTD.

I, W. Marston Becker, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Max Capital Group Ltd.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2009

	/s/ W. Marston Becker
Name:	W. Marston Becker
Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

OF MAX CAPITAL GROUP LTD.

I, Joseph W. Roberts, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Max Capital Group Ltd.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2009

	/s/ Joseph W. Roberts
Name:	Joseph W. Roberts
Title:	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 OF

CHIEF EXECUTIVE OFFICER

OF MAX CAPITAL GROUP LTD.

This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the quarterly report on Form 10-Q (the “Form 10-Q”) for the quarter ended September 30, 2009 of Max Capital Group Ltd. (the “Issuer”).

I, W. Marston Becker, the Chief Executive Officer of Issuer, certify that:

(i) the Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Issuer and will be retained by the Issuer and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: November 6, 2009

	/s/ W. Marston Becker
Name:	W. Marston Becker
Title:	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 OF

CHIEF FINANCIAL OFFICER

OF MAX CAPITAL GROUP LTD.

This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the quarterly report on Form 10-Q (the “Form 10-Q”) for the quarter ended September 30, 2009 of Max Capital Group Ltd. (the “Issuer”).

I, Joseph W. Roberts, the Chief Financial Officer of Issuer, certify that:

(i) the Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(ii) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Issuer and will be retained by the Issuer and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: November 6, 2009

	/s/ Joseph W. Roberts
Name: Title:	Joseph W. Roberts Executive Vice President and Chief Financial Officer